Cost of Doing Business in Ireland: Discussion (Resumed)

I would like to welcome Mr. Kevin Thompson, who is the chief executive officer of Insurance Ireland; Dr. Declan Jackson, who the director of government affairs of Insurance Ireland; and Mr. Michael Horan, who is the non-life manager of Insurance Ireland. I also welcome Mr. Séamus Maye of the International Small Business Alliance; Mr. Gerry Duddy, who is the secretary to the Public Banking Forum of Ireland; and Mr. Jerry Beades, who is the chair of Friends of Banking Ireland. They are here to discuss the cost of doing business.

In accordance with procedure, I am required to inform the witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, they are protected by absolute privilege in respect of their evidence to this committee. If they are directed by the committee to cease giving evidence in relation to a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given. They are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable. I remind our guests that their presentations should not last more than five minutes. The presentations submitted by today's attendees have been furnished to the members of the committee. I ask Mr. Thompson to make his presentation to the committee.

Mr. Kevin Thompson

I thank the joint committee for the opportunity to discuss issues relating to the cost of doing business in Ireland. Insurance Ireland has followed the work of the committee over the past six months. It has noted the detailed submissions made by other witnesses before the committee, particularly relating to the cost of insurance. The defining issue in general insurance, including liability insurance, is the cost of insurance claims. Insurance Ireland has been active on the issue of claims volatility in personal injuries since September 2015, when we published a policy reform document, Driving Change, the benefits of which would apply to motor and liability insurance.

The need for reform is clearly established by the trends in the market. According to the 2016 annual report of the Courts Service, the average Circuit Court award increased by 48% between 2013 and 2016, from €11,941 to €17,722. The report of the working group on the cost of insurance, which was published in January 2017, makes it clear that there was an increase in the number of new personal injury cases issued in the courts, including employer, motor, public liability and medical negligence cases, between 2010 and 2015. According to a document published by the National Competitiveness Council, Costs of Doing Business in Ireland 2017, legal service prices were 10.4% higher in the third quarter of 2016 than they had been in the comparable quarter in 2013. It is clear from the annual reports of the Personal Injuries Assessment Board, PIAB, that the average employers liability award made by the board increased by 30% - from €27,102 to €35,159 - between 2011 and 2016 and the average employers liability claim dealt with by the board increased by 35% - from €3,866 to €5,241 - in the same period. According to the same annual reports, the average PIAB personal liability award increased by 17% - from €22,686 to €26,562 - between 2011 and 2016 and the average personal liability claim dealt with by PIAB increased by 23% in the same period. The figures are set out in the documentation I have provided to the committee. On 20 April last, PIAB published figures which show that the number of personal injury claims submitted to it last year represented a decrease of 942 on the previous year. The figure in question decreased from 34,056 to 33,114. There was a reduction in the number of motor claims and public liability claims, but the number of employers liability claims increased.

The Government's working group on the cost of insurance has acknowledged that "there is a significant issue in relation to the cost of personal injury awards in Ireland for some commonly occurring personal injuries, particularly those of a less severe nature". I would like to mention as evidence of this that a minor ankle injury can lead to an award of up to €54,000 in Ireland, which contrasts with a figure of €12,554 in the UK. This situation is made all the more dramatic when the legislative reforms that have been proposed in the UK are factored in. Insurance Ireland has provided data on our claims costs on five occasions over the last two years. We are working in co-operation with the Personal Injuries Commission to facilitate the international benchmarking of our awards data. We have made a number of submissions to the Central Bank and the Department of Finance on how information flow to policy holders can be improved. We have also provided for a methodology to allow returning emigrants to benefit from their foreign driving experiences.

Our well-established commitment to reform is apparent from our actions to date. Insurance Ireland recognises and empathises with the concerns of business owners. We are determined to bring sorely needed reform to Irish claims costs. We believe there is a significant opportunity to bring about structural reform in 2018. All stakeholders should redouble their efforts to ensure this occurs. What needs to happen? We are pleased that the Personal Injuries Commission will publish a report that internationally benchmarks Irish personal injury awards against other jurisdictions. When this has been completed, the Government needs to provide a timetable to address the rise in the cost of claims. The PIAB legislation needs to be passed into law. Four years have passed since the consultation process on this legislation commenced. The design of the book of quantum needs to be addressed. More effective deterrents need to be put in place to combat fraud. If these steps are taken as a matter of urgency, the accelerating cost of claims will be addressed in an effective manner and the insurance costs which are having an impact on businesses and motorists will be managed as a consequence. I thank the committee. We look forward to discussing these issues in more detail with members.

I thank Mr. Thompson. I invite Mr. Maye to make his presentation.

Mr. Seamus Maye

I thank the joint committee for inviting us to talk about the cost of doing business in Ireland. This important topic goes to the core of the socioeconomic well-being of our country. It is the key to competitiveness, sustainable jobs and sustainable housing. We hear a lot about costs in Ireland. Several years ago, Eddie Hobbs presented a television programme called "Rip Off Republic". In 2005, Phil Hogan made an impassioned speech to the Dáil on competition law reform. He said his motion on the issue was inspired by "the complete refusal of the Government to deal with rip-off Ireland, its complete inability to tackle the vested interests [and] its complete antipathy to consumers and small businesses as a result of the flourishing anti-competitive practices it is happy to ignore". It is now 2018 and we are still talking about high costs, but we are not doing anything.

I have noted the contributions of the many other groups that have contributed to this discussion. I will take a more generic approach to the cost of doing business in Ireland. I will consider the issue from a macroeconomic point of view because I believe there are significant misconceptions about price and costs. Price, in itself, does not determine profit. Instead, profit is determined by price minus costs. Importantly, price determines competitiveness and we are not good at competitiveness in Ireland. As a country, we owe a lot to Whitaker and Lemass for setting the foundation for our incredibly successful foreign direct investment programme. Perhaps we have overcooked it. When Deputy Enda Kenny became Taoiseach in 2011, we wrote to him to argue:

Our high cost base is the reason why our corporate tax rate is so crucial to economic recovery. We should not have put ourselves in this position .... we in Ireland must act swiftly to radically reduce our cost base.

These words have turned out to be prophetic. In the past seven years, our foreign direct investment policy has come under heavy and sustained attack. The US and the UK have committed to very significant cuts to corporate tax rates. The EU is moving towards a federal tax regime. The OECD is working to create a fairer corporate tax environment by aligning profits with economic activity. The European Commission's decision in the Apple tax case has put a spotlight and even more pressure on Ireland's corporate tax model.

We can no longer rely on our decades-old foreign direct investment policy as a panacea for providing mass employment. We will have to place a greater focus on our indigenous economy, which has often been neglected even though it has massive potential. For example, there is potential for exponential growth in added value in the agriculture and aquamarine sectors. A whole new industry can be created by effectively processing the fifth quarter from the beef, pig and sheep sectors. The shoe-making sector can be revived. We have seen what competitiveness has done for the craft brewing sector. I admit that the competitiveness in this example is somewhat false, given that it is driven by substantial excise credits, but it shows that competitiveness works.

I would like to draw the attention of the committee to Article 45 of the Constitution, which is dedicated to competition. Our forefathers crafted Article 45 because they understood competitiveness. Even though Article 45 is a cornerstone of how we are supposed to be running our country, it continues to be ignored by the body politic at large.

Why have we let a small number of large corporations dominate so many key sectors? Why do we give them monopoly and duopoly market power when they constantly abuse it? Perhaps Transparency International nailed it. It stated, “Legal corruption played a role in the poor regulation and weak oversight of financial institutions which led to Ireland’s banking crisis”. It went on to describe “legal corruption” as taking many forms, including "cronyism, patronage and state 'capture’ - when powerful groups manipulate policy formation to serve their own interests rather than the public interest”.

We have the view of an expert. In 2004 the former head of the Competition Authority Dr. John Fingleton told the Committee of Public Accounts that there was a considerable shortfall in what the economy needed in terms of competition and that cartels amounted to theft because people met to decide that the customer was the enemy and the competitor their friend and to make an agreement to charge artificially high prices. He said there were wide sectors of the economy in which there were serious competition problems and that we were not putting enough resources into enforcing competition relative to the historical legacy. He also said private enforcement of competition law had absolutely failed and that it would not be until judges decided to convict people who were members of the same golf clubs, of which they themselves were members, that we would really see white-collar crime being tackled. He then estimated that anti-competitive practices were costing, in today’s terms, more than €5 billion per year. That equates to circa €3,000 per household per year. We believe this figure to be very conservative.

Article 45(2)(iv) of the Constitution states, “That in what pertains to the control of credit the constant and predominant aim shall be the welfare of the people as a whole”. We all know that is not what happened in the banking sector. Why do we continue to give the pillar banks a monopoly in the creation of credit? Pumping up the balance sheets of the pillar banks by allowing them to charge artificially high interest rates that far exceed those in other EU member states is entirely incompatible with driving the indigenous economy. It is worth looking at how German industry is structured, which I have outlined in Appendix 2. Germany’s economy is 70% funded through public and community banking. Ireland committed to introducing competition to the banking market as a prerequisite for the bailout but no such competition has been introduced. The Strategic Banking Corporation of Ireland is a manifestly flawed and expensive approach to re-banking Ireland. The real answer then, as now, was to introduce public and community banking. Currently, there are huge concerns that a potential competitor, the post office network, is set to be captured by the pillar banks in what would be an extraordinary setback in the quest to lower the cost base while credit unions are subject to a host of anti-competitive restrictions that prevent them from offering competition to the pillar banks.

In short, the core issue is that the economy is riddled with cartels and other market abuses which have, in turn, created an artificially high cost base, thus eroding our competitiveness. For example, beef farmers are being squeezed out of existence by excessive input prices and unviable trade terms for their end product, primarily due to the structure and behaviour of the market. There are very significant cost issues in the banking, agriculture, legal, housing, construction materials, insurance and pharmaceutical sectors, to name but a few, together with a decidedly unhealthy dominance in the media sector. The main problem is that Ireland’s competition law enforcement regime has been an abysmal failure in its 27 year life. It lacks independence, power, competence, adequate resources and, most of all, the culture to carry out its statutory function in any meaningful way. I have no doubt that we can turn Ireland into the best little country in the world in which to do business, but we must tackle the culture of high costs.

I thank Mr. Maye. The cost of insurance has been a common theme among the delegates who have appeared before the committee to discuss the cost of doing business, a topic on which we have spent a substantial amount of time. It was raised as an issue of significant concern in the majority of submissions received from business organisations during the summer of 2017. Many organisations highlighted the significant increases in the cost of public and employers' liability insurance facing their members. At our last meeting we heard from representatives of the Retail Jewellers of Ireland and the Irish Pharmacy Union who because of the nature of their businesses had very serious concerns about insurance costs. Their members are open to a lot of abuses by way of theft, shoplifting and even, in some instances, vandalism. The cost of public liability insurance has been particularly problematic. Reports of claims tourism have also been made to the committee. The delegates might factor it in when giving us some of their answers.

I welcome the representatives of both groups and thank them for their presentations. We have seen recurring themes in our discussions on the cost of doing business. As the Chairman said, the cost of insurance is a major issue. Rates and the cost of finance are others. Therefore, I am very interested in what Mr. Maye said about pumping up the balance sheets of the pillar banks. We are very interested in community banking. We have had representatives of the bank Sparkasse before the committee and are very interested in pursuing the introduction of that model of bank in Ireland in order to create real competition. It is based on community, interaction with the client, knowing what a client's business is and understanding its needs and the risks involved. To emphasise Mr. Maye's point, I was only just talking to someone who had been comparing notes at a social event in France. While she pays 3.3% interest on her mortgage, her cousin is paying 1.1% in France. We are supposed to be in the European Union and fail to see why there should be such a disparity. By the way, the cousin's mortgage is over 20 years, while the mortgage of the Irish person mentioned is over 30 years. That is an issue with which we have to deal and which we are going to pursue, but on the cost of doing business and insurance, in particular, we heard an excellent presentation by the Alliance for Insurance Reform. Not alone did it highlight the problems the delegates and the insurance industry have highlighted, it also came up with specific proposals which certainly received a lot of support here. One of its suggestions was the creation of a Garda fraud unit specifically to tackle insurance fraud. I would like to know the views of both parties on that suggestion. Would they support it?

The allliance also raised concerns about the dual responsibilities of the Central Bank in prudential supervision and consumer protection in the industry. It was of the view that there was a conflict in that regard. I would like to hear views of the delegates on the appropriateness of the Central Bank doing both jobs.

The alliance expressed concerns about the liability insurance market, 90% of which is controlled by eight underwriters. Some 90% of the insurance industry is controlled by just six underwriters. In some instances, when people look for insurance, there are really only two.

To come back to the issue of a Garda fraud unit, one of the other things that interested me was the suggestion there be an automatic referral to An Garda Síochána if a claim failed in court and was found to be vexatious. Such claims fall to be dealt with under sections 25 and 26 of the Civil Liability and Courts Act 2004. It was suggested there be a relationship between the two and that such claims be automatically referred to An Garda Síochána for further evaluation because there needed to be consequences for those who engaged in insurance fraud. I would like to hear the views of the delegates on that suggestion.

There was one other issue. In his report Mr. Thompson mentioned that the number of claims was increasing. There were many good statistics included in the report. One of the things his organisation would like to see is legislation being brought forward to demand that a judge explain why he or she was not adhering to the book of quantum. Nobody wants to interfere with the independence of Judiciary, but if an award is made in excess of the guidelines in the book of quantum, judges should be under an obligation to explain why.

Mr. Kevin Thompson

I thank the Senator. I will take each of his points.

On an independent Garda fraud unit, we support the suggestion in principle at a very high level. We have been working with Departments to draft a straw man in terms of at what it might look. It is a model which has been implemented in the United Kingdom between the Association of British Insurers and the City of London Police. What makes it effective from their point of view is that the industry funds it, but the City of London Police has total operational independence.

It decides what it wants to do and how to do it and the industry has no input into it.

The second question was about the Central Bank of Ireland and the adoption of the prudential as against the conduct approach. The Central Bank has been heavily involved in the implementation of Solvency II and the industry has worked very closely with it. That is very positive as we see adequate solvency as the correct form of policy holder protection. The Central Bank has restructured to have a conduct and a prudential directorate. It has been heavily involved on the conduct side. It has brought forward many consumer protection regulations which we have adopted and implemented extensively. We do not see the need to split the two functions and fear the setting up of another regulatory arm would drive further cost into the system.

Another question was about liability insurance and the fact that only two of eight insurers in the market might quote. It is difficult to comment on situations in which companies will or will not quote, but there are 13 providers in the marketplace, with eight substantially writing liability insurance policies. The cost of insurance working group focused on employers' and public liability insurance and its report contains a graph which shows that freedom of services carriers, that is, insurance companies which are not domiciled here but which have passports have been writing more and more liability insurance policies, which we see as positive.

I wholeheartedly agree on the consequences of fraud. If somebody is proved to have committed fraud, there should be serious action and a criminal prosecution.

The question about a judge's explanation in respect of the book of quantum goes back to the good work of the cost of insurance working group and the Personal Injuries Commission to benchmark awards against those made in other countries. That is the first step in bringing about a reduction in the level of awards. We would welcome anything that would bring transparency to the reason an award at a particular level was made.

Mr. Maye is founder and chairman of the International Small Business Alliance and joint chairman of the Public Banking Forum of Ireland. Will he give us a little of the background of the International Small Business Alliance? How many companies and what type of businesses does it represent? I ask this question in order that members will know what questions to put to him. There was no mention of this in the opening statement and Mr. Maye said he was going to talk about macro rather than micro issues.

Mr. Seamus Maye

The International Small Business Alliance concentrates on fairness in trade between SMEs and larger multinationals. We have been involved in leading competition law cases in several countries and campaigned actively with DG Competition in Brussels in the past 20 or so years. We have campaigned actively in Ireland with the various political parties on the issue of competition reform. In this country we have had a competition law regime in place since 1991, but it has been an utter failure. It does not work. We could talk about the insurance sector or any other until the cows came home, but we do not have the tools to investigate to see what is happening. In the United Kingdom there is a competition Act which is virtually the same as the Irish Act, but there is also in place the Enterprise Act 2002 which gives the Competition and Markets Authority the power to follow in-depth market analysis procedures. It also gives it sweeping powers of reform. We simply have not got to the start of the process here. In Britain under the Enterprises Act the Competition and Markets Authority can go into any sector to examine where the money is being spent, where the profits are goings and who is benefiting. It can then make orders and state something has to stop.

I am simply trying to get my head around what Mr. Maye's organisation is like. Is it made up of like-minded SMEs which have come together?

Mr. Seamus Maye

Yes.

Mr. Maye said he wanted to see fairness in trade between SMEs and multinational companies. Is he advocating for fair play for SMEs?

Mr. Seamus Maye

Yes. We have worked very hard for many years with the Competition Authority and the Office of the Director of Corporate Enforcement and found that regulators are simply not up to the task. They do not have the culture required. When it comes to examining the behaviour of big business, they just do not do it, as we have seen time and again. We have been dealing with the Office of the Director of Corporate Enforcement since 2001, when it was formed, and the Competition Authority since 1991.

Does the International Small Business Alliance deal with them on behalf of small and medium enterprises? I imagined that Mr. Maye would say he represented 50 or 60 businesses throughout the country, like RGDATA or other associations do. Is that the case?

Mr. Seamus Maye

No. Ours is not an association but an alliance. We operate all over the world and have, for example, done some work in New Zealand. We bring small businesses to the authorities, show them what has to be done to make better use of competition law and lobby for stronger competition law, whether it is in Germany, Britain, France or the United States.

It is not clear in the document. Mr. Maye makes several statements on where things have gone wrong, but in order to allow members to direct questions to him, I wanted to get some background information. We will move on.

Mr. Maye did not get an opportunity to answer the questions.

I beg the Senator's pardon. I thought his questions were for the insurance groups only.

Mr. Seamus Maye

A lot of factors affect the cost of insurance, but small businesses all over the country are in terrible situations. Some people can hardly put a dinner on the table and are faced with enormous bills. I do not know how they will possibly be able to pay them, but when one sees what is going on in the legal profession, it reminds us that we need an Act similar to the Enterprise Act in Britain. We need to examine what is going on and how claims are becoming so enormous. For example, we do not know what the legal fees are. We need to examine the fees being paid in dealing with all personal injury claims. We also need to examine the conduct of the insurance sector, but we do not have the tools to do so. We need to reorganise the competition regime and copy the UK Enterprise Act. That would allow us to look at several sectors, including the agriculture sector, the building materials sector and all of the other sectors I noted.

I read some quotes from Dr. Fingleton who said everything I am saying.

I put a number of questions which Mr. Thompson kindly answered directly. I wonder if Mr. Maye would do the same. One was whether he would support the establishment of a Garda insurance fraud unit. I also asked for a comment on concerns the Alliance for Insurance Reform had about the dual role of the Central Bank. Does Mr. Maye have a view on the issue I raised about sections 25 and 26 of the Civil Liability and Courts Act to allow for direct referral from the courts if there is a failed action and for the Garda to be automatically informed to investigate when there is a question mark about fraud? Will he comment on the suggestion that when a member of the Judiciary exceeds the book of quantum, he or she explain why he or she has done so?

Mr. Seamus Maye

We broadly support everything the Senator said. We do not have a good record in this country in dealing with white-collar crime. We need to throw the book at insurance fraud, of which there is a huge amount. We also need to throw the book at the legal costs involved in dealing with personal injury cases.

They are several times what they should be. The proof is there in the UK. There are law firms in Ireland getting €15,000 in fees for small injury claims and the equivalent solicitor in the UK is getting €1,500. That is ten times the amount. Who is going to look at it? We simply do not have the tools to look in through the window and see what is going on. I would be happy if I got nothing out of this presentation other than agreement to pursue an enterprise Act. We use it in the UK and it is every effective. We had a market investigation into the cement sector in the UK and it resulted in the forced sale or divestment of one cement factory and two cement substitute factories. It works. We have been trying in vain in this country for 27 years. We need regulation. Simply, we will not regulate ourselves.

I thank both groups for their presentations. They have been quite informative.

Insurance Ireland outlined the rise in costs and how it has tried to associate them back to claims. Some of the claims are noteworthy. From the figures they have given here, claims have risen from 6% to 12% per annum. They are not off the scale. I am trying to figure out how the sector can reconcile 2.5%, the lowest one I see here, to maybe 12% per annum, the highlight figure, with a rise in some insurance costs which are just jumping off the pages with consumers. Where is the correlation here? We have a plethora of figures on the rise in costs to the insurance sector which are beautifully correlated here. Mr. Thompson might explain.

Maybe consumers are not in the real world when they talk about insurance costs. I am sure the witnesses read the newspapers and everything else. Every second article is about how the cost of insurance has gone up, talk of cartels, competition and lot of stuff we heard here earlier. We had Mr. McCambridge, a retailer in Galway, here at our second last meeting. I am sure the witnesses have heard of him. He gave a detailed presentation of how his insurance premium went from €25,000 to €50,000, to €80,000 and it is at €100,000 now in the space of three and a half years, and he had no claim in this time. Maybe these are one-off cases. Maybe it is the one-off case that is being trumpeted in the media. It is certainly not my experience and what I am hearing from people on the ground. I myself can give a couple of examples. I am involved with a GAA club. I accept it might not be a run-of-the-mill case but its insurance has gone up nearly 300% in three years. That is a massive increase. It is more than doubling every year for the past three years. If I worked it out exactly, I would say it is higher than that.

I am curious about the correlation. These are all sad figures. I appreciate they are going up and the costs are going up. We wish they were not. Even blaming it all on the solicitors and associated costs, there does not seem to be a correlation between these figures and what consumers pay in premiums. Either that or we are getting the red herring cases instead of the truth. I feel many are telling the truth. It is not the red herring cases that are out there. I am curious on Mr. Thompson's thoughts on that firstly. I might talk to Mr. Maye afterwards, if that is okay.

Mr. Kevin Thompson

The Senator asks a fair question. First, I acknowledge that consumers have incurred serious premium increases. We hear it every day and we sympathise with them.

I will try and draw some correlation because I take the Senator's point that there are a lot of statistics there. The easiest statistic to look at is the gross incurred claims. According to the blue book, there was a 44% increase in the gross incurred claims from 2012 to 2015. That will show the Senator the level of claims occurrence that we have had within the market place over that period of time. Equally, when one tries to narrow it down, from example, to employer liability, we had net incurred claims in 2016 of €408 million, up 39% on the previous year. Unfortunately, we have seen jumps in the cost of claims and that is borne out by those high-level figures. In the figures we have quoted, we have tried to give a bit of insight on where claims are settled.

There has been an upward trajectory in terms of the cost of claims and that is very much one part of the story. That is why we as a sector are heavily committed to the ongoing work on the two Government reports on the cost of insurance working group for motor insurance and the most recent one on employer liability and public liability.

What will also help to bring some transparency to it is that one of the recommendations of the cost of insurance working group is to set up the national claims information database, which will be under the remit of the Central Bank. That database will capture the details of all claims and their associated costs. We are fully supportive of that and we want that to be implemented as quickly as possible. That will, in time, allow the Senator and other policy makers have real time information to allow them formulate policy which can alleviate this situation.

I would like to flesh that out. Mr. Thompson has given detailed figures, which are great, and we can understand why some of these costs are built in. I am sure he has the figures on the rebound. How much has public liability insurance gone up across the market from 2012 to 2015? How much on average has car insurance gone up from 2012 to 2015, or whatever the correlating figures are?

Mr. Kevin Thompson

I do not have the figures for premium increases to hand.

Mr. Thompson is knocking me down with figures everywhere else on all the money the sector has to pay out. He is not giving me the important ones.

Mr. Kevin Thompson

What we can tell the Senator is that the gross incurred cost of claims, as I have stated, have gone up by 44%. We already highlighted what the gross incurred cost of claims had gone to.

I heard all that. They have it all listed here, which I appreciate. I am asking Mr. Thompson about the reverse end of it. Can he tell us by how much insurance premiums have gone up? That is what the average Joe Soap is paying. Such persons elect us. Those are who we represent here. That is why we are all here having a chat. I would really like to know the correlation. We understand that the claims have gone up. Mr. Thompson has that detailed exceptionally clearly here and he has a pile more figures in that regard. How have premiums gone up? A basic question is, how is the sector linking this back to premiums? I presume Mr. Thompson thought he would be asked it at some point today. Can he shed any light on it for me?

Mr. Kevin Thompson

What I can do is give the increase in the aggregate gross written premiums for the sector from 2012 to 2016. The aggregate gross written premium from 2012 was €3.3 billion. In 2013, it remained at approximately €3 billion. In 2014, it was at €3 billion. In 2015, it increased to just over €4 billion. In 2016, again, we were at €3.2 billion. That is on an aggregate basis. That comes from our fact file.

Are these insurance premiums throughout the country-----

Mr. Kevin Thompson

These are gross premiums taken in.

-----which were taken in in recessionary times?

Mr. Kevin Thompson

From 2012 onwards, yes. That is the data we have in front of us here.

It would have been more beneficial if we had a more detailed breakdown of those figures, which no doubt are correct. If we had greater insight into them, it might be an easier sell for the insurance sector that it is not ripping off guys and that the following, X, Y and Z, are the premiums. Listening to most guys who are insuring their house, their car and everything else, nobody has told me his insurance is static or coming down over the past five years. One would do a lot of looking under a lot of hedges before finding such a person.

Mr. Kevin Thompson

The best port of call in terms of how premiums are moving is the CSO figures. In the CSO figures for the past 12 months, we have seen a reduction of 12% on motor. That is coming off the back of an exponential increase of about 70% in years prior to that.

Equally the CSO figures will highlight what the increases have been in terms of EL and PL.

Mr. Thompson said there was a 70% increase in motor in prior years.

Mr. Kevin Thompson

Over a three year period.

He is looking at a 70% increase.

Mr. Kevin Thompson

That is well known.

I was just curious.

Is it possible for those figures to be circulated to the committee?

Dr. Declan Jackson

It is collected as part of the monthly household survey. There is a collection of the figures on the CSO website and we can share the reference if-----

That would be great.

I appreciate that the figures are there. That is great and I am not trying to put the witnesses in a hard spot. We said that the payout in claims from 2012 to 2015 was approximately 44% which, if we take the four years of 2012, 2013, 2014 and 2015, is 12% per annum, but we are talking about insurance premiums in cars alone going up by 70% in three years. Premiums have gone up by about 25% or 26% per annum. I am curious about the correlation between the 12% and the 25% or 26%.

Mr. Michael Horan

We are talking about slightly different periods there because-----

Yes, I appreciate-----

Mr. Michael Horan

-----in the CSO index when people talk about 70% they are taking it from the bottom of the market to the top. If the three year period is looked at where we are talking about a 44% increase in gross incurred claims costs, the CSO index did not increase by as much as 70% over that three year period. There is a reasonably good correlation between the cost of claims and the cost of premiums. That is not surprising because the main determinant of premiums is claims cost because they are by far the biggest amount of expenditure insurance companies have. We have seen a lot of volatility over the last number of years in the cost of claims, largely driven by the underlying personal injury claims environment. There are well known problems such as the increase in the monetary limits in the courts. Those have retrospective effect in the sense that they affected claims that had already been made but had not been settled so those insurers had to increase their reserves for those claims. That was the backdrop to the whole situation. Now we are in a situation where premiums in motor have fallen over the last 12 months or so but at the same time I do not think the underlying reforms that are necessary to the personal injury claims environment have happened yet. That is what the cost of insurance working group report is all about. That is why we are working with the cost of insurance working group, to try to bring those reforms about, in particular to try to address the high cost of personal injury claims and the high cost of whiplash claims in motor, for example.

I appreciate the witnesses' time and honesty on this but the correlation between the claims and the rising insurance costs is off the wall from my point of view unfortunately. I thank the witnesses.

Any further questions Senator Davitt?

No and I would like to welcome Mr. Maye, Mr. Duddy and Mr. Beades from the International Small Business Alliance. I know one of them quite well from a lot of different work he has done. I know the witnesses are doing great work at present and they are pushing through with other Bills as well so I wish them continued success with that.

I thank both groups for their presentations. They were quite informative. I do not have to tell them about the cost of insurance. It was raised by everybody who came in. It is a major issue for the cost of doing business and for community groups, festivals, sports groups and everything like that. It is a massive problem. Mr. Thompson quoted some figures that I do not really understand. The CSO figures we were given had an increase of 57% in insurance premiums from 2011 to 2016. Mr. Thompson did quote from 2012 so I assume there is a slight difference there but from 2012, 2013, 2014 and 2015 there did not seem to be an increase of that amount from premiums that were being taken in when he was quoting €3 billion or €4 billion. He might come back to me on that one.

Payout for injuries has always been there and unfortunately insurance fraud is not news. It has always been there as well but the massive increases are new. I do not understand how the premiums have risen so far so recently. I note the outlying increases in different aspects of Mr. Thompson's claim over the last few years. There was a 48% increase in Circuit Court awards and a 10.4% increase in legal costs but none of these increases was at the level of 57%. Senator Davitt did try to get Mr. Thompson to explain that and I do not think he answered that question properly. Maybe he might answer it for me.

We all agree that insurance companies play a major role in our economy as they provide services which are required by law or services that people financially have to have, whether it is motor, home or public liability insurance. Due to this prominence and important position in our economy, insurance companies are not comparable to other undertakings. Therefore, does Mr. Thompson believe they should be required to be much more transparent about their premiums and their profits?

I have a few specific questions on a market insurance portal that has been reported on recently and I refer specifically to an article by Mr. Peter O'Dwyer in The Times, Ireland Edition, last week. I am sure Mr. Thompson is aware of that article. Can Insurance Ireland confirm if its members have access to a market insurance portal? Is this known as InsuranceLink? Is it a claims history database? What is it for and how is it used? Do the members have access to other databases known as integrated information data services? What is this for and how is it used? Do members have access to another database known as market intelligence portal and what is this one used for?

Would Deputy Quinlivan mind repeating that bunch of questions because there was quite a lot there and I know the witnesses were struggling to write them down.

Can Insurance Ireland confirm if its members have access to a market insurance portal? Is this known as InsuranceLink? Is it a claims history database? What is it for and how is it used? Do the members have access to other databases known as integrated information data services, IIDS? What is this for and how is it used? Do members have access to another database known as market intelligence portal and what is this one used for? The question following up from that then is how many members do Insurance Ireland have and do all members have access to these? What criteria are set down for the companies access to these databases and do insurance companies have access to pricing information through any of the above databases or through other databases? Insurance Ireland will be aware that their offices were raided by investigators last July. They called that an unannounced inspection. In relation to an ongoing investigation into alleged price fixing of motor insurance premiums, has this been the only time investigators or inspectors have visited their offices? Does Insurance Ireland accept people's frustration with rising insurance costs and the lack of transparency in premium prices? That was an issue raised by a number of groups who have come before the committee. I want to finish by saying that many people get quotes that vary by thousands of euros and because of the lack of transparency and detail as to where the price has come from, people get really annoyed by random prices but they cannot seem to do anything about it. Maybe the witnesses could address that as well.

There is quite a lot there, Mr. Thompson.

Mr. Kevin Thompson

If I miss any of the Deputy's questions please pull me up as I go along.

The easiest one to answer is on the visit by the EU competition authority. We have never been visited before or since.

On the databases we have, I am more than happy to explain every single one of them. The market intelligence portal is not InsuranceLink and it does not record claims information. InsuranceLink is the database which holds claims information. On the IIDS, it is a system which is a portal, not a database. It can be imagined as an electronic pipe which runs from Insurance Ireland to the national fleet data centre in Shannon. That is supported by the road traffic legislation. That pipe allows insurers who choose to access it to verify people's penalty points at the point of disclosure and to verify their no-claims discount.

The important point about the pipe we have to the national fleet database in Shannon is that we do not have exclusive access to it. Any insurer can access it. We established it for our members, but a non-member of Insurance Ireland can access the pipe. That is what the insurance information database does.

On the market intelligence portal and the article by Peter O'Dwyer in the Irish edition of The Times, it was related to an interview last week on RTÉ Radio One between me and another person. A correspondent said, "I am not talking about the market intelligence database which has form 8s". The question put to me was whether the market intelligence portal had form 8s, which are detailed regulatory returns to the Central Bank. My response was that we did not hold market intelligence and to suggest we did was a misnomer and factually incorrect. The answer to the question as to whether we hold form 8s in the market intelligence portal is that we do not. We have no pricing information whatsoever within it. Any information we hold within it is published in our fact file, a copy of which I have in front of me. Anybody can go to our website and download it to see the information contained in it. That is all it is; nothing more, nothing less.

Does that answer all of the questions asked?

It answers most of them. Do all members have access to the portal?

Mr. Kevin Thompson

All members have access to it.

There is no pricing information within it.

Mr. Kevin Thompson

We want to be absolutely clear that there is no pricing information in any of our databases.

Dr. Declan Jackson

Absolutely none.

I thank the delegates.

I also thank the delegates. I missed the statement made by Insurance Ireland because I was attending another committee meeting, but I have read it and have a number of questions. I wish to discuss some of the cost figures presented.

A variety of legal costs seem to be to the fore in the headline figures on the first page. One of the claims made is that there has been a 48% increase in the average Circuit Court award, from €11,800 in 2013 to €17,700 in 2016, according to the annual report of the Courts Service. That makes perfect sense because the jurisdictional limits of the court were increased in 2014. Therefore, we would expect awards to be higher. However, the corollary is that we expect costs to be lower because a person can take a case to the Circuit Court which previously had to be taken to the High Court to be litigated. By definition, therefore, awards should be higher, while costs should be lower. I am not sure I accept that as a ground, but I am interested in hearing the delegates views on it.

The same could be said on many of the other points made about legal services. I am a lawyer, but I am not currently practising and do not work in the area of personal injury claims. However, I have friends and colleagues who do. I made the point to another group which appeared before the committee recently that there was no gravy train. If there is, it is a closed circle in terms of lawyers receiving lucrative personal injury claims work. Someone is making money, but I am not convinced that lawyers are. I know that being a lawyer is not a popular profession, no more than being an insurer, but I am not convinced that many lawyers are running down the quays with briefcases full of personal injury claims.

When the Personal Injuries Assessment Board, PIAB, was established, it took all personal injury cases out of the courts. I am interested in hearing the views of the delegates and whether there has been a retrenchment from that position. Is the PIAB no longer dominating assessments? Are the courts becoming more involved? I am hearing anecdotally that insurers are settling very quickly and easily and, in many cases, not going to the courts or the PIAB. I have been told that defendants such as employers or workplaces dealing with trip and slip cases often want to fight a case with evidence, including CCTV evidence, because an employee is chancing his or her arm. They want to take on litigants, but insurance companies agree to settle and tell workplaces not to worry because they have the matter covered. That is what is leading to increasing costs according to businesses in my constituency or former legal colleagues. It seems to be a major issue. If cases are being settled, rather than going to the PIAB or the courts, that will increase costs. Is that the case and, if so, why?

I have other questions, but perhaps the delegates might answer those first.

Mr. Kevin Thompson

I thank Deputy James Lawless. On the first question about changes to jurisdictional limits, I draw him back to the first cost of insurance working group which examined the issue. On page 109 of its report it is stated, "There had been an underlying growth in cases across all courts". I accept that some cases which would have been heard in the High Court are now being heard in the Circuit Court or the District Court. Unfortunately, the figures from the Courts Service show that there has been growth across all courts. Unfortunately, that is driving the cost of claims.

The Deputy asked about insurers settling cases very quickly. This is always a charge put to insurers, but we have a duty and a responsibility to all claimants to treat them fairly under the consumer protection code, within which one of the abiding principles is that we settle claims quickly, fairly and satisfactorily for the claimants. Insurers will make a decision on whether to settle based on the evidence put in front of them. They do not want cases to drag on. If people are due money at the point of making a claim, they will wish to have the claim settled quickly, but there has been a far tougher approach within the sector to what we consider to be dubious or fraudulent claims. That will continue to be the case. On behalf of honest policy holders, as a sector, we make no apology for this. Our members are getting very tough in this area. The downside is that it is costly to defend such claims. Where we have a suspicion of fraud and want to take a case through the courts, it will cost money. Unfortunately, that feeds through to the cost of claims. Whether a claim is legitimate, honest policy holders have to fund that cost.

Regardless of what people think, we have been strong advocates of the PIAB from the time it was established. Following the consultation process which started in 2014, we believe the issue needs to be revisited. The board needs to be given more powers in order that it can deal with more claims. We know from its annual report that the annual cost associated with settling a claim was about 6.5%. That is what the figure should be and we have no problem with it whatsoever. We are very supportive of doing whatever we can to address the heads of a Bill to increase the powers of the board in order that legislation can be passed quickly. Unfortunately, when cases do not fall within the remit of the board and are taken to the steps of or into the courts, it is expensive. It is also expensive for us to defend fraudulent claims and that expense has been borne. A report from the Department of Finance from the cost of insurance working group stated that for every €100,000 claim, there were additional legal and other costs of over €42,000 which, by any stretch, is expensive. As an industry, we will do our bit and feed into the establishment of a national claims information database which would bring transparency to awards and associated claim costs.

I thank Mr. Thompson. I have questions about motor insurance. The opening statement outlines the situation for returning immigrants. I have raised this issue with the Minister. It seems very unfair that someone who has driven abroad with a full clean licence for a period of time, be it elsewhere in the European Union or elsewhere, is back to square one when he or she returns home. I have engaged on the issue previously and know that the delegates are aware of it. They have said they have put methodologies in place. What is the next step? Is it up to the Department to take it? I ask for clarification on the issue.

Another point is that the cost of motor insurance for younger people in particular is astronomical and prohibitive. I imagine this has been well-aired in many hearings. My colleagues possibly raised the point before I came in. It seems very unfair.

We all remember when we were at the age of getting our first cars. It was difficult to get on the road. The difficulty now, however, seems to be of a magnitude or order that puts it out of reach. Moreover, unfortunately, our public transport is not what it needs to be in many parts of the country and it is not an option for many young people. They need a car to get to work, to college or to their first job. What can be done? We could spend all day and all night on the subject. Is there any light on the horizon?

My next question relates to motor insurance as well. It goes back to the discussion on fraud and accommodating fraud. A Deputy hears many interesting and shocking stories from his constituency. People come to me with all manner of different revelations. I had a conversation with someone in the vehicle disposal industry. One issue was raised as being rife, namely, the practice of cars involved in collisions or accidents being used. Different categories are designated, including cars deemed recoverable and repairable. I think the categories were designated A, B, C and D. Some cars may be at end-of-life stage.

Let us suppose a car is considered to be sufficiently damaged that it is not worth repairing. The insurance company would pay out for a replacement car. That may make things better for the claimant but it may drive up the cost as well. The person I spoke to was concerned that some of those cars are re-entering the market through the back door. These cars could have been involved in fatal collisions. All manner of terrible damage could have been done to a car and it may not be obvious. What if those cars are back on the road 12 months later?

The argument was made for a certified end-of-life facility where these vehicles would go. They would be registered and off the road once and for all. The chassis numbers would be logged and so on. Some insurers were looking at the idea and thinking of going down that road while others were not so keen. Clarity on that question would be helpful, if possible.

Dr. Declan Jackson

The question of returning immigrants was raised. Our sector has been keenly aware of the issue for some time. I know the issue is difficult for people who may have had time abroad. They may come back only to find that the previous no-claims bonus did not apply. In essence, from an underwriting perspective, this means in some cases they were treated as new drivers, which was quite difficult.

A number of actions arose in the cost of insurance working group relating to left-hand drive and right-hand drive and various other things. When we got to the core of the matter around this time last year, however, the essence was around proof of driving experience. It was about being able to demonstrate that a driver had driving experience in his own name for the period abroad. This means if someone is not driving for a period of over two years, then the risk profile changes from an underwriting point of view. It is different if it can be demonstrated and verified.

We put in place a protocol with the Department of Finance. It allows for people to be aware of the facts before they go away. They can use some of the diaspora contact points while they are away and prior to returning. This can allow them to get the information to show what they need to bring to the country of temporary origin and what is needed when they come back. That seems to be working although it is not working flawlessly. We are still encountering some cases. There is awareness and a methodology to start addressing it. For us, success arises when people talk to their insurance company before they go so they have an awareness of what they have to do. That is starting and it is working. It needs improvement in certain areas but demonstration of verifiable information is important. If anyone wants more detail, we are happy to provide it.

Drivers need to show continued driving experience. It is difficult where there have been breaks in the driving experience of a person. The driver will be treated in a similar way to someone who might be at home who has a break and cannot demonstrate insurance cover. This arises because the person is not driving day in, day out. By and large, I believe we have a methodology that, while not perfect, is becoming more effective.

Mr. Michael Horan

Deputy Lawless asked about end-of-life vehicles. We notify the national vehicle driver file in Shannon of end-of-life vehicles. End-of-life vehicles are crushed and then the record at the national vehicle driver file is locked down such that the vehicle cannot be sold or no one can try to sell the vehicle.

My apologies, Chairman, I was in the Chamber.

I saw that. Thank you.

I thank the witnesses for coming in. Some of my questions are around motor insurance.

My first question is on emigrants. Mr. Thompson and I were on a television programme a month ago. He mentioned that there was a 50% drop in the premiums for emigrants returning home. Does Mr. Thompson have data that he can share with the committee around that claim? Is there any truth to the story that emigrants are putting themselves as named drivers on the policies of their parents before they go? This allows them to hold a policy for the three or four years while they are away. Mr. Jackson mentioned that emigrants should talk to the insurance companies before they go. Some emigrants go abroad but may not be coming back. If they do come back, it might be for four or five years. It has an impact on their rights as consumers if they are tied to a particular insurer before they go. They should be recognised for their driving credentials and they should be allowed to shop around. I would appreciate clarification on that point.

My next question relates to sales representatives on the road. I have heard of this anecdotally from the market. Let us imagine a sales representative is on the road in a company car for ten or 15 years but has not had a car insured in his or her name. Such a person is now getting hit for high premium policies as well. The approach of the insurers is that this is the first time the driver has had a policy. I want clarification and a statement around that and whether it is happening in the market.

I am getting the same feedback anecdotally with regard to cars that have had more than five owners. Again, it is anecdotal evidence and I am not suggesting otherwise. I am simply getting this back from constituents. Let us suppose a car has had five or more owners or is ten or 11 years old. Then it seems the premium increases as well. I would like clarification on that point.

The remaining question relates to the presentation by Insurance Ireland. Can I get some detail from the stakeholders of information on how premiums are calculated? I know we have the national information claims database. Are the bodies here satisfied that there is enough transparency between the insurance companies and the businesses that they insure? The question is especially relevant for businesses. I am removing myself from the motor insurance question. This relates more to where a business or livelihood is at stake. Businesses are providers to the community. Will the witnesses comment on claims that are under way? I have heard comment to the effect that many businesses may not be aware of claims happening. It seems it is only when they go to renew their insurance policies that they are told their insurance costs have been hiked because a claim has come in or because a claims process has started.

There are enough questions there. I am seeking some clarity on those points. I am happy to repeat the questions. There is no problem with that.

Mr. Kevin Thompson

I can probably spread some of these questions between myself and my colleagues.

I was asked about the 50% figure mentioned on "The Pat Kenny Show". We have had a 50% drop in the number of cases going through our declined cases agreement. These cases involve returning emigrants. Our interpretation is that the protocol we have implemented in agreement with Government is starting to work. My colleagues have commented on this. We still have some teething problems and we accept that it is not perfect yet. We hope that as we work through this process, it will get much better.

Deputy Neville asked about the question of emigrants notifying the insurance company before they go.

Yes, Mr. Jackson indicated intending emigrants should speak to their insurance company before they leave.

Mr. Kevin Thompson

All the insurers seek to abide by an agreed protocol. We are hoping to reach a point at which requirements are standardised. Before a person emigrates, the most natural point of contact will be his or her current insurer. The insurer will set out what is in the protocol and highlight what information the prospective emigrant should capture while abroad. This does not necessarily mean the emigrant must revert to the same insurer on his or her return.

All insurers will follow the same standards.

Dr. Declan Jackson

Deputy Neville is correct that a person should not be tied to any insurer on the basis that he or she has been abroad for a period. That is not the intention. However, there is an avenue available whereby a person can obtain advice from his or her insurer before emigrating. Emigrants can also obtain further advice before returning to this country and this advice is available from any insurer. The protocol is set up in a way that allows adequate freedom to customers who should not be tied. A prospective emigrant will not know in advance for how long he or she will be abroad. It may be one year or if things go well, it might be five years. The crucial issue is that consumers know what evidence will be required to verify their driver experience and allow them to re-enter the market with credit being given for driving experience. That is the intent behind the protocol.

Has the number of people who become named drivers on a family member's insurance policy before returning from abroad increased significantly? The argument can be made that the 50% decline in the cost of premiums for returning emigrants reflects the practice of emigrants becoming named drivers on a parent's insurance policy before returning to Ireland. This means they will be in the system when they return.

Mr. Kevin Thompson

We would not have visibility in that respect.

That is the counter-argument I am hearing on the ground. People are deciding to have themselves included as named drivers on family members' insurance policies, for example, while they are home for a fortnight at Christmas, because this gets them into the system. I am not pouring cold water on what the witnesses have said but advising them of what I am hearing on the ground.

Mr. Michael Horan

A question was asked on the age of vehicles, specifically vehicles that are more than ten years old. Insurance companies have their own individual underwriting criteria. Some insurers have had poor experience with older cars.

Do any insurance companies market policies at owners of cars that are ten years old or older?

Mr. Michael Horan

Cars that are more than ten years of age-----

Is any insurance company marketing a product that targets cars that are ten years old or older?

Mr. Michael Horan

It is perfectly possible to insure a car that is more than ten years of age in the market.

Are any insurance companies targeting that market because they want that business? Mr. Horan stated that each underwriter or company has the freedom to decide what business to target and what products to offer. Do any insurance companies specifically target the market for older cars?

Mr. Kevin Thompson

We do not know.

I have not heard of any companies doing this, which suggests that they are not doing so across the board. My point is that people who drive cars that are more than ten years old are finding it extremely difficult to obtain insurance. They are usually the less well-off.

Mr. Michael Horan

Some insurers are in the market for those cars.

That may be the case but they are charging substantial sums for policies.

Mr. Michael Horan

Some insurers are in the market for those cars, while others are less keen to insure them. However, it is perfectly possible to insure a vehicle of more than ten years of age in the market.

Has evidence or feedback been received regarding a practice whereby insurance premiums are increased for cars with more than five previous owners?

Mr. Kevin Thompson

Again, we are not aware of that practice. This is the first time we have heard of it.

I am informed anecdotally that insurance companies will charge high premiums in cases where a sales representative who has used a company car for a period of ten or 15 years changes job and seeks to have his or her car insured privately. The reason given is that the insurance policy will be viewed as for a first-time driver, even though he or she may have been driving for ten, 15 or 20 years.

Mr. Michael Horan

In that scenario, what sometimes happens is that a person driving a company car will not build up a no claims discount in his or her name on a private car policy. In such circumstances, the person can obtain a letter from an employer stating that he or she has been driving a company car for X number of years claims-free, etc., and then supply this letter when seeking insurance. The insurance company may take this into consideration.

The decision will be at the discretion of the insurance company.

Mr. Michael Horan

A proposer taking out insurance can approach any insurance company. A letter from an employer enables him or her to make a case for having been driving claims free for X number of years and the insurer may take that into consideration.

I propose that our report recommend that action be taken to standardise protocols for sales representatives who move from a company insurance policy to a private insurance company. A protocol similar to that introduced in respect of emigrants should be in place because the same principle applies. An emigrant may acquire driving experience for five or ten years in another jurisdiction and a sales representative will acquire five or ten years' experience driving for a company, albeit not under his or her name. If a protocol can be provided for one group, a similar protocol can be provided for another group. I will take Mr. Thompson's word when he states there has been a 50% fall in the cost of insurance premiums for returning emigrants and the reasons therefor.

We will certainly consider Deputy Neville's proposal. We have focused primarily on motor insurance which, while welcome-----

I asked several questions on business insurance, which were not answered.

I ask the Deputy to repeat his questions.

I sought detailed information on how premiums are calculated. This may go back to the national claims information database. I refer to the substantial hikes in business insurance as opposed to motor insurance. In many cases, businesses do not realise a claim has been made against them until they seek to have a policy renewed when they find the cost has increased significantly. I ask the witnesses to comment.

Mr. Kevin Thompson

On the Deputy's first question on transparency of premium calculation, when an insurer produces a quote it generally provides a breakdown of that for which the premium is being charged. There is guidance on this in the consumer protection code and we are happy to support, in whatever way we can, and work with government to see how we can make that more transparent, if possible.

On the notification of claims, again the consumer protection code mandates that the insurer must notify a policyholder in respect of a claim. From our perspective, our insurers abide by the code.

I am feeding back to the witnesses the stories I am hearing on the ground.

Dr. Declan Jackson

On the calculation of premiums, a recently completed consultation process focused specifically on the way in which motor insurance premiums are calculated. This reflects the desire for more information. We have provided standard information, as we were required to do on the costs of the insurance, as to the factors that lead into premiums. This is probably a direction of travel that will go into other classes of liability business in terms of how the premium is calculated. While I am speaking from memory and stand open to correction, I understand the consumer protection code requires that a policyholder must be informed prior to a settlement being made.

What I have been told is that when a person goes to renew his or her insurance, he or she is hit by this big insurance bill. The person wonders what has happened, and then he or she is told there is a claim against his or her insurance.

Dr. Declan Jackson

If a claim goes through PIAB, I think a notification would be issued to the policyholder.

Mr. Michael Horan

Generally speaking when a claim is made, the policyholder would be notified that there is a claim against his insurance. He would also be notified at the time of settlement. At the time of renewal, a claim may well have an effect on the premium. The size of the claim will also be a factor.

Of course, I think the question arises from the communications process.

I thank Deputy Neville. I have a question for Mr. Maye. During his presentation he spoke about the German industry and the pillar banks. While we were holding our many meetings, we had the pillar banks in and the following week we had Sparkassen, Irish Rural Link and the credit unions in to look specifically at what they could bring to the market. Mr. Maye is very supportive of the German model, as in his statement he said that the pillar banks are "entirely incompatible with driving our indigenous economy. It is worth looking at how German Industry is structured.". We looked at the German model in detail and we were very supportive of it, especially as they were really focusing on the midlands. Will Mr. Maye elaborate on that please?

Mr. Seamus Maye

I thank the Chairman for the opportunity to address this issue. We have worked quite closely with Sparkassen in the past. In fact our group, the Public Banking Forum of Ireland, brought Sparkassen into Ireland initially. We are talking to the credit unions, the Credit Union Development Association and the Irish League of Credit Unions. Our indigenous economy cannot and will not thrive until we lower our interest rates and until we have a model something similar to Germany. Where the Public Banking Forum of Ireland slightly differs is that we do not see that it is sensible to bring in a standalone public banking model into Ireland because we already have two, the credit unions and the post offices that are right throughout every community in the country. What we would like to see happening is a working group that would bring the Sparkassen, the credit unions and the post offices together. Let me give an example, New Zealand had a post office bank for 150 years and then they corporatised it and eventually sold it in 1989. In 2002 New Zealand realised they had made a terrible mistake and they set up the Kiwibank, and the post offices became the Kiwibank. In the past 15 years, that bank has taken 20% of the market. The people love it, it is a people's bank and it has brought competition into the marketplace. There is absolutely no reason we cannot turn our post offices into a similar model to the Kiwibank.

May I interject at this point, as Mr. Maye is aware we did have a post office bank at one stage but the post office bank failed? I know it was not quite a bank.

Mr. Seamus Maye

It was not really a bank.

It was a counter in the post office.

Mr. Seamus Maye

From what we can gather there is a major danger that some of the pillar banks will start to supply banking services through the post offices and that it could even be called community banking, which it is not and will not be.

We already have AIB supplying services within the post office network.

Mr. Seamus Maye

Yes, we do. There is a possibility from what we are reading that the pillar banks, AIB and Bank of Ireland, could operate services through the post office banks like what Bank of Ireland does in the UK. That would ensure that interest rates stay high. It would actually remove the post offices as being a potential competitor from the market and the post offices would be tied up by the pillar banks, which would ensure that we continue with high interest rates.

Does Mr. Maye think it would also be supportive of retaining the post office network into the future?

Mr. Seamus Maye

The only real viable way to retain the post office network is to create a post office bank exactly on the basis of the New Zealand model. It works in New Zealand and as we are pretty well identical economies, it can work here. Anything else is just painting over the cracks. To allow the pillar banks into the post offices to capture the post office network as a potential competitor is madness.

We would be very keen that this would be looked at by Government before the announcement. A report by the joint concentration group on the viability of public and community banking has been completed but we do not know what is in it.

The credit unions cannot survive. They have been shackled by the Central Bank and Government for years and years and the restrictions that are being put on them makes them non-viable. In our view the restrictions are anti-competitive. They are breaches of Irish and European competition law. We believe the Sparkassen can help but we also believe we have the basic infrastructure between the post offices and the credit unions to create an alternative to the pillar banking system.

Let us not forget that in Ireland the pillar banks have in and around 95% of the market. In Germany, the equivalent pillar banks have 12.5% of the market. There is something seriously wrong with the banking service in our economy. In one of the appendices I gave some figures on the German economy, which are quite fascinating because we all think that Germany is about Volkswagen, Mercedes Benz and Deutsche Bank, but in fact it is not, it is all about small business and micro enterprises.

I must say that during the presentations that day by Sparkassen, Rural Link and the credit unions, there was great buy-in from all the members present. Senator Reilly specifically asked for Sparkassen to be brought in together with Rural Link and the credit unions. I know it will feature heavily in our document. Does Mr. Maye wish to add because I know there were not a great many specific questions?

Mr. Seamus Maye

I understand that.

That is why I questioned him earlier, I was afraid that specific questions would not be put.

I have a specific question. Mr. Maye mentioned Britain's Enterprise Act 2002 earlier. Who is stopping the progression of the enterprise Act, as it seems very logical to me? I thought the wheels were in motion but evidently it has been stopped on a couple of occasions.

Mr. Seamus Maye

What is stopping us is culture. We have a culture of protecting big business. We have a culture of not standing up to big business. That is what is destroying the potential of our indigenous economy going forward. Most other European countries are way ahead of Ireland in terms of dealing with competition law issues. They hand down heavy fines and prison sentences. America is very good at handing down prison sentences. To all intents and purposes we have zero competition law enforcement in this country. We need it. We should start. We should also bring in rewards for whistleblowers. That is essential. It is very difficult to prove cartels are in place. We need to bring in rewards for whistleblowers, which we have campaigned on for years. We need to bring in an act like the British Enterprise Act 2002. We need to get serious about competition law enforcement. Let me put it this way. We have a man or woman working for €400 a week and they are looking for a 20% increase, to which they feel entitled as everything is expensive. There are two ways we can pay that increase. We can give them another €80 a week or we can increase the purchasing power of their €400, so that they get €480 worth for their €400. We do that by driving hard against costs. I have only touched on certain costs. There are many other costs affecting the indigenous economy, such as lack of infrastructure in parts of the country. We will not go into it now. As we depend less and less on foreign direct investment, we have to create the tools to make our indigenous economy thrive. I absolutely believe that this can be a great country. We can do it but we have to get an understanding of what we need to do to get there.

As there is nobody offering, I will bring the meeting to a close. This is the final of our eight meetings on the cost of doing business. We have a great deal of work to do to pull our document together, which we hope to launch in July 2018. We will make many recommendations on the cost of doing business and I have no doubt that insurance will feature heavily in it. I thank the witness for giving their time and coming here to engage with the committee. Go raibh míle maith agaibh.

May I remind members that the Select Committee on Business, Enterprise and Innovation will meet at 4.45 p.m. tomorrow, Wednesday to consider the Industrial Development (Amendment) Bill 2018?

The joint committee adjourned at 6 p.m. until 4 p.m. on Tuesday, 22 May 2018.