I thank the committee for inviting us back to present an update on behalf of the Alliance for Insurance Reform. The Alliance for Insurance Reform was formed in 2002 and now has a membership of 1,800 businesses. In conjunction with groups such as this committee and other interested parties, much has been achieved. On the positive side is the establishment of the Personal Injuries Assessment Board, the enactment of the Civil Liabilities and Courts Act 2004 — which deals with perjury and fraud — and the change in the public attitude to fraud as a result of the campaigns that have been carried on by the Irish Insurance Federation. While good work has been done, it has not been followed through and the benefit will not be delivered in reduced premiums. Some of the good will be unravelled by vested interests.
Among the current issues are lack of political will. There is a division of responsibility between the Department of Transport and the Irish Financial Services Regulatory Authority. We note that a Minister of State, Deputy Callely, has been appointed with sole responsibility for this area. However, giving the responsibility to a Minister of State rather than to a senior Minister shows the position it occupies on the political agenda.
Members of the legal profession have been relentless in attacking the Personal Injuries Assessment Board. They were caught on the hop and did not believe it would ever be established. We do not believe they will give up without a fight. They took a case in the High Court for representation of PIAB claimants. They won in the High Court. The case is being taken to the Supreme Court. We believe that legislation will have to be introduced if they win in the Supreme Court. Otherwise, there will be disaster.
I echo what Mr. John Power said regarding the misuse of the PIAB book of quantum by both solicitors and the Judiciary. The book of quantum was developed by the Personal Injuries Assessment Board based on previous claims experience. It was a given and they could do nothing about it. The book is quite complicated and requires factorisation in the interpretation of claims. However, solicitors and judges are using it as a quick reference guide. It was never designed for that purpose and this is resulting in much higher claims.
Solicitors cut deals before a claim goes to the PIAB, using the book of quantum as a guide. People are being steered into areas they do not understand. Judges refer to the book of quantum without reference to how it should be factored. As Mr. Power pointed out, it might mention a claim of €16,000 but when one reads on one discovers that should be scaled back 10% in respect one issue and 20% in respect of another. However, the higher amount is used and that results in higher claims throughout the system.
Uncompetitive practices between insurance companies and insurance brokers have never been tackled. We have heard on many occasions that new entrants to the market will result in greater competition. However, there is no sign of a new entrant. We welcome the fact that a Minister of State has been appointed with full responsibility for the issue but this has not received much publicity. It was barely mentioned in the newspapers. Again, the issue has dropped down the political agenda and it will take a great deal to bring this home. A new radical player must be brought into the market. The Competition Authority's recommendations, which we support, need to be implemented.
Unless the relationship between brokers and insurance companies is severed, there will never be true competition in Ireland. Brokers control the market. They are incentivised to keep premiums as high as possible because everything they do is based on a percentage of the premium. They get a bonus on loss ratio, which is the ratio between claims and the premiums paid in previous years. They get volume discounts. All these are still in place. We feel that brokers should become advisers. They should be paid a fee by the policy holder and the relationship should be between the policy holder and the insurance companies. That, coupled with bringing new entrants into the market, is the only way we will have competition.
If the committee wants to see the net result of lack of competition, Quinn Direct, the newest entrant to the Irish insurance market, proudly announced that the company's minimum year on year growth is still 38% per annum and its profit is 33% per annum. I do not know of any other business or any other sector where a new entrant could grow so fast and achieve such inordinately high profits. I mention Quinn Direct because, together with FBD, it is one of the stand alone Irish companies that can redirect its profits to an offshore company, like the rest of the operators here.
On the book of quantum, more education is needed so that people do not use it incorrectly. Work needs to be done with members of the Judiciary. If the Judiciary keep driving claims up and out of scale in comparison with those which obtain in other countries, tariffs will — as has been the case in those countries — perhaps have to be imposed on it.
Nothing has been done regarding adequate notice and claims history. People are not given enough time to renew. They are given their claims history in time. We would like to see legislation introduced to require at least two to three months' notice, especially in respect of large insurance renewals. At least two months is needed to achieve a proper competitive quotation.
