Reform of the Irish Insurance Market: Presentations.

We commence day five of the joint committee's hearings on the reform of certain aspects of the Irish insurance market. The presentations to the committee today are from ISME and IBEC.

The committee has received 50 written submissions following its invitation to certain bodies to forward their views. The public notice published in the Sunday newspapers of 2 March 2003 invited organisations and members of the public to make written submissions to the committee. Copies of this documentation have been circulated to members. The committee is now embarking on the next phase of its work, the hearing of oral submissions from those who have made written submissions to the committee.

Members are reminded of the parliamentary practice that they should not comment on, criticise or make charges against, any person outside the Houses of the Oireachtas or an official, either by name or in such a way as to make him or her identifiable. Members who wish to make a declaration about any matter being discussed may do so now or at the start of their contributions.

Members are also reminded that if there is a possibility of a conflict of interest, they should make a declaration of interest either now or at the start of their contribution. I have given the good example in this regard by informing this meeting that I am a member of the Irish Hotels Federation.

I welcome the representatives of ISME, Mr. Mark Fielding, chief executive, and Mr. Jim Curran, head of research. I welcome Mr. Tony Briscoe, assistant director of social policy at IBEC, as representative of the IBEC membership.

I draw the attention of witnesses to the fact that members of the committee have absolute privilege but this same privilege does not extend to witnesses appearing before the committee. While it is generally accepted that witnesses would have qualified privilege, the committee is not in a position to guarantee any level of privilege to witnesses appearing before it.

The committee requests both representative groups to make their submissions to be followed by a question and answer session.

Mr. Tony Briscoe

I thank the committee for its invitation to address this meeting as a representative of IBEC, the Irish Business and Employers Confederation. My organisation represents more than 6,000 businesses, of which more than 50% employ fewer than 20 employees and almost 80%, the substantial majority, employ fewer than 50 employees. For many years, IBEC has regularly conducted research and undertaken surveys to establish in considerable detail the extent to which the cost of insurance and personal injury compensation affects business and employers in Ireland. IBEC has carried out eight separate surveys on the cost of employers' liability, public liability and other related matters. In the past two years we have conducted three separate surveys analysing these areas and they confirm the extraordinary levels of increases in all areas of business insurance over the past three years. We observed that these significant and extraordinary increases began at the start of 2000 and followed a period of relative stability in insurance costs between 1995 and 1999. The surveys also examined what employers were doing regarding safety performance. This information can be made available to the committee.

It is probably an understatement to say the increases were extraordinary. For many businesses, their effect is extremely harsh and difficult in view of the extent of the increases these businesses have sustained. There is a significant lack of competition and availability of cover, particularly employers' liability and public liability cover. Compared with other costs, insurance costs have a greater impact on any business in terms of competitiveness, profit and the sustainability of the enterprise. First, insurance premiums are a bottom line cost which come directly off a business profit or loss. For example, a small enterprise with a turnover of €500,000 and a net profit of €50,000, currently paying €25,000 for cover, with a doubling of insurance costs, as has been the experience for many, will see its profit reducing by 50%. To sustain the same profitability, such a business would require an increase in turnover of an additional €250,000 or 50%. For many small businesses the impact of insurance increases has had a negative effect on profit. Such are the increases in some cases it has eroded profit to the extent that significant losses in operating results have been incurred. Second, it is an annual cost and the recent level of increases experienced were not anticipated and in many cases not budgeted for. Third, unlike many other overhead costs of running a business it bears no correlation to business activity, such as levels of production or sales achieved. It is often considered as dead money, with no purpose in advancing or contributing to business performance. Fourth, unlike many other business overheads, it usually has to paid up front or in advance. Fifth, for many businesses, including those competing in other economies which do not have similar experience, such costs cannot easily be passed on to customers and must be absorbed.

For many businesses the securing of insurance is an essential prerequisite in continuing in operation. It is not an option but rather an essential requirement. As a result some businesses where they can find cover, have had to extend their borrowings to fund the increased premium in the hope or expectation that they can afford to renew the policy. In addition, many business people in Ireland are aware, particularly those who also transact business in other EU states, of the disproportionate nature of insurance costs and claims costs in Ireland compared with those abroad. They wonder why this is so. We believe this is not a function of our accident record but more to do with our system of compensation and its huge delivery cost and is significantly influenced by the extent of spurious and exaggerated claims for personal injury.

The reason I mention our accident record is that compared to other EU countries which do not appear to have the same experience with insurance costs, our record is exemplary. The most recent EUROSTAT report on serious accidents in all EU states shows that Ireland has the lowest accident incidence rate of workplace accidents of all 15 member states. The EU average is 4,088 serious injuries per 100,000 persons in employment and the Irish rate is 1,291 per 100,000 persons.

Does IBEC have documentary evidence to present to the committee to substantiate this statement?

Mr. Briscoe

Yes, Chairman.

The EUROSTAT report covers 11 economic sectors including construction, manufacturing, agriculture, transport, etc. Based on these data, Irish workers are three times less likely than the average worker in Europe to have a serious injury at work. Social welfare occupational injury benefit claims are generally accepted as the best indicator of trends in workplace accidents. These claims have fallen by over 40% in the past ten years. OIB accident incidence rates per 100,000 in employment were 1,499 in 1992. In 2002 the rate was 852 which is almost half what it was ten years ago.

There are two observations I wish to make in the context of those two sources of information. What would be our situation if we were close to the European average? Also, while accident prevention must be always high on the business agenda - as employers we accept that - how much better can we reasonably be, or do we need to be, given our track record, to obtain a reduction in insurance costs? I do not know the answer but that is the question.

There is a very serious danger that if the benefits of our good performance do not translate into reductions in insurance it will inevitably undermine the case for continuing such investment. The long made case that investment in safety and accident prevention makes good business sense could be lost if no benefit by way of a reduction in liability insurance costs arises from a reduction in accidents and claims rates. We have experience of companies which have zero accidents and claims seeing their premiums rocket. If our accident record is not the major factor then what is the cause of our dilemma?

IBEC research has found that the cost to business of personal injury compensation in Ireland currently exceeds €2 billion annually. The average cost of liability insurance rose by more than 100% in the past three years; some companies experience much higher levels of increase. Other forms of insurance also increased substantially over the same period. Property insurance went up by 80% and commercial motor fleet insurance went up by 42% on average.

IBEC surveys found that the average cost of employers' liability claims were more than €30,000 with legal costs representing 44% of the actual award. The difference between cases settled on the steps of the court and those settled directly was as much as €25,000. Public liability claims averaged €8,800, with legal costs representing 46% of awards. Here again a significant difference exists between cases settled directly early on and those settled on the steps of court. The differences were as much as €6,300 on average per case.

We believe what is needed is to create an environment, which attracts greater competition for the underwriting of insurance and ensures greater control on unnecessary costs associated with compensation, particularly delivery costs. We also believe it to be unfair and unjust for people making fraudulent or exaggerated personal injury claims to benefit at the expense of the insured or other party, whether they are a commercial insured or other policyholders.

The measures we seek, which were set out as far back as 1999, include, in particular, measures to encourage and continue further improvements in safety performance. We have recommended particular measures to Government, including support for developing safety cultures, the rehabilitation of people who received injuries at work and getting them back to work as quickly as possible. We have published much of this information. We have contributed to Government and State initiatives and I would be quite happy to expand on that. In our view, the current adversarial system does not help either the injured party or the other party. It acts against rehabilitation and getting better.

We continue to support such measures though various work and advice to our members and I can give examples. Effective measures need to be put in place to deter and punish those who may concoct or exaggerate a claim for personal injury against another party. These include the measures just published on addressing fraudulent claims and our claims culture. Efficient means are needed to expedite reasonable compensation to those who suffer genuine injury through the fault of another.

The personal injury assessment board proposals, which were announced in May, represent a fair and I hope an efficient alternative system. We also wish to see established, in a transparent and helpful way for both parties to a genuine claim, a book of quantum for personal injury damages. This will remove early on in a claim uncertainty establishing the value of compensation in respect of general damages and speed the process to resolution of most settlements in such cases.

Finally, we wish to see the removal of the current excessive legal or delivery costs which provide no direct benefit to the parties to a claim, the extent of which in some cases frequently exceeds the actual award that the individual receives. This will be of considerable benefit, particularly where the only factor to be determined in settling a bona fide claim is the level of award appropriate.

Chairman, I thank you for allowing me to address the committee and I am available and willing to answer questions arising from my presentation, copies of which are available to Members.

I thank you, Mr. Briscoe. I welcome Mr. Mark Fielding and Mr. Jim Curran from ISME and invite them to make their submission.

Mr. Mark Fielding

Thank you, Chairman. As members know, ISME is the independent voice of owner managers of SMEs in Ireland. I am here to present their case on the crisis in SMEs brought about by the insurance industry's mismanagement of the insurance sector in recent years. I do not use the word "crisis" lightly. Since the turn of the century insurance premiums have increased at a rate well beyond inflation.

In March 2001, a full six months before the 11 September debacle, ISME was drawing attention to the increases being suffered by its members and in the years since the average premiums have increased as follows: in 2001 a 51% increase on average, in 2002 a 72% increase and in 2003 already we are suffering a 52% increase in premiums. This gives a total cumulative increase in the past three years of a massive 290%. To put that another way, an owner manager who was paying €10,000 in 2000 is currently being asked to pay €39,000 for the same or probably reduced cover.

We have shown a number of case studies in our submission. The company referred to in case study C was hit with an increase of 600%, which led to one-third of its staff being let go. In case study B there was an increase of 409%, which resulted in four out of 11 staff being made redundant to pay for the insurance premium and keep the company in business. These and many other examples are mentioned here to illustrate the costs and impact this crisis is having on small and medium business which form the backbone of the economy.

The association has previously outlined that the impact of insurance costs through the ISME surveys of March 2001, August 2002 and April 2003, which contain the empirical data, confirm that rising insurance premiums are one of the greatest threats to competitiveness of Irish business and have remained the number one concern of small businesses in the past three years.

Increasing and unsustainable insurance costs have a real impact on business in particular and on the economy in general. The only way for many businesses to absorb the increases is to make cutbacks in other areas. This is leading to a growing number of redundancies as well as curtailment of any future growth plans. Exorbitant and prohibitive insurance costs are also acting as a barrier to new start-ups and would-be entrepreneurs are choosing to stay in the shelter of employment rather than setting up new businesses thereby stifling any new wealth or job creation.

ISME surveys have found that the cost of insurance represents an average of 2.5% of turnover; it is not unusual to find companies that are spending more than 10% of their turnover on insurance premiums. The payment of ever increasing insurance premiums is far greater in most cases than the moneys being invested in training or research and development in small and medium businesses. The alternative to paying these premiums is to operate without insurance. As an economy based on asset ownership, doing that is fraught with danger and completely unsustainable.

Members of the committee will no doubt have heard from various quarters of the probable causes of this crisis. The insurance industry will have blamed the events of 11 September 2001, the legal profession - both solicitors and barristers - the Judiciary, the medical profession, the business community - both large and small - the compo culture, the Government and even the weather. The insurance industry has tried to pass the blame along the line like pass the parcel until the music stops. We are here today to say that the greatest blame must lie with the insurance companies themselves which have allowed a crisis to develop in the insurance sector in Ireland in recent years far greater than in any other area of the globe.

The insurance business model in the past was based on investment returns subsidising loss making insurance products. The products were loss making because there was a cosy arrangement between insurance companies and the legal profession, on the basis of dragging out cases and thereby allowing insurance companies to earn two or three years' returns on the premiums before eventually settling the case. At that stage, solicitors pocketed fat fees. The losses brought about by those high costs were easily covered by the high returns on investments in those days and both insurance companies and solicitors were happy.

Legal fees have not increased as a proportion of awards in recent years - they were always high. It was only when the return on equities collapsed that the insurance companies were hit with a double whammy of equity losses and insurance underwriting losses. They and the legal profession, like a pack of hyenas at a stripped carcase, turned on each other, with blame and counter-blame - a classic falling out among, let us say, professions. It is no wonder we have a low trust, litigious society which breeds a climate of distrust, dishonesty and naked opportunism which is affecting wealth, job creation, new business start-ups and SME competitiveness.

We in the business sector entrust our money to insurance companies to cover our insurable risks. I would have thought it reasonable to expect those highly paid, so-called experts in the insurance industry to manage those funds to at least achieve a break even return. However, the reality is that insurance companies have taken their eyes off the ball, allowing this shambles to grow to crisis proportions, following which they blithely throw their hands in the air and blame everybody from Osama bin Laden to Willie Wonka. One can hear them singing "It wasn't me" as one walks out the door.

How did they set about recouping their losses and recovering their expected 15% return? They increased premiums, cherry picked riskless business and refused cover to some existing clients. ISME surveys show that 15% of our members have had such refusals. The insurance companies act in cartel-like fashion, threaten to pull out if regulated and have to be dragged kicking and screaming to the MIAB. They displayed a decided lack of co-operation at the Motor Industry Insurance Board - those are not my words but those of the chairperson of the MIAB, Ms Dorothea Dowling. They are less than forthright with their figures - again, not my words - and they blame everybody but themselves. In so doing, they have put a minimum of 100 SME companies out of business in the last three and a half years and approximately 3,000 people have joined the dole queues. Those are conservative estimates. Some of those involved had been bailed out by the Government and the taxpayer in the events of St. Patrick's weekend of 1985, when ICI and AIB went belly-up, to the tune of IR£226 million.

ISME acknowledges that there are many problems with the insurance system in Ireland which have increased the cost of delivery of insurance. The committee will have already heard that it takes four times longer to deal with cases, awards are 12 times higher and litigation fees are running at between 40% and 60% of awards, there is a lack of competition, the compo culture is fuelled by ambulance chasing solicitors offering no foal, no fee terms, there is uncertainty of awards and claims are settled without recourse to the insured.

We also acknowledge that certain reforms are being introduced, however slowly, in order to reduce the delivery costs. The report of the Motor Industry Advisory Board is helpful, with 35 of its 67 recommendations being acted on currently: we welcome the introduction of the personal injuries assessment board by the Tánaiste; solicitors' advertising has been regulated and the no foal, no fee system has been banned; the book of quantum will, it is hoped, be part of the personal injuries assessment board; the affidavit of claims issue is being addressed through a recent Bill published by the Minister for Justice, Equality and Law Reform; the points system has been introduced and there is a reduction in the number of cases going through the courts, with a 14% reduction in High Court cases between 2001 and 2002.

I wish to refer to IBEC's presentation on the health and safety issue, notably the point that an Irish worker is one-third less likely to be injured. This evidence is totally at variance with recent pronouncements from insurance industry spokespersons, not for the first time. Those spokespersons are constantly pouring cold water on reforms of the insurance industry and rubbishing our expectations of premium reductions. Even with the initial reforms I have mentioned, we are still suffering premium increases of 52% this year alone. The insurance industry is once again on the prowl for profits and will pass on the benefit to the insured only if compelled to do so through regulation or, if necessary, legislation. ISME acknowledges the right of insurance companies to make a profit - we are the enterprise organisation. However, we cannot condone naked greed and opportunism on the part of the insurance industry while small and medium businesses are going to the wall.

ISME believes that the insurance companies, the Government to a certain extent and the legal profession must be held accountable for the damaging impact of high insurance on Irish business. By turning a blind eye to consolidation in the sector over the last eight to nine years, resulting in only four major players remaining in the Irish market compared to over 30 in the UK, the Government has allowed a cartel-like situation to develop in the insurance industry. As a result, insurance companies are cherry-picking business and only taking risk free premiums. The legal profession, which has always fed off the insurance industry like leeches, excessively charging for its services, has exacerbated this crisis and fuelled the compensation culture which is endemic in our society.

ISME urges the introduction of a number of initiatives without delay. We are anxious that the personal injuries assessment board be set up on a statutory basis as soon as possible. We request that all legislation in that regard be given priority status. We advocate the immediate implementation of a court reform programme, to be overseen by the Department of Justice, Equality and Law Reform, with a realistic timetable and assessment procedure. We urge the immediate introduction of a book of quantum, which will come about through the personal injuries assessment board and will alleviate the present uncertainty.

An affidavit of claims system is essential. It is estimated that fraudulent and spurious claims have cost Irish policyholders more than €65 million in 2001 and up to €100 million in 2002. While ISME guardedly welcomes the establishment of a fraudulent claim hotline by the Insurance Federation, that sector must play its own part by being less eager to settle claims until all the required investigative work is undertaken and discussed with the insured. We recommend the introduction of legislation obliging insurance companies to notify business in advance of premium renewals. This has been a major problem for many small and medium businesses which received their renewal notice either on the day of renewal or, in some cases, two to seven days after that date. That represents a shotgun-to-the-head approach.

We would welcome the introduction of a system similar to the 15 day requirement introduced last year on motor insurance. We would expect a ten week requirement for business insurance. We recommend that the Government levy be available to companies experiencing economic difficulties as a result of the insurance issue. Funding from that levy has been used in the past to bail out the PMPA and ICI and should be available to help companies, especially those stricken by the collapse of the Independent Insurance Company in the UK, which has left many Irish businesses exposed. Their counterparts in the UK have been compensated.

We recommend that a matrix of costs be put in place by the Irish Insurance Federation to provide figures for industry sectors and size of firms by numbers employed and turnover. That would enable firms to benchmark their insurance renewal quotes against similar type companies and international industry standards. Barristers should not be employed to settle cases unless proven to be required. Barristers are involved in 48% of cases in Ireland whereas the UK figure is as low as 3%. The onus should be on solicitors to settle cases between themselves rather than enlisting the help of barristers. In the UK, 71% of cases can be sorted out through correspondence or over the phone compared to 1% in Ireland. I doubt that solicitors in the UK are 71 times better at dealing with matters by correspondence or over the phone than their Irish counterparts.

Does Mr. Fielding have documentation to support his statement?

Mr. Fielding

Yes, Chairman. We also require an independent committee to monitor insurance industry pricing. The insurance industry has given a succession of reasons for increasing the cost of insurance. If those contributory factors which we have outlined are adequately addressed, corresponding reductions in insurance premiums should be forthcoming. A monitoring committee, preferably chaired by somebody like the Chairman of this committee or Ms Dorothea Dowling, should be introduced to audit the insurance companies regularly to ensure that the cost savings as a result of the reforms and other favourable changes are passed on in full, to the benefit of the consumer, in the form of premium reductions. The reduction of premiums is what we are talking about after all. While the establishment of the personal injuries assessment board is an important milestone for the reform of the insurance industry, the primary contributory factors for rising premiums still need to be addressed. ISME suggests that a root and branch investigation of all areas of the insurance industry, including insurance companies, brokers, the legal profession and the medical profession, should be undertaken by the Competition Authority as part of an overall programme of insurance industry reform. The investigation needs to be much deeper than a simple joint study by the Competition Authority and the Department of Enterprise, Trade and Employment.

ISME welcomes and appreciates this opportunity to outline the case of small and medium sized businesses to the joint committee. It wishes the committee well in its endeavours.

I will outline the trend that is emerging from the sitting days we have had so far. Members of the committee will recall that it was mentioned yesterday that small firms' insurance costs have increased by 308% in less than three years; the Irish Hotels Federation reported an increase of 351% in that time and this morning we have heard of an increase of 290%. The consistent percentage increase is alarming and a cause of great concern to the Government and this committee. I thank both delegations for their submissions.

I welcome both delegations to this meeting and I thank them for their comprehensive presentations. Some of the facts and figures that have been presented today are in line with what we have heard during these hearings. The organisations in question probably have much more evidence to sustain their arguments. I am glad that the idea of Ireland as an unsafe place in which to work is being challenged and that figures are being produced to support the argument we are making in that regard. Any loss of life is appalling and the situation will not be great until there are no fatal accidents. I am glad that the dramatic statement that Ireland is an unsafe place to work is being challenged.

The increase of 350% in insurance costs in recent years is simply shocking. At a glance it is totally unjustified. The word "cartel", which was mentioned earlier by Senator Leyden, is being used in relation to insurance companies for the first time. I would like to ask some questions. Do ISME and IBEC find that a high percentage of cases are settled without consultation? Have many companies gone out of business as a consequence of increases in insurance costs? How many companies are operating without insurance as a result of what has happened? I would like the three questions to be considered by the panel. I thank the delegations for their comprehensive presentations.

I join my colleague in welcoming ISME and IBEC to this meeting. I would like to ask a number of questions. This committee's task is to make sense of the evidence put to it, which sometimes may be in conflict. I would like to ask Mr. Briscoe about his clear assertion on the number of accidents. We will examine the figures that have been presented in some detail to assess whether they are sustainable, sector by sector. Does Mr. Briscoe believe that there is no connection between claims and accidents? The number of accidents in this country is one of the lowest in Europe, but we have some of the highest insurance premiums. Mr. Briscoe has made a strong case in relation to fraudulent claims. Does he contend that a disproportionate number of the claims that are paid out are fraudulent? I would like him to clarify whether that is what he is submitting so that we can accept at face value his claim that Ireland has one of the lowest accident rates in Europe but one of the highest levels of premiums charged in Europe.

I would also like to ask about the safety culture that Mr. Briscoe prioritises in the 14 point plan he has presented to the committee. I am sure he will acknowledge that many of the suggestions he has made are already being acted upon. I will not discuss them because they can be ticked off as issues that are being addressed. I am interested in the safety aspects of the plan. Mr. Briscoe offered to amplify his comments about IBEC's efforts to establish a safety culture. I would like him to tell the committee how closely IBEC works with the HSA. Does he believe that the HSA adequately monitors safety in the various sectors represented in his association?

My third question relates to Mr. Briscoe's assertion on the cost of delivering compensation. I assume he refers to the legal and medical components of delivery. ISME's submission claims that the Solicitors (Amendment) Act has dealt with advertising issues, but the IBEC submission specifically contends that difficulties remain in relation to the advertising practices of certain solicitors. Does Mr. Briscoe feel that this issue needs to be addressed and that difficulties remain? His comments in this regard would be useful at this point as the Bar Council and the Incorporated Law Society will give evidence to this committee next week.

My fourth question, which is about IBEC, relates also to the question of delivery costs. Both ISME and IBEC have spoken about courts reform. Mr. Fielding spoke of the requirement for such reform. This is not a simple issue. The submissions do not contain details of what exactly the organisations have in mind when they speak of the reform of the courts. The witnesses will be conscious of the constitutional separation of powers and the fact that the Oireachtas is relatively restricted when it comes to trespassing on the courts issue. My personal opinion is that the courts do not always have the same regard when it comes to trespassing on the Oireachtas. Does IBEC have an opinion or a specific submission in relation to achieving a greater consistency in the operation of the courts? Certain members of the committee, including myself, have a specific view in that regard. I would be interested to hear whether IBEC has thought this through and drawn up a specific set of proposals rather than simply decided that reform is required.

My final question relates to ISME's submission on the use of the insurance levy, which is a bone of contention for many of those who have given evidence to us, particularly those who actually have to pay it. I understand that people are frustrated because the levy has been used to bail out others in the past. I am intrigued by ISME's contention that it should be used to assist companies that experience difficulties as a result of the insurance issue. It would be very difficult to adjudicate on such cases. Would one reward the bad practice of companies that do not have good safety records and are, therefore, vulnerable on the insurance front? I refer to companies that are badly managed and have general financial difficulties. How does ISME suggest that the problem outlined in the submission it has made to this committee can be addressed in a way that would not reward and encourage bad practice?

Mr. Briscoe

I hope I remember all the questions. I have taken very brief notes but members may come back to me.

The delegation can share responses.

Mr. Briscoe

The first question related to consultation prior to settlement of cases which has been a bugbear for many employers. They have discovered after the event that a particular claim against them has been settled by their insurer without prior notice. We have raised that issue with the insurance industry and we have made the point that it is not an appropriate way to do business. In May this year we published joint guidelines which were negotiated between IBEC and the insurance industry. They include, among many things, a specific commitment by the industry that insurers will communicate with their clients before a case is settled. Many companies feel there may be important information or implications in the context of a case which is settled before they discover it for a variety of reasons which I will not go into in detail. That is no longer acceptable. We have indicated to the industry that we wish to review these guidelines in the autumn to ensure they are working. We have also asked our members to let us know if there are any elements of the guidelines which are not working out satisfactorily.

The question was asked as to how many companies had gone out of business as a result of not having insurance. I do not have a figure on that but I am aware that certain businesses have found it impossible to continue to operate as a consequence of not being able to obtain insurance. I do not wish to quantify their number, but in some instances it may have been one of a range of factors resulting in a cessation of operations of an enterprise. Inability to obtain insurance may have been the factor to tip the balance. Almost every day we receive very desperate communications from companies which find it impossible or difficult to obtain insurance. It is not just a question of the cost of insurance. I have been working at this for more than ten years and I have been involved in research groups established by the Government. I always ask why, if there are 1,000 insurance companies, do only three or four operate in Ireland. One could come to various answers. If our market was——

Which do you think is the correct one?

Mr. Briscoe

It is a significant function of market conditions. This is not an attractive market to foreign companies to look to in terms of setting up or underwriting business.

The third question I was asked related to companies without insurance. We are frequently asked if it is necessary to have insurance. Many companies are confused at times as to their legal obligations. My understanding is that employer and public liability insurance are not compulsory which means there are many businesses which may choose to self insure. For some businesses, however, that is not an option due to contractual reasons in service industries where clients or customers insist on insurance. It may not be possible also due to the size of a business which may not be adequately resourced to fund self insurance. If a company chooses to self insure or change an arrangement, it is not necessarily a bad thing. There are many self insuring companies with fine safety arrangements which look after their employees very well in the case of injury. I am sure the committee can identify some of them. The fact that a company does not have insurance is not indicative of it being less responsible. While it may suit certain enterprises not to buy insurance, the availability factor is significant.

I move on to Deputy Howlin's questions which I hope I cover. The Deputy asked about the connection between accidents and claims. In 2000 we carried out a huge survey of over 600 companies employing 80,000 people across all sectors. We did not ask only about how much cases cost to settle on the steps of a court house; we asked about all stages in the process. We asked about companies' accident record experiences and their claims record experience. The companies were IBEC members and we discovered that among these an average of one in four accidents resulted in a claim. Not everybody who has an accident at work makes a personal injury claim.

One in four in Ireland claims.

Mr. Briscoe

One in four approximately of serious accidents.

How does that compare with our European neighbours?

Mr. Briscoe

I do not have a comparison on that particular statistic.

With the UK.

Mr. Briscoe

I will say it is not consistent with the national figure. According to occupational injury benefit or other sources of data, the level of occupational claims is between 12,000 and 16,000. The insurance fact file refers to 12,000 claims against employers' liability. OIB figures in relation to workspace accidents and illness per year are of the order of 12,000 or 13,000. There is a message in this figure in relation to the ratio of claims to accidents. In our survey there are companies that have a much lower rate of claims to accidents than the national average would suggest and which is significant. There is a correlation for some, but the national figure may vary slightly. I do not know that I have explained the point very well.

Among the underwriters operating in Ireland, is there a trend whereby some companies settle earlier and have lower claims and others settle later with larger claims?

Mr. Briscoe

I am not aware of that. We advise members to establish with their insurer what its policy is in relation to settlements. I conducted research some years ago in which I examined the policies adopted by companies that had gone from conventionally insured to self insured. I asked them if this move affected their policies and was told by many companies that the new emphasis was to settle genuine cases as soon as possible rather than to delay them. Obviously, the longer one delays, the more it costs in terms of delivery and so forth. It is very important to establish that policy.

The McAuley committee, on which I sat, produced the Greenford report. We were hugely surprised by the fact that it takes over 1,100 days - over three years - to settle cases here compared to less than 300 in the UK. More than 50% of cases involve senior counsel or counsel whereas in the UK the figure is almost 0%. This is a huge influencing factor and I suggest to the committee that it does not benefit a person who has sustained a genuine injury nor does it benefit the employer. The focus is on the monetary resolution rather than on getting well and the result is often a Mexican stand off between the employer and the genuinely injured person in which case they cannot communicate. While the person may receive a certain level of compensation three years later, they may not be in a position to get back to work. The adversarial system does not represent a win-win scenario.

Deputy Howlin asked what we have done about the safety culture. We were instrumental in establishing a group in agreement with congress - ICTU - and other parties on a workplace safety initiative which was launched in 1997. The initiative is aimed at preventing accidents and looking after people injured following an accident.

Does IBEC monitor its members?

Mr. Briscoe

We encourage them. This is a voluntary system for which we have received support from the Health and Safety Authority and the insurance industry. Its objective is to prevent accidents and, where they occur, to look after people. We have also produced a comprehensive management guide for our members which includes reference to the law and specific hazards in industry. Last year we published liability management guidelines for business which include discussion of management's obligations in relation to the prevention of accidents and to ways in which to deal with insurance companies. I have mentioned communications. A great deal of work is ongoing and the guide is updated on a regular basis. We continue to encourage a safety culture.

I was asked about HSA adequacy and our involvement with it. I have been a member of the board of the HSA since 1989. I represent industry and I am probably one of the longest serving members, so we do contribute to that process. You cannot have a policeman at every corner. The HSA's resources have been increased but I do not think we can have inspectors in every situation. Safety is a collective responsibility. It is the responsibility of employers and workers to behave safely, although the greater onus is obviously on employers.

Business takes its responsibility seriously. When we analysed what companies were doing in regard to safety, we found that most of our members had safety statements, they invest in training and appoint safety officers and case management people. We discovered that companies are spending in excess of 2% of payroll on direct safety prevention, that is the quantifiable element, training and so forth. That is a big commitment by industry. It is regrettable that the evident commitment is not translating into a greater reduction in insurance costs. Historically, safety was considered as good business sense because by reducing accidents you reduced your costs.

IBEC has convinced us that it is doing its utmost in relation to safety. There are seven members offering to speak.

Mr. Briscoe

There were two other questions. Do you want me to address them?

Yes, please, briefly.

Mr. Briscoe

They relate to delivery of compensation and advertising. Again, there might be some confusion. That 14 point plan was produced in May 1999, hence the reason its provisions have now been implemented. It is a positive development. We have mentioned a few things. I believe it is the role of the courts to deal with liability and negligence issues. We do not need courts to decide on quantum. That is the expected role of the PIAB. We should have a panel of judges to ensure consistency. We should also have reliable and applicable quantum in relation to personal injury damages. The courts role is to deal with negligence issues and if that is at issue let it go that route but let it go quickly and efficiently.

Mr. Fielding

With regard to the reform of the courts, it is not ISME's role to tell the Judiciary how to run its business, but from our experience of attending court as small and medium business owners we can only surmise that the diary system needs to be sorted out. Having turned up in court, employers are frequently informed that we will not be needed that day or the next day. The use of IT could sort out this matter. The requirement to go to mediation will also, I hope, sort out some of the problems in the courts. As suggested by IBEC, a panel of judges expert in a particular area would lend confidence in the system. I will stop short of making recommendations to the Judiciary.

In his submission, Mr. Fielding stated that he welcomed the establishment of the PIAB. Does he believe that there should be an appeal system to the courts if either side is unhappy with the level of awards?

Mr. Fielding

I would not have thought so in regard to the level of awards, but there obviously has to be provision for an appeal on legal grounds. Awards should be worked out through the introduction of a book of quantum.

With regard to Deputy Howlin's question on the levy and the use of that levy, what we are saying here is that many small businesses were insured under the Independent Insurance Company Limited that went wallop. They have not been compensated for that whereas their counterparts in the UK were compensated. Some small businesses had to pay twice in that year for insurance. I would have hoped that small business could be bailed out in the same way as PMPA and ICI with assistance from that levy. The other aspect of that which is still waiting to hit us is that there are many outstanding claims which were insured by that insurance company. When such claims go to court the companies involved will probably go out of business.

Does Mr. Fielding have many members in that category?

Mr. Fielding

I cannot give a specific number, Mr. Chairman, but I am aware of claims pending in two particular cases from that period. I do not have the specific figures in regard to the number of companies.

In terms of employment, how big are these companies?

Mr. Fielding

I do not have the exact figures but we can get them for the committee.

In regard to the health and safety issue, I put on record that like IBEC, ISME has been making sure this area has been to the forefront, particularly in regard to training. Health and safety training is held twice a year, in the spring and autumn, and they are always the best attended of the courses we run. Last year we ran a new scheme in conjunction with European health and safety regulations.

My first question is for Mr. Briscoe. Improved safety performances has reduced the injury at work claim rate to half the European average, but is that improvement spread equally across the board? How does the Construction Industry Federation compare with the manufacturing industry? I am interested in hearing how different sectors compare. I am also interested in the level of awards at European level. Our level of awards appears to be four times greater than in Britain, but how do we compare in terms of the EU?

Mr. Fielding used the word "crisis" and I do not think that is overstating the case. The escalating level of insurance costs is threatening the economic future of the country. Mr. Briscoe mentioned that this is not an attractive place for an insurance company to operate, which confuses me. Is that due to a failure on the part of the legal profession or the medical profession? Are judges not properly trained to deal with insurance claims expeditiously? I am not sure what is the cause. Mr. Briscoe said that a cosy cartel operates between the insurance companies and the solicitors which is delaying the payment of awards. Cartels usually result in fairly massive profits, so why have insurance companies such as AXA and others exited the market? Can Mr. Fielding inform me if the profits of insurance companies here are similar to other EU countries?

I want to pursue two issues that were common to both presentations. The first relates to the medical profession. IBEC's submission contained a quote from a former Attorney General, Harry Whelehan, in respect of the medical profession. There was also a quote from Dr. Cormac McNamara, a former IMO president on the medical profession's role in connection with insurance claims and its responsibilities in that regard. What is IBEC's view in regard to the impact of the medical profession on insurance claims? I would like to hear from IBEC and ISME on this matter. Do they believe there is a problem to be addressed in the context of the medical profession?

ISME's submission contained a reference to the appointment of a suitably qualified independent medical practitioner to assess claims. Is it seeking a countrywide panel of medical experts who will adjudicate on a regional basis in relation to claims? I would like that to be fleshed out a bit more. Do we need to address the medical profession in a more serious way than we are currently doing? While there was a common thread to the presentations I heard today, the role of the medical profession was not addressed and I would like if that could be done.

The second question relates to what IBEC calls the Mexican stand off. ISME talks about it in terms of the early settlement of claims. Who is responsible if claims are not settled early? I ask this because there is a perception - it is not my view in particular - that employers or companies are not completely innocent in this matter. They might take the view that if they hear no evil they see no evil, and that if they respond in a positive way they might be accepting guilt before it is established. They feel that the safest way is not to play ball before being forced to do so.

The committee has questioned insurance companies on settling clearly fraudulent claims, pitched at a certain level, because it is deemed cheaper to do so than fight them in the courts. The companies responded by saying that this was their practice in the past but that they are now contesting more of such claims. Do the delegates believe this to be the case?

I welcome the two groups. I thank Mr. Briscoe for putting to bed the idea that Ireland is not a safe place to work. If one drives around and sees the quality of staff, etc., one will agree that there have been improvements. On the PIAB and the book of quantum, does Mr. Briscoe feel the board should deal with all insurances, including motor insurance? Does he feel the judges should have to use the book of quantum, which seems to be all-important in achieving the right level of claims, thus making the courts places to which one would appeal after having dealt with the PIAB? Mark Fielding referred to a cartel among insurance companies - I am not saying he is wrong. If such a cartel exists and Ireland is such a profitable place, why will companies from abroad not enter the Irish market? We have been told that there will be no competition until the conditions are more favourable here.

It was mentioned that barristers should not be involved in settling claims. Why are they involved? Who decides that they should be involved in the first place?

Mr. Briscoe

Deputy Dempsey asked if there was a breakdown in respect of sectoral specific data on a pan-EU basis. The EUROSTAT figures, which were published in the JER 2002 series of this year, are based on an analysis over a five year period. They show that the average incidence in Europe was 4,088 per 100,000 for the last reported year. The Irish incidence was 1,291 per 100,000; therefore we were the lowest in that year. I believe we were second lowest in the previous year and second lowest in the year before that. The lowest incidence is usually in Sweden or Ireland. There is a website that one could study in this respect. I am referring to a report on accidents in the EU published by EUROSTAT. There are various published reports issued on a regular basis. These reports give sectoral information but, as far as I am aware, not sectoral information by State. Therefore, one cannot ascertain how manufacturing in Ireland compares with manufacturing in France. It is a little problematic but all the high risk sectors are included.

Any statistician examining those figures - I have spoken to many - would say that even if the skew in Ireland was at 100%, our incidence would still be half the EU average. There will be pluses and minuses and a skew of even 90% is enormous, and this is corroborated by the Department of Social, Community and Family Affairs - I have already made that point and it is well established.

The second question related to the comparison between awards at EU level. The McCauley committee report, the second working group report on personal injury compensation, was published in 2000, and I was a member of that committee. The only data analogous to ours that we could examine pertained to the UK, simply because all other European states have differing arrangements in terms of how compensation is addressed. They have different social security focused benefit systems than the Irish system. If one is looking for like with like in the EU we have to look to the UK. The Greenford findings, which do not have to be repeated, demonstrated that the difference in the rate between Ireland and the UK is enormous, 12 times higher in Ireland. There are reasons for this, to which we will return later.

Our views on the medical profession were sought. Two things are critical to the success of the PIAB, the first being the reliability of the first medical assessment. We understand there will be an inquisitorial rather than an adversarial system. This is good because there will be facts on the table. I also believe it is good for genuinely injured people because, if one suffered from an injury and knew one was going to court, one would tend to exaggerate slightly. People cannot be blamed for this because they will be under pressure. The system will depend very much on medical evidence. I stated in the report, to which the Deputy referred, to the comments of various people. We believe it is essential to have a panel of medical referees, not just one doctor.

Court cases currently involve occupational therapists, physiotherapists, engineers and so many other professions that a judge often has to determine which form of medical evidence is the most reliable. Therefore, if the PIAB is to operate successfully, we feel that it should have an independent, adjudicating medical panel so that if the treating physician feels evidence is not totally accurate, it can be determined at this stage. Equally, it is vitally important that compensation people receive, particularly in the context of general damages, is equivalent to what they would expect to receive in court. This has been achieved in the UK with judicial guidelines and quantum for general damages. The guidelines should be consistent. Obviously there will be savings on delivery costs but if a claimant were to work for three years before his case were settled or if he were in non-recovery mode, this would have huge implications in terms of costs, which I hope will not arise if we can settle such cases at an early stage. This will benefit individuals as well as having benefits in terms of the cost in respect of damages.

The problem with the Mexican stand off is that if an employee had an accident and went to a solicitor, his or her employer could only deal with him or her through that solicitor. The modus and the focus is on compensation and not on the employee getting better and getting back to work. This creates a Mexican stand off. I have never spoken to an employer who has said he wanted to resist compensating an employee with a genuine injury whose case is not exaggerated. Most employers want to deal with such cases reasonably and responsibly. What offends employers is when somebody concocts or exaggerates a claim in order to maximise the compensation.

One thing that our members regularly state is quite offensive to them is the settlement of what they regard as a concocted case for economic reasons or if such a case goes to court and the judge still awards compensation. Many business people made the strong point to me that legal costs get met, and they do not believe this should be the case. This is why it is important that people who make fraudulent or grossly exaggerated claims should have something to lose.

Mr. Fielding

I will take the questions from Deputies Dempsey, McHugh and Callanan together.

The first question was who is to blame or what is the cause of all of this. I must come back to who we have entrusted to run the insurance business in Ireland - the insurance companies. The compensation culture did not happen two or three years ago, neither did high legal costs. All the problems with regard to delivery of insurance have not just happened in the last two or three years but the insurance companies, because of the types of profits they were making, were not interested in sorting out the system. They were proceeding with a cosy agreement and relationship between themselves and the legal profession.

Deputy McHugh asked about the medical profession. This is the first time the issue has been raised here. However, they got in on the act. One doctor will say that a person has broken his or her leg and that it will be all right in X number of weeks or months; another doctor may say that not alone did the person break his or her leg, but he or she is having flashbacks and will have them for the next 700 years or whatever. We had the ridiculous situation of two medical professional people going at each other in an adversarial way. As Mr. Briscoe says, under the personal injuries assessment board, with the panel of medical experts, we will have one medical expert who will say that person broke his or her leg and that is that. This behaviour has been condoned by the insurance companies over the years.

The return on capital on insurance companies in Ireland since 1992 is as follows: 1992: 28.3%; 1993: 40%; 1994: 8.5%; 1995: 28.7%; 1996:15.1%; and 1997: 22%. This is at a time when the combined operating cost of payouts as against premiums was running at 109% in 1992, in other words, the premium was 100% and they were paying out 109%. In 1993, the premium was 100% and they were paying out 110%; and even when they were losing that kind of money on that product, they were still making a return on their capital of anywhere between 28% and 40%. They were all happy until such time as the equities market took a dive. In 1999, the return on capital dropped to 2.1%; in 2000 it went down to 14%. The problem for the insurance companies, because they took their eye off the ball and did not change their model of business, was that at the time equities and the return on capital was a minus figure, they were still paying out €113 for every €100 they were getting in premiums. In 2000, that went up to a massive 120% as against 100%.

Therefore, the reason for all this has to come back to the insurance companies not managing the insurance industry in a proper fashion over the years and allowing these abuses to happen. A member mentioned that I said the industry was run as a cartel. Rather, I said it was cartel-like. Nevertheless, if it looks like a duck, walks like a duck and quacks, it is a duck.

Who decides to bring in barristers? As far as I am aware, the solicitor decides who to bring in, in conjunction with his or her client. This is the crux because the client is the insurance company, not the insured. Therefore, I have no say in what happens in the management of my case. The members of ISME and I are fed up with people talking about the problem with insurance lying with barristers and the medical profession. The problem and the cause must rest firmly at the feet of the insurance companies and the industry which have allowed this to happen.

I welcome the representatives of ISME and IBEC. This is a major issue for them which I am sure gives them many headaches and one which is not going away. The fact that the average cost of liability insurance has gone up 100% is a significant cost to any business. Mr. Fielding said that 15% of companies were refused cover or quotation. What sectors are badly hit in this regard?

Mr. Fielding mentioned the need for greater transparency from insurance companies to give reasons to justify an increase in premia. Does he have a view or a suggestion to make about how one could go behind the figures which justify such increases? Should there be someone to monitor the increases, who should that person be and, without getting into the commercial realities of a free market and damaging the competitive relationship between insurance companies, is there are particular structure or model that he recommends?

The situation in regard to the collapse of the Irish independent group is still a major bone of contention. There is a report in the Department of Enterprise, Trade and Employment——

I want to make it clear that the Deputy is not referring to the Irish Independent newspapers group.

Mr. O'Reilly is well able to look after himself.

We do not want to get involved. We are depending on him to spread news of the good work we are doing.

I am talking about Mr. Myles O'Reilly.

Mr. Fielding mentioned the independent group and the chairman did not take him up on it. This is the group which collapsed. The other is going well.

A report was commissioned by the then Minister of State, Deputy Treacy, before the general election to bring in the various people and establish the extent of the damage arising from the collapse of the insurance company which was licensed in the UK, trading here, and for which we had no responsibility. Does Mr. Fielding have any figures on the extent of the damage done by that collapse?

Mr. Briscoe mentioned the workplace safety group initiative and a code of practice which is required. He indicated that the State should provide some tangible support for it. Is he saying the Government is not providing enough support at the moment and what support does he suggest to improve the situation at workplace initiative level?

I welcome the representatives of IBEC and ISME to the committee. The SFA is a strong organisation whose motto is all for one and one for all. I do not know how many companies it represents. Is it 13,000 or 14,000? If we achieve all the SFA hopes we can achieve through the courts, the law on perjury, the PIAB and so on, would it not be something they could consider that their combined strength would make it possible for the SFA to make arrangements to form a group which could attract an outside insurance company from Europe into Ireland? They have enormous power and strength in the premium the member companies pay each year. They have all the solutions to the problem but the insurance companies are happy to continue as at present. The only thing which will worry them is if the SFA combines its efforts and every company paying premiums will combine and seek a company in Europe to come here take on the business.

According to last Sunday's edition of theSunday Times, 10,000 Irish companies are not insured. Are many of those members of ISME? They are playing Russian roulette; one claim and they are gone. If it is a limited liability company, the individual will be badly damaged and there will be no compensation. Would Mr. Fielding be in favour of compulsory public and employers’ liability insurance? I am not optimistic about what is happening at the moment. Everything we do and everything that has been achieved so far seems to be of no avail whatsoever in bringing down the cost of premiums. Will all the efforts we are making here and all the efforts the Government will make in the future really make a difference to the industry? It will not unless the ISME takes an active and positive role and takes on the companies itself.

Mr. Fielding

We estimate that 10% of our members are probably uninsured at the moment.

How many is that?

Mr. Fielding

About 350 companies. We are certainly not in favour of compulsory insurance, the main reason being that compulsory insurance covers the uneconomic and the bad managers for whom we will all end up paying. I agree that many companies are playing Russian roulette. The problem is that the gun has been put to their heads not by themselves but by the insurance companies who have increased their premiums. These companies are simply unable to get together the cost premiums. It has been mentioned in this committee that many companies are actually borrowing this year to pay their premiums and did so last year as well. They come to the end of that payment over 12 months and then they must borrow again for the following year's insurance. Many companies, in our own organisation and right across the board, are in business until their next renewal date. That is the truth.

How much has the collapse of Independent Insurance cost? Back in June 2001 we asked independent brokers to consider this. The figure that came out for potential costs to businesses in Ireland was upwards of €100 million.

Is Mr. Fielding talking about outstanding claims?

Mr. Fielding

It is a mixture of outstanding claims and the cost of reinsuring.

Does that include the cost that has already been paid?

Mr. Fielding

Yes, which must be paid again.

What about outstanding costs - the potential hit for costs that is still unknown?

Mr. Fielding

That is about €100 million. The amount of premiums that had to be paid are fairly small overall - the figure mostly consists of claims. The independent brokers gave us that figure. We must be aware of the open market, but there should be some sort of independent body which would have the authority to investigate insurance companies, with some sort of open book system. If the insurance companies say that due to the compensation culture in Ireland, exaggerated claims are costing them X million, and that is sorted out in the new Bill, that should lead to a reduction in premiums because it leads to a reduction in the delivery costs for the insurance companies. We know from the attendance of insurance industry representatives at the MIAB that they have been dragged kicking and screaming into the new arrangements. They refuse to give figures, or give them reluctantly. We advocate the establishment of an independent body to audit the insurance companies to ensure that these cost savings are passed on in the form of premium reductions.

With regard to the sectors that have been hit, somewhere in the region of 15% of our members have been refused - 37% manufacturing, 42% service and 41% distribution companies. It is a broad range. Construction and engineering were very badly hit.

Surely the reduction in premiums can only happen through regulation and legislation.

Mr. Fielding

That can be of assistance, but the insurance companies themselves must change their model. They are doing that slowly but surely. They cannot depend on equity returns to boost a loss making business. No small business would be run like that. It could not afford a loss leader that would bring it down.

This was pointed out the other day when their delegation was present. If they do not make these changes it will be to their own detriment in the long-term.

Mr. Fielding

The different initiatives that have been taken by the Government - the PIAB, the Bill being brought in by the Minister for Justice, Equality and Law Reform, the points system - represent the Legislature taking a hand in the matter. The problem is that these things should have been called for by the insurance industry itself. I know this is water under the bridge, but I keep going back to it. If those in the industry saw that legal fees were too expensive, that the awards were too high or that there was uncertainty in the awards given, they should have looked after their own business by making sure that the Legislature, the Judiciary and other interested parties knew about this, but instead they have sat on their hands for 20-odd years. It was only when the squeeze was on them and their bottom line that they acknowledged these problems and now they are trying to put the blame on everybody but themselves.

Mr. Briscoe

We have looked at the insurance figures over the last number of years. It is unfortunate that the most recently published figures are in respect of 2001; I would like to see figures for 2002. Other things to bear in mind are claims incurred, which is a significant figure - how much is spent on claims - and the number of accidents. Public liability accidents came down by 5,000 in those two years and employer liability accidents went up a little, but not significantly. However, the most significant figure is the technical reserves. From a business point of view, we must be careful as we do not want a recurrence of what happened with Independent Insurance. This was a triple whammy for businesses who lost the premiums they paid and had to meet the cost of the claims in respect of the period for which they thought they were covered as well as having to seek out insurance, usually at a much higher cost. The whole thing was very expensive for businesses. We want to make sure that the insurance or insurer is solvent because, although we want to see efficiency, we must make sure there is sufficient solvency to ensure that the cover exists to meet the claims that arise.

In any year there may be 12,000 employers' liability and 15,000 public liability cases. Because it takes three years on average to settle these, only a small proportion of the moneys set aside for claims incurred are actually paid. Probably 70% of the money set aside for claims incurred is set aside to deal with future claims. I know there is now a requirement for insurers to have an actuarial evaluation and certification for assessments outstanding. This affects technical reserves. Actuaries have the responsibility to ensure that their certification is adequate. This has an influence on premium costs. The more we can improve the process by which claims are handled, the more opportunity we have to reduce the extent of technical reserves significantly. It is always a contentious issue, but it is clear from our reading of the situation that the actual cost of claims - I am not talking about the cost of awards - is very high. If there are 20,000 public liability claims in one year and 15,000 in another, and the cost of claims is rising, even allowing for inflation there should be some reduction, but this is not happening.

Senator Leyden asked us about hunting companies. I have been involved with insurance companies, not working for them but as a business client, and I can tell him that because of the Irish claims culture, which has been discussed and received publicity, the industry feels that Ireland is not a good market for business, although this is changing. Developments in Britain and elsewhere are moving up the Richter scale. If these measures are introduced here, the situation could change significantly. I would like to see more competition in the market and it will happen when competitors know the extent of that market.

We constantly talk about self-insured or uninsured. I prefer to use the term self-insured because there are certain risks where businesses are forced to self-insure anyway, such as asbestos risks. When I started in this area 20 years ago, a person could get unlimited employer liability insurance and limited public liability insurance but there are now limits on that, it is not an open-ended exercise. It is very difficult to get competitors to enter the market when they see a claims culture and high incidence and costs for those claims. We must change the social and economic conditions.

I am absolutely opposed to compulsory insurance. It has not worked in Britain or Northern Ireland. Some companies in the North are spending money to hang a certificate on the wall but they are still meeting the costs of claims. Motor insurance is compulsory but people are now paying an additional premium to fund those who do not insure because there will not be 100% compliance. It would have an inflationary effect. If a person can afford a Lamborghini for his 19 year old son and the son does not have to worry about the risk factor, he should not be insured in the first place because, although his father might be able to afford €50,000 insurance, it may not be appropriate for that person to drive such a vehicle in the first place. There are risks that could skew the situation and, from a business point of view, we do not see compulsory insurance as the way forward. Many companies can prudently and adequately self-insure so we do not want to restrict them.

With the combined strength of ISME, IBEC and the SFA, is there no one working to quantify the amount of premium paid in the last year who could head hunt a major company?

Surely companies that took out insurance with a registered European company could not be liable for claims against that company when they were paying their premium. There is definitely something missing. If a person pays the premium to an insurance company registered in the State and the company goes belly up, the liability is owned by that company and, unfortunately for the person affected, it will bear the loss. Surely the company that took out and paid the premium could not be liable.

Mr. Briscoe

I am not legally competent to answer that question but the experience is that companies have had to pay claims that have arisen where they assumed they were covered.

Mr. Fielding

The employers' liability insurance in Britain is mandatory and, therefore, when they went belly up, the Government was obliged to cover them because it was a legal requirement. It is not mandatory in Ireland so the Government could say, tough luck.

ISME took an initiative 11 months ago where we brought together 18 different organisations, including the Irish Hotels Federation, SIMI, the Irish Road Hauliers Association and the two vintners associations, under an umbrella group called Business Insurance Alliance and through that organisation we carried out a feasibility study on setting up an independent intermediary for insurance. We are still in the process of putting that together so we do not have an answer but it does not look too positive at present because of our perception in Europe and the size of our market. The large underwriters in Brussels or Munich see a market outside the window with 20 million potential customers within 50 kilometres. They then look at us and see a small island off an island off Europe with only three million people. There is the problem of size. The Business Insurance Alliance, however, represents 18 organisations and 25,000 companies with 250,000 or 300,000 employees and we will continue to look at this.

On IBEC's submission on legal costs, I can see the motive but it is unrealistic to say that solicitors taking cases should put a bond in place so, in the event of the claim being unsuccessful, there is money to pay the costs. It would disadvantage the sector of society that cannot take cases for economic reasons. It is fine for someone to have professional liability insurance, it relates to their professionalism, but a bond involving a third party would require a solicitor to perform a dry run on a case before deciding to take the case. He would have to try the case himself within his practice to check that he could afford to take it if this system was in place.

It is for solicitors to insure themselves.

Yes, but it adds another layer to the system and makes it more complicated. Is there another way? This idea has been put across by other companies but, on reflection, it appears unworkable. There must be a simpler way, although I understand perfectly where IBEC and ISME are coming from - to put more of an onus on the solicitor to look at a case seriously before taking it on.

Mr. Briscoe

I am less concerned about that issue now in the context of the proposed reforms to deal with fraud and exaggeration. Since we set out those measures many things have arisen, such as the MIAB report.

There was, however, a strong view within the business community that taking cases on a no foal, no fee basis could encourage people to bring spurious, exaggerated and opportunistic claims and the only person who had anything to lose - if only the legal costs of defending it - was the employer. In many of these cases nuisance settlements were made because if the case went to court there could be thousands in legal costs and the case could be settled for less. That measure was intended to say that if a case was being taken on a no foal, no fee basis there must be some equity in the system. There would still be a risk but cases would not be spurious.

The new measures make provision for reverse lodgments and I would like to see those applied early in the process, not on the steps of the courthouse. We found that cases settled outside are often settled for more than in court. We need to see minimum and maximum terms of settlement at a much earlier stage. There may be complex cases but 90% are straightforward.

I thank the delegations for coming here today. It has been a most valuable meeting. Does Deputy Sargent wish to ask any questions?

No, I am just following the debate.

I thank the Deputy for coming here. I also thank Mr. Briscoe, Mr. Fielding and Mr. Curran for being with us. It has been most helpful. The Tánaiste and Minister for Enterprise, Trade and Employment, Deputy Harney, will attend the next meeting of the committee next Tuesday, and at 1.30 p.m. on that day the Minister for Transport, Deputy Brennan, will also attend the meeting of the committee. Next Wednesday morning we will have the seventh of the public hearings on reform of certain aspects of the insurance market. The Bar Council and the Law Society will be in attendance.

The joint committee adjourned at 11.50 a.m. until 12.15 p.m. on Tuesday, 15 July 2003.