Presentation on Non-Life - Society of Actuaries in Ireland

Society of Actuaries in Ireland
Non-Life Insurance
Current Topics 2003
By Neil Shepherd & Tanya Fick
1

Introduction
• Significant premium increases in 2000-
2002
• Factors underlying the premium hikes
included :
1. Inflation in claims settlements
2. High rates of legal expenses
3. McEneaney & Crilly court judgements
4. Increased reinsurance costs
5. Falls in investment returns
2

2003 Issues
• Motor Insurance Advisory Board (MIAB)
• Personal Injuries Assessment Board (PIAB)
• Oireachtas Joint Committee on Enterprise &
Small Business
• Penalty Points
• The Competition Authority
• Insurance Fraud
• Irish Financial Services Authority (IFSRA)
• Discrimination
• Solvency Issues
• Product Initiatives
3

The Motor Insurance Advisory Board (MIAB)
IIF identified 7 recommendations as priorities :
• Improved road safety
• Increased penalties for uninsured drivers
• A fundamental review of civil court procedures
• Establishment of PIAB
• Altering Health Amendment Act to remove hospital
charges
• Publication of a book of quantum
• Non-implementation of increases in Circuit &
District Courts’ jurisdiction limits
4

The Motor Insurance Advisory Board (MIAB)
The likely effect of fulfilling these would be :
• A decrease in the number of motor insurance
claims due to fewer collisions, injuries & road
fatalities
• A reduction in uninsured driving
• Lower legal expenses
• Less fraud and exaggerated claims
• As a result, lower motor insurance premiums
5

Personal Injuries Assessment Board (PIAB)
• Primary objective - reduce
unnecessary legal & expert witness
costs
• Will not reduce claimant’s
compensation
• Non-litigation cases
• Initially EL ; Motor & PL within a few
months
6

Personal Injuries Assessment Board (PIAB)
• Inquisitorial basis rather than
adversarial
• Costs should be reduced due to:
Book of Quantum
“Documents Only” assessment
Reduced solicitor’s/legal fees
• Claimant may reject outcome of PIAB
• Unreasonable objections will be
penalised
7

Oireachtas Joint Committee on
Enterprise & Small Business
Most significant recommendations :
• Implement MIAB recommendations
• Establish PIAB
• Book of Quantum
• Increased transparency in premiums
• Road safety
• Abolish/ring-fence 2% insurance premium levy
8

Penalty Points
Background :
• Introduced on 1 st November 2002
• 12 points within 3 years = 1 year
disqualification
• Initially only speeding offences
• Driving without insurance & failure to wear
seatbelt added in 2003
• Ultimately will cover 69 separate offences
9

Impact to date :
Penalty Points
• By end 2003, almost 100,000 drivers with
penalty points
• Recently first driver disqualification
• 342 fatalities during 2003 – 9% decrease
on 2002
• Evidence of increases in 2004
• Enforcement will be the key
10

Penalty Points
No of Road Accident Deaths
500
450
431
437
453
472
458
400
404
413 415 411
376
350
341
300
250
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
11

Impact to date :
Penalty Points
• Evidence of increases in 2004
• Enforcement will be the key
12

Competition Authority
Competition within the broker market :
• Biggest competition issues were in broker market
• Main areas of concern –
1. Fixed percentage commission fees
2. Incentives related to quantities of sales
3. Lack of buyer transparency
4. Buyer switching costs
• Greater transparency sought; recommends
investigating fee-based commissions
13

Competition Authority
Competition between insurance
companies :
• Less competition issues among
insurers
• Main areas of concern :
1. Barriers to entry
2. Niche markets
14

Insurance Fraud
• Costs €100m in 2003
• Advertising campaign
• “Insurance Confidential”
• Supreme court judgements
• Ban on “no win, no fee” advertising
• New Courts Bill proposals
15

Irish Financial Services Authority
(IFSRA)
• Formed on 1 st May 2003
• Regulates all financial services in Ireland
• Focused on consumer information in a “safe
and fair” market
• Potential updates to role of non-life
actuaries
16

Discrimination
Equal Status Act :
• Prohibits discrimination on 9 grounds
• Exception for insurance policies
• Recent Equality Authority Decision –
Ross v RSA
17

Discrimination
Proposed EU Directive on Unisex
Premiums :
• Mix of business risk to insurers
• Average premium rates increase
• Social cost – more male drivers?
• Possible future legislation
18

Product Initiatives
Inexperienced Driver Offerings :
• Young driver market traditionally
avoided
• Innovative products reduce risks
• Ignition
• Traksure
19

Product Initiatives
Digital Flood Mapping :
• Identifies properties at risk from
flooding
• Implemented in the UK in 2003
• Possible future option in Ireland
20

Solvency Issues
CP181 – Implementation of the
Solvency I Directives:
• Increased thresholds when
calculating solvency margin
• Discounting of liabilities no longer
benefits solvency margin
21

Solvency Issues
CP190 – Enhanced Capital
Requirements and Individual Capital
Assessments for Non-Life Insurers :
• A new risk-based regulatory capital
requirement (ECR)
• Individual capital guidance (ICG) to
insurers by the FSA
22

Some Thoughts
Regulation
• Emphasis on fairness & transparency to
consumers rather than solvency?
• How far should regulation of rating factors
go?
Claim Costs
• Road safety enforcement?
• Implementation of PIAB/MIAB?
23

Society of Actuaries in Ireland
Non-Life Insurance
Current Topics 2003
By Neil Shepherd & Tanya Fick
24