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JOINT COMMITTEE ON ENTERPRISE AND SMALL BUSINESS debate -
Wednesday, 23 Jul 2003

Vol. 1 No. 24

Reform of the Irish Insurance Market: Presentations.

Before embarking on this, the ninth of our public hearings on the reform of certain aspects of the Irish insurance market, I wish to welcome back Mr. Myles O'Reilly of O'Reilly Consultants and his colleague, Mr. Joseph McGrath. We have had many meetings on this topic but this committee makes no apology for addressing the issues with the intensity that is required.

We heard yesterday from the Minister for Justice, Equality and Law Reform, Deputy Michael McDowell, and from Ms Dorothea Dowling, the author of the MIAB report. I commend the Minister and his colleagues in Government, the Tánaiste and Minister for Enterprise, Trade and Employment, and the Minister for Transport for their concerted efforts in tackling, with the committee, this very serious and urgent problem.

With the agreement of the committee I propose that we take the proceedings today in the following order: the Irish Brokers Association and the Professional Insurance Brokers Association; the Irish Congress of Trade Unions and the Irish Road Hauliers Association. Members may ask questions after the groups have presented their submissions.

Members are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against any person outside of the House or any official, either by name or in such a way as to make him or her identifiable. Members who wish to make a declaration in relation to any matter being discussed may do so now or at the beginning of their contributions. Members are also reminded that if there is a possibility of there being a conflict of interest, they should make a declaration of interest either now or at the start of their contribution. I repeat my own declaration, made at previous meetings, that I have a professional interest in insurance reform as I am a member of the Irish Hotels Federation. Yesterday, a very important document was presented by Ms Dorothea Dowling, the contents of which I was not aware until after the sitting yesterday. That document related to the Midland Health Board of which I am also a member.

I welcome Mr. Paul Lynch, Mr. David Cowman and Mr. Paul Kavanagh of the IBA and invite them to make their presentation. I will then invite members to contribute. The period allowed for submissions is ten minutes. This will leave time for questions afterwards.

Mr. David Cowman

I wish to thank the committee for the opportunity to make this presentation. I am president of the association and I am joined by Mr. Paul Lynch, the chief executive officer. Mr. Paul Kavanagh is a former president and Mr. Donagh McSharry is deputy president.

The Irish Brokers Association has 750 member offices throughout Ireland, employing more than 5,500 people. Member firms range from the largest global insurance brokerage to the smallest local insurance brokerage. Members of the Irish Brokers Association account for the placing of some 80% of general insurance, that is, commercial non private - 35% of individual life policies, 55% of individual pensions and 90% of group life and pensions business in the Irish market, although that is not the business of the joint committee.

We made a submission in March 2003 in response to the joint committee's advertisement, a copy of which is included in the pack which has been distributed, within which the key points are contained.

The first issue I wish to highlight - and to echo what the joint committee has heard over and again - is that the liability insurance market in Ireland for small and medium enterprises is in crisis. The liability premiums have multiplied. Some small and medium enterprises are unable to get an economic premium or, in some cases, cover at any price and many are uninsured or self-insured either by choice or because they are forced.

The underlying causes of the crisis are well documented. Shortage of global capacity is essentially outside our control. We need to speak about the issues which are not outside our control and which are to be addressed in our submission by Government and society. The relative unattractiveness of the Irish market is within our control and it is our responsibility as a society. Ireland has a reputation as a hostile environment for liability insurers and unless we take decisive action to change this perception, the revival of global capacity, when it happens, may pass us by. There is a real risk that Ireland could remain in crisis when other countries start to get some relief. To address that risk we need to look at the litigious society and our compensation culture, the way claims are managed by all parties concerned - the legal profession, the insurers and the courts system; and safety standards in industry. I am conscious the joint committee has had many submissions under those headings and I do not propose to repeat them.

The proposed strategies which Government should adopt include introducing legal system reform; promoting improvement in safety standards in industry; taking active steps to promote availability of liability insurance for SMEs; adopting a clear position on financial supervision and policyholder protection and making the insurance levy, which is at an all-time high, available for the benefit of policyholders.

On making liability insurance cover available for SMEs, we are on record as believing there is a strong case to be made for making employer's liability insurance compulsory. We are also conscious there is not a great deal of support for that view. However, the availability of the cover at any price is a real problem that is not going away.

Many employers, faced with the high cost of cover, are choosing to go uninsured. When uninsured claims occur, society is at risk on a wide scale. There are people who will not be paid compensation for injuries sustained. Employers who cannot afford to pay will go out of business. It is a huge issue. The short-term issue is how to ensure it remains available and affordable. It is worth noting that in the late 1980s and early 1990s the Irish Insurance Federation had a version of a "declined risks" committee for liability insurance, similar to that in place for motor insurance. In the absence of a compulsory insurance regime it is difficult to see how this could be revived. We believe there is a case to be made for setting up a mandatory liability compensation reserve pool, whereby protection would be guaranteed to employers who have a good safety record.

Any employers seeking relief from this scheme - essentially that means an employer who cannot get regular insurance - would sign up for a proactive risk management programme and the improvement and safety standards would be monitored on an ongoing basis. The scheme should pay only claims to the level recommended by PIAB, using the PIAB book of quantum and should be run on a partnership basis and not by insurers alone.

Insurers have a social duty to provide some protection in the market in which they operate provided conditions can be made tolerable for them. The State is at risk because, without cover, firms will become insolvent, people will lose their jobs and injured parties will be a huge further burden on an already overburdened health service. Also, there would be a loss of income to the Revenue Commissioners. The banks are also at risk of bad debts where they lend money to firms which become insolvent or are at risk of becoming insolvent. It is because the banks are at risk that they have a vested interest in helping us solve this problem. The scheme which should be set up should be financed by contributions from all four sections, which includes premiums. The State contribution can come from the unused insurance levy, which is running at an all-time high of €70 million and has no other means of being disbursed. The banks can be brought into it and the insurers can be amenable in some form.

The March 2003 submission focused on health, safety and legal issues and on promoting greater safety awareness among employers. In a balanced statement on the causes of the problems in the liability insurance sector it would be improper to ignore the responsibility of employers to foster safe systems of work. We have already made proposals on rehabilitation of insured persons in our original submission of March 2003. On regulating the market, we are alarmed the Government has not been able to find a solution to the "Independent Insurance Company" issue and Irish policyholders will continue to be at risk from similar incidents until this is resolved. The legal environment is a huge contributing factor and we are greatly encouraged by all the initiatives taken by the appropriate parties in that regard.

We are in favour of the MIAB report and its recommendations. We believe that promotion of greater safety among employers and on the roads, rehabilitation of injured persons, a well regulated market, a reasonable legal environment and implementation of the MIAB recommendations would address many of the issues causing today's problem. One final initiative which the Government can take is to make the 2% motor insurance levy available to policyholders. Many people have said that here and we echo their sentiments. To say it is just another tax is not acceptable and we do not believe it is the right answer.

The three messages we want to leave with the joint committee are that a fund should be set up to ensure that all SMEs can have liability insurance, the greater focus on health and safety and related issues should be pursued for the benefit of all and the insurance levy should be used for the specific benefit of policyholders.

Insurance brokers, who are now called insurance intermediaries, will continue to play a role in the reformed process outlined in the MIAB report and also in the Tánaiste's reform package. We are delighted to have the opportunity to co-operate with any authority which is making a serious attempt, as the joint committee is doing, to address the extreme difficulties in which we find ourselves. We urge the joint committee to exert its collective influence to press for immediate action on these issues. I thank the joint committee for the opportunity to make this presentation.

I welcome the representatives of the Professional Insurance Brokers Association. Following their presentation, I will invite members to make their contributions in a question and answer session. The PIBA is represented by Mr. Terry Hardiman, who is the chairman; Mr. Derek Fitzgerald, PIBA committee; Mr. John Hogan of the claims legislation committee, and Mr.Diarmuid Kelly, the chief executive. Some of us heard Mr. Hogan being interviewed on RTE this morning and we are delighted to learn that he shares our concerns on this issue. We thank him for his support because the determination of this committee is to address this problem. Mr. Cowman described it as a crisis, which is very close to our view. It is becoming a national problem affecting everybody, particularly those in employment. I invite Mr. Hardiman, the chairman, to make his submission.

Mr. Terry Hardiman

Thank you, Chairman. In this instance, Mr. Hogan will make the presentation.

I thank you, Chairman, and the members of the committee for affording the Professional Insurance Brokers Association this opportunity to make a short presentation, after which my colleagues and I would be delighted to answer any questions.

The PIBA was formed in 1995 as a representative organisation for brokers, particularly those involved in the life and pensions end of the business. Since that time, PIBA has grown dramatically and today has more than 700 members throughout the country. In order to be a member of the PIBA, a broker must have agencies with a minimum of five companies and while a majority of members are life and pension brokers, we have an increasing involvement in the general side of the business, including motor and liability insurance.

The Chairman's predecessor in the last Dáil, the now Minister of State, Deputy Callely, had invited the PIBA to appear before this committee to make a full presentation on the life and pension side of the business. I appreciate that this is not the committee's principal focus now but, perhaps, it could bear us in mind at a future date.

Today we are focusing on the role of the broking system in delivering competition and value to Irish consumers. Other presentations will have covered issues in regard to the costs of claims, legal fees, risk management and so on. On general insurance liability, I would like to make a number of points.

First, the Irish insurance market is a very small market in relative terms. The gross take of all premiums here is equivalent to that of the Greater Manchester area. Consequently, there is not, nor do we believe there will ever be, a queue of companies trying to break into the Irish market. Currently, the general insurance market is dangerously close to a monopoly situation. There is only a handful of companies in the retail insurance market. Reports from our members suggest that of the five main players, there are only two who are genuinely open to new business. Two others are extremely selective and conservative in the risks they will underwrite, while another is not open to any business except renewals. Many brokers will say there is at best two and sometimes only one company that will quote for certain types of business. Furthermore, market segmentation is the norm, and insurers know where they face competition.

During the past two or three years, when insurance premiums spiralled, brokers would regularly ring companies to protest about the high level of renewal premiums they were offering. Invariably, they would be told that no other company was dealing with such clients and that a competitor's premium would be higher. Such monopolistic tendencies are clearly not good for the consumer, and insurance companies make a lot of money. No insurance company has ever gone bust, although we did have one rather spectacular Government-led rescue some years ago.

One of the key roles played by brokers is that they are the only buffer between the insurance company and the general public. When brokers receive renewal terms, they will query any increases and seek alternative quotations for their clients. In this way, they force companies to offer competitive terms.

In a normal market, brokers are the engines of competition and insurers are forced to offer competitive terms to broker clients but due to consolidations, mergers and the upheavals in the general insurance market over the past two years, this competitive function has been thwarted. However, what little competition there is in the current market is principally driven by brokers seeking the best terms for their clients. We are beginning to see light at the end of the tunnel, and companies are starting to drop quoted prices when brokers produce lower alternative quotes for their clients.

We believe brokers will have a key role in forcing premiums down as we emerge from the current difficult market. In addition, the existence of a vibrant broker market will make it easier for foreign insurers to operate in Ireland rather than set up their own costly distribution system. In other words, the broker system keeps a check on excessive pricing by insurance companies. This point is not lost on the insurance companies, and some of them have a deliberate strategy of increasing business with direct selling to broker clients. That is not for cost reasons, because advertising and services costs will outweigh savings in commissions paid to brokers, but to increase retention levels.

A client who deals directly with the insurer is more likely to stay with the insurer each year than a broker client because the broker is constantly shopping around for the customer and will offer a better rate when it is available. In five years, it is possible for a broker client to switch between several insurers and back to his or her original insurer in search of a better premium. Direct business gives the insurer more control over business and volumes and greater ability to increase premiums and profitability than business conducted through the broker market.

Clients sometimes claim to be able to secure lower premiums by dealing directly with the companies over the Internet or otherwise, yet often what they are buying is not the same product at all but a yellow pack version of some kind. Brokers are experienced and best qualified to advise clients which insurance or financial product is best suited for their needs and situation. They are the public's guarantee of a professional and personal service for which there is no substitute. In the short-term, members of the public dealing directly with companies might secure reduced premiums but in the longer term they will merely spiral back up again.

The PIBA is also concerned about other recent developments. Over the past year, some companies, as outlined in our written submission, have set down annual production targets for brokers in order to continue to be allowed deal with them. If brokers fail to achieve their target, their agencies are threatened with cancellation. We do not believe insurance companies should arbitrarily set down production targets for brokers. That is anti-competitive and not in the interests of the consumer. Brokers must be free to place their business where it is in the best interest of their clients. This is now a legal obligation on brokers following the transfer of the regulations of insurance intermediaries to the Central Bank, completed in 2001. The PIBA does not believe the consumer will be best served by restricting access by certain insurers to the larger corporate brokers as this will retard competition in the broker market and will result in many consumers not having access to the broker firms of their choice. Indeed, such a policy may wipe out the broker service in the smaller rural towns, leaving such clients at the mercy of dealing directly with the insurers.

The PIBA believes that an active broker market in the insurance sector is the best promoter of dynamic competition, choice and competitive premiums for Irish consumers. We would like to put forward the following policy proposals for the committee's consideration which, if introduced through legislation, would serve to underpin such competition in the insurance market.

Insurance companies should not be allowed to cancel agencies purely on the grounds of not reaching targets, as I already outlined. Insurance companies should be obliged to give agency facilities to all multi-agency intermediaries and all information to authorised advisers, as appropriate. Insurance companies should be obliged to deliver the product at the same wholesale prices to the different distribution channels, thereby creating a level playing pitch. Insurance companies should not be allowed to discriminate on terms offered to brokers. In summary, we believe the brokers are the engine of competition within the insurance sector and that policy makers should do everything in their power to protect and promote this system which delivers competition, choice and value to the consumer. Ireland is a small economy and with few insurers. If a tied distribution channel is allowed to take hold, the monopolistic character of the market would increase further.

I will turn briefly to the life and pensions side of the industry. The PIBA broadly welcomes the major reforms introduced in the insurance market in recent years, most notably through the Insurance Act 2000. However, a number of proposals by the Central Bank have been a source of concern, and we have sought meetings with the Tánaiste, the Minister for Finance and the independent regulator to seek a number of changes. Some of these meetings have already taken place while others are in train. We view today's meeting as another opportunity to highlight some of the anomalies we believe are unfair to our members. The PIBA wishes to see a level playing field established in the insurance sector as otherwise many firms will cease trading.

I will give a few examples of the current regulations. Banks and tied agents who sell one insurer's products and do not offer choice to the public are subject to lighter regulation than insurance brokers who offer choice. There is an inherent danger of encouraging brokers to go tied to the detriment of competition and consumer choice. Also, solicitors and accountants are left to self-regulate the incidental insurance business they operate. This incidental insurance business can have a higher income than many brokerages.

Second, many insurance brokers are now categorised as multi-agency intermediaries, MAIs, who have agencies with a specified number of insurance companies. Under current legislation, MAIs are not allowed to give advice to clients on investments they already hold if the broker does not have the relevant agency. This is far too restrictive and not in the best interests of the consumer. Onerous auditing and corporate compliance requirements applying to small brokerages, even sole traders, are an unnecessary burden when the brokers concerned do not handle client cash. We have concerns that the compliance fees to be introduced by the regulator, if set too high, along with increased professional indemnity insurance, accountancy and other costs, will drive many brokers out of the market. We would welcome a level playing pitch where there is lively and vibrant competition. I thank the members of the committee for listening to this presentation and I and my colleagues will answer any questions they may have.

Thank you. Does the delegation consider that there is a cartel in the industry?

We consider that the Competition Authority is the most competent authority to address that question and we consider it could usefully look at the issue. However, we have concerns about anti-competitive practices with insurers in Ireland. We consider differential pricing is designed to lure the consumer into dealing directly with an insurer. The evidence for this is that they are lured into a false sense of security, become lethargic and do not shop around and seek advice. We consider this to be to their disadvantage in the longer term.

Reference has been made to the business levels insurers are laying down for intermediaries to hold in order to retain their agencies. We believe this is designed to drive small brokers, particularly, out of business, which will be to the disadvantage of consumers in the long-term because it removes the limited choice at their disposal and restricts their access to advice from intermediaries who will be driven out of business by what we believe to be anti-competitive practices. We have brought this matter to the attention of the IFSRA and are forcefully pursuing the matter because we believe them to be anti-competitive practices designed to the detriment of brokers in the short-term and consumers in the long-term.

Mr. Hardiman, do you agree with Mr. Lynch?

Mr. Hardiman

We go most of the way with what he has said. We consider that Ireland is very close to a monopoly situation with too few companies quoting for business, particularly for liability and commercial type business, and, in effect, naming their own price. There is a danger of a monopoly developing.

Mr. Hogan, you mentioned five underwriters. Who are they?

The five main companies are Hibernian, AXA Group, Eagle Star, Royal & Sun Alliance and Allianz Group.

There would be other specialised insurance companies, but the ones mentioned would be the five main retail companies.

Are any of them Irish owned?

They are all foreign controlled.

Mr. Paul Kavanagh

Many of our members also have additional niche companies in the motor insurance market, such as Rightway, Askard, ARB, St. Paul, Europa and various Lloyds syndicates. On the liability side there is Liberty, Crest, Quinn, St. Paul, Europa and, again, numerous Lloyds syndicates, one of which, Quinn, is an Irish insurer. There is no differential pricing with those insurers, but among the main five companies, differential pricing is operating in the private motor insurance market, but thankfully not in the liability market. Insurers are doing this in the private motor market to lure clients with lower prices but often with large claims excesses and inferior cover, referred to by Mr. Hogan as yellow pack policies. We would say there are non-competitive practices in operation that need to be seriously examined by the Competition Authority. How can there be a 20% differential in price when brokers are being paid a mere 5% on private motor insurance? There is no justification for this price differentiation; in fact, insurers will freely admit that placing business via the broker market is cheaper then having it placed through their own direct networks.

Brokers are obliged to get the best price they possibly can for their clients and in doing that they shop around the various companies?

Mr. Kavanagh

Absolutely.

Can you give the committee an assurance that both your organisations are doing this at present?

It is a legal obligation.

I am aware of that. While we will publish an interim report in the first week in August, the committee may revisit this issue in the autumn. I have reason to believe this practice is not happening and I am seeking clarification on the matter before I open the meeting to members. Are you assuring the committee that you are engaged in getting the best possible deal and that, especially with regard to motor insurance, you are offering business to all the companies seeking it?

Most brokers have a system that enables them at the time of the renewal of policies to search for available quotations. Recently, there appears to be movement on the quoted price and we have heard reports from some companies that rates are starting to move, which is a good sign. However, it also means that insurance companies are not necessarily putting their best foot forward in terms of their standard rating book. It is for the brokers to go behind that on behalf of their clients.

In the past two to three years, we have received several hundred telephone calls from our members who have desperately sought better terms for their clients as their premiums have doubled and, in some instances, quadrupled. Brokers have not lacked effort in seeking the best terms, but sometimes they run up against a brick wall with insurance companies who know they are the only company offering a realistic quotation for a risk. In a small market like Ireland's with a few main players, it does not take much for everybody to know who is competitive. We argue that the broker seeking the best terms for his or her client is doing the best competitive job in that instance. They know the market and they know, perhaps, the limits to which insurance companies are prepared to go.

You are assuring the committee in response to the question I have raised? I call Senator Leyden.

I welcome both delegations. It is unusual that a small country like Ireland should have two groups representing brokers. That is a matter for the business. To paraphrase Brendan Behan, first form a committee, then have a split. I am not sure it happened in that way in this case.

I must declare an interest in that my brother, Patrick, works in a good company in New York. He shops around for his clients. The Irish have a strong presence in the insurance industry in New York, but since 11 September 2001 there has been a major problem.

There is no incentive for brokers to get a good deal for their clients because their commission is based on a percentage of the premium. The more premiums increase the greater their commission, so brokers are doing well in this, not the small companies that rely on their services. There is no competition between brokers and, according to a submission to the committee, if an insured wishes another broker to secure a quotation, insurers will give only general details to the new broker and never renewal terms. I wish to have this matter clarified because it is very important. It is being alleged that there is no competition between brokerage firms and that it is not in their best interests to reduce the cost of insurance because it will mean a cut in their income. Neither do they welcome new entrants to the field who are prepared to fight for clients. It is in the insurance brokers' best interests to continue to collaborate with this rotten system that operates here. I am delighted representatives are present in order that I can say that to them directly.

Will one of the witnesses elaborate on the €70 million fund that has been built up? To what purpose could it be put to assist in reducing insurance costs?

We will take two members at a time because we want to conclude this part.

I welcome the brokers. I am a former insurance broker and no longer an active participant in the market. I want that to be known before I ask questions of the PIBA.

The Deputy brings enormous experience to the matter.

We will see. The Professional Insurance Brokers Association made a serious accusation - it is probably relevant to the market and accurate - that we are close to a monopoly. Two companies are genuinely open to new business and others are selectively open to business.

Will the witnesses say what they mean by "market segmentation" and how it operates? It would bring home to the committee how companies dip in and out of segments of the market for which other companies are not competing. It would lend credence to what was said about the monopoly that exists at present.

On the different insurance rates, I inquired of the Hibernian insurance company, which effectively has five different ways of extracting premiums or distributing its products, why it bothers with brokers if it could conduct its business on-line at a cheaper price to the consumer. I put this question to the representatives of both organisations present. If modern technology allows people to conduct their business on-line at a cheaper rate, why is there a need for brokers? Why is Hibernian allowed to do this? Why does it bother dealing with brokers if it can conduct its business through on-line facilities which, in its opinion, are better?

Regarding the re-categorisation of insurance policies, especially motor insurance policies, if one inquires of insurance companies whether premiums have increased, they will occasionally say no, that their group three rates or whatever are the same. Have the witnesses encountered the practice whereby a motor vehicle, such as a two litre car, is classified in group three initially and reclassified in group four when the premium is renewed? Is this practice ongoing? Are motor vehicles being reclassified in a higher group to achieve higher premiums? It has been brought to my attention that this practice may be ongoing. Will the witnesses say if, from their experience, it is?

How widespread is the practice of increasing the level of excess an insured party must take on board to reduce insurance premiums for liability? Our friends in the road haulage business and other companies would be conscious of this. Will the witnesses give some examples of the impact in the marketplace and on premiums of the level of excess companies are prepared to accept for certain categories of business?

The Central Bank introduced a considerable number of new regulations in recent years covering the area of consumer protection in the insurance brokerage business. Do the witnesses find that these regulations are akin to using a sledgehammer to crack a nut? Could changes be made to achieve the objective of consumer protection while also keeping brokers in business to offer competition in the marketplace to consumers?

Mr. Kavanagh

Many questions were asked and I tried to digest them as they were asked. If I miss something, we can return to it or, perhaps, one of my colleagues can address it.

I refute Senator Leyden's allegation that there is no competition in the Irish broker market. There is huge competition. Deputy Lynch, a committee member, will confirm that there are 20 brokers on the South Mall in Cork city and 60 brokers operating in the greater Cork area. We gave a quote for hotel insurance yesterday and were one of five brokers quoting against each other. I can confirm that the practice to which Senator Leyden referred is not happening.

I cannot speak for every firm, but I can certainly speak for my firm and those with which I am familiar in both organisations when I say that we actively seek new markets every day of the week. The problem is that the Irish market is not attractive to foreign insurers. It is very difficult to establish an insurance company here. The regulations laid down to establish an insurance company are very restrictive and that is why no new insurers establish businesses here. Those who establish a motor insurance business must be members of the Motor Insurers Bureau of Ireland. This is of grave concern for new entrants to the market. We try to interest them in establishing a business here; we produce our facts and figures, do a great deal of work and make our presentation only for this MIBI issue to arise.

Membership of the MIBI is necessary to deal with uninsured drivers who are estimated to number 80,000 but I would estimate the figure to be higher than that. Last year, the bureau paid out €50 million in claims and another €50 million is outstanding. It is a disgrace. It costs each client between €100 and €120 on his or her motor insurance policy. We suggest that should be shown and some of our brokers are showing it on renewal notices. This cost must be eliminated immediately. It is an awful scourge.

How will this be done? It is being done in the United Kingdom and we must follow that model. If a driver is stopped by the police in Britain or Northern Ireland, the police have the instrumentation in their cars or on their motorbikes to show the insurance company, the drivers on the policy, whether the vehicle is taxed and properly insured and whether it is stolen. In Norwich, 250 stolen vehicles were recovered in one month. That is how successful this system is. It is a means of identifying vehicles, finding out whether they have passed their inspection test, whether they are licensed hauliers and all the other information that is required. It has proven hugely successful in the UK and was only introduced last January. I have made presentations on this to the Tánaiste and the Minister for Finance. The MIBI has also received a presentation on it, but nothing has been done. This issue must be tackled seriously because the cost is crippling the industry.

There is huge competition between brokers. In the motor insurance market, as was explained to members already, we have computer systems that produce quotations on renewal. The information from when we last spoke to the client is inputted and we obtain quotations from the five main insurers along with Rightway, Asgard, ARB, St. Paul, Europa and Lloyd syndicates. There could be 12 different quotations.

On Deputy Hogan's question about segmentation, I wish to state that insurers segment. They seek to take on, for example, the female, male, young male, over 35 or husband and wife market because they see profit margins in certain areas. None of them balances its books evenly in all categories. Some of them segment and will only take one section. It is a case of what makes a profit for them. They have informed us that they cannot make a profit and have increased premiums as a result to try to give a return to their shareholders. Those are the economics and it is a matter for the committee to discuss those with the insurers when they attend.

Mr. Kavanagh quoted the five underwriters but did not refer to Quinn Direct.

Mr. Kavanagh

It is on the motor side along with FBD. However, neither deals in the broker market for private motor insurance.

So if someone tells you to contact to FBD or Quinn Direct for a quote your members will do that?

Mr. Kavanagh

They do not go to brokers for private motor insurance. Our members will do that for liability insurance and haulage insurance.

And they are doing so at present?

Mr. Kavanagh

Absolutely.

Are they doing it?

Mr. Kavanagh

Those with agencies——

Are they contacting FBD and Quinn Direct?

Mr. Kavanagh

If they have an agency with that firm, yes, absolutely. Given the amount of work involved in rebrokering - if one takes haulage insurance we would go to the end of the earth to get better haulage insurance for our clients. Whoever it is we will try to source that for our clients.

Regarding Senator Leyden's allegation that there was no competition because of the commission rates, at 5% on motor insurance we shop around. We probably do too much work but we do so to get the best deal for our client.

But the higher that goes the more the broker gets.

Mr. Kavanagh

There is no higher commission in motor insurance.

The higher the insurance premium goes the more the broker gets.

Who is taking the question from Deputy Hogan?

I could not agree more with my colleague from the IBA on competition. There is tremendous competition and I reject the idea that higher premiums bring in more money. One insurance company cut back its rates because they said: "You're making too much money," so it cut the commission rates. It did not negotiate but arbitrarily cut the rates because they said we were making too much money.

On competition, ask any broker and he will say it is red hot. We are all fighting among each other for the business and the best interests of our clients. Taking Deputy Hogan's question on the need for brokers, I received a quotation for a 35-year old from our system, something we do every day of the week. If he were to walk in with this to the wrong company he could pay €686 extra, or €1,087 for the same policy. Does he know which company to go to? No. That is why one needs brokers. We source the market and all policies are not the same.

What about Hibernian and the five distribution plans?

Hibernian has its own idea whereby one can go out and sell insurance on the Internet almost like hole in the wall machines. With technology it reckons one can type in one's information, use a credit card and then, hey presto, one will have a quotation for insurance cover. It is feasible but what are people buying? Are they getting a product they are happy with?

There are many different products. Does one know if one is covered to drive other cars, for driving on the continent, for legal fees or for one's son being added on at age 18? We know where to go for such policies because we know our clients and we know their needs. If one gets rid of the broker one may have something like a supermarket but it will not be as competitive as a supermarket because Ireland is not big enough. Brokers are essential in so far as they know the insurance market - I am referring to motor insurance.

As for employer's liability insurance, there are areas such as declarations and so on where brokers advise their clients to get the best deal. There is certainly a need for brokers.

One of the proposals we had was that the insurance company would deliver the product at the same wholesale rate to the distribution zones. We are not looking to be molly-coddled. There is a 5% commission for the brokers and the 95% charge is the same as what is available on the Internet. We are at a loss to understand how they can run these massive telesales operations, with advertising and so on, on 5%. They cannot. It does not stack up. The Internet technology which goes with payment systems and so on, far outweighs the 5% commission.

Equally, if the same technology is available to brokers, those brokers will deal with insurance companies. Many brokers deal with EDI at present and there is a seamless interface between the insurer and broker. We are confident once we get the same level of terms, the personal service, the expertise and the choice one has, dealing with a broker will more than outweigh the small savings on commission.

Mr. Cowman

There was a question on the €70 million and the 2% Government levy and perhaps I should address that. A long time ago there was a 1% tax levied on insurance premiums. When an insurance company went into administration there was a requirement to provide for a compensation fund so there was a 1% levy and a 1% contribution to the insurance compensation fund.

Was this the 1986 experience?

Mr. Cowman

It was before that.

It was 1984.

Mr. Cowman

So when the 1986 experience came along the 1% became 2%. At that stage policy holders were paying 3% on top of their premium: 1% as a tax and 2% into a fund for their protection and to ensure they were fully paid for claims on which they had paid premiums.

Time went on and the two insurance companies concerned left administration and went into new existences. There was no longer a requirement to fund the compensation fund at 2%. It was lowered to 1% and finally dropped altogether but when it was dropped the Minister for Finance increased the tax levy from 1% to 2% for what one might say was no better reason than having the opportunity to do so. There has been money going into that fund since 1994 and nothing has been coming out. In addition there was a surplus in the fund at the time other arrangements were wrapped up but there is no way to get at that money either. There is a figure of €23 million listed as being in there but if there was €23 million in there then and €70 million going in there every year, that is an awful lot of money going in and nothing coming out. When we have such distress among those who can afford insurance as well as those who cannot while that money is sitting there, then there is a case to be answered as to why it is not being made available.

My questions have not been answered - one was on recategorisation and the other on the Central Bank regulation.

Who is taking those?

Mr. Donagh McSharry

To reply to Deputy Hogan on car groupings, all vehicles insured in the Irish market are grouped by the Association of British Insurers in the UK. As members saw earlier, most insurers on the panel, including the top five and the Lloyds syndicate, are represented in the UK. The vehicles are grouped in various ways. It was suggested that cars are changed from group 3 to group 4 but my colleagues will support me when I say this practice does not go on. Should it happen to a vehicle there can be a number of reasons for it. Calculating the group of a car depends on how often it has been stolen, spare parts and other mitigating circumstances to come up with the grouping. I hope that answers the question.

Is that grouping or categorisation reviewed?

Mr. McSharry

I am unable to say ^ monthly?

It is quite a technical point. I agree certain cars, though they have the same horse power, will be in different categories. This may be as a result of insurance companies having a bad claim experience. Without naming names, the Volkswagen is unfairly categorised but this is something the insurance companies and their underwriters are doing. It is done purely on a commercial basis and I have never seen anything wrong about it.

And the second question?

The Central Bank regulation.

On the Central Bank regulations, the Irish Brokers Association welcomed the new regulatory authority. We thought it was good for both consumers and the professionalising of the business. However, we took issue with the Central Bank at the time and currently IFSRA on the approach it took to certain issues. In some instances it may prove not to reflect best practice in the industry or to acknowledge the realities of the current marketplace. Some of the reasons for this is the legislation. It would say it is not its responsibility; it is not the legislator, just the regulator. The legislation does not differentiate between the life and general side of the industry. There are significant differences on which IFSRA agree with us but it does not have the power to address these issues because it is restricted by the legislation.

Within the legislation itself, it has taken a very robust position on certain issues which we feel does not reflect best practice in the marketplace which brokers would have conducted over many years. Some of the things required of brokers do not add value to consumers, these are just administrative matters which add to overheads and do not benefit consumers. We believe consumers will be disadvantaged in the long-term. For example, the amount of documentation is perhaps more confusing to consumers rather than making things clearer.

Are brokers going out of business because of the amount of paper work involved?

Yes, some smaller brokers - a large percentage of our members are small brokers - are under extreme pressure which may, in turn, lead them to go out of business. They must continue to come to terms with new regulations. In addition to the regulations laid down by IFSRA, there are further requirements coming on board in the next year or two.

One of the key points in the IBA submission relates to the promotion of greater safety among employers. This issue has arisen quite a lot. Are members of the delegation saying that Ireland is not a very safe place to work? This issue has been commented on several times.

Will the proposed legislation to tackle fraud and the setting up of the PIAB, including the book of quantums, reduce the cost of insurance? Self-insurance seems to be taking over a lot in many companies. What are the views of the delegation in relation to associations trying to get together in this regard and what has been done to try to get insurers from abroad to set up here?

I welcome the delegation and thank them for their coherent presentation which will help the committee's work. My first question seeks to develop the role of brokers. Virtually every group coming before the committee has a vested interest - there is nothing wrong with that - and, therefore, we would expect the delegation to defend its interest in this regard. However, it is the job of members of the committee to find out where the blockages are to giving best value to consumers in the insurance market.

In terms of the role of brokers, I wish to ask both groups whether they are satisfied that there is currently sufficient transparency in relation to brokerage fees? It has been said that there is no such transparency and some companies have found out that there are arrangements between brokers and their insurance companies that they were unaware of not only in terms of fees but in terms of specific arrangements. Can the witnesses say there is absolute transparency? Although brokers are not tied agents of any individual insurance company, they have an arrangement with a number of companies, and are those arrangements on the basis that sometimes they work against the best interest of their ultimate client? Related to that question, are there arrangements where direct provision by insurance companies cannot undercut the price quoted to the broker? In other words, do any brokers have an arrangement with the insurance companies that the insurance companies cannot provide cover to a client at less cost than through the broker?

The submission referred to the wholesale price of insurance as if it was a commodity and there was value-added simply by handling it. Why should there be a wholesale price? Why should there not be a net price that the client can get directly from the company? I appreciate the case was made that you interpret for unwary members of the public. However, our experience is that most people who are concerned about insurance premia are discerning enough to be able to understand exactly what they are buying, and are not likely to buy a pig in a poke.

My next question is on submissions from the Irish Brokers Association in relation to, first, the levy - the witnesses spoke about using the 2% levy for the benefit of policyholders. What specifically have the witnesses in mind in this regard? The Tánaiste has indicated to us very honestly that the levy is nothing more than a tax, which is what it is. It was put to us that if we accepted that general provision, and the other suggestion that there should be a fund to ensure all SMEs have liability insurance, that would simply be another way of screwing the compliant by creating a fund to shelter the non-compliant. How do members of the IBA react to that observation on these two specific proposals made to us?

My next question was put to me by various professional groups. It relates to the rising cost of professional indemnity insurance. Is this something the association caters for? I was surprised at the response of the Tánaiste who, basically, said that has not come into her purview. Are the witnesses aware of the spiralling cost of professional indemnity insurance and is it an issue they have taken up directly with the insurance companies?

Mr. Hardiman

I am trying to put the whole lot together. There is no obligation on brokers to disclose commissions. That is basically the best answer I can give.

Should there be?

Mr. Hardiman

My understanding is that this provision will be enacted in the future.

Do you agree with it?

Mr. Hardiman

It has worked very well on the life side. Basically, it has not affected the earning potential of brokers on the life side. It has yet to be seen from the general side. May I ask a question in return? The Deputy mentioned that he was concerned about some area.

Perhaps we can come back to that matter.

On the idea that we are prohibiting insurers offering prices below what is available in the broker market, the reverse is happening.

Is Mr. Kelly saying he is not aware of an agreement with any insurance company not to undercut the price they are quoting through the brokers?

I am not aware of any arrangement. The insurance companies tell us this is what they would like to have as a common price platform. What they mean by that is that the cost of taking it to the broker market, of taking it to the tied distribution market, the cost of a telesales operation, the cost of Internet operation, the cost of getting the product to that level, is the same. Distribution costs are added on top of that. Nobody has a problem with that. If the Deputy means that we are preventing it, the reverse is the case. The product that might cost €600 in the broker market with 5% commission, is turning out to be €400 in a direct Internet operation. A commission of 5% is in operation which is €30. There is no accounting for that. It is operating to the opposite of what the Deputy suggests. The insurance companies have loss leaders through the tied direct channels and we wonder why that is so. It does not stack up on a cost basis but it means that they can increase their direct business and then in a year or two, hike up the cost there. That is our answer to that question asked by the Deputy.

Mr. Cowman

In support of Mr. Kelly, if an insurance company can make a product available to a client at a price of €400 and the price through a broker is €600, emphatically I am not suggesting that a broker would expect the insurer to charge €600. We would ask the question that if it was available at €400 through the direct channel, why should it not be available at something close to €400 through a broker? It cannot be justified. It is not about putting up the prices. "Arrangements" is the wrong word but there would be——

Understandings?

Mr. Cowman

That is the worst word I could possibly imagine.

Deputy Howlin seems to have——

I am simply curious.

Mr. Cowman

Every now and again we sit down with insurers and we say: "This is embarrassing for you and it is embarrassing for us. You cannot justify how you can have X number of distribution channels and you have a totally different pricing in all of them." The most that is ever arranged is that if a lower premium is available though the direct channel, then in certain circumstances, on appeal, they will reduce the price available through the broker to match the direct channel, where a loyalty factor is involved.

Does Mr. Fitzgerald wish to answer one of Deputy Callanan's questions?

Mr. Fitgerald

The Deputy asked about PI insurance. The question of PI insurance is a factor that has crept in very quickly in the past year or two, whereby the costs have risen. We have not been able to find out the reason for this. The insurers maintain that it is due to bad claims but we have not seen any sign of——

Enron might be one.

Enron has nothing to do with the Irish market. There is a tidal backwash coming from that into general insurance. The problem is that Irish insurers, like Irish bookies, do not carry the bet. They pass it back by doing what is called reinsuring. The reinsurance market is very expensive. We have no control and, I suspect, neither do the Irish insurance companies, over these rates of reinsurance. It spills back into the Irish market place and that is what is happening in the PI area. Unless the reinsurance market softens, it will continue like that for some time.

To echo those comments, the professional indemnity for brokers has trebled in some cases over the past three years. It must be the most profitable scheme in the country because there have been little or no claims. The insurance companies said to us: "such and such a company has €X million in Ireland but has several billion world-wide". They are looking around the world and wondering which country they should pull out of. It is back to the point about international capacity.

The committee wants to hear how premia will come down. Deputy Callanan asked some questions. Who will answer those questions? The committee does not wish to listen to one story all day. The members have learned quite a lot from this inquiry so far. We know there is another side to the story.

Mr. Cowman

I am happy to answer the questions. The Deputy asked a perfectly fair question regarding safety in the workplace. The point we are making is that if the consequences of accidents at work are more severe in Ireland than elsewhere, it behoves us to be even more diligent than would otherwise be the case because we cannot afford the consequences. It is nothing more aggressive than that.

The Deputy asked whether in our opinion the implementation of the PIAB and the fraud provisions will have the effect of a reduction in premia. We believe so but I would not like to hazard a guess as to by what percentage but we think they are excellent initiatives and we believe they will have a good effect.

The Deputy's third question was about self-insurance and where associations came together to pool their resources and their problems and find a common solution. He asked if brokers were for or against this method. The answer is that brokers are for it. There are many such association schemes in operation. They are supported by the brokers and well competed for. Some of them involve insurances and some involve very little insurances and a lot of self-insured and self-funded risk pooling. It is a very good question and I hope the Deputy is happy with the answer.

The fourth question he asked was what brokers have done to bring in extra capacity. This is a related question. As an organisation, the IBA is not structured in such a way as to be able to act for insurers but our members can do so. Members, large and small, are always on the look-out for new capacity. I have a note which I wrote last year which said that at that time more than 100 schemes were in operation through large and small IBA members, involving non-resident capacity. They were essentially niche products. The IBA uses its network to ensure that facilities are made available on a wide basis. Today the figure is a lot less than 100 schemes because many of them have fallen off in these difficult times for the market. It behoves us as a society to make the markets that have withdrawn take another look and come back in. The brokers will be tireless in their efforts to find them and bring them in.

Who will answer Deputy Howlin's remaining questions?

If I may refer to the comments made by the Chairman earlier about how insurance levels or premia could be lowered, some of the areas of reform which we suggested can have some effect on that. One of those goes to the heart of some of the questions raised. The question was asked whether we always give the best price to the consumer. The answer is that to the best of our ability, we do so, but there are some constraints. Where we do not have access to the information, it is very difficult for us to do that. That is one of the reforms we are looking for. We should have access to the information. If a company is offering terms or rates, they must provide that to us and that will enable us to give the best advice to our clients. We are authorised advisers and that is a mandatory requirement. In many cases, the companies will not give us the information so it is very hard for us to carry out that. We would like to do that.

There are a number of other areas about which we talked. There is no easy answer, but a number of technical amendments will result in a transparent market, where brokers can give the best price. That is the aim of brokers here. We wish to give the best price to the clients, but we require technical amendments to do that.

Would Mr. Hogan like to comment on the levy and fund he is suggesting?

I have no problem in saying the levy should go straight back to the consumer.

Should it just be abolished?

Yes, just abolished.

The submission made by the association stated it should be a fund to benefit policyholders.

No, we have not said that. We believe it should go straight back to the consumer.

Mr. Cowman

The question was probably directed to us as we made the comment. A report in one newspaper in the past couple of days was titled: "Grant scheme for small and medium enterprises", which was not in connection with risk management and risk improvement, but was in connection with something else altogether. However, it would not be that difficult to contemplate a grant scheme being put in place for small to medium enterprises to fund the development of more effective risk management in the workplace or in some way to make it possible to either get insurance or handle the consequences of not being able to get insurance.

I do not understand that. The submission of the Irish Brokers Association suggests putting a 2% levy on insurance so that we can assist people to get insurance.

Mr. Cowman

I do not understand the point the Deputy is making.

The submission of the Irish Brokers Association said the use of the 2% levy should be for the benefit of the policyholders. The Tánaiste has acknowledged that the 2% levy is in essence a tax. Some have suggested the best way to make insurance cheaper is simply to abolish it. The Irish Brokers Association is saying something different and suggesting it should go to a fund to help SMEs. Is that the case?

Mr. Cowman should conclude on this point.

Mr. Cowman

I do not think you want me to debate it, Chairman. I just want to say "yes".

I wish to return to Mr. Cowman's response to Deputy Callanan, as he responded in a language that I could not understand. Have members of either association tried to place business with companies outside the country? Is it possible to do that? Do barriers exist to doing that? Are there disadvantages to doing that, for example in the event of the collapse of companies that are not regulated here? If this has been done have members of the associations found more favourable results when compared with doing business with companies operating here?

A strong case has been made by the IBA for compulsory employer's liability insurance. Is that not impractical at present because of the high premiums that are being charged? If that were the case would many companies not be forced out of business because they would not be able to afford the premiums? Would that not also operate against those who want to self-insure?

The PIBA submission mentioned that brokers must do business with five insurers. Does that also apply to the IBA, as I assume it does? Is the association saying that such a restriction should not exist and that there should be total freedom to do business with all insurance companies? The PIBA made the point that its members are not allowed to make cold calls. Is the association suggesting that if its members could make such calls it would lead to a reduction in insurance premiums?

In view of the fact that we now hear that German insurers are facing charges over price fixing, do the associations find a lack of competition between insurance companies here?

On looking at alternative markets, we continually place business with Lloyds. The problem with Lloyds is once it sees business is coming from the Republic, it doubles its premiums and sometimes trebles them. Out of necessity, people have to get certain types of liability insurance and the Lloyds market is the only market to which they can go. Lloyds is not cheap; it is very expensive. That is not the area to go to find cheap or reduced insurance premiums. Once Lloyds sees it coming from Ireland, it knows it cannot be placed on the Irish market and it can charge what it likes.

Only a couple of weeks ago we sent a committee to England on a fact-finding tour. The members of the committee, who were entertained by large brokers in England, discussed matters of mutual interest that were happening there. In England, the cost of PI insurance is so high that if it came to Ireland, I would not be in business. They are talking in terms of £25,000 in PI premiums for brokers to stay in business. In that respect the English market, while it is a huge market and its brokers have far bigger turnover than any Irish brokers, certainly has a lot of problems. We are continually exploring areas where we can try to get improvements. The real problem is that nobody is interested in Ireland. We are just not big enough to justify them sending people and opening a branch office here. That is a fact of life.

The question of cold calls was something that was brought in by the Central Bank. We do not like it at all. We are not permitted to go up to somebody and sell him a life policy. It is totally outside of the remit of the discussions here. It is a small technical issue and I do not think——

The point we are making on that is that we highlighted the distinction between the regulation of tied channels and the regulation of brokers. Our point about brokers being with five insurers was that the broking system offers choice and competition. The tied system offers one product. The regulation per se as it currently stands - and we are trying to reach a level playing pitch on this - encourages a tied system at the expense of the broker system, so much so that there are insurers trying to convert brokers into tied agents. One of the sticks they are using is the lighter regulation. If the market ends up being distributed through tied channels only, there will not be a broker comparing five or more companies. There will be higher premiums and less favourable terms than currently exist.

Mr. Fitzgerald said Lloyds could charge what it liked in the knowledge that the request is coming from here. Does that make a case for people here dealing with British brokers so that they can deal with a British insurance company?

In many cases when it comes to the underwriter, he gets the risk address and once he sees Ballyfermot or other points west, he knows what to charge.

Mr. Hardiman

It has already been said here that it is not attractive for new insurers to come into this country. A thorough analysis should be immediately instigated to determine why that is so. We have recently had one of our major players go out of the commercial market here altogether and there was no big uproar about it.

Mr. Cowman

The only small point I would add to the question on barriers and disadvantages of dealing with foreign insurers is the issue of regulation and policyholder protection. We still have no satisfactory answer to the question as to what would happen if there were a repeat of what happened to the English insurance company, Independent Insurance. There is a risk when going abroad. We have to be sure about where they are regulated and from where the compensation comes and under what conditions. I fully understand Deputy McHugh's point on compulsory employers' liability. The issue we raised might, be uncomfortable to the compulsorily insured but we are concerned by the consequences of it being acceptable not to be insured. In the absence of a pocket from which to compensate people who are injured at work, there is the possibility of loss of employment in a situation where victims are not being compensated because the event was not insured and the responsible party cannot afford to pay.

There is also pressure on the State, in terms of the social welfare and health systems. There is not a major problem if the number of such incidents is very limited. However, ISME and others have pointed out that a high percentage of their members cannot get affordable insurance. This suggests a possibility of many employers being unable to pay and becoming insolvent, resulting in a loss of employment across a wide spectrum of Irish business. There is also a loss of competition in some of those areas as a result of business closures, with consequent pressure on prices and inflation.

We are trying to create a new climate in which Ireland will be a much safer place in which to do business. If legislation is required from the three Departments concerned, that will be forthcoming. The work of this committee is concerned with ensuring that Government will create the type of playing field which will make it very attractive for people to do business here. I wish to raise a matter to which Mr. Cowman has not yet referred: Is there a problem due to equities being very soft over the past three or four years, that 85% of premiums are invested in equities and that the Government only allows 15% to be invested in property in Ireland? Is there a problem in that regard, or is that an area on which the delegation does not wish to comment?

Several insurance companies have said there has been a permanent loss of capital, the reason being that certain percentages of their funds have to be held in liquid assets, be it in cash or Government bonds, as security against claims. In other words, a certain percentage of one's premium is paid out four or five years later in settlement of a claim.

Property has been the safest investment over the past 30 years or more.

If I may explain the equity argument, as equities fell over the past two years, because of liquidity margins, companies were forced to sell them and convert to more liquid assets. Even if there is a rebound now in equity markets, there is a permanent loss of capital. That is the argument.

We understand that. It is this committee's understanding that the investment of more than 15% of premiums in equities is not legally permitted. If the investment was in the property end of the market, the penalties on insurance premiums would not be as severe as has resulted from the fall in equities. Is that not the factual position?

Mr. Cowman

I believe that is true. I read recently - I cannot recall where - that there is a suggestion of increasing that 15% threshold very substantially.

We are currently considering that.

I welcome the two delegations. On the reference in the PIBA submission to recent developments, what type of targets are the insurance companies and underwriters seeking, financial or otherwise?

In one recent case, a company laid down a specific annual target of €130,000 worth of business to be produced to the company by a broker. Irrespective of whether that business was profitable or was subject to 0% claims or that the broker was most cost-efficient, his agency would be cancelled if he did not deliver €130,000 in premium income to the insurance company. At the same time, the insurance company was hiking up the premium. The company concerned had once been very competitive in health insurance but suddenly became very uncompetitive in that business. Brokers throughout the country were complaining to us that they could not place business with the company but that their agencies were about to be closed unless they achieved their business targets. That practice has operated in a subtle way for several years past. We have reached agreement with six insurance companies in the life assurance market that they will no longer do that. That anti-competitive, anti-consumer practice should be eliminated right across the insurance market. Insurance companies should put forward their products and terms and let the business flow accordingly.

Continuation of that practice is very bad for consumers. In effect, underwriters are controlling the market in which brokers operate. I believe we have to take that point on board in the committee's deliberations. Perhaps I should declare an interest: I am a client - the most important interest of all. All of us have experience of receiving insurance renewal notices showing hugely increased premiums, complaining to our broker and getting a more competitive quotation from the same underwriter as before. What is the explanation for that? Is the insurance business reverting to a form of bartering system?

Mr. Kavanagh

The best source of explanation in that regard would be the insurance companies, when they appear before this committee. However, I am not making any excuses. First, in the case of motor insurance, we are obliged by regulations to issue renewal notices, showing no-claims bonus, 15 days in advance of renewal date. Second, we shop around, using our computer systems. We may obtain up to 12 different quotations, depending on the risk, following which we may invite our client to discuss the matter with us. Unfortunately, as already discussed, there is differential pricing in the marketplace and quotation systems on the Internet are open to manipulation. Depending on whatever profession or occupation one declares, such as carpenter or plumber, the quotation will change accordingly. One can also vary it by putting in a €500 excess and changing the stated engine capacity of a car. However, that is fraudulent insurance practice. Members of PIBA and all brokers have an obligation to avoid any involvement in any form of fraud. We must put forward the bona fide risk.

In those circumstances, there would be no valid insurance cover in the event of a claim being made.

Mr. Kavanagh

I would say there are approximately 250,000 people driving on the roads of this country without proper insurance cover. The road hauliers' representatives would have some comments on that issue. There are hundreds of unlicensed hauliers operating; couriers are masquerading as carpenters and many other categories are not properly insured. Brokers are encountering this on a daily basis. It is a huge problem. A courier for whom I recently arranged insurance informed me that he was the only one paying proper insurance in the courier firm concerned. Others in the firm were describing themselves as carpenters, fitters or whatever.

We must not mention names; these proceedings are being broadcast live on television.

I would like to be associated with other members in welcoming both delegations. I have a quite simple question. We have spoken about anti-competitive practices and I have listened to both submissions with interest. Consumers and policy holders can receive better value for money when their brokerages change from a commission-based policy to a fee-based system. There may be increases when one is renewing one's policies. If one is on a commission basis, it is obvious that the increased commission will make it worth one's while to get the highest possible premium for the consumer. Companies such a Quinn Direct represent a safety net for policyholders, who can receive a direct quote from them over the telephone. What does the PIBA think of the idea of changing from commission-based policies to a fee-based system?

A broker would have a problem if his or her client wished to deal with him or her on the basis of a fee-based system. The experience of the PIBA is that most clients prefer to deal with a broker on a commission basis - no sale, no fee.

Can Mr. Kelly see it from the client's point of view? Surely there is a suspicion that a broker will shop around when one goes to him for a renewal, having been with him for some time. As Deputy Lynch correctly pointed out, when one queries the quotation that suddenly appears, a new, lower quotation is produced. Surely there is a suspicion that there is a small tie-in between the broker and the company, as it is in the broker's interest to get the highest possible commission. The policy that one is shown may be the highest one that is quoted to the broker. I accept that one can decide to avail of the fee-based system, but surely it should be the other way around. A system in which all brokers are fee-based would be in the interest of consumers.

One must remember that there is competition between brokers. When one sends out a renewal, having looked at all possibilities, one is conscious that the person with whom one is dealing can quite easily ring another broker. One will lose business if one is not competitive. Every broker has to rebroker every case every year, not in his own interest, but in that of his clients. Brokers have no control over premiums that are issued by insurance companies. The only control we have is to say where we will place the business of a given client, if we can get a better quote. If one talks to one's clients one can get better quotes, perhaps by reducing the value of one's car or by other means. A premium can be reduced slightly in this way, but not by a large amount. Will one say to one's client that one will take 5% off a premium, which is all one will get anyway? Will one take €40 from an €800 premium, but then charge a fee of €80 for looking after one's insurance? It would still be more expensive.

I think Mr. Kelly answered my question. Would the PIBA have any difficulty in transferring from a commission-based system to a fee-based system?

It would have no difficulty in that regard. Some brokers already operate a fee-based system. One will find that most brokers are neutral. A client who wishes to pay by fee will be happily accommodated.

I suppose it depends on the account.

I welcome the delegations from the Professional Insurance Brokers Association and the Irish Brokers Association. I believe that brokers are honest, generally speaking. They shop around for the best deals they can find for their clients. I should declare an interest, as I was once a broker and I am still a member of the LIA, mainly on the pensions and investments side. Deputy Nolan has asked the question I was going to ask. I accept that brokers are neutral about this matter and that competition will sort it out. The delegations have outlined the reforms they would like to see in the market and have mentioned how many companies are dealt with in each category. I do not have any further specific questions.

I will call the Senator earlier in the next meeting.

The Chairman has been promising me that for the past few weeks. I am sorry I had to leave the meeting earlier.

The Senator is a member of the second largest party in these Houses.

I thank the delegations from the Irish Brokers Association and the Professional Insurance Brokers Association for attending this meeting. I look forward to working with them during the next four years. This committee intends to examine what can be done about the major difficulties in the insurance sector, which we need to address together. The expertise of the two organisations is needed and their co-operation, particularly on the arrangements for today's hearings, is appreciated. The representatives of the associations are welcome to stay for the presentations that are about to be made by the Irish Congress of Trade Unions and the Irish Road Haulage Association. I understand that they may have diary commitments to meet, so they may leave at this point if they wish to do so. I thank them once more.

Sitting suspended at 4.25 p.m. and resumed at 4.40 p.m.

I welcome Deputy James Breen from Clare. I look forward to his contributions during this part of the meeting. I welcome also our friends from the Irish Congress of Trade Unions represented today by Mr. Fergus Whelan and Mr. Eric Fleming. Members may ask questions.

Mr. Fergus Whelan

I thank the Chairman for the opportunity to make this submission. We made a rather brief submission to the committee a number of months ago and I intend, with the permission of the Chairman, to talk the committee quickly through it. I wish also to take the opportunity to make a few observations on a suggestion by IBEC to the committee that this country's safety record is exemplary. We have some useful information which will enable the committee to evaluate that claim.

Earlier, I heard people identify where they had a particular interest. On the general question of insurance, we represent a vested interest group to the extent our 500,000 members are usually householders, motorists and consumers with a very definite interest in insurance costs. We do not have any particular knowledge or deep insight with regard to such costs to provide to the committee. I am sure that most of the people present know more about the matter than I do. On behalf of those we represent, I can tell the committee that insurance costs are too high. We do not know why insurance is as expensive as it is, but the cost is too high and increasing. We have a particular interest in regard to employer liability insurance and the question of compensation for workers where accidents occur and the focus of my remarks today will be on this area.

On the general question, the MIAB report seemed to suggest that one of the problems in regard to motor insurance was profiteering by the insurance companies. That certainly suggests to us that it is also a problem in the area of employer liability, which causes a number of problems for our members. Many good employers are telling us that they are having difficulty staying in business because of the increased premiums. Some of these are people who are committed to safe, efficient, well-run workplaces. Another difficulty is that, unlike in the UK, employer liability insurance is not compulsory here, so many of the smaller businesses, in particular, do not have insurance cover. When one of our members is injured he or she is faced with a dilemma; if he or she pursues compensation for the injury they could actually be putting themselves out of employment.

If I had appeared before the committee 18 months ago, I would have said, unequivocally, that the Irish trade union movement and Congress are very committed to the idea that employer liability insurance must be compulsory, but I cannot say that today. We know that if that happened many of our members would find themselves out of employment. We still think that should be an objective, however; that everybody at work should be covered by insurance, but we realise that cannot happen unless something is done about the cost of insurance.

Insurance companies are good at pointing to losses in their underwriting business. It was alluded to earlier, and it is certainly a perception on our side, that some years ago when the equity markets were buoyant and interest rates were high it seemed that insurance companies were not anxious to settle claims. They were happy to let claims drag on while interest accumulated on the money put aside for those claims. That was one of the reasons the adversarial court system came into disrepute as far as our members were concerned. This system has not delivered. It has been slow and inefficient. If it delivered to anybody, it was to the lawyers.

Most people accept that there is a compensation culture here. We are all familiar with the syndrome of a person pretending to be injured in a public place and making a fraudulent claim for insurance. There is no compensation culture, however, in the workplace. There is a huge difference between a member of the public or a fraudster faking an accident in a public place and then going after a stranger for compensation with the help of legal advisers, and workers who have a relationship with their employer. That is an important relationship and their career, pension prospects as well as job security are dependent on that. Workers are reluctant to jeopardise the relationship with the person who employs them by making a claim even when it is justified, let alone making a spurious claim.

I will say more about figures later. None of the figures we have here is particularly accurate. In so far as we can tell anything from the figures we have, it is clear that there are far more accidents at work and people injured than there are claims.

I have a similar point to make about exaggerated claims. Anybody who claims they were injured when that is not the case is a fraudster and a criminal and should be treated as such. A person who suffers a minor injury and exaggerates that into being something much more serious should be treated in the same way. When a decent, honest working person gets injured at work, sometimes through their employers' negligence, often the first thing they are told is that the accident never happened. The second thing they are told is that it was their own fault. If a claim is made, the lawyers for the negligent party negotiate in a hard-ball way to try to minimise the amount of compensation payable. This forces the injured party to also employ a lawyer. The lawyer has a vested interest in making as big a claim as possible because his or her fee will increase with a higher compensation award. The lawyer can probably justify this by saying: "look, there are negotiations going on, their side will offer a small amount and we will make a big claim and somewhere in between a fair settlement will arise." Some of the propaganda and the advertisements we have seen tended to equate that type of negotiation and maximisation of losses as being on a par with criminal fraud which I think lacks balance, to put it mildly.

To reiterate, employer liability insurance is compulsory in the UK and should be compulsory here but that cannot happen until the cost of insurance is tackled.

On the PIAB, one thing I wish to say is that not only do the trade unions support the PIAB; but it is our contention that we first suggested it. We suggested it because the adversarial legal system was simply helping the lawyers not injured workers. It was certainly not helping injured workers in terms of rehabilitation. All the research suggests that it is in the best interests of a person injured at work to get back to work as soon as possible. The longer an injured person stays out of work the less chance there is of he or she resuming work. The adversarial legal system does not aid that; it is not efficient and does not give good compensation to workers and, in fact, is only in the interests of the people who deliver the system. For that reason we are enthusiastic supporters of the PIAB but we will look at it very carefully, particularly in view of the sort of propaganda which I referred to earlier. If the PIAB is really about reducing compensation for genuinely injured workers then we will be re-evaluating our support for that concept.

I will move on to my second paper which is in response to the suggestion that was made by IBEC that Irish industries' safety record is exemplary. As I understand it, the main evidence it produced was based on Eurostat figures which showed our accident rates to be the lowest in Europe and occupational injury benefit figures which showed that there was a 40% decrease in payments in the past ten years. In regard to Eurostat, all experts in the area of health and safety know that European figures and cross-country comparisons are riddled with difficulties and that one should never draw clear conclusions from international comparisons. For instance, most European countries have sophisticated and rigorous systems for collecting accident data and, generally speaking, their data tends to be far more accurate than ours. All our systems of data collection are flawed and that is acknowledged as such by everybody, including those who collect the information. One needs to be careful using comparisons in this way. Comparisons across sectors are relevant. For instance, it is relevant to compare the construction industry here to that in the UK. General comparisons across all sectors, however, do not work. A country with a large logging industry, a heavy engineering industry and a coal mining industry, for instance, will have a much higher accident rate than Ireland, given that much of our enterprise and industry is of a low-risk nature.

It was suggested that the 40% decrease in occupational injury benefits is an indication of exemplary safety performance. Last year, there were 500 occupational injury benefit claims made by construction workers. The Health and Safety Authority requires employers to report serious accidents, and 1,200 of these were reported. We know that only four years ago one in six accidents was reported to the authority. In fairness, there has been a huge improvement on this figure. We believe and the labour force survey figures suggest that the number of reported accidents is a little under 50% of the total number and, therefore, it is reasonable to assume that the number of building workers injured last year is approximately 2,500. If 500 claims were registered how do we account for the other 2,000? Twenty-one of them are easy to account for because 21 people were killed in the construction industry last year - they did not make a claim because the dead do not make claims.

A self-employed plumber or carpenter, for example, who is injured at work will not make a claim for occupational injury benefits. There is another category in the construction industry about which I have had occasion to tell another Oireachtas committee - the bogus self-employed or the C45 people who are, to all intents and purposes, employees but who are treated by their employers as if they were self-employed. If somebody on a C45 or a bogus self-employed person is injured this will not be represented in the occupational injury benefit statistics.

However, the real key to understanding the issue is to examine disability benefit. Until ten years ago, interestingly, occupational injury benefit was worth approximately 40% more than disability benefit. Therefore, a person who was injured at work had a huge incentive to make sure that an occupational injury was recorded. This changed ten years ago with the equalisation of the two benefits. The following year, 6,000 people signed off in respect of their occupational injury benefits - I am not suggesting they availed of disability benefit. When one makes a claim for either benefit one fills in the same form. There is only one difference: if one is injured at work one must get one's employer to stamp the form. One must be seen to squeal on one's employer because an injury at work usually involves, according to the law, an employer failing in his duty of care. A person who wants to claim occupational injury benefit has to say to his employer that he or she has breached his duty of care to the claimant.

The average person claiming occupational injury benefit does so for 40 days. I do not know if anybody present has ever been so badly injured that he was unable to work for 40 days but if he has he will know it involves a serious injury. It is our contention that people who suffer from minor injuries, such as a cut finger or a sprained ankle, will claim disability benefit and not occupational injury benefit because it is easier to do so. If this is correct, it reinforces my point that the people concerned do not intend to gratuitously sue their employers. If they are prepared to accept sickness benefit rather than occupational injury benefit, they clearly will not claim.

We work very well with IBEC and the CIF on safety matters and we respect their efforts. We certainly have our difficulties with the latter organisation, but we work very hard with it on safety because we all accept that we are all trying to make workplaces safer. However, we do not share its complacency. It is coming here and clapping itself on the back for having the safest workplaces in Europe and that does not help protect workers or work, nor does it help this committee in getting to the bottom of the problems that exist.

As the witness has correctly stated, his organisation was one of the first advocates of the PIAB. Is he happy with the heads of the Bill?

Mr. Whelan

We are very happy with the concepts of the PIAB but our worries are on three fronts. No matter what way it is run, there needs to be some sort of medical input. An injured worker will need to be able to get somebody to state that his injury is real and to determine its extent. There is a cost factor involved in this. There will also need to be some limited legal input, which will also cost money. We are very worried that this cost might fall back on an injured worker because this would not be right. The main issue regarding the PIAB is that, whatever system of quantum is introduced, there should be some inbuilt mechanism for hedging awards against inflation. If the PIAB begins to make awards and these are gradually eroded by inflation, injured workers will realise that they would have received a much better deal in court two years previously. This would bring the whole system into disrepute.

I welcome the submission on accident statistics because some of the presentations we have heard have been contradictory. It rebalances the issue, on which we need to be very clear. If there is anything concrete this committee or the Houses of the Oireachtas can do to improve the safety record of Irish industry - however good this record may be, no organisation, including IBEC, would suggest that it could not be better - it should be considered. We are all very concerned at the mortality rate in the construction industry last year. Has Mr. Whelan any specific suggestion we should incorporate in our report to improving workplace safety? In particular, does he see any merit in our legislating for a new crime of corporate manslaughter - where there is proven negligence leading to death - or has he any other specific legislative proposals to suggest to us?

I understand Mr. Whelan's good reason for not modifying the regional position on employer liability insurance in his latest written submission to the committee, but I note that he has resiled from it by way of recognising that if it were made compulsory now it could well threaten very vulnerable companies and lead to his members becoming unemployed. A strong case has been put to us not only by the employers' organisations by also by Dorothea Dowling yesterday regarding the validity of self-insurance. The implication was that large corporations and companies can carry their own insurance well and can, in some instances, be more effective in providing insurance for their employees on this basis. Has Mr. Whelan thought this through and does he see any merit in it? Alternatively, should compulsory insurance be a mandatory requirement, as is the norm in the UK?

Mr. Whelan's view that it should be as simple as possible to proceed with claims through the PIAB, as far as this is practicable, is probably shared by many committee members. Perhaps it should be absolutely mandatory that there be no involvement of lawyers in the process. I believe the Chairman once described it as a lawyer-free zone. On the practical application of the system without lawyers, does Mr. Whelan believe there is a need for some mechanism to assist people who might not be familiar with even very standard claim forms? I am aware that Ms Dowling was very dismissive yesterday of the notion that anybody would have any difficulty in filling out a form. Those of us who attend weekly clinics and advice centres might have different views on this. How might assistance be given? Would the trade union movement itself be useful in providing assistance to its members to ensure that entitlements are properly processed through the PIAB?

Mr. Whelan

On the question of legislating for corporate manslaughter, it is our view that our health and safety legislation is, under most of its headings, second to none. It is on a par with that of the rest of Europe. However, it has two problems, the first of which concerns penalties. These have been always very weak.

One of the developments we welcomed in recent times was the fact that the courts seem to be taking the issue more seriously than previously. Up until a few years ago, no cases were taken on indictment and the average fine for a person found negligent or in breach of the duty of care was about £500. Happily, that has changed in recent years and there have been some significant headline cases on indictment, which has been useful. One of the things which really disappoints us is that the Health and Safety Authority signed off on proposed new legislation with stiffer penalties nearly two years ago and it seems to have disappeared into a black hole in the Oireachtas. We are anxious to see that Bill back on track.

The crime of corporate manslaughter would be a useful one to have on the Statute Book, not that it would be used that often. We do not think much would be achieved by taking a negligent middle manager a putting him or her away for a few years. However, because of the signal it would send out - that negligence leading to the death of employees is not acceptable - corporate manslaughter should perhaps be included in the new Bill.

Some of our members have experience of working with companies that are self-insured and the experience has not been a bad one from our point of view. Perhaps that may not be because the companies are self-insured, rather that they are bigger companies with more expertise. Nevertheless, the safety management within such companies tends to be the best around. Therefore, we have no problem in principle with the idea of self-insurance. However, it is only possible if the company is big enough.

The Deputy is correct in identifying that we keep the PAI simple. I like the chairman's term of a "lawyer-free zone" but I do not think that will be achievable. I do not know how much work will be involved in this but trade union officials will always help someone to fill out forms or prepare them for formal discussions. However, I doubt it will be possible for people who are not members of trade unions to have it totally "lawyer-free". Perhaps in the early stages, there may be some limited role for lawyers, just in terms of advice rather than getting into big battles about liability or high cost activity, but small, simple administrative advice that any citizen using any system will need.

We were concerned about the reckless generalisation that Irish workplaces were much safer than any other place in Europe, particularly because of the publicity which has been gained by workers in the construction industry trying to highlight how bad things have been. We believe that through that excess effort on their part in the past six or seven years, there have been some improvements. However, statements like this could lead to complacency which was evident last year and the view that things were getting better. It appeared that the adjustments we had made had got us out of the red, that we were flying and things would be all right. It all came back in our face before Christmas when there were four terrible deaths on construction sites and the death toll shot back up again. This year it seems to be on the rise again.

Is Mr. Fleming content with the level of operation of the HSA?

There are not enough inspectors. We are getting less commitment than we were at the beginning of this process. A certain urgency was attached to this three years ago - we set up the health and safety partnership and drew up a number of measures to try to improve the situation and I am glad to say that some of those are working. However, this is such a mammoth task for us that it will take decades before we clean this mess up. That was the case in Sweden. It did not happen overnight. The authorities had to throw a lot of money and resources at it. What has happened is that the resources are beginning to dwindle. Less money is being handed over to the health and safety authority to cover construction safety. Their target for inspections which was 8,000 per annum three years ago and which it felt was adequate to get around the sites, has now been reduced to a little over 4,000.

In the Netherlands, there is an inspector for every 15,000 workers. In the UK, there is one for every 20,000 workers and in Ireland there is one for every 33,000. There is a huge discrepancy and the number of deaths in Ireland is well ahead of that in other countries. We are concerned about this and the fact that not enough money is being put into the health and safety authority to do this job. We also think there should be greater involvement of workers in health and safety itself. There is now a network of health and safety representatives who are elected by workers on sites. They should be given additional powers to complement the work of the authority. If they do that, as they do in Spain, Sweden, the Netherlands and other European countries, it will help to drive down the number of deaths and injuries in the workplace.

I am aware at first hand in the midlands area that health and safety has improved enormously. There is an inspection at least once a week on every site I know of in the midlands area, which has been a great improvement. I compliment everyone associated with that.

Which side of the argument does the ICTU come down on? Hibernian Insurance has been before this committee suggesting that this is a very unsafe country in which to work and live. People from the insurance alliance campaign have refuted that using the Eurostat figures. I accept that comparisons can be invidious between countries. Does the ICTU lean towards the general assumption that this is a very unsafe country or that we are average to medium rather than bad to terrible?

Has the ICTU noticed a huge discernible difference in the safety management culture in the companies which employ its members between those which are self-insured and those which are not? Is there a different culture of safety management and are there lessons to be drawn from that?

On involving ICTU's only safety officers in the work of the Health and Safety Authority, is the ICTU saying that they should be given statutory power of some kind in regard to workplace safety?

Mr. Whelan

We are clear about where Ireland stands comparatively. All the Scandinavian countries, the UK and Germany are way ahead of us in regard to the resources they put into health and safety, enforcement resources and so on. There are many countries in Europe which are behind us. The Greeks are not close to us; the Portuguese would love to be where we are. Therefore, we are just below the middle point in Europe. However, our point is that we have a long way to go and there is a great deal more we could do. People coming before the committee and telling it that Ireland is exemplary does not help the cause. That was the main focus of my contribution.

On our own officers, the way health and safety legislation operates, our people have a statutory role. The legislation allows for every workplace to have a safety representative who has statutory functions. They have functions underwritten by law - I am not sure if "statutory" is the correct term. They have certain powers but in our view, they do not have enough powers. In fairness to the construction industry and employers, in recent times, they have agreed that the appointment of such representatives is compulsory in the construction industry. We wish IBEC would agree to that for the industry in general.

Will the ICTU furnish us with the proposals it would like to see to strengthen the legislation for possible inclusion in our final report?

I welcome the delegation and the clarification provided on accidents, which is very important for our committee. The submission on accident statistics speaks for itself. I am interested in the delay in the introduction of the Bill dealing with health and safety in the workplace. The ICTU has been in contact with the Department of Enterprise, Trade and Employment and the Health and Safety Authority. What is holding it up?

Mr. Whelan

I must declare an interest. I am a board member of the Health and Safety Authority and was involved in the original review. From our point of view, this review, completed in March 2001, is hugely disappointing. Given all the problems we have had in the construction industry, it is a matter of great disappointment to us that we have not seen anything yet.

Where is the delay?

Mr. Whelan

I do not know; I presume it is somewhere in the Department.

As the safety officer in a company in which I used to work, I went around with the inspector from the Department on his visits. The safety officer on the floor should be given more power. In my experience, an inspector on his visit to a plant may direct that a machine be repaired, but on his return in two months if the work had not been carried out, he did not take any action. The person on the floor needs more power and a factory inspector on his visits must insist that when an order is given it is carried out. Sometimes it is not.

Recently the HSA decided to have a blitz on the construction industry. I call it a flash in the pan. The authority does this on a regular basis and it may learn a little from the process but it gives the wrong impression. People get ready for the blitz and when it is over they all go back to normal. I cannot share the enthusiasm of the Chairman. I know his experience in the midlands has not been too bad, but I have been near the midlands on holidays and I was not too impressed by the sights I saw. The authority said only last week that it had not been around to as many sites as it would have liked to because it did not have the resources to send the inspectors around. However, the vast majority of the companies they visited were not complying with the regulations, particularly the small sites. They are not able to do what is asked of them by the State and they are not being held to account, as Mr. Whelan said.

We want the HSA representative to have extra power on the floor. Deputy Lenihan asked about these representatives and how they act. In other countries where they have extra powers they can visit smaller sites where no health and safety officers are elected because there are too few working on the site. The HSA is not inspecting those sites as far as we can see. If there are large sites in the vicinity with health and safety officers they should be given the powers to go to those smaller sites to give advice, take an audit and report back to the HSA. There is not much power in that, but at least they would be acting as the eyes and ears of the HSA and augmenting the small number of inspectors that are there.

I will declare an interest as I have a few sites being developed at present, both in Dublin and Mullingar. I am very proud of the health and safety people. They are very vigilant, perhaps because I am a public representative, but I am very proud of the job they are doing. They visit every week, sometimes twice a week. Two years ago this would not have been the case, but I have seen some changes over the past 12 months. I am delighted it is happening. It is costing a fortune, but no price can be put on a life. I fully support these initiatives and I hope the good work is continuing.

I am disappointed to hear that the latest research is two years old. Is any new research being carried out? Mr. Whelan is involved in this area. We were very alarmed to hear the statistics - 21 deaths is 21 too many. Anything we can do to encourage the various Departments to step up the inspections will certainly be done. We endorse everything the ICTU is doing on health and safety.

I welcome the members of the ICTU. From my own experience in Cork I know that before the HSA was set up, the ITGWU, as it was then - now SIPTU - used to send representatives to visit sites in order to ascertain how people were being treated and the state of health and safety. What is the current position of sites that are not entirely unionised? I know the ICTU's tradespeople are represented, but there are more sites now that are not entirely unionised. What kind of reception do the trade union representatives receive on approaching these sites? It used to be not very healthy in the past and I wonder whether it has changed dramatically.

Mr. Whelan

Mr. Fleming, who actually visits sites, might know more about that than I do.

Invariably, when we visit sites it is to organise the job and make sure that things are regularised and people are receiving the proper rates of pay. Part of our brief is to check out health and safety issues. There is no doubt that in recent times things have changed for the better. That is because the unions are stronger and better represented on the ground. I am not as enthusiastic as my colleague about the fines issued in recent times. They are very slow in coming. There is talk in the construction industry about how a builder in Limerick was sent to jail. I must remind the committee that it was only for two days, or for one day if I am not mistaken. That builder threatened a health and safety inspector.

I share the opinion of the Chairman that the inspectors, by and large, are excellent and are doing a wonderful job - our problem is there are not enough of them and they are not getting support. They were pilloried by me in the media for not taking people to court; now they are, and they spend more time at their desks preparing cases for court than getting on with their inspections. They have told me this privately. That has been acknowledged in the HSA. They are not receiving the backup they need.

Surely the threat of closing the site encourages these developers to do things right?

Mr. Whelan

That is an interesting point and I will tell the Chairman something about the history of this measure. The HSA has had the power to close a site since 1989, when the Act came into operation. The first time it was used was in 1997 and that had an amazing effect on the industry. It sent a message far beyond that site. We were delighted to see that happening; it is a very useful sanction and one dreaded by everybody who is trying to get a job finished. Unfortunately, in recent times the policy has changed. The way to close a site under the Act is to apply to the High Court under section 39 of the Act. In this way the newspapers know about it and the industry knows about it. A total of 35 sites were closed last year by the HSA, but they were closed on the basis of a private agreement with the employer. In other words, instead of using section 39 and going through the courts, which has the effect of naming and shaming the culprit, the HSA told the employer that if it closed down the site for a week or two it would not be brought to court. From our point of view, that is a big policy mistake. If a site is to be closed down it should be done under section 39 and everybody should know about it. That sends out a message to the industry.

Hear, hear.

I thank the representatives of the ICTU for their attendance. We look forward to working with the congress for the next four years. I hope we can assist each other in introducing improvements for workers, employers and the Government.

I welcome Mr. Eamon Morrissey and Mr. Seán Murtagh who are appearing on behalf of the Irish Road Haulage Association. I apologise for keeping them waiting but the committee is extremely busy.

Before I hand over to Mr. Seán Murtagh to make the presentation on behalf of the Road Haulage Association, I would like to say that one of the speakers earlier gave the impression that hauliers are driving uninsured. We hold no brief whatsoever for uninsured drivers and we have made representations to the Minister for Transport and the Minister of State to the effect that uninsured vehicles should be immediately impounded. The committee might consider that in the future.

We will bear that in mind. The Irish road haulage industry makes a major contribution to the economy and anything that drivers make is dearly earned, as I know from personal experience, having driven 60,000 miles a year at one time. It is a most difficult sector.

Mr. Seán Murtagh

The Irish Road Haulage Association was founded in 1973 and we currently represent 1,500 haulage companies, from the very large to the owner-driver operators. Our industry is a model of competition at its best - competition in the industry is intense to say the least. Our members always thought that the marriage between brokers and insurance companies was a match made in heaven but some of the comments made today indicate that all may not be well in the Garden of Eden and the marriage might not be as close as people imagined.

For many years the insurance sector has proven itself a difficult supplier to our industry. When I bought my first truck 17 years ago, I thought insurance was too dear. I was also struck by how hard it was to deal with insurance companies and noticed that customer care was certainly not a high priority with them. In the intervening years, I had many calls from tyre and truck manufacturers, ferry companies and fuel suppliers trying to find out if they could improve their product or service but I never once received a call from an insurance company.

It is not my main aim, however, to come here to criticise insurance companies. I wish to give an insight into how our industry is dealt with by the insurance sector. When a person buys insurance, he is given an insurance certificate. The cost of this has increased every year since 1999 by a multiple of inflation. In the past two years the cost of insurance has at least doubled and, in some cases, quadrupled. We are aware of at least 30 companies that have gone out of business in the past three years.

The present crisis is not unique to the haulage industry. From our involvement in the Business Insurance Alliance, we are aware that every sector of industry has been affected by the crisis. We acknowledge the work done by the MIAB, of which we were a part. We further acknowledge that the Department has embraced the report and started to implement its recommendations.

Those improvements notwithstanding, very little has changed on the ground. Insurance is still very expensive and cartel type behaviour is still prevalent in the industry. There is always a struggle within insurance companies between financial management and risk management. Insurance companies in most cases continue to regard their brokers as their customers. This is fine where the broker offers value added service but not where the broker is an extra layer of cost offering no services.

Insurance companies must come into the 21st century. There is little to be gained by blaming their suppliers, whether they are the medical or legal professions. There are signs of light, however, that some insurance companies are now prepared to move forward. I hope they will not be held back by the conservative voices in their own industry, that they will receive the full encouragement necessary from Government and that the implementation of the MIAB recommendations will be speeded up.

Earlier it appeared that some Deputies thought there was a difficulty with spending the €70 million that accrued in the fund of the Motor Insurance Bureau. We can resolve that problem. The cost of a claim from an accident where no insurance cover exists is spread across insurance companies. The RHA feel that uninsured drivers are a product of poor law enforcement and, therefore, this cost should be borne by the State. When the Minister for Transport addressed the committee, he estimated that almost 80,000 vehicles on Irish roads were uninsured. That is a national disgrace and creates an unfair tax on law abiding companies. We have also put a proposal to Mr. Brennan that he should impound uninsured vehicles.

Writing in the national media last week, the chief executive of the Irish Insurance Federation, Mr. Mike Kemp, said that liability insurance was the only area where premiums continue to rise. The insiders in the insurance industry tell us privately that liability insurance claims are not significant in our sector. One would imagine insurance companies would cherry-pick and that premiums would fall but that is not the case, leading to the impression that this is a cartel, although it is more likely that it indicates a lazy industry that does not know how to compete.

The Irish Road Haulage Association is totally committed to improving road safety but it is dangerous to talk of road safety and insurance together because the real issues can get lost. From an insurance point of view, poor road safety is a factor that pushes up the cost of insurance. In our opinion that is where the cross-over between road safety and insurance ends. It is also unfair that insurance companies talk about road safety and the carnage on our roads with a holier than thou attitude that can border on smugness at times. The database of information insurance companies have about road accidents should have better statistics. Telling people that drink driving and speed are the major causes of accidents is not having any effect. Even the penalty points are now being questioned. The stage is clear for someone with innovative ideas to improve road safety. If the insurance companies managed to provide this innovation it would certainly improve their public image.

I have enclosed in our submission a copy of a survey we conducted among our members last year that makes interesting reading. I have also enclosed copies of articles from various transport journals about insurance. Insurance companies are a provider of service to our industry. In the past 20 years our suppliers have given us the ability to track the progress of a truck 3,000 kilometres away, the ability to have a conversation with a driver in a different country and have improved fuel economy of our trucks while reducing costs all the time. With insurance companies, however, it can still take days to have an insurance certificate issued and some insurers still refer to us in policy documents as draymen and carters. It will be a long time before any insurer will receive a supplier of the month award from a haulage company.

I have highlighted some sections of our insurance survey. We have carried out surveys over the years among the membership of the RHA and we have never managed to get more than 15% to respond, a figure in line with other trade associations. There was, however, a 50% response rate to the insurance survey. Of those respondents, 36% were involved in international haulage and 98% in local haulage. Insurance represented an average of 15% of turnover of a company and the average cost increase on that turnover was between 4% and 6%, a significant increase in costs for marginal businesses. There is no doubt for 70% of respondents feel that the responsibility for the problem lies with the insurance companies.

We are surprised that in yesterday's Irish Independent, a small article mentioned two of the underwriters referred to here today who have been convicted of cartel type behaviour in Germany. A wag in our association wondered if Charlie Bird and “Morning Ireland” were on holiday because he could not believe that this did not make the national news on the basis that we are told the decisions of these multinationals are made in Europe. It is possible, therefore, that the companies’ internal pricing may have filtered through to Ireland.

The coverage that RTE has devoted to this inquiry has surprised me. I have heard various other so-called high profile, day to day recordings of events broadcast that have not been as important to the economy, but maybe it is just holiday time and they have gone cooking or whatever they do. It is certainly evident - "Morning Ireland" has been supporting us - that the remainder of the programmes on national television and radio have been giving our meetings very poor coverage. I must acknowledge the contribution of The Irish Times, The Irish Examiner and the Irish Independent for their very good coverage of our inquiry to date.

Perhaps it is not too late yet because in fairness to RTE, it was the "Prime Time" programme that gave the emphasis and brought the stark reality home to everyone who has experienced this trauma. In Mr. Murtagh's submission he stated that that there are signs of cartel-type behaviour in the insurance market. He mentioned that at least twice, if not three times, in his submission. As we are in the concluding days of hearings before producing our interim report, I ask whether he can provide evidence of this behaviour. If he can we would be extremely grateful for it. We would certainly like to hear from him if he has any evidence of that.

Before I throw this meeting open to the members for a question and answer session I have a second question. Over recent years, is the level of claims experienced by the IRHA's members on the increase or decrease?

Mr. Murtagh

To answer the first question, we have trawled the country to try to get some tangible evidence for the Competition Authority. We almost had what we thought would have been the evidence that would have been the fuse to light the keg about four months ago, when two brokers quoted us for the same type of business and one broker wanted to withdraw. We were missing one document and we took our case to the Competition Authority but it was not able to make anything of it.

We were disappointed because we had our own incidents with the Competition Authority about six years ago, and it certainly did not need much documentation to bring us to account. Nonetheless we hope that some evidence will materialise.

On a separate point, we wrote an article in our own magazine because we thought that there may be some disgruntled employees who, in the buy-out of some of the insurance companies, might have felt that they were not well treated and might have been the whistleblower that was needed. There is no doubt in my mind that there about 100 potential whistleblowers out there in the insurance industry who could provide the information needed to open this debate up fully.

On the second question about claims, we are going to revisit the survey we carried out of our members. At present, our belief is that most of our members are under-insured. A person who had comprehensive or accidental damage insurance on a new truck now just has third party insurance purely for financial reasons. Where claims can be avoided they are avoided.

I have a few brief questions. I thank Mr. Murtagh for his professional presentation. I am disappointed to see that 30 companies have gone out of business because of escalating insurance costs, but it is typical of what we have been hearing from witnesses. I ask Mr. Murtagh for a reaction to the points system and how it is being implemented at present. The second paragraph of his presentation paints, at best, a picture of an unfriendly insurance company. He says that different suppliers get on to him but, alas, none from the insurance companies. Is that evidence of a seller's market or a cartel?

Some hauliers tell me - I do not know if Mr. Murtagh will substantiate this - that insurance companies do not want to quote them at all for EL or PL. What is Mr. Murtagh's reaction to that? Hauliers in my own constituency tell me that quite often people, probably outside of Mr. Murtagh's association, are insuring to carry their own goods but are carrying other people's goods. That must have some kind of impact upon the IRHA's business and may be similar to a black market.

How does the IRHA's safety record compare with hauliers around Europe? We have two different stories from other witnesses, with insurance companies saying that it is not such a safe country to work in and the Alliance for Insurance Reform saying that it is a very safe country to work in and that we have half the European average of accidents.

I welcome the members of the Irish Road Haulage Association. I read their submission and some of their articles in their internal magazines. They used strong language when describing insurance companies. Even though we are under privilege and our witnesses are not, we would probably be better off not to mention——

I should point out that members have privileges——

I will not mention the word "scumbags" in relation to this issue. Does the IRHA have any specific proposals to improve safety or make necessary changes that in its view would contribute to a safer environment? We do not have the same level of national primary networks as other jurisdictions and I am interested to know if the IRHA has any new ideas that have not been mentioned before on road safety.

Mandatory employers' liability was mentioned by some people. Would it put companies out of business or does the IRHA have any particular view on this? It would be great if Mr. Murtagh could back up claims of signs of cartel-type behaviour. It would certainly be a good indication of progress or otherwise on this myth that might be out there in the absence of evidence. Predatory pricing is probably going on in the market place rather than cartel-type behaviour but it can often end up the same way if particular companies want to quote for certain types of business and others do not. If any of the IRHA's members had some information on that it would be helpful to the committee.

I ask Mr. Murtagh to elaborate on the 2% levy for non-insured drivers. How does he see that helping the haulage industry? He believes what the Minister for Transport said about how insurance premiums could be reduced by 10%. Would he elaborate on those two points?

Mr. Murtagh

I will deal with penalty points first. We welcome the penalty points and certainly think that Minister Brennan was very brave in spite of much advice to the contrary. There is no question but that there are at least 50 people alive now who would not be had the penalty points system not been enforced.

We have some concern about the roll-out of the penalty points system and the fact that it will lead to 63 offences, particularly offences that are not safety related. Most truck dealers will say that one of their biggest selling parts are mirrors for the sides of trucks. A cracked or broken mirror can happen any day, and it will attract a penalty point for a truck driver. There is a difference from the inconvenience that some motorists describe as regards slowing from 60 or 70 miles per hour - depending on whether one is on a motorway or not - to 30 miles per hour.

A vehicle is capable of doing that and it is just an inconvenience if one is driving, but members from rural constituencies will understand that trucks in some of the more rural areas physically will not fit inside the white lines. We think about ten of these points are unfair to people who are on the road full time, by they car drivers, van drivers, coach drivers or truck drivers. We have made representations to the Department about this and are concerned about the roll-out of the penalty points system. It may undermine the safety nature of the system.

Deputy Hogan mentioned customer care. I do not remember an insurance person ever asking me a question about anything that might either improved our business with them or anything else. I mentioned also in our submission that there is sometimes a conflict between financial management and risk management in a company. With respect to the brokers who were here earlier, often when one speaks to a broker it is about a financial transaction. They are dealing with somebody in an insurance company on a financial transaction and by the time it gets to risk management it is way down the order. There is a danger there. I acknowledge that there are some specialist brokers emerging in the market place and taking an interest in presenting the best risk possible for their clients but there are very few of those around.

On employers' liability and public liability, I think the question was about the cost. Traditionally employers' liability and public liability was a very small cost for haulage companies but liability insurance has almost doubled in cost and is now becoming a very big issue. Although we have not had people telling us that they do not have employers' or public liability insurance, our belief is that there are many people who do not have such insurance.

Should it be mandatory?

Mr. Murtagh

My belief is that it should mandatory. Where there is a potential in the course of employment for a person to be maimed for life, the employers should indemnify themselves and those who work for them. It is a bigger picture than that.

Are road hauliers finding it difficult to get quotations for EL and PL insurance?

The ICTU representatives said that it would create many job losses.

Mr. Murtagh

It is well documented by the hotel business and other small businesses that to introduce mandatory employer's liability insurance would have such an effect that it would put companies out of business. It is starting at the wrong end of the scale and that is not the issue. It is a bit rich of the insurance industry to come out with this suggestion as it will mean more business for them. Our view on this is somewhat jaundiced.

If one is involved as a road haulage operator, the insurance policy must have a "hire and reward" clause. The insurance companies, for no explained reason, believe that goods carried by a haulier contractor are more at risk than if delivered by the person themselves. We have never had a satisfactory answer from any insurance company on this matter. There is a difference in the cost and that was what the broker delegation referred to earlier where someone was getting insurance for carrying their own goods. There is a cost differential.

With regard to safety records, we do not know where we stand on the European average. Figures are usually thrown at us on accident records involving trucks. We do not have fixed details on it as the insurance companies are slow to give us information. That was what I referred to in their statistics from their databases. Furthermore, an accident involving a truck on the road comes under the Road Traffic Act rather than a health and safety description of an accident at work. I understand that this will be changed.

It is difficult to describe the penalty points system as a road safety initiative. They are more a punitive measure. Anything that improves road safety is certainly to be welcomed. We were involved five years ago with FÁS in an attempt to set up a scheme where drivers would be trained in a proper environment. We could not get co-operation from the insurance companies in this area. The precedent is there where insurance companies have to insure airline pilots and ships captains who have been trained in controlled environments. However, there was no co-operation from the insurance companies when we approached them with this scheme. We believe that what makes air travel so safe is that every incident that occurs is investigated. It comes back to the conflict between risk management and financial management. In our submission, we refer to the example of the Comet aeroplanes and how air travel was made safer. We feel the same approach should be used for the road haulage industry.

With regard to cartel type behaviour, we reckon there are approximately 100 people who have been disenfranchised by the buy-outs of insurance companies. Some of them have lost their jobs or feel they have been hard done by. We are waiting for one of them to come forward.

That would make them unreliable?

Mr. Murtagh

Maybe so, but if somebody came forward and produced documentary evidence it would be a different matter. I am not talking about someone who is upset because they lost their job. We could fill this room with hearsay. Every one of our meetings is full of hearsay. It is the documentary evidence we need.

Could Mr. Murtagh address the issue of the levies?

Mr. Murtagh

On the 2% levy on insurance, we take the view that this cost is a tax and is of no benefit to road haulage companies. I am not sure what the broker delegation were getting at when they suggested that it should be given back as an incentive. By and large, people who do not have insurance or risk management are not the people who would qualify for such grants in my experience. To give it back entirely would be the best resolution.

Would you not agree that if the 2% levy was removed it would put more of an onus on the Department to apprehend uninsured drivers?

Was it not proved by the 1984 and 1985 experience?

Mr. Murtagh

We suggest that the State should take ownership of the problem of uninsured drivers. It is a function of law enforcement and that is not happening, especially for uninsured drivers. It strengthens the argument for a separate transport police force.

The committee has been informed that a high percentage of truck drivers are on provisional licences? Is this true and, if this is the case, is there a safety problem with this? Road hauliers travel to the Continent often and the IRHA have contact with other hauliers abroad. What is the difference in cost in insurance between here, Britain and the Continent? If it is cheaper abroad, can the road hauliers avail of this cheap insurance through EU membership? Does a road haulier have to register abroad to avail of this?

I welcome the submission and the commitment of the IRHA to road safety. I had the personal experience of a road haulier company recently, as has been reported in the newspapers. It concerned a Polish national who was recruited to drive for a transport company in County Wexford. The Polish Embassy formally complained to the Department of Enterprise, Trade and Employment. Among the complaints, from a first hand account of the driver, are that he was required by the company to drive unsafe hours with no rest breaks. When he complained about getting rest he was threatened with dismissal. I am not sure if this company is a member of the IRHA. However, do the IRHA police their membership? Are there standards of road safety that the IRHA demand from their members and, if so, how are they monitored? Is there a system to deal with complaints from drivers in IRHA companies concerning unsatisfactory practices? If so, would the IRHA disown themselves from such practices?

Mr. Murtagh

The issue of provisional licences is a national problem. It is a little rich of the insurance companies to come along now and produce it as a problem as they continually allowed drivers with provisional licences to drive. However, of late, the insurance companies have stopped this practice. I cannot say for definite that there are truck drivers with provisional licences. However, it is not the norm any more. Insurers at the time of renewal of policies are now looking for copies of drivers' licences. If it was in the system, it has now been washed out.

We have had several high-profile incidents of people getting insurance cover abroad and telling everyone about it. The next thing is that the insurance is withdrawn or there are other difficulties. It does not seem to have worked so far.

We do not condone any member or operator in the industry suggesting that a driver should work beyond the hours set by regulations that could lead to dangerous practice. We are primarily a lobby group who have strong contacts with all the enforcement agencies. We always report any information of bad practice we get to hem whether it is about a member or driver in the interest of public safety.

Are there any standards that you require of a company that is a member of the Irish Road Haulage Association?

Mr. Murtagh

We had an unfortunate court case about five years ago. Once a person has a licence issued by the Department of Transport, as it is now, he or she is entitled to be a member. We are examining the imposition of standards, but we could have done without that, to be honest. We are conscious of it, however.

I welcome the delegation and thank them for a very detailed and comprehensive submission. It leaves very few questions to be asked. Regarding the roll-out of penalty points, the delegation has clarified the situation. However, there is also concern that the Department will make available to the insurance company details of any points which a company has received since the start of this campaign. That may be causing some worry. The industry is the lifeblood of the Irish economy, for we are an island off an island, and what it contributes is enormous. People do not recognise what the Irish hauliers have supplied and their commitment. I have known the business for some time and have always felt that it never really got the recognition that it deserved from the European Union in particular, but that is another story.

Mr. Murtagh mentioned training for drivers. From my personal experience of a case in Greece concerning a registered Irish company and a 23-year-old driver, I feel that there is no real training service for them. That will certainly contribute to the cost of insurance and lead to major accidents. I am not referring to any individual, for the person in question happens to be an excellent driver. Training is vital, and I know that Mr. Murtagh mentioned the FÁS driving course. I suggest that he reactivate that with the support of the Oireachtas, for it is very important that training be supplied.

On the long-distance haulage companies, has the association investigated getting insurance quotes from continental Europe? Nearly all the industry's work is there. A very small percentage of the driving is in Ireland when it comes to long-haul work. The major risk is in continental Europe. I often said this to delegations here: have you worked together to try to secure a united insurance quotation from companies? With the strength of this organisation, have you tried to negotiate with a German, French, Spanish or Italian company to bring about a better deal for the organisation? I very much regret that hear that 500 jobs have been lost in the industry already because of insurance costs. They are enormous, and I see that the industry is caught under every heading, including public liability, employer's liability, goods in transit and motor. The association is one of the few groups to come in here that is responsible under four headings.

Where I live there is a major junction that carries a great many trucks. On penalty points, I know that mobile phones have been a huge asset to the haulage industry. It goes without saying that it is so when people who are isolated and travelling long distances are able to contact people such as their employer and notify delays; they can phone ahead. It has probably been one of the great benefits for the industry. However, I am still horrified to see huge trucks coming around the corner whose drivers have a phone in one hand while the other is on the steering wheel. Should it be made compulsory for trucks to have hands-free telephones? I am not suggesting that lorry drivers should get rid of phones altogether, for I understand what a benefit they are to the industry, but rather that it should be compulsory that they be hands-free, for it is quite terrifying, sitting there in a little car, to see a huge truck coming round the corner.

I thank the road hauliers for their very frank and clear presentation. The delegates touched on the cartel situation. We have listened to the brokers, insurers and legal people. Evidently there are gaps in all the stories. I will ask Mr. Murtagh directly, why you think your insurance premiums are so high?

Mr. Murtagh

Senator Leyden mentioned penalty points. I will give one example of where I see a potential problem with its roll-out. It is an offence for the speed-limiting device on a truck not to be calibrated. It takes a technician to know whether it is calibrated or not. However, it is also covered by a Department of Transport certificate. We think that that is overkill, and there are a few such areas. We are afraid that we may be pressurised by our members to get involved in some kind of judicial review. A very good safety mechanism could be undermined by them, and that is why we are talking to the Department - to see if five or six matters might be looked at again. We have no issue whatsoever with the penalty points for speed.

The Irish Road Haulage Association has been in contact over the past few years with three national haulage organisations abroad. We made much progress with a Dutch insurance company through a Dutch brokerage company and the Dutch road haulage association. All of a sudden, the trail went cold. They came up against problems with registering their business here in Ireland, and we were not able to get around that. We have been in contact with Minister Harney's Department and have given it all the information available. We have ongoing negotiations with another company in continental Europe, but we are not very hopeful that it will come to anything. Some of the issues that the brokerage people mentioned may affect moving that forward.

Groups of people get together to buy insurance, but we found it very difficult to get information from people. We are primarily a road haulage lobby group rather than an insurance company. If we put together a proposal, we will hear the best of everyone's story. It was going to be a very difficult task, and we did not make progress on it. The brokerage people said that there were only five underwriters in the market. However, there are only three supermarkets here, and the competition between them is fierce. The thing about there only being five is complete nonsense. Two should be enough for competition. Ryanair and Aer Lingus can do that. I do not wish to name supermarkets in case I insult some of the smaller groups, but there are no more than three players in the supermarket business. If there is no competition there, I do not know where there is.

Some would say that the 500 jobs going is nonsense, for things still have to be moved. With the accession of the other countries into the EU, we are starting to lose a great deal of our international fleet. Foreign carriers are coming into Ireland and moving goods out. The fleets of most of those involved in international transport are starting to reduce in size. That is where the jobs are going. As for insurance, I have to accept that they have it. It may not be costing them as much, though. That is where the jobs are going. There is no mystery about that.

Deputy Lynch mentioned mobile phones. I fully sympathise with her situation. All my relatives who drive cars, male and female, and do not drive trucks have the same fear. We have a sponsorship deal with O2. We came to an arrangement with it last February that we would get a reduction on hands-free kits for members to install in their trucks, and many have done so. It is the same problem as people driving cars. It is a behavioural change, and unfortunately, I think that it will take legislation to make that happen. I fully sympathise with and accept the Deputy's very valid point.

I mentioned competition between the supermarkets, and there is no doubt in my mind about that. I was once asked whether insurance companies are cartels. It is a mixture of that type of behaviour and simply not knowing how to compete. The example I use is that, if one puts six elephants in a three-legged race, they would probably all fall on each other, but one could not say they had fixed the race. It would be more that they did not know how to run it. I really believe that insurance companies do not know how to compete. If we still had the trucks we had 20 years ago, imagine the noise in O'Connell Street. Trucks now are 17 times quieter than they were 20 years ago and about 20% more fuel efficient. Every one of our suppliers has been able to deliver huge savings and efficiencies with great benefit to the environment. The insurance companies do not do anything but produce insurance certificates, and they are not very good at that. We are not sure what the reason is, but in our opinion, it is lack of competition.

Mr. Murtagh mentioned accession and the fact that insurance companies are coming here from Eastern Europe to backload here. Are they covered to take on supplies here? Looked at the other way around, if they are getting cheaper insurance in Poland or Czechoslovakia, and coming to Ireland and backloading Irish products and exporting, surely that puts Irish haulage companies in a very uncompetitive position. If Irish haulage companies registered their company in Prague, for example, and came back here——

Mr. Murtagh

Some Irish haulage companies are starting to register and operate abroad. That seems to be the way they do business. We are a mobile business and both good and bad come with that. We have a huge issue, which is not a matter for this committee, with law enforcement within our own industry. That is an issue for another day.

Are Mr. Murtagh and Mr. Morrissey happy with everything?

Mr. Murtagh

Yes.

I thank the delegates for attending the meeting and for their co-operation which is most appreciated.

That completes the last of our public sessions.

The joint committee went into private session at 6.08 p.m. and adjourned sine die.

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