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car insurance

Former Setanta policyholders worried they're 'personally on the hook' for outstanding claims

In May, the Supreme Court ruled that the Irish State must be held liable for the claims.

THERE ARE OVER 1,500 active claims outstanding following the collapse of Setanta Insurance.

In May, the Supreme Court ruled that the Irish State must be held liable for the outstanding claims, which could cost in the region of €90 million.

Maltese-based insurer Setanta was wound up in April 2014. In the aftermath it was announced that those insured who had been struck by uninsured drivers would not be covered.

Fianna Fáil’s Finance Spokesperson Michael McGrath has said “no clarity has been provided for both claimants and former policyholders” since the Supreme Court decision over six months ago.

“The rules of the Insurance Compensation Fund mean that it can only pay out 65% of the claim or €825,000, whichever is less. In recent weeks we have learned that the liquidation process will only cover 22% of the value of outstanding claims leaving a significant portion of compensation left unpaid by both the liquidation and the Insurance Compensation Fund.”

McGrath said the result of this could mean former policyholders “who took out their insurance in good faith” could be left personally liable for the balance of outstanding claims.

He said some former policyholders have received letters from solicitors informing them they could be “personally on the hook”, something that is “causing enormous stress for people”.

I have met and spoken with people caught up in this nightmare and some of the stories are heartbreaking.

“Claimants also continue to be left completely in lurch. There remain 1,576 active claims outstanding and it is not clear when these claims will be settled. Some claimants have been asked to sign waivers pledging not to go after policyholders for the balance of outstanding claims. Understandably, claimants are reluctant to do this so many settlement cases have stalled completely as a result,” McGrath said.

He has called on the government to speak to representatives from the insurance industry to “collectively arrive at a solution whereby the full bill is settled and settled quickly”.

McGrath added that legislation is “urgently needed” to allow the Insurance Compensation Fund (ICF) to pay claims more frequently than once every six months, which is currently the case.

When McGrath raised the issue in the Dáil recently, Finance and Public Expenditure Minister Paschal Donohoe said the uncertainty that followed the collapse of Setanta “highlighted weaknesses in the existing insurance compensation framework in Ireland”.

A spokesperson for Deloitte, which acted as receiver for Setanta, told the company was “not in a position to comment on this matter at this time”.

‘Complex’ situation 

Donohoe said estimating the number of former policyholders of the company that could be made personally liable for outstanding claims is “complex”.

“This is due to a number of issues, for instance there may be still ongoing disputes around liability between the policyholder and the third-party claimant, and in some instances, there may be more than one claim against a single policyholder which means that the active claim figure below may not equate to an equivalent amount of policyholders,” he said.

The minister noted that 573 claimants have been paid compensation from the ICF to date, subject to the 65%/€825,000 limits.

“I have been advised that the process of settling claims is still ongoing and is subject in some cases to complex negotiations between all relevant parties. I, as Minister for Finance, am not party to such negotiations and therefore do not have sight of individual claims, and consequently am not in a position to comment on such matters.”

Donohoe noted that legal proceedings between the Law Society of Ireland and the Motor Insurers Bureau of Ireland (MIBI) commenced after Setanta was liquidated.

The Review of the Framework for Motor Insurance Compensation in Ireland was completed in June 2016 and was approved by the Ministers of Finance and Transport. Its key recommendations were as follows:

  • Coverage of the ICF would be extended to include third-party motor insurance claims in the event of a liquidation of an insurer;
  • The level of compensation from the ICF for third-party motor claims to be increased from 65% to 100% in line with that currently provided by MIBI;
  • The increased coverage of the ICF to be funded by a direct contribution to the ICF from the motor insurance industry via the MIBI to the value of 35% of the third-party motor insurance claims;
  • Administration of the ICF to be transferred from the Accountant of the Courts of Justice to the Central Bank of Ireland;
  • To provide for a more formal role for the State Claims Agency in the event of a failure of an insurance company resulting in a draw on the ICF.

Read: Supreme Court rules State must make payouts to claimants affected by collapse of Setanta Insurance

Read: This is how drivers will be protected if a motor insurance company collapses

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