Car insurance premiums could spike if a landmark court ruling stands

THE BODY RESPONSIBLE for paying crash victims of uninsured drivers is launching an appeal against a ruling on the liabilities of the defunct Setanta Insurance that it warns could lead to increases for policyholders.

The Motor Insurers’ Bureau of Ireland (MIBI) is predicting increases of €52.50 on average if the non-profit organisation remains liable for the 1,750 claims left behind following the liquidation of Setanta.

Following a High Court judgement last year, which effectively left MIBI holding the can on the broke firm’s policies, the bureau said it will bring the issue in front of the Supreme Court. It has been estimated that €90 million in outstanding claims are left over from the now non-existent company.

The ruling in September centred around whether it would be MIBI or the Insurance Compensation Fund that would cover any claims relating to Setanta.

Who should be making the payments?

Prior its collapse, the Maltese-registered Setanta had been a member of MIBI – an organisation set up by the government in 1955 to compensate victims of road traffic accidents caused by uninsured or unidentified motorists.

By law, all companies in the state involved in underwriting motor insurance are required to be members of the bureau and they contribute to funding any claims it pays out in proportion to their market share.

MIBI’s essential point is that if it has to make a hefty payment to Setanta’s old customers, the money will have to come from somewhere – with that somewhere being its current members, which will in turn pass on costs to consumers.

In his judgement last September, Justice John Hedigan said that it was his interpretation of a 2009 MIBI agreement that the organisation had a liability to pay out on claims for customers with policies from an insurer that had become insolvent.

‘A major shift’ 

In its statement, MIBI has said that the outstanding claims should be paid from the state’s Insurance Compensation Fund.

Speaking about the Supreme Court appeal, bureau chief executive Patrick O’Brien said:

“If the current High Court ruling stands this will impact on the sector’s understanding of the role of the Insurance Compensation Fund.

“It will also mean a major shift for the MIBI beyond the purpose for which it was originally established.  These are extremely serious considerations and are likely to require closer scrutiny by the industry and government alike.”

Written by Michael Sheils McNamee and posted on TheJournal.ie