The Government has announced it will extend the Insurance Compensation Fund to cover in full third-party motor claims, with insurers paying 35 per cent of the cost.
Minister for Finance Michael Noonan said the recommendations in the Review of the Framework for Motor Insurance Compensation will provide greater certainty regarding insurance compensation in Ireland.
“Importantly, for insured motorists, this will facilitate speedier payments and a simplification of the claims procedure,” Mr Noonan said.
However, industry lobby group Insurance Ireland said the decision to proceed with a proposal that would “expose insurers to the unlimited liabilities of a failed competitor poses a systemic risk to the motor insurance market”.
The industry is particularly concerned that there is no upper limit on the exposure of insurance companies.
“Insurance Ireland supports the use of the ICF to resolve insolvencies but strongly opposes the deeply flawed funding model being proposed as liabilities are not capped,” it said in a statement.
Chief executive Kevin Thompson said it marked a "missed opportunity to bring some stability to the market".
“This opens the door to a future financial shock for Government, consumers and insurers. Insurance Ireland has been clear in stating that insurance companies cannot assume unlimited liabilities of their competitors. No other business would be expected to do this and it makes no commercial sense as the risk has to be factored into premiums.”
But Sinn Féin finance spokesman Pearse Doherty welcomed the recommendation as representing a "sensible approach" and hoped that the move will lead to a drop in insurance premiums sooner rather than later.
“The report today maps out a way to remove one of the excuses insurers have been using to justify high premiums,” he said.
The review took place in the wake of the collapse in 2014 of Malta-based Setanta Insurance, which led to a dispute over who should pick up the tab for the 1,700 open claims that could cost up to €95.2 million to settle. That remains subject of a Supreme Court appeal.
