The preliminary findings of the Motor Insurance Advisory Board published in this paper today appear to turn on its head the picture that has been painted by the insurance industry in recent years. Far from being a non-profitable risk, young people are in fact the most profitable sector of the market, closely followed by old age pensioners and women. The whole premise on which insurance companies justify charging young drivers thousands of pounds a year in premiums is now "open to question", according to the MIAB, which was established by the Government in 1998 in the wake of concern about the costs of insurance to young drivers.
What must also be questioned is why the industry considers it appropriate to make women contribute more than their fair share. Profits of £730 each on female drivers aged 19 to 20 are hard to justify. Women drivers in general appear to be badly served by the industry, with consistently higher margins being made on female drivers who are over 51. Old age pensioners will also have some questions for an industry that feels justified in charging this sector of society some of the highest margins; 30 percent in some cases.
The final report of the MIAB is not due until the end of the year and the Department of Enterprise and Employment stresses that the report released under the Freedom of Information Act is not based on a full data set. At the same time they point out that this does not mean the interim reports finding are incorrect. It should also be remembered that the findings relate to the years 1993 to 1997 which immediately preceded the board's establishment. Regardless of these caveats the fact remains that during this period a number of large insurance companies made large profits out of young drivers while allowing the public think they were losing money on them.
The report has clearly ruffled some feathers in the industry already. This was demonstrated by the Irish Insurance Federation's threat to stop providing the raw data on which the MIAB works. It is no great surprise that the threat was withdrawn when the MIAB issued its own threat of a "more rigorous forum for investigation this area of public concern". The industry cannot be accused of covering itself in glory in its dealings with the MIAB.
A number of other worrying issues are raised by the report. It flags the possibility that the reason there is less choice in car insurance for the very young and the very old has more to do with a lack of competitiveness than the cost of claims. The Competition Authority may wish to pursue this further and also look at the ownership by the five largest insurers of INSECOM, a company that is meant to provide competitive quotes to insurance brokers. The final report of the MIAB is awaited with interest.