How your policy is hit by a string of levies

The 3pc levy

The collapse of insurance firm PMPA in 1983 left the State on the hook, so a levy was imposed on home and car insurance. This levy also covered the collapse of the Insurance Corporation of Ireland. When the PMPA bill was finally paid in 1991 the levy was retained but turned into a stamp duty on all non-life policies.

The 2pc levy

The collapse of Quinn Insurance saw the introduction of a

2pc levy on all non-life policies in 2012. This is to go into what is called the Insurance Compensation Fund. The cost of bailing out the insurer is currently €1.1bn, and there is currently an €800m deficit in the fund. The new 2pc levy

The collapse of Maltaregistered Setanta Insurance in 2014 led to a long legal wrangle in the courts over how the cost of the claims should be funded. Some 1,500 people with claims against the Maltese insurer have been left out of pocket as there is not enough funding left in the company to pay the claims. The Supreme Court eventually found that the Insurance Compensation Fund was liable for third-party motor claims. This meant the Insurance Compensation Fund has to pay, but its payouts are limited to 65pc of any claim, or €825,000, whichever is the lower figure.

Junior Finance Minister Michael D’Arcy (inset) told the Dáil last week the 2pc is expected to generate between €34m and €40m a year for four years.

At that stage, when the fund reaches €150m, the levy will be reduced to 1pc to take the fund to €200m.

MIBI costs

The Motor Insurers’ Bureau of Ireland (MIBI) was established by insurers to compensate victims of accidents caused by uninsured and unidentified vehicles. The operation of the MIBI costs €60m a year, which works out at €30 on the average premium.

So, a consumer with combined insurance policies costing €1,000 a year will incur levy charges of about €100 from the three levies, and the indirect cost of funding the MIBI.