Thank you. I am accompanied by Mr. Kevin Gilna who is in charge of public affairs for the CIF, Ms Patsy Supple, director of John F. Supple Construction from the Cork branch and Mr. Billy Clancy, MD of Clancy Construction of the south-east branch.
This is our first opportunity to address the committee. The CIF is the representative body for the construction industry in Ireland and our membership covers all regions and all sectors of the industry. Approximately 95% of the firms in the industry are small to medium-sized enterprises and membership of the federation follows that pattern. Most of our members are small to medium-sized enterprises. The turnover of the industry last year was €20 billion, which is 19% of the total economic activity in the country. There are about 190,000 people employed in the site based sector of the industry and that accounts for over one in ten people working in the country. It is a very large sector of the economy and insurance is a major issue for the construction industry.
In terms of the overall insurance market it can be described as a hard market, with rapidly increasing insurance rates and a low capacity within the market. The situation in construction has an added dimension in that the number of firms interested in doing business in that sector is down to about three and one of those is responsible for over 50% of the construction insurance market. In addition, there are a number of industry schemes. The federation is involved in one such scheme through AON brokers.
We welcome the co-ordinated action on insurance by Government, the insurance industry and employers. Together we can change the whole culture in the insurance market. We welcome the fact that in the new national programme, Sustaining Progress, the social partners have made insurance one of their top ten issues to be dealt with by the Government.
In terms of the key issues, the availability of insurance to construction firms is important. Many firms are finding it difficult to get quotations from more than one insurer and in many cases they are lucky to get one quotation. They can get a quotation within a few days of the renewal date on a take it or leave it basis. Some firms have found it impossible to get insurance and there are issues in that they are possibly trading without insurance at present although I should point out it is not a legislative requirement to have insurance. I will deal with the cost of insurance policies later.
Regarding regulation of the insurance market, it is a European market for non-life insurance but the demise of independent insurance companies has highlighted some key issues for us. The fact is that construction companies in the UK which were insured by independents were compensated by the compensating authorities in the UK in respect of their employment liability claims while Irish firms insured by independent insurance companies got nothing and were excluded on the basis that while employers' liability insurance is mandatory in the UK, employers' liability policies are not mandatory here. That is an important issue for the committee to consider.
Much has been said about the claims culture and I will go into that later, including the Government initiatives in that regard. We surveyed our members at the end of last year and I have selected some of the views expressed to give a flavour of what is happening. The first states:
It is nearly impossible to get a quote from an insurance company, therefore you have no option but to obtain your policy with your current broker or insurance company. Due to the fact that you have to stay with one company you are forced to pay a very large premium. As they have very little competition against them therefore you are caught in a web of large fees. Even if you never claim from them, you never receive a reduced rate, only more hikes in premiums.
The clear message is that even if one has an exemplary health and safety record, that is no protection against the huge increases in insurance premia that have taken place. The second states:
Choice in the market is severely limited. At our last renewal date we put a proposal to the only potential competitor of our current insurer, who replied to the broker with a one-line response refusing the quote. This means we had absolutely no choice in placing our insurance elsewhere. Currently there are only three insurance companies in the market which may be willing to take on our business. Secondly, despite an excellent health and safety and claims record our insurance over the last two years has risen by 45% and 85% respectively, with no choice - we have to accept increases in both premia and the levels of excesses applying to our policy.
On the types of increases suffered by the industry, quoting from example No. 6, in 2000 employers' and public liability was €6,600, in 2001 it was €8,900, in 2002 it was €13,000 and in 2003 it was quoted at €27,000. That is an increase from the year 2000 to 2003 of from €6,600 to €27,000. In example 9, prior to this year the insurance cost was €800 per housing unit for employers' and public liability.