Mr. Murphy spoke of cycles and it is good to reflect on the recent one which really kicked off in the 2001-02 period, and look at the condition of the market. The committee will see in slide 12 that the market had been coming off the back of several years of substantial losses. As Mr. Murphy stated, the Independent Insurance Company collapsed in 2001. The World Trade Centre tragedy created problems, not in this market but externally in taking out insurers and reinsurers in the global markets and reducing capacity, and in fact, some of the transitory capital had already withdrawn from the market leaving real pressure for the local client base.
At that point there was no immediate prospect of change. Road traffic law enforcement, to which we will return, was at an insufficient level. The PIAB and other legal reforms like the courts Bill were not at all under way. We had experienced quite consistent adverse weather, which was likely to recur at any time. Substantial price increases were the order of the day at that time. Indeed, this committee had not really kicked off its work to any great extent in 2002.
Since late 2003 premiums have been falling back again and at the same time there has been a significant dynamic in this marketplace. There has been exponential growth in the number of motor vehicles here, a substantial change in the numbers and values of properties with the building now of perhaps more than 80,000 dwellings per year, and major commercial developments in every town and city so that the asset base is increasing. At the same time, the number of people in employment is growing substantially and now stands at over 2 million, and rates of pay under pay agreements such as Sustaining Progress have been moving forward. The entire exposure base has increased quite dramatically. The context of that growth, the slide shows a high-level overview of the successive years of rate reduction in the various lines of business.
I suggest that we look more closely at individual situations because sometimes we feel the real reductions are perhaps lost in presentation. We must view the reductions in the context of economic activity. I have provided a selection of changes in large risk involving hotels, contract cleaning companies, construction companies, etc. In the construction area, members can see that an increase in activity of more than 100% occurred and that prices decreased. However, some client's premiums remained unchanged. Many premiums decreased but others either remained unchanged or increased. That is part of the economic activity. I have provided an explanation regarding the hotel risk, which is a good example of what is happening. Turnover is increasing everywhere and many hotels are adding leisure centres and extra bedrooms, taking on more employees and attracting additional patrons, functions and activities. The risks involved are quite different but even though the rates are down, the prices must reflect that. In the aggregate, premiums are down.
The position relating to the area of household insurance is quite similar. Property values are increasing and I provide an example which shows that the premium relating to a typical rebuild — most people rightly insure in respect of rebuild as opposed to market cost — in Dublin costs €306. In 2003, the figure was €354. On the face of it, that appears to be a reduction of €48. However, the value has increased and the worth of the premium is €60, which is conceded in the overall transaction.
The reductions are probably more obvious in respect of motor insurance because factors relating to exposure are not changing in the same way. I have provided some examples for members and these show some dramatic changes in individual premiums. One of the examples to which I refer shows a decrease to €247 in the cost of a premium quoted to a person in Cork. I never thought we would see premiums of that order. However, that is the type of decrease that has come about.
The committee requested our views on many of the reforms that have been introduced, namely, the Personal Injuries Assessment Board, PIAB, the Civil Liability and Courts Act, the road safety programme, changes in insurance, etc. I will address these quite quickly.
The establishment of the PIAB was most welcome. Our experience is that its initial development was quite slow and was hampered by an early challenge from legal representatives who wanted to be present at hearings. Matters are moving forward, however, and cases that come before the PIAB are in or about the level we would have expected. It should be borne in mind that the PIAB deals with non-contested cases in which it is a question of the quantum involved and all that comes into play is an assessment. In such cases, there is no issue of liability. Approximately 50% of our cases go through the PIAB.
We are somewhat concerned regarding the awards being made. Our experience is that awards have been made in approximately 25% of the cases we submitted to it. This means that 75% of cases remain. We would like to see more cases being decided upon. We have accepted the awards in every one of our cases that has come through the PIAB. However, there have been a growing number of rejections on the part of injured parties. These people then take the court route. That is a source of concern. We would like more cases to be dealt with, increased acceptance and further bedding in of the system. The bulk of the cases settled is of the "slip, trip and fall" variety and are of low value. In 75% of our cases, the awards made amount to less than €20,000. We would like to see more of the higher value cases coming through in order that we can establish baselines and identify where we stand.
This has ramifications for the Civil Liability and Courts Act, in respect of which the committee sought details of our experience. Again, there were initial delays regarding the implementation of the provision of the Act and the early problems in respect of the PIAB to which I referred had a knock-on effect in this regard. In addition, there have been lower volumes than we would have expected. One significant aspect, which relates back to the PIAB and the need to deal quickly with cases, is that the Statute of Limitations is suspended while cases are before the board. Even though the Civil Liability and Courts Act reduced the Statute of Limitations to two years, the latter is suspended during the period in which a case is before the PIAB. If cases are before the board for too long, the clock is being allowed to run. This is a matter for concern and we would like to see progress in respect of it.
No contentious cases have arisen thus far in respect of the Act, which deals with matters such as fraud and unvouched earnings. We have not experienced any difficulties because the volumes so far have been small. It is too early to judge the impact of the Act, but we still welcome it because it has real merit and will, over time, prove its worth.
The real gains that have emerged from these changes relate to the improved claims environment. The changes have given rise to a better process and claims must now be notified earlier and better information, witness statements, etc., must be provided. It is, therefore, possible to make earlier decisions and deal promptly with claims. That is the real benefit to date.
On the road safety programme, everyone is aware that there was a honeymoon period when penalty points were introduced. The Society of Actuaries in Ireland estimates that had it been possible to sustain the initial effect, 255 more people — 78 a year — would be alive today. In 2003, following the introduction of penalty points, the level of deaths in Ireland fell to their lowest level in 40 years. Even then, however, we were still behind other developed countries in respect of our performance in this area.
I am not sure of the effect it is having. A couple of months ago, the IIF carried out a survey of motorists which showed that seven out of ten people believe the penalty points system is not effective, that 95% of drivers admit to breaking speed limits and that 52% and 51%, respectively, believe they will not be caught for speeding or drink driving. There is a real link here. The number of road traffic accidents and fatalities dropped significantly in August when random breath testing was introduced and when a high-profile enforcement campaign was pursued. This is clear evidence of a direct link and it is down to putting in place measures with which we all agree and sustaining them. The IIF's survey was carried out prior to August and I am sure people might have changed their minds during that month. However, they may have reverted by now because I am not sure that the level of enforcement currently matches that which obtained in August.
We support all of the measures to which I refer. We have been arguing and lobbying for more enforcement for many years and we have contributed €7.5 million to the IIF's road safety campaigns since 2000. However, the lack of enforcement must be highlighted. In addition, there is a degree of inconsistency regarding the setting of speed limits throughout the country. This may be one of the issues that leads people to fail to buy into road safety. There are roads that are really unsuited to speed limits of 100 km/h and others that are quite safe. Consideration must be given to this matter.
The lack of driver training in secondary schools must be addressed. In addition, the driving test must be overhauled. We must also deal with the unacceptably high number of learner drivers on our roads. I presume that most members are drivers and it is scary when one sees what happens on our motorways, including people overtaking on hard shoulders, etc. These matters of concern to us must be tackled.
On health and safety in the workplace, we must be careful. The reduction in the number of claims in recent years should not lull us into a false sense of security. Accidents continue to happen. It is a matter of some concern that almost 30% of employers do not possess safety statements. It is a legal requirement that they should possess such statements. Of those who have statements, only 5% are fully compliant. This is another matter that must be examined.
The Health and Safety Authority, HSA, has identified a real issue and is taking a proactive approach to the changing workplace. We support its efforts but additional resources and funding will be required in this regard. In our experience, difficulties arise in respect of language, training and the fact that people come from different backgrounds and have been exposed to different training techniques. The HSA has identified that foreign nationals suffer a disproportionate number of fatal injuries. Among Irish workers the figure is three fatal injuries per 100,000 employed, whereas among non-nationals it is 5.6 per 100,000. That figure will probably increase — unless we can do something about it — as the number of non-national employees grows.
CSO figures show that while the figures relating to industrial injuries have remained relatively stable since 1998, the number of work-related illnesses has increased sharply. This may relate to changes in work processes, the use of chemicals or whatever but it is a matter to which consideration must be given because the figures have increased dramatically since 1998, from 1.7 per 100 workers to 3.1. That is a huge increase. The issue here is not only the rise in claims that we can expect but the knock-on effect in terms of economic losses.
The Minister of State, Deputy Killeen, who accepted the committee's report, commented recently on the economic cost of industrial injury and illness and estimated the figure in that regard as being between €3.3 billion and €3.6 billion. Those figures represent multiples of the cost of employers' liability insurance and they will damage the economy.
Good work is being done but support is required. We play our part and have the largest number of risk improvement surveyors. We assess risks and offer risk improvement advice. We contribute quite significantly to risk management publications and encourage adherence to work safety practices among our employees. This focus must be maintained and supported. This refers to changes in insurance regulation. We continue to engage in the consultation process. We believe this is good for the consumer and that the advent of Solvency II will bring transparency which will raise standards and be to the long-term benefit of consumers. We must bear in mind that regulation comes with a cost which is factored into the insurance premium. It is all about focus and doing what it is correct to do.
The committee asked about additional reforms. Substantial well balanced reform has taken place and we need to make sure it is enforced and bedded in. The PIAB and the Courts Acts are bedding in and we cannot lose focus. We must continue. There are other issues such as penalty points. We must avail of the link to which I referred. The changing work environment needs focus. Perhaps the Road Traffic Acts should be consolidated soon. Every week we read of technicalities in laws with defendants getting off charges. Perhaps an amendment in this regard would be worthwhile but the priority must be to achieve maximum benefit.
We were asked to comment on the seven questions posed. I do not have time to read the comments but they have been included in the presentation.
