Written Answers. - Public Liability Insurance.
Bernard J. Durkan
Question:
42
Mr. Durkan
asked the
Tánaiste and Minister for Enterprise, Trade and Employment
if she has satisfied herself that public liability insurance costs are not a deterrent to industrial investments; and if she will make a statement on the matter.
[4243/99]
Phil Hogan
Question:
100
Mr. Hogan
asked the
Tánaiste and Minister for Enterprise, Trade and Employment
if her attention has been drawn to the difficulties of small businesses in getting reasonable rates of employers' liability insurance from the existing base of insurance companies; the action, if any, she will take to address this vital issue for business and employment; and if she will make a statement on the matter.
[4112/99]
Bernard J. Durkan
Question:
126
Mr. Durkan
asked the
Tánaiste and Minister for Enterprise, Trade and Employment
if her Department has carried out an evaluation of escalating costs of insurance claims; if so, the measures, if any, identified with the objective of stabilising these costs; and if she will make a statement on the matter.
[4425/99]
Bernard J. Durkan
Question:
132
Mr. Durkan
asked the
Tánaiste and Minister for Enterprise, Trade and Employment
if she has monitored the level of insurance claims over the past number of years; if her attention has been drawn to any particular trends in these areas; and if she will make a statement on the matter.
[4431/99]
I propose taking Questions Nos. 42, 100, 126 and 132 together.
The question of securing reduced rates of employers and public liability insurance cover for small business has been dealt with in a number of recent replies to Dáil questions, the most recent being the reply which I gave to the House on 19 November 1998. The broader economic issue of the effect of liability insurance premium costs on industrial investment in Ireland cannot be assessed in isolation from the totality of costs born by manufacturing enterprises located in Ireland and the trends in these costs relative to costs in competing economies.
In its 1996 report on An Economic Evaluation of Insurance Costs in Ireland, Deloitte & Touche set out comparative quotations for employers and public liability insurance obtained from insurers in a number of EU countries. The quotations showed that premium rates in the other EU countries surveyed were considerably lower than in Ireland, with the Netherlands rate at 14 per cent, Denmark at 46 per cent and France at 90 per cent of the Irish quotation. However, the consultants pointed out that higher levels of State expenditure on social protection in the Netherlands and Denmark compared with Ireland meant that private insurance in these other EU countries was required to bear less of the cost of personal injury compensation and their liability insurance premiums would be correspondingly lower than in Ireland.
Deloitte & Touche also undertook a survey of small and medium enterprises in manufacturing and services in Ireland to establish the cost impact of employers and public liability insurance. The survey found that, while in the larger employing firms insurance premiums amounted to 1.4 per cent of payroll costs, in very small firms with less than ten persons employed, insurance liability costs amounted to over 8 per cent of payroll. This indicated that the cost competitiveness impact of liability insurance in Ireland was essentially a problem affecting small business and did not constitute a significant cost competitiveness burden on larger firms.
The consultants investigated the reasons for the wide discrepancy between the premium costs borne by larger and smaller firms in Ireland and found that insurance companies perceived small firms, in general, as representing a high insurance risk category lacking in sophisticated risk management systems. This assessment was reflected in the high liability insurance rates quoted to individual small companies.
To address this insurance cost problem for small companies and its contributory causes, the Deloitte & Touche report recommended that small businesses should join affinity groups to strengthen their collective bargaining power with insurers and that they should seek to improve their risk management procedures through greater awareness of and compliance with health and safety standards. A number of special affinity schemes have already been successfully established by, among others, the Small Firms Association of IBEC, the Construction Industry Federation and by publican, restaurateur and farmer groups. A new affinity scheme for the services and self-employed sector of ISME was launched in 1997. I understand these schemes have been successful in securing lower rates of liability insurance for the participating small companies.
In addition to affinity schemes for purchasing insurance cover, I recently launched a voluntary code of practice aimed at reducing the cost burden, including insurance costs, of injuries in the workplace which has been developed by a Workplace Safety Group representative of, amongst others, IBEC, ICTU, the Health and Safety Authority and the insurance devision of our Department. The object of the Safe Working and Accident Prevention Code is to seek to ensure that injuries, where they occur in the workplace, are dealt with in the best way possible by management and that the employee is given every assistance and encouragement to return to work.
Voluntary participation in the code of practice commits the employers to make safety an integral part of their business operations and make accident prevention a top priority; develop a safety culture through a partnership approach and with employee involvement; consult with employees and safety representatives on health and safety arrangements; provide, either through internal or external advice, requisite competence and appropriate health and safety training for all levels of employees, both on the job training and general health and safety training. Where appropriate, have information on hazardous substances, including material safety data sheet; and provide a safety statement and ensure implementation through communication with all staff.
For their part the participating employees undertake to exercise care for their safety and that of others through their actions and safe work practices; participate in safety measures, including safety training; use their initiative and take a responsible approach to accident prevention in their workplace; support the safety policy and familiarise themselves with the company safety statement and the arrangements, information and procedures therein; and co-operate with safety arrangements. The common objective for employer and employee is to address health and safety matters in a non-adversarial climate of consultation and partnership.
As the representative association for employers liability insurers in Ireland, the Irish Insurance Federation has indicated its full support for the voluntary code of practice. It particularly supports the co-operative approach proposed which recognises the shared responsibilities of employers and employees. The adoption of the code of practice is seen by the Irish Insurance Federation as a very positive step in building a safety culture in the workplace and it envisages that compliance with the provisions of the code on accident prevention, accident investigation and treatment of occupational injuries will help to reduce the frequency of accidents in the workplace. This, in turn, will help to control the costs, including insurance costs, associated with accidents at work with resulting benefits to employers in the calculation of liability premium rates.
I regard the initiatives on the establishment of affinity schemes for small businesses and the development of a voluntary code of practice in safe working and accident prevention as significant and positive measures being taken by Irish business, through a social partnership approach, to reduce the cost burden of accidents in the workplace and the related cost of liability insurance cover.
With regard to the trend in liability insurance claims, the Deloitte & Touche report found that, over the ten year period, 1985-1994, the annual number of claims remained fairly constant – employers' liability claims averaged 8,451 per annum with a high of 9,506 in 1990 and a low of 7,695 in 1993; public liability claims averaged 15,500 over that ten year period.
With regard to the trend in the cost of claims, the consultants report found that the average cost of employers' liability claims rose by about 50 per cent in real terms over the ten year period to 1994 while the average cost of public liability claims almost doubled.
The Deloitte & Touche consultants undertook a detailed examination of the factors contributing to the high and rising cost of liability claims in Ireland. The report found that the two major factors driving up the cost of claims were high legal costs relative to personal injury compensation awards, particularly in smaller claims, and medical inflation. The high legal costs, including the cost of expert witnesses, associated with establishing claims for personal injury compensation in Ireland is attributable to the adversarial and highly legalistic nature of the tort-based claims process which requires the litigant to establish that his injury resulted from the defendant's negligence. The submission to Government of the Deloitte & Touche findings on the major factors contributing to high liability insurance costs in Ireland led to the establishment of a Special Working Group under the aegis of our Department. The working group is currently engaged on a research-based examination of cost and other issues surrounding alternative systems of delivering personal injury compensation in operation in other countires. The group hopes to complete its report by the end of June, next.
