Insurance Costs for Small and Medium Businesses: Discussion

We will now deal with No. 5, insurance costs for small and medium sized businesses. I welcome the representatives of the Alliance for Insurance Reform and the Irish Small and Medium Enterprises Association, ISME, to the meeting.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the joint committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable.

Mr. Boland of the Alliance for Insurance Reform will now make an opening statement.

Mr. Peter Boland

I am joined by my colleagues, Ms Linda Murray, director of the Alliance for Insurance Reform and owner of Huckleberry's den and play centre in Navan, and Mr. Gerry Monks, director of JDM Insurance. Mr. Noel Anderson of the Licensed Vintners Association is in the Gallery.

Since we last presented to the committee in May 2018, the situation for our members had worsened considerably. In particular, small businesses are now closing on a weekly basis and members right across the spectrum are reporting savage increases in liability insurance renewals. My colleagues will give members evidence in this respect. The crisis is spreading to a broader range of SME sectors, as illustrated by our more recent members, including Nursing Homes Ireland, the Irish Travel Agents Association, the Association of Irish Showmen's Guild which represents circuses and fairs around the country, and Retail Excellence. The crisis is existential in many of those sectors. Businesses across the leisure, childcare and hospitality areas are threatened and one could add many community, charity, sporting and arts organisations to the list. There is increasing alarm among members regarding the slow pace of key reforms and it is clear to us that the dead hand of vested interests and a lack of sufficient political will are grinding the response to the crisis to a halt.

My colleagues will gladly share their specific experiences with members but right now I intend to cut to the chase and focus on analysis and solutions. When we last presented to the committee we submitted ten asks, practical measures that would help reform this dysfunctional area quickly. We further communicated these asks to the cost of insurance working group, CIWG, and to the Ministers involved. While we acknowledge the amendment of section 8 of the Civil Liability and Courts Act 2004, which now obliges claimants to inform defendants of a potential claim within one month, progress on other key reforms remains frustratingly slow. It is illuminating to note in this regard that when a similar crisis arose in 2002, the major reforms were in place within two and a half years. Following on the publication of the Motor Insurance Advisory Board, MIAB, report in April 2002 the two key responses, namely, the establishment of the PIAB and the commencement of the Civil Liability and Courts Act, were implemented by July 2004 and September 2004, respectively. By contrast, the cost of insurance working group report was published in January 2017 but, over two years later, the key reforms remain uncompleted. Indeed, of the 68 recommendations made in this committee's report on the rising cost of motor insurance from November 2016, our analysis suggests that only 17 have been actioned. Of the CIWG recommendations, ongoing delays in the establishment of a long promised Garda insurance fraud unit and the recalibration of the book of quantum are prolonging and amplifying the crisis.

On the CIWG recommendations, I will start with the recommendation to establish a Garda insurance fraud unit. Insurance fraud is a crime with profound consequences up to and including the loss of livelihood and valuable public facilities. Additionally, it criminalises the very process of making a personal injury claim, tarnishing all claimants with the same brush and deterring genuine claimants from seeking redress.

An oft-repeated quote from a member of the public at an alliance meeting last year is as follows.

If I had a need for big money and I had a choice between robbing a bank and faking an injury, I'd pick the fake injury every day. More money and no consequences if I'm found out.

It is absolutely clear from the experience of our members that An Garda Síochána is not currently equipped to deal with this issue. A specialised unit to deal with insurance fraud has been a key element of the cost of insurance working group strategy since the start and a key recommendation of the Personal Injuries Commission. We are bewildered by how long it has taken to establish the same unit, with issues such as political support, a year-long Insurance Ireland cost-benefit analysis and sources of funding wheeled out to justify the delays. It must be established without further delay if the scourge of fraudulent and exaggerated claims is to be meaningfully addressed. Incidentally, on this point, I welcome the statement by the Minister of State, Deputy D'Arcy, on RTÉ Radio 1 yesterday evening that An Garda Síochána is investigating some medical practitioners and legal firms in this regard. However, these are one-off investigations and do not constitute a full strategic response to the issue.

I refer to recalibration of the book of quantum. As documented in the Personal Injuries Commission reports, the general damages awarded for minor injuries in Ireland bear no relation to those made in other countries, which makes Ireland a very attractive place to sustain a minor injury. This applies not just to whiplash injuries, as covered in detail in the Personal Injuries Commission, PIC, reports, but also to all minor, fully recovered soft tissue injuries. Additionally, there is no consistency between awards for identical injuries between the Personal Injuries Assessment Board and the courts, or from judge to judge, which makes it very attractive in personal injury cases to reject a Personal Injuries Assessment Board, PIAB, offer and head for the courts, safe in the knowledge that with the right judge, the rewards from the court or by direct settlement with the insurer may be substantially better.

It is now abundantly clear that the book of quantum and the current process of its drafting are no longer fit for purpose. However, there has been much debate in recent months about the best approach to address this. We are fearful that the net result of all this debate will be no action and no change, a situation forced by vested interests making hundreds of millions in income from the status quo. This will have catastrophic results for our members as they cannot sustain current premium levels, never mind the additional increases in insurance premiums that may arise if quantum for minor injuries is not addressed. What makes the delay in doing so all the more frustrating is that awards are already capped in this country at the top end of the scale by the Court of Appeal in Nolan v. Wirenski, which has also clarified the principle of proportionality in Shannon v. O'Sullivan. The framework and principles for a recalibration are, therefore, already in place. We ask that the book of quantum is calibrated to reflect international norms and norms already established by the Court of Appeal as a matter of urgency. On this point, we welcome the passage of Committee Stage of the Judicial Council Bill in the Seanad on Tuesday night. However, as it has taken more than a year to get to this stage, we fear that without political will, the Bill will die a slow death.

I refer to a schedule of forecast reductions. If anything, the situation regarding transparency in this systemically important industry has worsened since we last presented to the committee. As well as the blue book, which gave comprehensive data oversight of the insurance industry, we have learned that the Central Bank has abandoned publication of the comprehensive data on policyholder demographics and cost trends provided by the private motor insurance statistics report. For example, analysing trends in insurance costs for young drivers is no longer possible. This approach to the reports, which offered key consumer protection insights, can only be described as data vandalism. Data from the national claims information database for the years 2009 to 2018 are due from the Central Bank in the second half of this year. Initially, it is expected that the data regarding motor insurance will be very limited. However, neither the national claims information database nor the Central Statistics Office, CSO, has any concrete plans to issue any data on liability insurance costs. Reports on possible plans from both are due by the end of 2019. In this data vacuum both Ms Murray and Mr. Monks are willing to share definitive data on their sectors. From a broader perspective, policyholders cannot plan or be protected if there is no data to measure what is happening or what can be expected to happen. We ask, therefore, that the Department of Finance produce a schedule of forecast reductions for reforms using the 2002 Irish Insurance Federation, IIF, schedule as a model, which I have attached in appendix 3 to my written submission. It is abundantly clear to us at this stage that lawyers and insurance companies will do anything to stop real reform, working tirelessly to slow reforms and blaming each other to deflect from their own responsibilities. This is why it is imperative that political will drives this agenda. Otherwise, we will be here again in a year's time providing a similar update.

This concludes our formal presentation. As an alliance, we are intensely aware of how urgent this issue is for our members and their employees and volunteers. We hope the committee can help us in getting meaningful action quickly and we are happy to take questions.

I thank Mr. Boland. May we now have ISME's opening statement, please?

Mr. Neil McDonnell

I thank the Chairman for his invitation to address the committee. Our cost of insurance continues to rise. ISME's latest cost of insurance survey results for quarter 4 of 2018 are shown in the first appendix to our paper. The results show that 81% of members report increased public liability insurance. Recent statements about moderating insurance costs refer to private motor insurance only. No one has reliable statistics on liability or other commercial insurances as the CSO does not measure them. The continued rise in insurance costs is the outcome of a failure to make meaningful change in three areas: reducing quantum, to which there is no constitutional impediment; reforming our legal system; and reforming the insurance system itself. The issue goes far beyond the simple cost of insurance to SMEs, although this issue is already causing many businesses to fail. The issue of the cost of insurance is now hollowing out Irish society, restricting the conduct of sport, play and charitable activity, attracting criminal activity and encouraging the advancement of manufactured grievances. It is harming the physical and moral health of citizens. We are getting to the point where suing someone for the most minor of inconveniences is now socially acceptable across all educational and class strata.

While there has been a large amount of activity by the cost of insurance working group, it has not addressed the core issues, which we address in our presentation. The cost of insurance working group has committed the cardinal sin of confusing performance, by which we mean doing lots of things, with effectiveness, which is doing the right things. What we are left with is a veneer of progress and the complete absence of material reform. What we need is quantum to be reduced; the legal profession to engage honestly with a reform process; moral hazard for plaintiffs in our courts; a perjury statute and an amended Defamation Act; a just, answerable Judiciary committed to continuous professional development; meaningful action on the detection and punishment of fraudulent claims; and transparent, granular data on a well-regulated insurance industry.

While it would be easy in these circumstances to call for the head of the responsible Minister of State, we believe this would achieve nothing other than political theatre. We need a Cabinet Minister to take over the lead on this issue personally, and the nature of the reforms required suggests that this should be the Minister for Justice and Equality. We appreciate that the committee has pressing issues such as Brexit and housing to attend to but we have suffered a lost decade on this issue. People are losing their jobs and businesses now because of legislative inaction. Members alone are the people who can fix this, and we ask them to do so now.

I am accompanied by our former chair, who will be able to give the committee real-world examples and figures brought to his attention by members.

Mr. James Coghlan

As Mr. McDonnell said, I am a former chair of ISME, a position I held in the period from 2015 until 2017. Knowing what we know, liability insurance began to ramp up from 2014-15, so I had many people approaching me at that time. I will share with the committee a couple of stories to illustrate this. The first story is illustrated on page 10 of our written submission and concerns an ISME member in the south west, a medium-sized manufacturer with a substantial multi-risk policy in six figures. The policy was with what I would call a multinational enterprise, MNE, a broker or an international brokerage firm. The policy was underwritten, so broker A was underwritten by underwriter B, both of which were multinationals.

At recent renewal, the member received off the record advice that underwriter B had paid broker A and a number of other major brokers a substantial commission to direct all their clients to underwriter B. Broker A would shortly advise the ISME member that the only underwriter who would accept his business for 2018 would be underwriter B and a 30% increase would apply. There would then be only one underwriter bidding for the business at a 30% premium. However, if the ISME member approached broker C, he could renew the book with underwriter B for the same price as before. Broker A duly quoted the premium plus 30% a few days later and the ISME member severed his relationship with broker A. The ISME member will not identify himself or the broker underwriter for fear of commercial retribution. I do not need to explain the implications of this to anybody here as they should be clear.

The second story is also in the submission. An ISME member in the east has tracked a policy for six years with respect to premiums, claims, losses, etc. The underwriter has made a surplus of €430,000 over these six years before reinsurance costs and overheads. This surplus of €430,000 represents an effective gross profit of 91%. The ISME member has had four claims over this six-year period, with a total value of €45,000. The premium income is €430,000 while the claim total over six years has been €45,000. I would love to see how the risk was priced over the six years as it effectively amounted to price gouging. Again, the ISME member will not identify himself for fear of commercial retribution. When there is only one underwriter bidding for the business, if the bidding party withdraws, the company will be left uninsured.

All brokers should be obliged to provide a five-year claims history at renewal. The insurance industry would say this adds to cost and it cannot be done but it is done anyway. The information must be produced for an actuary to be able to price the risk. Somebody may say this cannot be produced but it is already produced and there is no cost. At least with this approach, the client would be in a position to make a business decision by seeing the premiums and claims over a five-year period and deciding if it is an acceptable level of risk and price.

These are just two stories about members of the organisation but there are many others. The common thread seems to be that there is only one underwriter bidding for the business. Is that by accident or design? I do not know.

I welcome our guests from ISME and the Alliance for Insurance Reform. If I may, I invite Ms Linda Murray to tell her story as the matter of insurance for play centres is centre stage right now and it is representative of issues facing a number of other sectors too. These are areas with a significant public footfall, including pubs, nightclubs and restaurants, as well as other parts of the leisure industry like leisure centres. As a parent of small children, I know well the value of play centres and the important role they play in society. I wish to give Ms Murray the opportunity to tell her story of Huckleberry's Den and the picture she is facing now.

Ms Linda Murray

I thank Deputy Michael McGrath for asking me to speak and I am honoured to be here. This is not something I normally do. I run Huckleberry's Den in Navan, County Meath, and I also represent 60 businesses which have all come together to form an organisation called Play Activity and Leisure Ireland, PALI. We had to form that organisation with a common goal to lobby for fair insurance for our members. We are all in the leisure sector and we include play centres, trampoline parks, pet farms, bowling alleys, karting tracks and basically facilities where families can have fun. It is something that Ireland definitely does not want to lose.

We cannot get fair insurance and in many cases we cannot get any insurance. Our premiums have risen by between 379% and more than 500% in the past five years. My insurance has risen by 1,040% in the past six years. Incredibly, our premiums far outweigh our claims. As an organisation, we have paid €5 million over the past five years in premiums. We have had claims and reserves of just over €1 million. In the past five years, only €200,000 of that €5 million has been paid in claims in our sector. This means €4.8 million is sitting there while I cannot get insurance and our group cannot get fair insurance.

When I opened my business six years ago, my premium was €2,500. Last year, it was €16,500. I have been told that I cannot get insurance but I have been advised if I were to get it, I should expect to pay €26,000. That is just a "little" increase of 1,040% since I opened six years ago. This is my livelihood.

I understand Ms Murray's policy is due to expire.

Ms Linda Murray

I have 12 people employed and I have 25 days left to get insurance. Members may ask why I cannot do it. I have had two claims in the past five years. One child banged his head and, as a result, I am being sued because the child now has anxiety and is unable to play with his friends, go to play centres or play in playgrounds. The reserve on this is €23,000, despite the child not suffering any injury. This is the only reason I cannot get insurance.

I have the only play centre in Navan and the other play centre closed six weeks ago. Navan has a population of 40,000 people and there are many children who need to play, especially on rainy days. Parents need to go somewhere for their kids' parties. I really do not want to close in 25 days. My own case is horrific but it is not unusual. Centres across the length and breadth of the country are being told they are lucky to even get insurance. After being handed a quote, we are told that even though it was €20,000 last year and €45,000 this year, we are lucky to get that. We are genuinely told that.

All our centres in the past year have seen increases in premiums of between 100% and 300%. This affects even centres that may have had no claims. Deputy McGrath is familiar with one in Cork that paid just under €8,000 for insurance last year, has never had a claim but has been told it is very lucky to get a premium of €18,000 this year. I challenge the Government to save my livelihood and that of all our members. Save the livelihoods of our staff and give our kids somewhere to play. Within the next 12 to 24 months, there may not be any play centres or leisure centres left if insurance is allowed to keep going the way it is. I thank the committee for its time.

I thank Ms Murray. I am aware of another example in Cork where the quote provided for the next 12 months is €32,000. It is a play centre with which the witness is probably familiar. That figure is double last year's premium and more than six times the 2017 premium. That is the level of growth. The excess provision in the policy has gone from €1,000 in 2017 to €7,500 for each claim in the current proposed renewal.

Ms Linda Murray

This is making centres consider going without insurance. Nobody wants that. A centre should have insurance to cover cases where a real injury occurs and the centre has been negligent, for example. That is what insurance is for and we all need it in our lives. Centres are now proposing going without it, however, which is very risky. We do not want to do that and we want to be able to pay our insurance but we just cannot afford it.

We can give a sense of the impact that will be felt if the trend continues. The witness states that Navan has a population of 40,000 people and the other play centre closed just six weeks ago.

Ms Linda Murray


If Ms Murray's business closes, that will be it.

Ms Linda Murray

That is it. There are no other play centres in the town.

I prefer to have parties for my children outside the house. I do not really want people in or to be cleaning up after everyone following a long day. People who live in apartments need somewhere to go. On rainy days, children need somewhere to play. We have had people coming in with their children. We have a very comfortable breast-feeding environment where women can come with their babies. We see those women holding fifth or sixth birthday parties for them five or six years later. This will not be possible anymore. There is no trick up my sleeve. I have 25 days left and that will be it. I have tried everything. I have worked on nothing but insurance since the beginning of January, or a few months before that. I cannot get a quote.

When I outline the figures, such as €5 million in premiums and €1 million in claims, including all the reserves, I wonder why an Irish insurer does not examine this. Why can we not get insurance on this island? Why do we even have to go across the water, where we are told we are lucky to get insurance? Why can we not get it here? That we cannot beggars belief. It is trickling into other industries. When I was bringing my two children to gymnastics a couple of weeks ago, the organiser said to me he will need to get €10 from me for each of them for insurance. I asked whether it was not included in the membership fee and he said this is the first year in which insurance money has to be collected and that his business is down to its last insurer. He said the business now has to charge everyone coming in for insurance. If this is occurring in gymnastics organisations, what about other organisations? Soccer clubs are ringing me asking whether they can join in with me. What kind of society are we showing our children if we cannot even send them out to play a bit of hurling or football or do gymnastics without worrying whether the organisers will go out of business because of insurance costs?

All this brings home the point that insurance is now centre stage in sporting, business and civic life, and part of our cultural identity as a people. I ask either Mr. Boland or Mr. McDonnell to identify what they regard as the core issues. They outlined them in detail in their submissions. Regarding the issue of awards, the claims environment and trying to stop and deal with the current trend, the roadmap the Government has laid out comprises the Judicial Council Bill and the new guidelines for personal injuries awards. Do the delegates have faith that this is the right direction in which to go? If the Bill becomes law and we get guidelines, will it change the direction in which we are currently going in terms of awards?

Mr. Peter Boland

The play centres, and Ms Murray in particular, have been incredibly brave in going public on this because it is very upsetting.

Mr. Peter Boland

It is a very vulnerable time for those concerned. As I emphasised in the report, there is fear of alienating the only broker or underwriter now available or of bringing additional claims, reflecting poorly on oneself, personally or from a business point of view. I can guarantee members that behind the play centres is a queue of sectors that are very close to being in the same circumstances. I could list festivals, convenience stores, leisure centres, the entire adventure tourism industry, circuses and street artists. Nightlife in Ireland is being severely affected by this issue. Charitable groups are also affected.

On the point about the roadmap, it is abundantly clear that there has been enough analysis. There have been two exceptional reports, namely the cost of insurance working group report and the Personal Injuries Commission report. Both were kick-started by the report this committee produced at the end of 2016. That is enough analysis at this stage. We are well aware of what needs to be done. The problem we have concerns the pace of the action and the apparent lack of political reform. When there was a similar crisis in 2002–2003, there seemed to be political will to get work done. The establishment of the Personal Injuries Assessment Board involved incredibly complex work but it was done in less than two years. The Judicial Council Bill was introduced to the Oireachtas in 2017 and it is still slowly working its way through the Seanad, from where it must proceed to the Dáil. That suggests to us that the political will does not exist to resolve this. We find this extraordinary in the sense that this issue is solvable and the pathway exists. The Government and Oireachtas have many issues that are very difficult to resolve, including housing, healthcare, Brexit and all the other issues that are major distractions, but the issue of insurance is solvable. The pathway exists but the bit that is missing comprises the momentum and political will to get it sorted.

Does the Judicial Council Bill represent the right direction? If it is enacted and is implemented, will it make a difference to award levels?

Mr. Peter Boland

We are policyholders. We do not have a sufficient legal or insurance background to say for sure but we know that, after all the expert analysis, it is the judicial council that is being tasked with reducing the claims levels. If that is what the expert advice is, we say it is fair enough but we ask that the work be done and that results be achieved quickly. If we are still talking about this in another year, all the small sectors at the periphery of Irish society will have been closed.

How big a factor is fraud? There are fraudulent claims and some claims may be exaggerated. From talking to nightclub owners, I have learned that fraud is a significant factor. They say that a high percentage of claims are completely bogus or exaggerated. What is Mr. McDonnell's perspective on this issue? What is the perspective of his members? Is the issue being dealt with? We have tried to obtain data on whether prosecutions have been taken and whether there are any convictions but we cannot get any from the Department of Justice and Equality or Courts Service. Nobody seems to have any. I suspect this is because there are none.

Mr. Neil McDonnell

There is a data black hole. The Deputy is absolutely right to point that out. We have already seen in the latest update on the report of the cost of insurance working group that there is not going to be a database. We have said that in view of Mr. Nicholas Kearns' final report, it is absolutely clear that there needs to be a claim-by-claim database. We have asked the Minister of State, Deputy Michael Darcy, to reconsider the decision because we believe it is wrong.

It is a greater cause of anger if one believes that a claim is fraudulent but the final outcome actually does not matter. The only difference is that one is getting sued by someone who knows they do not have an injury but one is still going to pay regardless of whether the claim is legitimate. The reason we have made quantum the number one concern relates to Mr. Kearns' point in his summation. Like Hansel and Gretel, Mr. Kearns did a fantastic job dropping the breadcrumbs for Members of the Oireachtas to follow in terms of required outcomes. He stated that the quantum is unjustifiably and inexplicably large and that it is leading to all sorts of other consequences. It is resulting in higher premiums but it is also attracting criminality. Mr. Kearns is saying that we do not have any mechanism to deal with this. The Minister of State, Deputy D'Arcy, is saying that he cannot tell the Garda what to do. We have suggested this is a particular area of white-collar crime in which there is no enforcement whatsoever, and that the courts do not enforce anything against those concerned. To an extent, it does not matter whether an organisation such as a play centre operator is getting sued by a fraudulent claimant or a legitimate claimant; since there is €30,000, €40,000 or €50,000 of quantum, there will be somebody there. We have described it as a honey pot that is attracting all these people in. The level just has to be reduced.

Collectively, Members of the Oireachtas have been informed that there is a problem with capping damages. The very first recommendation Mr. Kearns made in his Personal Injuries Commission report, which went back to the Department, involved capping damages by means of legislation. We have shown, in documentation sourced through freedom of information provisions by Mark Tighe in The Sunday Times, that it was immediately nobbled by the lawyers and taken out. Mr. Kearns very clearly left the same recommendation in. He has just said he believes the judicial council is the way to go or the way to achieve the same thing. There is a possibility that a judicial council could sit down and decide to maintain damages at the same level, or 60% or 70% thereof. That would not be a solution. In our view, this is a public policy matter, not a matter for court procedure or judges. Respectfully, we suggest it is the members' job to cap damages.

I commend Ms Murray and the other business owners who have spoken out. In a sense, they have nothing to lose at this stage.

Telling one's story and bringing the humanity of what is involved here to the fore is very important. Looking back at the work done by the committee on the tracker mortgage scandal, the tide turned when those affected by the tracker mortgage issue came before the committee and told their stories. They were totally outside their comfort zone, but they bared their souls and told their stories and that is when the tide turned.

Mr. Boland spoke about the issue of political will. My observation is that the Minister of State, Deputy D'Arcy, is doing his best, but he is a lone voice within Government. The Minister for Finance, Deputy Donohoe, has delegated to him the whole issue of insurance. The Minister for Justice and Equality, Deputy Flanagan, seems to have no interest in the issue. I never hear the Minister for Business, Enterprise and Innovation, Deputy Humphreys, even talking about the issue. When there was a Private Members' motion on the issue in the Dáil some weeks ago, the Minister of State, Deputy D'Arcy, was the only Government representative for almost the entire debate. There is only one person in the Government even attempting to do something about this and that is not good enough. There is a lack of political will. All I can say to the representatives is that, for whatever period is left in this Dáil, Fianna Fáil will hold the Government's feet to the fire on this issue. We know what is at stake.

Not long, we hope.

I welcome the witnesses to the committee. I know that it was difficult for Ms Murray in particular to give her contribution as a person who has invested so much of her life, expertise and resources in a business and is facing that uncertain outcome in 25 days. Many members are familiar with other play centres that, unfortunately, have closed. Some in my constituency are facing the same future and uncertainty as Ms Murray. I ask her to explain to anybody listening why insurance companies will not insure a soft play centre in Ireland. Is it the case that only one insurance company based in Britain was doing so but is now pulling out of the market? I ask her to explain why the situation has come to this point.

Ms Linda Murray

Historically, I do not know why we cannot source insurance in Ireland. I have been in the leisure sector for 11 years. It has never even been brought up. In the past, one went to one's broker and was told that leisure centres do not get insurance in Ireland, so I have always sourced my insurance across the water. The insurance company in the UK told me that Ireland is seen as a loss-making nation when it comes to insurance and that the cost of claims is far higher than is the case in the UK. It stated that it has no interest in insuring play centres in Ireland, particularly those with a claim or two against them. The premiums of centres without claims against them are increasing by 100% or 200% to cope with any potential claims on the business. I have noticed what seems to be a cycle, with insurance companies from the UK coming in every three or four years and then leaving. We have never had a range of insurance companies from which to choose. The companies see us as loss-making. However, the figures for our group show that we are not loss-making. I have been told that the insurance companies are afraid of what could happen, given the type of awards that are made.

When I began looking into this matter a few months ago, I thought the biggest reason for the difficulty sourcing insurance was claims and that our insurance premiums probably matched or came near to the level of claims. When I discovered that there is a significant disparity between the two, I asked why we cannot get insurance if there is so much money to be made on us as an industry. I was told it is because of the fear of what can happen as a result of the type of awards that are made. It is the fear of claims for broken bones, such as a broken arm or finger. It is not catastrophic injuries, it is the fear of claims for broken bones. Most of the injuries suffered on our premises are soft tissue injuries such as bruises or a split lip. Those are the injuries for which €15,000 or €20,000 is being awarded; it is not, in many cases, injuries such as a broken arm. The insurance companies are afraid that eight companies within the group scheme being sued for broken arms could result in €200,000 or €250,000 of payouts.

Ms Murray gave figures in regard to the level of payouts over the past five years, where €5 million has been paid in and €1 million has been paid out or reserved, which shows that there is significant profitability in this area.

Ms Linda Murray

That is 100% the case.

The level of payouts and awards has not dramatically increased over the past five years. Unless there was a surge in claims against the centres, I do not understand why an insurance-----

Ms Linda Murray

It is not our experience that there has been a surge in claims. Half of our centres have no claims. This is what does not make any sense and why I would challenge an Irish underwriter or insurance company to look at us. Obviously, in my case, there are exaggerated and fraudulent claims. One hates to see them coming through the door and there are many sleepless nights over them. However, as a sector, we do not have a huge number of such claims and there does not seem to have been a significant increase in them, yet our premiums are increasing by 300% and some centres cannot get insurance. There is no transparency in how this is calculated. When my insurance premium increased from €8,000 to €16,000, I asked what was the reason for the increase. The broker told me that was just the way it was. I had no claims in that year, but my premium increased from €8,000 to €16,500. When one questions the increase, one is told that there is one underwriter offering insurance and it is the only option. I took out a personal loan to pay that premium because there is no way that one would have that money lying around. One pays it over the year and prays that one will not have a claim during that time. We are all on tenterhooks.

A significant issue is that many of our businesses such as leisure centres are based in units in industrial parks where one must take out a four year and nine month lease. In God's name, how can one take out a lease for four years and nine months when one does not know what one's insurance premium will be the next year or the year after that? How can one tell a bank that one can take out a five-year loan to pay for a new set of laser tag equipment such as that we received a couple of weeks ago and be able to will repay it over a few years when one does not know where one will be with insurance in one year? One year ago, I did not know I would not get insurance this year.

The clock is ticking for Ms Murray. She referred to other businesses having 25 days. It depends on when the renewal falls due, which may be in September, October or in a couple of months. What can or should be done?

Ms Linda Murray

I am not very strong when it comes to the law and I ask that members forgive me if I make my points in basic English. I do not understand why we cannot shop in the European market or get an insurance company in. I also do not understand why an Irish insurer will not give us cover. Three or four big Irish insurers recently posted profits of €200 million. One can see the profit to be made on our business but we cannot get an insurer. We need an insurance company to be able to insure us.

We need something to be done about fraudulent or exaggerated claims. If I walk into a soft play centre with my child and he or she suffers an injury, I should not immediately think, "What could I get for that?" That is what some people are thinking. They think they might as well claim and see if they can get something because nothing will happen to them afterwards anyway - they will not be prosecuted if it is found that the claim is fraudulent or exaggerated. That mentality must be nipped in the bud. People should know that if it is discovered that the child did not suffer as serious an injury as was claimed for, the parent could face a fine or prosecution. It is very important to start getting that into people's minds. Persons who lodge fraudulent claims in the UK may face time in jail. That happens there but it does not happen here. I do not think anybody has been prosecuted here for anything to do with public liability. I do not know all the facts but, as far as I know, nobody has.

Ms Linda Murray

That needs to change. We need an insurance company to offer cover. We need competitiveness rather than a monopoly in order that companies are not faced with having to go without insurance or to self insure, which is what we are currently considering but should not have to. Self insurance is very risky but, as a group, we are trying to think of ways to stay in business. We love what we do and being in this business. We love to see tourists and families coming into our businesses.

Where would we be if there were no bowling alleys or similar facilities down the country? Yesterday, one of our members featured on the "Today with Sean O'Rourke" programme on RTÉ radio. The premium for his bowling alley increased from slightly less than €10,000 to €25,000 with no claims in the past year. There is very little that can go wrong in a bowling alley apart from a ball being dropped on a toe. A similar bowling alley in the UK would probably have an insurance premium of £2,000 or £3,000.

One of our members provides trains in shopping centres such as Swords Pavilions.

One can get into a little train with the children and go around. He does it in the UK and Ireland. In the UK, he could get all of it insured for £1,500 but his latest insurance quote here is €33,000 for the same industry. It involves trains going around a shopping centre.

That is appalling. The Alliance for Insurance Reform is made up of a wide range of groups, including owners of soft play areas. As Ms Murray and Deputy Michael McGrath stated, this issue goes much wider than one sector. The GAA, other sporting organisations and community groups have spoken to us. We have heard of festivals that cannot go ahead because of insurance issues. St. Patrick's Day parades are being put in jeopardy as a result of insurance. There is a real and sharp impact on businesses and jobs and the resulting issue of employees who have lost their jobs being able to keep a roof over their heads. In a situation where that type of monopoly exists or the State does not provide insurance to a certain sector, has the alliance engaged with Insurance Ireland and has Insurance Ireland given a legitimate reason for not addressing the matter? If somebody does not get motor insurance from a company, Insurance Ireland has a scheme whereby somebody who has been refused a quote for motor insurance will be provided with a quote. That does not mean the quote will be reasonable but at least a quote is offered. In this case, businesses operating in this State cannot get insurance from companies and their representatives, which are now very profitable. Has there been any engagement with Insurance Ireland?

Mr. Peter Boland

There has been engagement. Our perspective on this is evolving because we did not start as an alliance that could analyse this crisis in detail. We started and remained an alliance that represents members regarding the crisis they are experiencing. We have engaged and developed a much broader perspective in the past while. I go back to one of the Deputy's original comments on this. Historically, we have had very high levels of awards and claims in this country. These are serious issues that have fed into this crisis and need to be addressed. Arising from our engagement with the insurance industry, we have not received any data that would justify the spike in premiums we have seen in recent years. I am conscious that this is the finance committee and that we are representing businesses. While we have data on motor insurance, we do not have any data to explain what is happening. I will ask Mr. Gerry Monks to give an insight from the perspective of family grocery stores. From January 2014 to December 2016, we saw a 70% spike in motor insurance premiums. We did not see a spike in claims or awards that would justify that increase. There is no clarity in this area. As Ms Murray stated, insurers are again recording very healthy profits across the sector. We do not have clarity on this either but our understanding is that management fees transferred back to parent companies remain an issue. As we do not have a blue book, we cannot prove that. The extent to which insurance companies reserve for potential losses has increased dramatically in recent years, prompted by the Central Bank. Again, our understanding is that the companies are over-reserving at this stage, which means these reserves are ploughed back into profitability. We are faced on one side with an interest group, the lawyers, that has historically done very well out of this sector and, on the other side, insurers, which over any ten-year period always make a profit. We are the jam in the middle. We have not got clear answers and we do not have the data to explain the position, which is certainly part of the problem. I will let Mr. Monks introduce himself. He has put together some data on another sector to show that this is not a very specific issue for one sector.

Mr. Gerry Monks

I am account director with JDM Insurance Services. I have been looking after retailers - typically shops and convenience stores - across the country for more than 20 years in my 43-year career in insurance. These are commercial businesses but they are also families. When I looked at an analysis of the level of increase for the purposes of this exercise, I deliberately wanted to make sure I was not picking out cases with claims so I whittled it down to a certain number. I came up with a figure of 73% over a five-year period for the average increase applied to these businesses. Of the 29 selected cases, 15 were claim-free. I took out extraordinary figures to try to make it read realistically. Insurance in Ireland is broken. The very simple fact is we seem to somehow tolerate levels of payment for minor injuries and all other classes of injury that are multiples of those in other countries such as our nearest neighbour. The UK has a population that is more than ten times the size of our population, yet we pay out approximately four times more than is paid out in the UK. The figures do not add up and the system does not work. We do not have the numbers to justify it. The reserving being placed by insurers has increased in accordance with Central Bank best practice and nobody will argue with that. Claims do not come and go inside a matter of weeks or months. They take years. A claim can be outstanding for four years and in the meantime, the policyholder - the family - will be faced with an increased bill because the outstanding or reserved claim will be treated as a claim paid. Even if the claim is ultimately not paid and the only costs incurred by the insurer are its investigation costs, the premium increase will have taken place. It is history now. The insurers do not have the wherewithal to go back and pay what they owe to Joe Bloggs back from four years ago. They look at the end of every year and balance out what they need to make sure they do not go into the red because if they do, the Central Bank will close them down.

I will ask a number of questions together because I am conscious that many other members wish to contribute. I hear what Mr. Monks is saying and I agree with him on some of the exaggerated awards that are being paid. While that issue needs to be addressed, I do not believe the insurance sector will reduce premiums accordingly. I do not trust the industry in which I believe a cartel is operating. Ms Murray's example of €5 million in premiums and €1 million in reserves shows that price gouging is taking place.

In his opening statement, Mr. Boland spoke about the commitment by insurers to reduce prices in parallel with reforms. FBD told the agricultural sector that prices would fall if it undertook additional safety measures, installed cameras and so forth. Rather than falling, insurance premiums have increased dramatically resulting in the closure of some rural marts, which constitute the fabric of many rural communities. Before any further reforms are undertaken at this level, do we need a commitment from insurers, similar to the one given in 2002, that if businesses take certain steps, insurance premiums will reduce by a certain percentage? This was set out in a table agreed at that point in time.

There has been much talk about fraudulent claims. The insurance industry told us these claims result in a €50 increase in all motor insurance premiums. We can imagine that the cost is significant and not just in motor insurance but in other areas of insurance. Many people do not claim from their insurance even when the claim is legitimate. I think the model is broken. If a tree fell on my car - one fell across the road from my house and my car ran into it just a couple of weeks ago - there is no chance that I would claim on my insurance policy because the company would increase my premium by twice the amount that it would cost to fix the car. Many people who have minor accidents simply do not contact their insurance companies. The sector is broken because businesses are penalised for claiming and using the insurance they have.

We have statistics on fraudulent claims for the first time. Insurance companies now have to report fraudulent claims or suspected fraudulent claims to the Garda. I found it quite surprising that from 1 October to the end of February, which is five full months, there were only 19 cases of fraudulent claims right across the insurance sector. That includes public liability insurance, motor insurance and all the rest. Either the insurance companies are not reporting what they are saying or they are exaggerating the number of fraudulent claims to justify the price gouging that is taking place, or there is something else going on. That does not take away from the point that there needs to be a Garda insurance fraud unit. We are very strongly in favour of that. The committee is united on it. It should happen without delay. Is insurance fraud as considerable as the insurance companies are telling us? If so, why are they reporting only three cases per month across all sectors of insurance? The claims that are reported are suspected fraudulent claims. Some of them may not be.

Mr. Peter Boland

I will deal with those questions in order. With regard to commitments to reductions from the insurance companies, I agree absolutely. We have quite a list of reforms that we believe are necessary but we are very conscious of the amount of traffic going through the Oireachtas at the moment. We want to try to stay very focused. It is one of the top three items on our list. There is a considerable amount of work being done on this. An enormous amount of pain is being caused by insurance premiums. If we emerged at the end of this crisis with no reductions in insurance premiums to follow, it would have catastrophic consequences. It is essential at this stage that we obtain clarity from the insurers as to the benefits of all this work. I am conscious there have been developments since 2002 with regard to competition law and so on, so there may be complications. That is why we have asked the Department of Finance to address this issue. We have asked that it do so from a State point of view because the State is inextricably linked to the issue. Very often, we are legally obliged to have insurance, whether it is motor insurance or, in many cases, public liability insurance. As it is the State and organs of the State that are obliging us to have insurance, they cannot give the impression they are a third party on this issue. We are looking for this kind of commitment from the insurers via the State as quickly as possible.

On fraudulent claims, I am aware of the data mentioned by the Deputy. We welcome any clarity or transparency in this whole area. I am not here to speak on behalf of the insurers but my understanding from some insurance companies is that when they make what they call section 19 complaints on suspected insurance fraud, they are not yet being logged on PULSE. I have been told that by somebody anonymously. I cannot verify it one way or the other. I would be surprised by the low levels of fraud, as reported. The experience of our members is that fraud is a good deal more prevalent than the statistics indicate.

May I clarify that for the benefit of the committee? The information is from the Minister for Justice and Equality. We have got the information from the Garda. The Minister says that in the period between 1 October 2018 and 28 February 2019, there were 19 incidents of insurance companies reporting insurance claim fraud as per the stated guidelines. An Garda Síochána has advised that crime counting rules have not been applied to these data. I refer to recording the data on PULSE. However, while they are not accounted for on PULSE, as should be the case so we can have ease of access, they represent the total number of claims reported by the insurance industry. In my view, that is concerning. Either they are not taking this seriously enough or there is another reason.

Mr. Neil McDonnell

I will deal with that point first. We have covered it on page 7 of our submission. There may be reluctance on the part of defendants, by which I mean policyholders, and insurance companies to invoke the fraudulent claim clause under section 26 of the 2004 Act. There is case law on this. We have quoted it on page 7. Mr. Justin Kevin Cross said that because, in his view, the 2004 Act is so pro-defendant, with which we have an issue in the first case, aggravated or exemplary damages is the only real deterrent to an irresponsible or, indeed, over-enthusiastic invocation of such a plea. In simple English, that means that if a defendant suggests in defending his or her claim that the claimant is making a fraudulent claim and does not succeed with that assertion, not alone will the plaintiff get damages but he or she can also get aggravated or exemplary damages. That is crimping a lot of activity in the sector.

The Deputy implied that if awards came down, premiums might not. I will qualify his perspective very slightly for him. In our view, premiums absolutely will tumble, but in a competitive market only. We have CSO data on that. PIAB was established in 2003. The CSO tells us that, from peak to trough, the cost of motor insurance came down 41% in four years since PIAB's introduction. One should bear in mind that PIAB was not reducing awards in that period. It was paying out what the judges were paying out but doing so on the basis of payments of €45 being made to it. The motor insurance market is a competitive market and one is legally obliged to have insurance. Some of the problems the Deputy has heard about today concern those with a single underwriter. To qualify this, if awards are reduced in a robust, competitive market, premiums will fall, but only where there is more than one underwriter.

I welcome everyone, particularly Ms Murray, whose statement was very compelling.

With regard to practical measures, I will first address Mr. Boland. The Judicial Council Bill is going through the Seanad and Mr. Boland is probably aware the Minister is to introduce an amendment on Report Stage for the book of quantum to be reviewed by the judicial council. I offer assurance, along with my Seanad colleagues, that we will be seeking to have the legislation passed in the Seanad as quickly as possible. Once this is done, it will proceed to the Dáil for consideration.

There are a couple of points I need to understand on the Court of Appeal. I understand that with this court, the awards are decreasing. Am I correct?

Mr. Peter Boland

On appeal, that is correct.

Should the Court of Appeal not be acting as a kind of quasi-book of quantum for the other courts? Surely the High Court, in making an award, should be required to refer to the Court of Appeal, whose cases should be precedents. It becomes a quasi-book of quantum, an updated book of quantum.

Mr. Peter Boland

The issue, which has been referred to in a number of High Court cases, is that while there is a cap at €450,000 for catastrophic injury and while there are principles of proportionality and common sense, as given by the Court of Appeal, there is no scale.

I have a more straightforward question. What is the typical award for whiplash in the High Court?

Mr. Peter Boland

For a very minor case, the average is about €17,500.

Some of the cases must have been before the Court of Appeal, where lower awards were given.

Mr. Peter Boland

I would be very surprised if an award at that level went to the Court of Appeal, particularly given that the current waiting list is two years.

For the Court of Appeal. Has the Alliance for Insurance Reform determined why it is taking two years?

Mr. Peter Boland

I gather that is being addressed by the Department of Justice and Equality. It is important to make this point and the Senator is absolutely right to raise it. What has constantly been the bulk of the issue as we see it is the level of awards made quite regularly over the past while for very minor injuries, or paracetamol injuries as they have been called. Typically, the type of case that goes to the Court of Appeal involves quite substantial injuries. I do not think anyone in this room would question the right of someone who has been seriously injured to get sufficient general damages to cover their pain and suffering. This is not the issue. The issue is at the bottom end of the scale for minor soft tissue injuries. It is important to note it is not just with regard to whiplash but extends throughout the scale. For example, if I bruise my thumb and there is no ligament damage, no breakage, a certain amount of swelling and a full recovery in a short period of time, at present the book of quantum entitles me to up to €21,200 for that injury. This is what is driving this issue from the insurer's point of view.

Is the book of quantum based on precedent cases that have come before the High Court?

Mr. Peter Boland

As it stands, that is exactly what it is based on.

Many solicitors tell me that awards made in cases are reduced in the Court of Appeal. This relates to a very minor number of cases which are very much at the upper end of major injury and there is a two-year delay. In essence, the Court of Appeal does not influence mainstream awards.

Mr. Peter Boland

I am afraid that by the time the Court of Appeal has an influence on minor damages, neither the Senator nor I will be part of the equation.

I am utterly frustrated because this is déjà vu. I want to know precisely what we have to do to make the changes. The Court of Appeal we have been told about is not actually the panacea for the problems. Is the book of quantum based on precedent awards in the High Court?

Mr. Peter Boland

Within the courts?

Mr. Peter Boland

That is correct.

Is the book of quantum updated in terms of awards made in a particular period?

Mr. Peter Boland

Over a period of approximately two to three years.

It is a moving document.

Mr. Peter Boland

It was last renewed in November 2016 and is due for renewal at the end of this year. Slow reform of this area will not work and will not cut it for the likes of Ms Murray and the clients of Mr. Monks. This is why after all of the analysis and reporting that has been done, the solution put forward by the Personal Injuries Commission was a judicial council. We have to accept there is solid advice behind this and so we have chosen to back it. Many of our members would suggest that asking a judicial council to reform quantum is like putting a fox in charge of the chicken coop but we are well aware there are many very wise heads in the Judiciary, particularly at Court of Appeal and Supreme Court level. We are relying on them. First of all, we are relying on the Oireachtas to move quickly to pass the Bill.

That is fair comment.

Mr. Peter Boland

It is absolutely essential from our point of view, and it should include the amendment the Senator has mentioned. When this happens, it will be up to the judicial council to step up to the mark on behalf of society and address this.

When will the next de facto review of the book of quantum take place?

Mr. Peter Boland

As it stands, according to the Personal Injuries Assessment Board (Amendment) Act passed last month it is scheduled for November this year.

Does this allow adequate time for the review to be done by the judicial council and for whatever changes required under the Bill going through at present, which is on Report Stage, to be made?

Mr. Peter Boland

I suggest it is very tight. I am not an expert in this area but it sounds very tight to me. It will require an enormous amount of effort from both Houses and from the Judiciary to hit the deadline.

Mr. Neil McDonnell

The Senator is absolutely right that an element of sanity has been introduced to proceedings by the Court of Appeal and, before that, the Supreme Court. They have introduced effective caps on what they call catastrophic damages. There are not a lot of figures out there on catastrophic damages but, interestingly, they suggest that Ireland's payouts in terms of those very serious injuries are not out of line internationally and may even be below international comparisons. This is not where the damage is being done.

That is the point.

Mr. Neil McDonnell

Our former chairman, Mr. Coghlan, will provide a good example on where this happens. Where the damage is being done to small businesses is at the lower end of quantum. Whiplash awards are all below €21,000. The Circuit Court jurisdiction is up to €60,000 and, interestingly enough, we see all of the plaintiffs coming to the Circuit Court looking for €60,000. We have to start understanding what is driving the behaviour. They do not want to risk it in the High Court even though the High Court's jurisdiction is unlimited. We have a Circuit Court with a cap for €60,000, where all the action is happening. Very few people go to the High Court, although there are a few in-----

What is the level at the District Court? Is it €15,000?

Mr. Neil McDonnell

It is €15,000 at present. The sky is the limit after that. The difficulty is that not alone are businesses not able to afford to appeal an award of the Circuit Court to the High Court, no insurer will even let them exercise an appeal to the Court of Appeal. It will not happen. Not alone this, and this is where I would like our former chairman to jump in, the issue of costs is being used to blackmail people into early settlement. Mr. Coghlan might be happy to discuss a couple of cases.

Mr. James Coghlan

To illustrate the point, Mr. McDonnell did not write this report off the top of his head. He has worked closely with members. A short paragraph on page 7 of ISME's submission states its members advise it that one of the most important considerations before a case is defended in court is the name of the trial judge. It also states that if it is one of a small number of judges with pro-plaintiff renown, businesses will instruct counsel to settle, or counsel will instruct them to settle, irrespective of the merits and strength of the defence. I had an experience as an operator, again going back to the Circuit Court limit of €60,000, whereby, having won decisively a case in the Circuit Court in which the judge was scathing with respect to the plaintiff in summing up the case and awarding us costs and the case effectively, within a matter of days we received a phone call from the solicitor acting for the plaintiff. Committee members know what I am going to say. His words were that he needed to earn his fees out of this so he was going to appeal it to the High Court unless he was paid a certain amount of money. That cost me my excess. Why would I not want to go to the High Court to defend a case that I clearly won hands down? I go back to the paragraph I read from ISME's submission.

Did Mr. Coghlan's insurance company pay out?

Mr. James Coghlan

Yes, and it asked me my opinion on it, which was unusual. I asked what was the downside. The downside is going to the High Court. Again, I refer back to the paragraph I read from ISME's submission. If the case is heard by a certain type of judge it will go the other way.

In that case, if Mr. Coghlan had told his insurance company that he wanted to go to the High Court would it have gone to the High Court?

Mr. James Coghlan

That is why insurance companies tend to settle. They know they take a huge risk. If they have just had a success, will they risk that success by going to a higher court where the cost implications are massive?

Will reform of the book of quantum make that difference? What reform should occur? The Minister of State, Deputy D'Arcy, genuinely wants to get the book of quantum reformed. He was hounding us to make sure it would go before the Seanad. He has spoken to the Minister, Deputy Flanagan, and it will be on Report Stage. We will get it through as quickly as possible but it is not just about getting it through, it is also about the precise contents we get through. I am not an authority on the book of quantum but I know it is the problem. I will speak to Ms Murray and Mr. Monks shortly about people being able to get insurance. We have had myriad meetings. Will the book of quantum make a significant difference on awards?

Could it have an indirect, but positive, impact by allowing Ms Murray and the clients of Mr. Monks to get insurance cover at a realistic rate?

Mr. Peter Boland

This committee will need to ask that question of insurers. I am aware that FBD Insurance is coming in later but the question needs to be asked of the broader insurance industry. We have been told by everyone with expertise in this area that the pivotal part of this is getting the quantum from minor fully recovered injuries down quickly.

What will be the benchmark for the quantum? It cannot be what has come from the courts in previous years because that would mean continuing higher rates. What will the terms of reference have to be for reviewing the book of quantum?

Mr. Peter Boland

The level of awards for injuries in the rest of the world is depicted on a graph as a straight line and, as the level of injury increases, so does the level of award. In Ireland it shoots up.

It is bell-shaped.

Mr. Peter Boland

It is bell-shaped and, from the start, we are talking about serious money.

When the legislation is going through the Seanad, I will want to know what form the review of the book of quantum will have to take. Was there a recommendation from the committee for it to go to the judicial council? The terms of reference will be key. Will there be an international benchmark?

Mr. Neil McDonnell

That is a fair question. We do not really pay for people in wheelchairs or with catastrophic injuries and we need interaction with our health system to deal with that. One should not need to win the lottery if one is put in a wheelchair. Payment orders need to take over in such circumstances. In his second and final report, Nicholas Kearns said we were at 4.4 times the nearest jurisdiction, which itself is an international outlier. Without us, the UK is the worst for generosity and even if we were to use the UK as a benchmark, we would have to be at an absolute maximum of 23% of the current level at the lower end.

The book of quantum has effectively been a review of what has gone through the Irish courts in previous years. The next book of quantum will have to be about benchmarking that to international norms.

Mr. Neil McDonnell

It needs to be taken down by 80% at the lower end.

People such as Ms Murray come to see us because they cannot get insurance or have to pay crazy rates. I met a man recently who is in the vehicle recovery business. His insurance has gone up threefold in the past three years. What does Mr. Monks believe is required so that Ms Murray and other playschools and crèches can get insurance at a reasonable cost? What could be the game-changer for providing insurance cover at reasonable rates?

Mr. Gerry Monks

Deputy Pearse Doherty referred to fraudulent claims a little earlier but that is the very tip of the iceberg and the deeper problem is exaggeration and the amounts being awarded for minor injuries. Accidents do and will happen but the way we reward them in this country encourages people to make formal claims and to go legal.

The book of quantum is key.

Mr. Gerry Monks

The book of quantum is absolutely key.

If the book of quantum is reformed to international norms, will that be the game changer that means insurance is available at a reasonable rate from a number of competitors? There are myriad aspects to this and our guests are saying it is not one thing or another.

Mr. Peter Boland

The Senator has to understand that there is desperation among our members.

I accept that, but we want to do something positive.

Mr. Peter Boland

When we drafted the presentation, we asked for a list of nine different actions and we put in an appendix with quite a few more. It is a complex industry and we know the Oireachtas is very busy at the moment with a lot of major priorities. Accordingly, we whittled it down to the three that are absolutely essential and the book of quantum is top of that list. It drives many other aspects of the issue, most of which have been outlined. It also tends to muddy the water in an area for which very little data are available and it precludes proper analysis. There is a sense of injustice when a fraudulent or exaggerated claim is made against someone and the book of quantum is the driver of this, so it needs to be resolved.

I put the same question to Ms Murray.

Ms Linda Murray

We have spoken a good bit about the Court of Appeal, the High Court, etc., but I wish our cases got to court. We are being put out of business because of the settling culture and the costs surrounding that. I spoke to a loss adjuster a couple of weeks ago about my insurance contract coming up for renewal next month and she said there was a simple answer. I should settle an outstanding case now and I would then have a chance of getting insurance. I said that it was a highly exaggerated and possibly fraudulent claim and it would not have been right to settle it. All I would do by settling it would be to let the cycle continue. We had to fight it.

We will work to bring reforms to the book of quantum as quickly as possible.

I thank our guests, particularly Ms Murray, for sharing their experiences with us. What has been said brings home to us the fact that we have a complete market failure in insurance. We have had report after report, including substantial reports on which this committee worked, but it has not improved and we do not have the transparency we need. I was looking at the eighth progress update and it gave the impression that we are making progress. I cannot get my head around the CSO figures for motor claims because they do not relate to my what I know, particularly having spoken to many people about their experience in this regard. Contrary to the research I have done, the figures state that motor insurance has gone down by 23%. Do the witnesses have confidence that the information gathered by the CSO reflects what is actually happening?

Mr. Peter Boland

We have looked at this in quite a bit of detail. The CSO contacts insurers, who give quotes related to the type of policies the CSO wants to measure. It is not an ideal approach to putting together data in an area like insurance, which is so fraught with difficulties. The figures are better that they are for liability, where there are no data at all, but in the area of motor insurance the data being generated are for a specific type of premium. People, including those to whom the Senator has spoken, may not be in the category picked by the CSO.

Our experience is that younger drivers, drivers of older cars, and drivers of commercial vehicles are still getting hammered and are not experiencing reductions. A very specific area, which I suspect is comprised of standard families based somewhere outside Dublin, may find their premiums reducing at the moment but we do not think that is widespread.

One must take the good with the bad. Everyone was quite willing to use the 70% increase as a prompt for action in recent years. That was entirely valid at the time. While there is some validity in the figures and in the response to them, we are not at all convinced that the model being used cover all areas.

It is important to point that out because we are being lulled into a sense that something is happening and that things are moving, with these reports having brought about the impact we had sought.

Mr. Peter Boland

The report which the Senator had to hand has 100 actions in total. We undertook a detailed analysis of them, which showed that 71 of the actions are process actions, that is, meetings, reviews, reports, consultations, liaisons etc. They are not in any way actions that might get some sort of reform in place. Only 29 of those actions are important, of which over half are still delayed.

That is the problem. Did Mr. Coghlan wish to come in?

Mr. James Coghlan

Yes. Mr. Boland has spoken about how data are collected and how it appears from a motor perspective, I will refer to liability data that the CSO may or may not collect. I may be one of the random companies chosen so I am asked to fill in this form, the CSO annual services inquiry form, 2808B, annually. I have tried to put this on the agenda before but have failed so far. The form asks for the company's costs. One question is what is the firm's insurance cost as a global number. Say a firm's insurance premium is €10,000, within that there is a premium for motor, for assets, for property, a premium for employer liability, for public liability, consequential loss etc. The CSO should ask for a breakdown of the insurance figure as otherwise, the question is meaningless. Liability is the key number, it is the biggest cost in any premium. In the case of a manufacturing company, employer liability will be the most significant number. In a business where people are on the premises, public liability is the key number. If I was to be asked to give a breakdown of my insurance premium, if it was €10,000, I should be asked for my public liability premium. Then in another part of the form, to get the denominator for measuring the rate for public liability, one divides the premium into the sales figure. That can be compared internationally to see if Ireland is an outlier: we are. In the case of employer liability the actuarial formula is arrived at by dividing the premium into wages, which gives the rate. The CSO is not collecting these data. Either it does not understand the data or they do not want to collect them for whatever reason, maybe it does not think it is important. It is vitally important that we have the data.

The Alliance for Insurance Reform has its asks but ISME's approach is different. It reverts to Senator Kieran O'Donnell's question. There are three key issues of which the first is quantum. My colleague, Mr. McDonnell referred to several issues relating to legal reform, including reform of the courts and procedure. The final area is the need for transparent granular data. There is no one thing that will solve the problem, but those three things combined, if they are tackled simultaneously, will solve the problem. That is the answer.

Mr. Neil McDonnell

I need to answer the two Senators together because Senator Kieran O'Donnell asked a simple question which we did not actually answer, which was whether quantum was the silver bullet. It is about 70% or 80% of the bullet. I will not refer to any individual business but I ask members to bear in mind that we need to reform how liability is assessed. Currently, if something occurs on a premises, there is not even consideration of negligence, the insurer effectively will simply ask the business "Did this happen on your premises, yes or no?" Last week, the papers reported a €30,000 settlement to a child in a city centre crèche where one child went into another with a tricycle. This happened several years ago and €30,000 was awarded where the child is fully recovered and has a 1 mm scar. Whether we think that is a good idea is a subjective assessment, however we might ask if that happened in a person's kitchen, and one child banged into another and gave a scar, should a payment of €30,000 arise? If the answer is no, then neither should it arise in a crèche or a play facility. We must get our heads around the fact that simply because something happens on a premises does not mean the owner of the premises is liable for it. We have a bonkers concept of what constitutes negligence and duty of care. We have spent a long time arguing that. Currently anyone who owns or operates a premises who goes before a court, most especially where children are concerned, loses before going in to the courtroom, irrespective of the merits of their case. That is an area that must be taken on.

Mr. Peter Boland

From the perspective of the alliance, I ask that members, as individual Deputies and Senators, ask as a matter of urgency what is necessary to get the Judicial Council Bill through quickly. We have received commitments from the Department of Finance that it will be by summer, which seems onerous, but if the political will is there we do not doubt that is possible. Also, where is the Garda insurance fraud unit? Those are the two key questions.

I am conscious that the committee does not have a direct line to the Law Society so I will concentrate on the insurance industry, into which it does have a direct line. We are well aware of the profits that have been declared in recent weeks. Given that it looks as though they were over-reserved in recent times, and that may have had quite an influence on the losses they declared, we suspect they will go into a period of very substantial profitability, as those reserves are released back into the profit and loss accounts. I would ask them a direct question, namely, what they will do in light of their improving financial situation, to help the policyholders of Ireland?

We started off looking at insurance because we had suspicions that a cartel was in operation and that things were going on in the insurance industry that were putting huge premiums on people and that they were basically robbing people. It returns to Ms Murray's comments and what Ms Dorothea Dowling has been saying about the black hole and the amount of claims versus what is taken in. She had identified something like €2 billion black hole. The industry is running rings around this Government and around citizens and they will continue to do that until we force through the situation. The 25 days mentioned earlier keeps coming to mind. We need emergency legislation. We can pass legislation through on many other things, and we had weeks for Brexit legislation. For me, the job losses and the impact on society and communities and so on, this needs to be treated like emergency legislation.

Ms Linda Murray

In our group alone, there will be two closures this month if this is not sorted out. There will be one in Cork and my own.

I am aware of situations in Mayo as well. I was first contacted by a pet farm, which was getting its insurance cover from the UK, and the letter came in the post stating: "We are no longer going to insure you. Goodbye". It has no insurance.

Ms Linda Murray

On that point, which we have not brought up in this discussion, I am unusual and lucky that I know I cannot get insurance. One does not get told until about 24 to 48 hours before one's premium is due what will be the premium. They do not even allow someone to try to shop around, even though there is not any shopping around to do. One is told they cannot look at one's new insurance premium until four weeks before the due date but I have yet to come across anybody who has been told what their premium will be at least a week before.

To take up Mr. McDonnell's point that that would not happen in someone's home, my daughter is four but last year when she was three she was invited to a play date in a house. We were delighted to go but the day before we went a disclaimer came through on WhatsApp to say that if anything happens in the house the owners will not take responsibility. I said it was laughable. That is the society in which we live.

I ask Ms Murray to comment on what happened earlier this week in terms of IPB Insurance and the court case. She will be familiar with that. IPB Insurance issued High Court proceedings and it wanted them to be held in secret. That sounds very strange.

Mr. Peter Boland

This comes under the heading of transparency.

Mr. Peter Boland

I am loath, particularly in this committee, to suggest that the banking industry is a shining light in this area but, from my understanding, if there is a crisis within the banking sector, one will be able to get data to verify what is going on. That is absolutely not the case within the insurance industry. There is no transparency. If anything, the insurance industry is more systemically important because we cannot function without insurance. We are legally obliged to have a relationship with the insurance industry yet we cannot get the data. That case absolutely falls under that heading.

I very conscious that the FBD representatives are coming in at 11.30 a.m. and we are gone past that time now. Deputy Burton, Senator Horkan and Deputy Murphy may ask some questions if they wish but they should bear in mind that the time is ticking away. We will have less time with FBD.

I want to ask some questions.

Deputy Burton was next. She will be followed by the Senator and then Deputy Murphy.

Listening to the disaster that has fallen on the witnesses' business, essentially they are saying that insurance is strangling SMEs because it is unpredictable, expensive and who knows what will happen tomorrow in terms of whether it will be available. First, have they compared the North and the Republic in this regard? Are there processes in the North that we might examine in the sense of an all-Ireland approach, which might make it easier?

Second, as somebody who goes occasionally to play centres with children which, as Ms Murray said, are popular now for children's parties, it could it be made clearer to people using them at the beginning in what effectively would be a disclaimer notice to the effect that they are using the premises at their own risk unless something very serious happens. Leaving aside the question of responsibility, as she and others said, accidents happen. That is the reason we pay insurance. However, could clear information be given on behalf of insurance companies, not the business, on how they approach it and that people are there effectively at their own risk unless something very serious happens?

The other aspect, which is often a contributory issue, is a person suffering relatively minor injuries. There is a series of 24-hour accident centres in the Dublin area, where one can get treatment. Would it be possible to develop a system where if somebody gets a bad bang, such as a suspected fracture, that could be addressed quite quickly? That requires disclosure as soon as possible, which is essential, but do the witnesses believe there are ways and means by which we can address that? At a local level,there are local enterprise offices. Could a package of information be put together for SMEs but also for the customer because, as a previous speaker said, many people do not make claims because they feel empathy with the business owner and they do not want to make a claim? However, sometimes, because of a lack of attention at the time, it develops into something bigger and then resentment, expectations and so on set in and it becomes a difficult road.

We might bank those questions and ask the Senator to come in.

I hope we can extend this discussion a little. Everyone else had 20 or 25 minutes but I will try to be as brief as I can.

The Senator will not get that.

I accept that but it is an important topic.

The Senator is wasting time now.

I thank Ms Murray and Mr. Boland for their contributions and I thank their association for all it is doing. The three big asks I am taking from the discussion is to get the Garda fraud unit set up as quickly as possible. Where are they with the Minister, Deputy Flanagan, or the Minister of State, Deputy D'Arcy? Are they playing pass the parcel with each other? Is one saying it is not a matter for me, it is a matter for the Department of Justice and Equality and vice versa or is it all a matter for the Garda Commissioner?

I refer to the book of quantum, which I have discussed previously with Mr. Boland. It is a statistical, historical database of what has happened and the only way it can change over time is by claims changing. Legislation cannot change the book of quantum but it can, as he suggests, cap the injury awards or whatever over time. The book of quantum is historical and statistical and it is compiled from the information available. Unfortunately, the premiums are as high as they are because the payouts from judges and the insurance system generally have been high. We need to focus on how we can reduce those claims. I do not doubt that everybody in their business is doing everything they can to minimise that.

In the ten or 12 years of her business's existence, has Ms Murray physically changed the design of her premises, taken out certain climbing frames, slides or whatever? Twenty years ago I was involved with summer camps and people would tell us that we could not have step-ups and so on. We hear about children not being able to play or run in playgrounds and so on. I read about a claim yesterday where a table flipped over in the wind and, unfortunately, a three year old broke a nose. The award was €30,000 even though the nose healed perfectly. I am sure there was some trauma for the child but I am not sure about an award of €30,000 or where that figure come from. Does Ms Murray have comparative figures for insurance premiums for similar play centres in the UK, although it has a different claims environment?

Most people have said the Minister of State, Deputy D'Arcy, is doing his bit but he is a lone voice in that regard. I met the Connacht publicans yesterday and I am conscious that the LVA is doing significant work and that the Vintners Federation of Ireland, VFI, is helping out as well. The biggest bone of contention the Connacht publicans had, bar the issue that arose recently in terms of the limits, is the cost of insurance generally, which is destroying their businesses. They are getting one or two customers a night in some venues but they are still paying large insurance premiums for very little return.

The FBD representatives are coming in next. Do the witnesses have any questions they would like members to put to them? We get many lawyers blaming the insurance industry and the insurance industry blaming the lawyers. I would like their thoughts on who is more at fault. I am sure all of them are at fault. I am throwing out the questions because we do not have much time for engagement.

The witnesses final big ask was in terms of their schedule about the reductions in the data availability. Since I joined this committee in 2016, we have been crying out for visibility on claims. They said the CSO and the Central Bank have more or less thrown out the idea of visibility on that. They might give their thoughts on that.

I will respect the time constraints and keep my contribution as short as possible. I watched Ms Murray's contribution in my office while I was doing other work and it was very sad because she was a person who was full of enthusiasm and had built up a business.

The emotion struck me. All we can do is tell people to keep going and not to let others put them down. It is important to say that because people become frustrated and opt out of business. It has happened in my own area.

Mr. Boland spoke about the slow pace of reform. When I first came into the Dáil following my election in 2016 I heard the Chairman making a very strong case for businesses in his own constituency in the context of insurance costs having risen by 100%. Last year RGDATA told us that shop insurance had increased in many cases from €10,000 to €100,000. Restaurant insurance has gone up by almost 50%. The Chairman has heard me talk previously about the case of an hotel in my own constituency of Roscommon-Galway that was facing closure but a very innovative family took it over, maintaining the employment of 25 people. The family looked at the insurance cover which was very low at the time, amounting to €12,500. A review was conducted four years ago and the family was advised that the proper cover would bring their costs up to around €25,000. Today, their insurance costs are almost €50,000 per annum. This really frustrates me because there were only two small claims against the hotel in the period. One was to the value of €2,500 and the other was €1,500. I ask the representatives of the insurance business here today to explain to me how that is possible. In the context of such small claims, there appears to me to be no justification for that level of premium increase. The Government's competitive watchdog, the National Competitiveness Council, NCC, said in 2016 that the biggest issue facing small business was the increase in insurance costs. Three years later and many businesses are barely holding on. These insurance costs will crucify more businesses if we do not make progress quickly.

Senator Kieran O'Donnell asked a number of pertinent questions on the book of quantum. When the reform of the book of quantum takes place - and the work of the Minister of State, Deputy D'Arcy in this regard must be acknowledged - can the insurance industry representatives assure us that insurance costs will fall? I will give the witnesses another example of the problems here. I know of a haulage company that has secured insurance abroad and I wonder if that is totally safe. One haulier had to take out insurance abroad. He has 15 trucks and at one point his insurance was costing €70,000. In one year, it increased to €130,000, even though there were no claims against his business. His insurance increased by almost 100%. In terms of the costs of running a small business usually wages, raw materials and energy costs outstrip other costs but now, in many cases, insurance is outstripping even these costs. That is not sustainable.

I welcome the delegations. We had lots of different groups in here, including road hauliers, insurance companies and legal professionals when we were preparing our report on insurance costs. Nobody was to blame, according to those with whom we engaged.

ISME apportions a lot of blame to the Judiciary. It argues that a substantial minority of our Judiciary is excessively, unfairly and unjustly pro-plaintiff. ISME was not surprised to see the same High Court justice, who ironically oversees the personal injury list in the High Court, mount a stout defence of the current personal injuries system in the press, suggesting that awards for general damages have fallen in real terms since the 1970s. ISME suggests that this committee should understand that while it does not expect the law to be on its side, it does expect it to be blind. ISME members have advised the organisation that one of the most important considerations before they decide to defend a case in court is the name of the trial judge. If it is one of a small number of judges with a pro-plaintiff reputation, they will instruct their counsel to settle, irrespective of the merits or strengths of their defence. ISME argues that this is an appalling indictment of our Judiciary and I agree. The statement from ISME is unbelievable but the representatives here today stand over it. It is a sad state of affairs, in my view.

We have all come across cases such as those outlined by previous contributors and we understand the issues relating to the book of quantum and so forth. Mr. Boland said that it was clear to his organisation that the dead hand of vested interests and the lack of sufficient political will are grinding the response to the crisis to a halt. In that context, he is blaming the political system, as well as the Judiciary and vested interests. I ask him to outline to us what we, as politicians, can do. We believe there is very little more than we can do. We are already exerting pressure wherever we can.

I will ask each witness to respond briefly and to provide a summing up comment because as I said, representatives from FBD are waiting outside. I also ask them to outline what lobbying they have done directly with the Minister for Finance, other Ministers or the Government.

Mr. Peter Boland

I will wheel through the questions in reverse order, if I may. In response to Senator Paddy Burke, the pace of reform in this area is not fast enough. I used the example of the last time we had a crisis in this area in 2002 and 2003, when all of the legislation and actions to address it were done and dusted within two and a half years. We are nowhere near that timeframe this time around. In very practical terms, what politicians can do to speed things up is get the Judicial Council Bill through the Houses as quickly as possible. They can also exert political pressure to get the Garda insurance fraud unit up and running and this committee can hold the insurers to account in terms of what they are going to do to make sure that premiums go down.

I would respond to Deputy Eugene Murphy's question on the book of quantum by going back to what the Minister and the insurance industry have said constantly, namely, that claims drive costs. That is the insurance industry's analysis of this problem so if the book of quantum can be resolved, that sorts the claims issue. Certainly from our point of view, we would then regard the insurance industry as being under an obligation to respond with reduced insurance costs. The Deputy's story about the hotel is one which is very familiar. What happened there is happening all over the country. In terms of why it happens, we are mystified and it is absolutely a question for the insurers.

In response to Senator Horkan, as I understand it an announcement on the Garda insurance fraud unit is imminent. We would ask why it has taken so long to get to this point because it is our understanding that An Garda Síochána has been ready internally for this for quite some time. We are awaiting a decision on that but there is an opportunity to apply political pressure. We are told that it is a decision for An Garda Síochána but surely the Government has a role to play in terms of expressing the desire of the State to have a Garda insurance fraud unit in place.

As the legislation currently stands, the book of quantum can only be revised through the history of awards over the previous two to three years. However, the Judicial Council Bill will give the power to reduce downwards, regardless of awards history. That is what we are expecting the Judiciary to do; we need judges to step up to the mark on behalf of society. In terms of health and safety, I would suggest that this country is the health and safety nation Our colleagues from Europe and further afield are gobsmacked at the level to which health and safety is acknowledged and enforced in this country. It is time for the insurers to respect that in terms of the premiums being paid.

The national claims information database is a partial solution to transparency. When the first report is released towards the end of this year, I suspect that it will be very unsatisfactory because it will be a first look, it will refer only to motor insurance, and there are no firm plans to examine liability.

To respond to the question on insurers, I reiterate that FBD and the broader insurance industry should be asked what they will do for policyholders in the light of the improvement in their financial position and the forecast additional improvement.

Deputy Burton referred to Northern Ireland. I suspect that the UK, and Northern Ireland in particular, has its own problems in this area. While the UK is by no means the ideal, as Mr. McDonnell noted, it is regarded by the rest of Europe as an insurance outlier. I would not, therefore, necessarily consider Northern Ireland to be a role model in this area, not least because there may be complications arising from Brexit. I would prefer if we got our own house in order at this stage and there is a fairly well-defined roadmap in that regard.

On healthcare and early intervention on injuries, much has been done to try to achieve that but the problem is being caused by general damages, which are paid for pain and suffering, rather than special damages, which cover medical care and loss of earnings. The general damage for the pain and suffering of the original incident is the problem, which is why the solutions we have proposed are in place.

Ms Linda Murray

To respond to some of Deputy Burton's points, all our businesses, with the exception of perhaps one or two, have a disclaimer for people to sign. Unfortunately, however, when an accident happens to a minor, disclaimers are not worth the paper on which they are written. We would welcome a change in the duty of care to the effect that when someone is on the premises of a business whose owner is not negligent, a disclaimer will stand. Nobody is questioning anything about where negligence has occurred. It would be ideal if a disclaimer stood for something but, unfortunately, it does not.

On the 24-hour accident care, we would all welcome it but one is afraid of one's life of suggesting paying for that or even giving the child a Smyths voucher if he or she has sustained an injury. Insurance companies will say it amounts to an admission of liability if there is an offer of something. Nevertheless, many businesses will offer something such as vouchers where something has happened that is not the business's fault, although one can still end up being sued even after offering something like that. Being able to pay for medical expenses, as is the case in Scandinavia, would be great.

Senator Horkan spoke about similar premiums in the UK. I am not sure whether he was present earlier when I mentioned that one of our members paid £1,500 in the UK to have his trains insured there. To have them insured in Ireland, however, he had to pay €33,000 through the same company in the UK, which illustrates the difference.

On FBD, I challenge it to insure us as a group. I stated we have €5 million in premiums and €1 million in claims and reserves. I would love, therefore, if FBD was asked why it will not insure us.

Finally, I thank Deputy Eugene Murphy for his kind words. I will not give up without a fight.

Mr. Gerry Monks

I thank everybody present and urge them to stop kicking the can down the road.

Mr. Neil McDonnell

I will provide some brief, rapid-fire responses. On what the committee should ask the insurers, we would specifically ask whether solvency requirements are driving higher reserves, profits and premiums.

On Senator Paddy Burke's question, it is not only we who stand over what we stated on page 3 in respect of our legal system. The dogs in the street, the European Commission, the OECD, the Office of the Director of Corporate Enforcement and the Competition and Consumer Protection Commission have stated the Legal Service Regulatory Authority is a waste time which has not delivered for consumers.

Deputy Burton asked about the notion of having clinics. Not only would that not make a difference but I have received reports from industry to suggest that a number of GPs will, in exchange for €150, produce a report to allow the patient to approach PIAB. Unfortunately, therefore, a number of medical professionals are now part of the problem.

Mr. James Coghlan

Most of the points have been covered, although Senator Horkan asked about health and safety. I turn to appendix 4 on page 15 of the ISME document, in case there is any doubt about the rates of accident per 1,000. In 1997, the rate per 1,000 was 6.63 but that has dropped to 2.58. There is no causality with anything we are doing wrong in health and safety. There has been massive improvement.

I thank all our guests for joining us and giving their view on the market and what needs to be done. In particular, I thank Ms Murray, who put a human face on the issues. The committee cannot be accused of kicking the can down the road. We have prioritised, debated and written a report on the matter. None of the guests addressed the question I asked about what they did about continually lobbying the Minister or the Government. If any change to the situation is to occur, it will be through Government action. We will keep the Government on notice of the action that is required and contained in our report. I will not single out the Minister of State, Deputy D'Arcy, but the Government is the driver in this regard and it is required to implement the 60 or 70 recommendations we put before it. If there was action on those recommendations, the witnesses would not be appearing before the committee.

Hauliers, co-operatives and many other industries in business have appeared before us. I have met all of them, as well as vintners, throughout the country. Every one of them is complaining. I reject some of the commentary that was made on the reduction in motor insurance, for example. I have yet to meet anyone whose premium has been reduced. Given what is happening and how the Government functions, it is important that businesses engage directly and robustly with the Government. Mr. Boland stated politicians are too busy but they are never too busy. They are paid to be busy. Being busy is one matter but making that business work for the people we represent is another. It is not working, however, and we need to cut through the fog and deal directly with the people who obstruct the course of the reform that is needed in the insurance business. That lies at the feet of the Government.

Mr. Boland referred to the Judiciary and lawyers. As they have been mentioned, they are quite welcome to attend a future committee meeting in the light of the commentary and make any submission they wish to. They might wish to appear before us to defend their position or comment on what was said. Until now, the description of a cartel in operation has been used. People in the insurance world are hard nosed. The insurance world encompasses the Judiciary, lawyers and much more. They are taking advantage of the utter shambles that this has become. As a result, small businesses throughout the country and individuals such as Ms Murray are being penalised and made to pay more and more, but we do not know for what.

Deputy Eugene Murphy asked businesses not to give up. I assure all our guests that we will not give up. Our work will be to ensure that can is kicked no further down the road. I thank the witnesses once again for their attendance.

Sitting suspended at 12 noon and resumed at 12.10 p.m.

We are resuming in public session to discuss insurance issues.

Just to clarify, will the representatives from Bank of Ireland be here at 3 p.m.?

Yes. We are joined by Mr. Jackie McMahon, chief claims officer, and Mr. John Cahalan, chief commercial officer, of FBD Insurance. I welcome both and I invite Mr. McMahon to proceed with his opening statement.

Mr. Jackie McMahon

FBD Insurance is the only indigenous insurer. We are part of and embedded in the community, with 34 branches in cities and towns throughout the country. Insuring farms and small businesses is our business. They are critically important to us and represent 85% of our premium. It is our job to be there when things go wrong. We have a proud and long tradition, spanning more than 50 years, of paying claims and of being there when things go wrong.

From 2014 to 2016, FBD Insurance was making a loss. It is in our customers' interest that we have stabilised and returned to making profit. In order to stand by our customers and pay our claims, we must be stable and profitable. We stabilised matters by taking a raft of measures, including charging our customers more. The cost of insurance is too high. It is affecting our customers' ability to do business and that affects us. A great deal has happened in the attempt to address the cost of insurance, but not enough has changed. With the permission of the committee, I will share FBD Insurance's insights into why this is the case and what must be done.

First, I will summarise what is causing the high cost of insurance. In essence, Ireland has too many claims and those claims are costing too much. People are too willing to make a claim and advisers are too willing to encourage them. Compensation payouts are simply too generous and the cost of getting to a payout decision is too high. To address the root cost of the high cost of insurance, all roads lead to our legal system. The legal system dictates the level of award. It sets the market price that determines the level of our awards, both in and out of court, and the system creates a vicious cycle. High payouts with no downside encourage claimants and high legal fees encourage certain solicitors and barristers to take and make the case. The legal system is difficult to reform and resistant to change and practitioners have little to gain and, perhaps, much to lose.

I would go further. FBD Insurance does not recognise our legal system as the root cause of the problem. We do not have the capability, or at least we have not demonstrated the capability, to fundamentally reform the system. Litigation is always expensive. I will share how costs spiral as a consequence of this system. Take the example of a soft tissue injury from a low impact collision, meaning there was little or no damage to the car. The occupant has a sore neck. Bear in mind that soft tissue injuries comprise approximately 80% of our motor claims. It is the type of injury that some jurisdictions do not recognise or for which they do not pay or pay very little. Normally, it will take three years and up to five years from the date of the accident until the case is heard. The Injuries Board will assess the injury 12 to 18 months after the accident based on a medical report that gives a six month forward prognosis but the majority of claimants will continue to report pain right up their day in court, three to five years after the accident. The judge will make an award for the same injury based on three to five years of reported pain. Court awards, determined later than the Injuries Board, are higher and costs are significantly higher. The key insight is that the level of award is based on the length of time the complainant is complaining of the pain as opposed to the amount of pain the complainant feels. Compensation is more a function of time than of suffering. There is a major incentive, therefore, to bring a claim to litigation.

FBD Insurance has previously stated what it believes must be prioritised. Our key recommendations remain outstanding or are work in progress. We should lower the level of awards. Why do we pay four to five times more than what the UK is already trying to reduce? We must recalibrate claimants' expectations. The proposed judicial council and its proposed redrafting of the book of quantum can be the vehicle, but awards and soft tissue awards in particular must be significantly and consistently lower.

FBD Insurance also believes that we must cap awards, implement what one might call a front stop on the legal system's generosity. We need a standardised objective approach to assessing whiplash, a measure of pain that is not linked to the time it takes to settle the claim. There must be a more efficient process up to and in litigation. The vast majority of soft tissue injuries should be finalised in the Injuries Board.

Insurance companies must be more transparent and publish premium levels. They must work harder on fraud. We need help to be allowed to share data. Finally, we must establish a dedicated insurance fraud investigation unit with An Garda Síochána. In a nutshell, we must build momentum and drive home meaningful reform of the legal system.

The chief executive officer of FBD Insurance, Ms Fiona Muldoon, has said that Irish society can have either high injury awards or cheap insurance, but not both. As legislators, the members of the committee have the sole ability to help deliver what is to the greater benefit for most in our society.

That was a robust presentation outlining the company's presence in the market. It is welcome that we have at least one indigenous motor insurer. It is, perhaps, a reflection on the Irish insurance market that we only have one surviving indigenous operator and a number of multinationals. There are probably much fewer participants in the market now than was the case previously. Much of that goes back to transparency, and representatives of Insurance Ireland have appeared before the committee, in terms of the databases and the data that exist.

From our point of view it is very difficult to see what is happening. We see many claims being settled. Mr. McMahon spoke about fighting fraud. What percentage of claims FBD Insurance receives in all categories, but particularly motor insurance and public liability, are rejected? How many are fought and lost? Obviously, many cases are legitimate. They are what they are and there is fault. I do not know if Mr. McMahon saw the earlier session with members of the Alliance for Insurance Reform and ISME. Various people were here. The Alliance for Insurance Reform represents restaurants, publicans, small businesses and many people. I am sure Mr. McMahon has engaged with them.

There was a particular focus this morning on play centres, the play centre industry and the broader play centre activity park and the like. Our guests at the earlier session stated that their industry has paid money to insurers. It was not FBD Insurance because they stated that most of their business has to refer to the UK because nobody here will insure them. They have paid in €5 million. There are reserves of €800,000 against claims and only €200,000 has been paid out in the last five years. By any measure, it appears to be a profitable industry. Why will FBD Insurance not consider that, or will it? There are play centres, activity centres, places for people to go for birthday parties and places for children's activities closing down in many towns. One lady is in Navan and has the only one left, but she will have to close after 12 years in business. She has seen her insurance premiums rocket. Mr. McMahon might have heard a discussion on "Today with Sean O'Rourke" yesterday morning about play centres. Other people said their insurance premiums have gone from very small amounts to multiples of those. In one case it went from €6,000 to over €200,000. Phenomenal increases were mentioned, and I only heard a small part of the interview.

There is an existential crisis here for many industries. Representatives of marts appeared before the committee, and I am sure Mr. McMahon is very familiar with marts. It appears that this is the most health and safety conscious country in the world and certainly in the EU. If one goes to Brussels, Paris or elsewhere, there are holes in the ground and no fencing around them but if people fall into them it is their own fault. We seem to have put great emphasis on this. I am aware of a school that had no claims but its insurance bill increased from €27,000 to €34,000 on the basis that it was in a scheme and the scheme had ended. It was more or less a case of "You were getting it on the cheap for the last few years and we are going to ramp it up at the end of the term that was agreed".

We have a problem with insurance. I do not think the industry is doing enough to fight fraud. I am not referring to our guests in particular and I would like to hear any figures they have on that issue.

I also have a question about solvency. Is fraud leading to higher reserves? Are higher reserves causing higher premiums, profits and payouts? What would our guests do if they were on in our position? It is all very well to state that we want lower premiums, etc., but what three things would our guests would do if they were legislators and what requests would they make?

Mr. Jackie McMahon

The Senator is touching on many of the fundamental issues. As a company that is insuring businesses in the community, FBD certainly wants to be there for those businesses. They are important to us and to our own business. We want to right that premium. We need to right that business at a profit and we need to be profitable. While there are many different adjuncts to what is quite a complex issue, it all boils down to the fact too many people are making claims. I put claims into two brackets with fraud at one side. There are people who have genuinely suffered loss and that is what we are in the business for, it is why customers pay the premium, we are there for them and that is what our business is about. We have a long tradition of being there for our customers.

There is another group of claimants who have suffered very little, if any, loss or injury as a reasonable person would understand those terms. The problem is that group, which is quite significant, can easily make a claim and receive very high compensation payouts at no risk to them while, at the same time, generating significant fees and incomes for the people bringing those claims on their behalf.

Does Mr. McMahon have a percentage for such claims? He stated that there is a significant number of them, but is it 10% or 45%? There are payouts to people who have suffered losses and legitimately claimed for them. There is a percentage amount for fraud, exaggeration and payouts for people who broke a fingernail or whatever, and then there are real claims. Has Mr. McMahon a breakdown of what he suspects the figures are?

Mr. Jackie McMahon

Within that breakdown, there are also questions about how severe were the injuries and loss and what is an appropriate compensation for a case of that severity. We could argue a subjective point here. Someone could claim they have pain in their neck because they say they have. He or she tells a doctor about the pain and that doctor states that this person has pain in his or her neck. The doctor then provides a medical report which states that the person has pain in his or neck and which is presented during a court case. We value that, in Ireland, starting at approximately €15,000, with an average of €20,000, compared to the UK where the figures are between £300 and £3,000. It is a question of the magnitude and severity of the injury and the rewards that are granted.

There are tables of rates for different firms that outline the level of compensation a claimant is likely to get for various types of injuries. Those are well publicised in many different quarters. They are well out of step with our international benchmarking and the Personal Injuries Commission has proven that. We are way out of step with international norms. The problem is that significant costs are generated because awards are higher. For every €10,000 we pay in litigation, we pay another €4,000 in legal expenses. It is higher than what they are getting pre-litigation.

The €10,000 in Mr. McMahon's example relates to compensation rather than litigation expenses.

Mr. Jackie McMahon

Yes, €10,000 in compensation once the case is in litigation. For every €10,000 in compensation, we are paying an additional €4,000 in legal fees.

That does not answer the question. If FBD Insurance receives 100 claims, how many of those are legitimate, how many are subjectively legitimate or exaggerated, and how many are fraudulent?

Mr. Jackie McMahon

I will answer that in two ways. We estimate that approximately 20% of our cases are fraudulent, approximately half of which we would expose as fraud. We cannot prove the other half.

Are they staged accidents?

Mr. Jackie McMahon

Yes, staged accidents.

And about half of those are caught.

Mr. Jackie McMahon

We catch about half of them. We are putting a huge amount of effort and resources into this, including investing in sophisticated artificial intelligence in entity analytics and a range of defences against fraud. We are working hard to try to-----

Does the industry share that information? Does FBD identify people who have made multiple claims, regardless of whether they are awkward and accident prone or otherwise? There must be people in the industry of whom fraud is suspected and with whom all of the companies have experience. Are insurers sharing that information and those names with each other?

Mr. Jackie McMahon

This is one of the difficulties with which we would like some help. The protocols we have established around the sharing of data contain strict criteria regulating when we can share data with other insurers. For example, if a person has previously made a claim and is claiming a similar injury of the same class as the last one they made, for example a sore neck as a result of an accident, we cannot share the previous medical reports with another insurer. We would have to go to court and issue-----

That is the case if it a different insurer is involved. Presumably, that insurer can have access to the history of the claimant.

Mr. Jackie McMahon


In a case, however, where an insurer knows that somebody made three claims and then moved to another insurer and also knows that there is litigation with the other insurer, it cannot inform the latter of that fact.

Mr. Jackie McMahon

We might know they have a previous claim but we cannot share the medical details, for example. I am repeating myself a little but the significant issue is how high the compensation awards are.

I accept that. I met people from the car rental sector last week. In the Seanad, we passed the entire Committee Stage, including 79 amendments, of the Judicial Council Bill in one night. That will hopefully move us some way towards achieving something. Other Bills have taken much longer in the Seanad but this one was all done in a single session. We extended sitting times on a Tuesday night and there were only two votes on 79 amendments. The legislation passed Committee Stage and only Report and Final Stages remain to be completed. It will then go to the Dáil. I hope its passage through the Lower House will be as quick and that something can be delivered.

Mr. John Cahalan

FBD concentrates on small businesses. It typically insures businesses that are adjacent to our farm business, namely, small pubs, restaurants and the like. We are different from our competitors in that we have 34 branches right across the country. This means that FBD comprises a number of micro-businesses. We are a part of the business community and are very aware as to the consequences of small businesses not getting insurance.

FBD has grown its small business book so customers like dealing with us. We welcome anything that will help the small business seek the right level of cover in the marketplace. That is an important point.

One of the points Mr. McMahon is making is that there is an incentive involved. There would not be as many people applying for compensation if whiplash claims were resulting in awards of €1,500 rather than €15,000 or €25,000. The point has been made that if one tries to rob a bank and one is caught, one will possibly go to jail and have a criminal record. What happens to a person who is found to be making a fraudulent claim? What does FBD do with such claims? Does it send all of the details to the Garda fraud squad? Are people who make fraudulent claims essentially told that they have been unlucky and asked to come back again the following week?

Mr. Jackie McMahon

Where we have evidence and a strong case, we will send the matter to the Garda for investigation and, hopefully, it will then go to the Director of Public Prosecutions, DPP, and to a prosecution.

There is a lot of hope there.

Mr. Jackie McMahon

There is a lot of hope there and, not only that, the bar of evidence required in order to prove fraud is very high. It is very often a difficult case to pursue and that can also be difficult for our customers who sometimes feel that there are fraudulent cases taken against them but knowing a case is fraudulent and proving that to the standards of the court are different things. There a number of steps from a Garda investigation to a DPP prosecution.

I want to understand FBD's motor insurance book. FBD has a book of however many customers to whom it provides premiums. Typically, how many make claims in a year? Is it 6%, 8% or 20%?

Mr. Jackie McMahon

It is about 11%.

So 11% are making claims and of those claims Mr. McMahon reckons 10% are fraudulent and 10% are fraudulent that are not caught. Of the 80% that are left what are the really hardcore and legitimate claims of the sort that every other country pays out on? Is it 40% or 50%?

Mr. Jackie McMahon

The Senator is probably not far off on that. Some 80% of the count - or the number of claims we get in - are soft tissue injuries. Balanced against that are some very serious and horrific injuries that, frankly, is what we are in the business for. These are extremely expensive and the people are in very difficult situations after them.

That is what insurance is for and no one in this committee is trying to dispute that. If a person is in a car accident more often than not there is more than one side to the accident but usually one side is more at fault than the other. Nobody is disputing proper claims but what if a certain number of people come along and say "My car got a tip and now I have mental trauma, anxiety and my children are not able to sleep"? We have had months of this before the committee previously when Insurance Ireland was here telling us this. What can be done with regard to the motor insurance market? We could blame whiplash but I would prefer if it was to European norms or less. With technology, telemetry and so on one could have black boxes in cars, dash cams, web access and information about speed limits and performance going into the cloud. It is all there. What efforts does the industry make to monitor the premium holder's behaviour in his or her car so if the driver is on the mobile phone or texting he or she will be caught by a camera in the car? Has the industry explored any of those options?

Mr. John Cahalan

The Senator has raised a couple of issues. When one considers all our claims and expenses over premium, with our overall combined ratio in insurance we make a margin of approximately 10%. We are a business and we feel this is a modest and fair return for the service we give.

The Senator mentioned dash cams. The current legislation around GDPR does not allow us to use some of the data that dash cams actually track, unless we have the explicit authorisation from the other person who has been recorded on the dash cam footage. Legislation could help us to improve our ability to get the correct data to allow us to proactively challenge or pay out fairly on claims.

That goes somewhere to answering the question I asked: if you were us what would you do. Is any technology in place to look at the behaviour of the person who pays the premium to FBD, for example, a camera within the car monitoring the driver's behaviour, seeing if he or she is texting or taking calls, and keeping track of the speed limit?

Mr. Jackie McMahon

I am not saying it is not a good example. In Italy they have moved to a situation where telematics are fitted in all cars and the system there does not allow soft tissue injury claims outside of a certain G force collision of the car. Fundamentally, we in Ireland are just too generous in our court awards. It is a very subjective decision to say what is the real cost of the pain and suffering when a person says they have pain and suffering, especially around soft tissue injuries. I shall colour this with one example from some weeks ago. Two cars had the wing mirrors on both vehicles damaged. The wing mirrors hit as the cars went by each other. The claimant lost no time from work but his overall complaints were alleged anxiety, sleep disturbance and palpitations. Our cardiologist gave him a clean bill of health. We ran the case on the basis of minimal impact, no complaints made at the scene and that he continued to work normally since and did not seek any medical attention until six weeks afterwards. We thought his complaints were unreasonable on the basis on the facts of the accident. The case ran before the courts. A psychiatrist was called by the plaintiff who supported his evidence and he was awarded €22,500.

The legal fees on top of that could be another 40%

Mr. Jackie McMahon

The legal fees could be another 40%. I have reams of this type of example.

Keep going because this is the only time we are going to see them. Give me two or three more examples.

Mr. Jackie McMahon

I will give two or three more examples around the key point of time. The length of time can determine the costs not the severity of the pain. This is the key insight I can bring. For example, we had a claimant who suffered neck and upper back injuries. The Personal Injuries Assessment Board, PIAB, awarded €14,700 at 12 months after the accident based on a medical examination that the plaintiff would recover within 16 months of the accident. The case went to trial and 4.8 years later - the claimant alleging ongoing complaint - the judge awarded him €33,000, and costs were set at €16,700.

Another case of soft tissue injury to neck and shoulder, for example, was awarded €9,900 by PIAB one year and ten months after the accident. In his report the claimant's own GP expressed the view that she was 100% recovered six months after the accident. The case went to court and the judge awarded €33,700. The claimant was alleging ongoing complaints and stated that she did not agree with her own GP's first report.

A case that was not a soft tissue injury was a claimant who suffered scarring to the lower leg and post-traumatic stress after being bitten by a dog. PIAB made an award one year and 11 months after the accident for €78,600. The case went to trial in the High Court two years and eight months after the accident and the claimant was awarded €103,000, and legals costs of €41,000.

We can talk about a lot of aspects on the margins and on the periphery of insurance costs, but a key point and the fundamental issue is that the legal system is too generous. It is too generous by a factor of five timeS, especially on soft tissue injuries, which is where the real problem is. It is incentivised because a dragged out, long and slow process generates significant legal costs. At the end of the day the claimant wins because he or she gets a higher award and the lawyers win because they get significant fees. Businesses, consumers and those who pay insurance lose. Ultimately society loses. Everything else helps with the margins but that is the significant issue that needs to be addressed. We need to use that to change what is fundamentally a very high claims culture in Ireland.

I thank Mr. McMahon and perhaps he might come back in during another response on solvency.

I am really glad to see the representatives from FBD insurance here today. I thank Mr. McMahon for his opening statement. It is extremely useful to have the witnesses here to answer some of the questions we have. I have a number of questions, the first of which is how much did FBD pay out last year on claims?

Mr. Jackie McMahon

Our claims last year were in the order of €190 million.

How much did FBD take in from premiums?

Mr. Jackie McMahon

We took in €371 million.

So that is a fair profit. Profits were up 41%. Is that right?

Mr. John Cahalan

After losses in 2014, 2015 and 2016, yes.

They are up 41%. At another meeting of this committee last year Mr. Cahalan said "Just follow the money" in the context of another reason for increased premiums. In light of that massive profit increase, will it be reflected in the cost of premiums for FBD's customers now?

Mr. John Cahalan

We have to be very careful in terms of counting in any way on premiums and prices. We do not want to be price signalling, and we cannot. I believe that premiums are beginning to stabilise.

Is it Mr. Cahalan's view that when people see those profits they could reasonably expect a drastic decrease in premiums? This could be applied to any company.

Mr. Jackie McMahon

Looking at any company, FBD is very proud of its turnaround. We had to do a massive amount to get back to profitability-----

We really have to get to the crux of this. We are running out of patience on this issue. We need insurance prices to come down. We have talked about this for the last three years.

The witnesses are from the insurance company that happens to be here. I am really running out of patience with all of this. We need emergency legislation. The witnesses are telling us what we need to do and we are listening and hearing what is being said. I am now stepping into the shoes of the people in the delegation to tell them what they need to do as well.

Mr. John Cahalan

Our current year combined ratio is running at approximately 90%. That means for every euro we underwrite, we are getting a return of 10 cent. We are a business and we do not think that is an unreasonable return.

It is a very profitable business and we just want fairness for citizens. I am sure the witnesses would share that idea of fairness and transparency for customers as well.

Mr. John Cahalan

Absolutely, and that specifically relates to small businesses. As I mentioned, our book is growing and we are getting more customers now than we had before. That is important. It is in our interests to try to attract as many customers as we want but we must make a return as a business. In our view, a 10% return is not excessive.

Okay. We can go on to risk management practices. The witness has stated that risk management practices were to be put in place and this would reduce premiums. Risk management practices are now in place and have been in most of the marts for the past two years. When will marts see the decreases reflected in those actions taken in risk management?

Mr. John Cahalan

I have had some very good conversations with representatives from the Irish Co-operative Organisation Society, ICOS, and Associated Livestock Marts, ALM, which represent marts. We have shared our numbers with them. The facts are that marts are currently loss-making for us. Our combined ratio in that sector is approximately 160%, so for every euro it is costing us €1.60. We are committed to working with the marts and insuring them. A frustration for me is that we are insuring them but our competitors will not insure them because of losses.

Have claims decreased in marts over the past two years because of risk management measures that have been implemented?

Mr. John Cahalan

We have not seen them decrease at the rate we would like to see.

How much have they gone down?

Mr. John Cahalan

I do not have the figure to hand currently. All I can say is that the combined ratio on marts was in the order of 160%. They were loss-making and we are the only insurer in this market that will insure marts. We are committed to doing so because that is where our farm customers trade.

So FBD has a monopoly on mart insurance.

Mr. John Cahalan

Absolutely not. Nobody else wants to come into the market because it is loss-making.

Right. One mart manager tried to gather information on premiums, costs and claims, and that person said every roadblock was put in place to prevent that happening. When she organised a meeting with all the marts, the representatives would not go.

Mr. John Cahalan

I personally attended a meeting with ICOS mart managers.

Yes. That was three days beforehand.

Mr. John Cahalan

I also attended a meeting with ALM. I believe the person in question is associated with the ALM. We deal with the representative bodies.

The witnesses will not meet with mart managers so it is just the representative bodies.

Mr. John Cahalan

The mart managers were all there at the ICOS meeting.

Okay. With many claims that are paid, there is little or no evidence that any injuries were caused or sustained on mart premises but the insurance company has settled. Mart managers are very unhappy about 80% of those settled claims. Why are the claims being settled?

Mr. Jackie McMahon

In the first instance, we put much time and effort into investigating a claim. In that we want to understand whether the customer is on cover and if liability is an issue. In other words, we consider whether we are at fault within the claim. If investigations indicate the customer is on cover and there is liability, we would be in a position of trying to value the scale of the injury. My core point is that those scales are essentially set as a market rate by the courts. What we are trying to do that is absolutely in our customers' interests and favour is to pay the claim without having to pay the significant cost to bring it through the legal system, which has a two-fold impact. The first is that when the length of time the injury is suffered is greatest, the compensation may be significantly higher, and we would also incur costs. It is absolutely in our interests to settle the claim at a fair price. It is also in the claimant's interest to settle that in a speedy manner. If it is in that zone, we will try to settle the matter. If it is not, we will fight it absolutely.

The witness is right in that sense. If the mart is not negligent and there is no evidence to back up the claim, why are the claims being paid in the name of the marts? Is it not then too easy to then pile on whatever amount is claimed to the premium holder? It seems to be what is happening.

Mr. Jackie McMahon

I have much sympathy for the marts and that perspective on liability. The difficulty is the Senator's or my interpretation of liability, what constitutes an injury and what the courts will ultimately declare as liability and injury could be worlds apart. To balance that, we have seen some horrific accidents within marts. We are working hard with mart owners to address this matter but, fundamentally, as patrons are in gantries with animals, there is much potential for them to be caught in gantries. We have seen many examples where that is the case. I certainly would like to leave the Senator in no doubt that we will pay where we think it is right at what we believe to be market rate, although the market rate is way too high. If we are not happy it is right and we have a strong case, we will absolutely fight that case. I would not like the Senator to have any doubt about that. I speak for FBD and we will fight the cases.

Is there closed-circuit television in all the marts so there could be evidence of what is happening? Surely that must reduce the number of fraudulent claims.

Mr. John Cahalan

It certainly has but unfortunately not all the marts across the country have it.

How many fraudulent claims has the company reported to the Garda?

Mr. Jackie McMahon

The Senator uses the word "fraudulent" but the issue is very often about the severity of the injury and what the payout for that injury might be. In many cases there may have been an accident or incident and some injury may have been suffered. It is the cost of that payout and specifically the cost of us getting to that payout decision through the legal system that is really driving the lion's share of our cost of claims.

Does the company check with the premium holder - the marts in this case - before settling a case?

Mr. Jackie McMahon

In terms of detailed investigations, we would speak with all parties.

What about before the settlement? If the company is coming near the end of settling a claim, does the company go back to the premium holder and indicate the amount that will be paid out for an incident?

Mr. Jackie McMahon

We give a settlement letter to our policyholders telling them what we are settling for.

The deal is made with whoever is claiming and then the company goes back to the person with the premium.

Mr. Jackie McMahon

Much of the time we would do it in advance. It is interesting as I can understand and I feel that on many occasions the payouts are just too high; they are too high. I am absolutely making that clear from the start and it is driving the cost of insurance. We could tell the customer that we are paying €25,000 on the basis of an injury and he or she might say "no way, that is ridiculous". We could then ask them about a hypothetical offer of €25,000 plus 40% of that in costs to run it. Would they accept that?

Of course not. It would be too much risk, given the cost of the bill and of running the case, the fact that the size of the compensation can increase, and the courts' interpretation of what is "fault" and the severity of injury under the law of the land.

I will leave it at that. I have a case of a small mart that had just one claim, which was in 2016. Its insurance in 2017 was €12,200. Increases are constantly being piled onto the premium holder.

Mr. John Cahalan

We are losing money on marts. We are possibly the only insurer that is willing to insure them. There is a reason for that - they are loss making.

There is a perception out there that, up to a couple of years ago, insurance companies were going head to head in a competitive market. Instead, they were underpricing and not making proper provisions. We then got to a point where the wheels came off the industry's wagon and rates increased.

We have been asked to put a direct question to the insurance companies. They are now beginning to show significant profits, yet their rates are not decreasing in any way. Their reserves and profits are increasing, but their premiums are not decreasing accordingly. We are being told anecdotally that they are provisioning to put a reserve bank in place. The insurance companies blame the legal profession and legal costs. Solicitors and barristers blame the insurance companies. The only person who appears to be getting a raw deal is the consumer. We are here as public representatives. When the legal profession and insurers appear before us, it is a case of déjà vu and we never seem to get to what is really happening. If insurers are making such profits, why are the premiums not decreasing accordingly?

Mr. Jackie McMahon

I will put the profits in context. Some €50 million, or €43 million after tax, sounds like a great deal of money. Our investors are taking a risk because we target low double-digit returns on equity. The €50 million figure equates to a 15% return. That was a little above what we targeted in 2018. We need our profits for the providers of capital, who demand and are entitled to a return on their capital. They are investors in the company. For the type of risk they are taking, low double-digit returns are not exorbitant. It is what the markets expect and it is what we are expected to deliver on their behalf. It is a highly competitive industry and there is no question of FBD making any kind of supernormal profit. We are making an adequate return, which we need to pay our future claims, remain financially sound and stable, continue investing in the customer, and give stability to our customers through the cycles. From FBD's perspective, the profits are not exorbitant.

The Judicial Council Bill 2017 is before the Oireachtas. If the book of quantum is revised on the basis of international benchmarks for claim payouts, will premiums drop?

Mr. Jackie McMahon

If the cost of claims drops, premiums will absolutely drop.

Will they drop proportionately?

Mr. Jackie McMahon


If I am paying €1,000 per year for motor insurance and claims drop overall by 50%, is Mr. McMahon telling me that my motor insurance will decrease to €500?

Mr. Jackie McMahon

The Senator should see a commensurate drop in his motor insurance.

How will the insurers do that? Will it be based on overall claims across a range of areas or just on motor insurance claims?

Mr. Jackie McMahon

We price our book by product, channel and sector. Broadly speaking, we bundle risk. The principle of insurance is that the premiums of the many pay for the claims of the few.

Will it be based on claims across all business areas?

Mr. Jackie McMahon

If injury claims reduce across all areas, the premiums for injury claims will reduce across all areas.

I presume that FBD's largest number of claims are on car insurance.

Mr. Jackie McMahon

In terms of injury claims, yes.

What is the proportion?

Mr. Jackie McMahon

Roughly 50% on motor insurance, 25% on employer's liability and 25% on public liability.

To what value do those proportions equate? Some 50% of injury claims are on motor insurance, but what percentage of the actual payout on claims relates to motor insurance? Is there a correlation? Do the percentages that Mr. McMahon provided relate to the number of claims or their value?

Mr. Jackie McMahon


What is the ratio in terms of the number of claims?

Mr. Jackie McMahon

It would not be far off that.

Are the personal injuries in motor insurance claims of a common variety, for example, whiplash? What is the percentage? Are the bulk of claims at the lower end? Mr. McMahon probably heard our discussion this morning and knows that the Court of Appeal is dealing with the upper end of serious injury claims. Are the bulk of payouts in routine areas?

Mr. Jackie McMahon

The bulk of claims are on the lower end.

If we see a situation whereby-----

Mr. Jackie McMahon

But the low end is high.

That is what we need to find out. From the committee's discussion this morning, I believe that the minimum payout for whiplash is €21,000. I am going by memory. Maybe the Chairman will correct me, but I believe that was the figure. If it decreases to €10,000 and FBD sees a 50% reduction in payouts under the book of quantum across a range of areas, will I see a 50% reduction in my premium?

Mr. Jackie McMahon

Absolutely, and I am actually quite happy that-----

Will Mr. McMahon give that commitment publicly?

Mr. Jackie McMahon

We will analyse the revised book of quantum and tell the committee what impact it will have on prices if it is adhered to. Part of the difficulty with a book of quantum is that, if it is open to discretion and that discretion is exercised liberally, the book of quantum becomes meaningless.

Is Mr. McMahon willing to say now that there is a direct correlation between the premiums that insurers charge and, under headings, insurance claims?

Mr. Jackie McMahon

Without doing back-of-the-envelope calculations, I would be happy to have our actuaries examine the revisions to the book of quantum and then tell the committee their impact in terms of reduced premiums.

Has FBD made submissions to the Department of Finance, the Department of Justice and Equality and various Ministers regarding the terms of reference for drawing up a new book of quantum by the proposed judicial council?

Mr. Jackie McMahon

I do not even think that there is a full acceptance that the level of awards within the full legal system is too high. After the last report, some of the commentary coming back was to the effect that claimants were entitled to those awards and were what they should be getting. There is a fundamental problem if people believe that those payout levels are okay.

The result is that premiums will stay high.

I wish to ask a question that did not come up earlier. Does FBD Insurance underwrite itself or does it have underwriters?

Mr. Jackie McMahon

We underwrite ourselves.

Will Brexit have any impact on the business model?

Mr. John Cahalan

It will. Some 50% of beef consumed in the UK is Irish beef. The downstream implication for our farming customer base is that money will be tighter on farms. That will affect people's ability to pay premiums. It is very worrying. Irish milk and cheddar are also consumed hugely in the UK. That impacts on our customer base.

What is the breakdown of FBD Insurance's customer base between farming, small businesses and individuals?

Mr. John Cahalan

Approximately 55% of our book is farm-related, 30% is accounted for by small businesses and 15% is made up of consumers.

As such, 85% of the business is tied into the SME sector. It is very simple then. Everything appears to revolve around the book of quantum and its revision. Once the legislation has passed this committee must engage actively in determining the terms of reference of the revision of the book of quantum. We can pursue a review all we want but the terms of reference will be absolutely key. We seem to have a commitment from FBD Insurance, which is the largest indigenous insurer in Ireland. Where does it rank in the Irish insurance market?

Mr. Jackie McMahon

We jostle between first, second and third place in terms of scale.

We will say it is the premier Irish insurer.

Mr. Jackie McMahon

I thank the Senator.

If FBD Insurance is willing to make a commitment that if the book of quantum brings about a reduction in awards there will be a directly correlated and proportional reduction in premiums, then we have something structured to work on.

That depends on the book of quantum. That is the caveat.

Mr. Jackie McMahon

I would like to add one thing to that.

That is a matter for the terms of reference of the review.

Mr. Jackie McMahon

The other aspect is the cost of getting the payout decision. An awful lot of money is tied up in the legal system and the process of getting to an award. We need to focus on trying to make that process. I know there is-----

Say someone is involved in a car crash. How long will the case take?

Mr. Jackie McMahon

About five years.

I would like to welcome our guests as well. I will be relatively brief. I refer to the Judiciary's interpretation of the book of quantum. The fundamental point is that it cannot be too loose. If there is still a significant degree of discretion I am not sure we will solve anything. If the judge merely has to have regard to the new guidelines it is a waste of time. The application has to be much tighter than that. We will have to watch that very carefully in the course of the legislation, otherwise we will not make the progress we want.

On the overall financial performance, I take Mr. McMahon's point that insurance companies have to be profitable. It is a risk-based business. I was looking at the annual figures. Profit before tax of €50 million equates to a 15% return on equities. The gross written premium is €372 million. Profit before tax is therefore about 13% of the premium. Is that typical of what the market would expect FBD Insurance to deliver as a public limited company, PLC? FBD Insurance has investors. I am not sure what the profile of its shareholders is. I assume there are significant institutional shareholders among them. Is that typical of what would be expected? If that figure was 20%, 30% or more would the witnesses accept it was too high? I appreciate that it is not at that level now.

Mr. Jackie McMahon: That is what the investors expect. That is what we target on their behalf. They invest on that basis. I can certainly understand the concern but I would just like to say that as an insurance company and a PLC our accounts are open. They are published and audited. We are the only insurance company in Ireland whose accounts are available. The rest are folded into their parents in the UK or elsewhere. To give some comfort to members of the committee I note that we are in a very competitive market. People and investors need a return but we also need to grow our business. It is basic economics. If the profits increase excessively, sellers will want to sell more as a result. This drives prices down and profits return to a normal level. Those are the forces of the market within which we operate. Competition is sometimes quite brutal but the free market will ensure that we continue to make a normal profit.

Am I right in saying that FBD Insurance's financial report encompasses its full activity, that is, there are no intra-group transfers, management charges etc.? It can be very difficult for us to get a true handle on the underlying financial performance of some of the larger international groups.

Mr. Jackie McMahon

They do very little reporting in Ireland.

Money flows in and out and the reported performance can be significantly influenced by management charges flowing in and out.

Mr. Jackie McMahon

There are no flows in our firm.

These reports reflect all of FBD Insurance. Nothing goes in and out apart from that activity. Very well.

I refer to farm accidents and the tragedy of farm fatalities. The number of fatalities was 17 last year, down from 24 in 2017. That is a very large number of people dying on farms, which is an awful tragedy. There are many more accidents that do not involve fatalities but do involve serious injuries. What is the overall picture? What is the trend concerning farm safety and the number of accidents on Irish farms? Is the trend going in the right direction? With all the work that the Health and Safety Authority, insurers like FBD Insurance and farm organisations are doing to raise the profile of farm safety, is progress being made? Those figures are still worrying.

Mr. John Cahalan

One death is too many. We look very closely at this. A farmer is a busy person and works with heavy machinery. We invest a lot of money in promoting farm safety across all our books of business through our local branch network. We can never do enough, but we will continue to invest in it. We go to marts and onto farms to talk about farm safety. We are hugely supportive of any initiative that will help our customer base and reduce fatalities. For us, one fatality is too many.

Is the trend improving as reflected in claims from the farm sector? Has there been a reduction in claims? What is the picture?

Mr. Jackie McMahon

The frequency is broadly in line. The level of cost is beginning to moderate. It is still slightly high but it is moderating. I wish to echo the Mr. Cahalan's points about the accidents themselves. Some of the cases that cross my desk are absolutely horrific. So much pain, damage and suffering is inflicted on people. We are working hard with the Irish Farmers Association, IFA, and with our people on the ground to give the best advice possible. We also sponsor and support several farm safety initiatives through FBD Trust.

In the financial report that came out in February, FBD Insurance said that more moderate inflation is evident across the claims environment though the cost of claims remains high. It went on to criticise the lack of urgency in the reforms. Is it the case that there is still inflation in claims but the rate of growth is easing? They are not falling. Can Mr. McMahon elaborate on what more moderate inflation across the claims environment means?

Mr. Jackie McMahon

I can give some high-level figures on the average cost of injury settlement. In 2016 it went up by 11% from 2015; in 2017 it increased by 8% from 2016; and in 2018 it went up by 2%.

It is moderating and levelling out. Inflation is still increasing, not decreasing.

I am not sure if Mr. McMahon heard any of the testimony during the previous session. Linda Murray, who owns a play centre in Navan, spoke passionately about her difficulties. It is 25 days away from potential closure. She cannot get a quote for renewal. It is symptomatic of wider problems, especially in businesses where there is public footfall. Where does Mr. McMahon apportion ultimate responsibility? He says that claims are too high and that judges are too generous. He has been critical of the role of some in the legal profession. Where does responsibility lie? Does all of this come back to claims and rewards, and the lack of follow-through for fraudulent claims? There seem to be no prosecutions or convictions, so there is no deterrent or consequence if a person takes a bogus claim and it does not work out, since he or she can try again with somebody else. Where does responsibility lie with regard to the insurance industry and payouts, as FBD Insurance sees it?

Mr. Jackie McMahon

It is a difficult area and my hopes sit with this committee and the Legislature. I appreciate that the legal system as we currently have it is insulated by layers of legislation. I also appreciate that it is protected to some extent with the separation of powers. This is not new. We have tried to address legal costs outside of insurance and injury. We have a system that has created a culture that is highly litigious and which is very beneficial for claimants and the people who are making those claims. That needs to be addressed. The challenge is how to address it given those layers of legislation and the separation of powers.

The bottom line is that the reward for that litigation and claim is too great. There may not be a great foundation to it but the reward is potentially significant. The downside of taking a claim, especially taking a claim without foundation, is non-existent in the current climate.

Mr. Jackie McMahon

It is creating high costs and, ultimately, society is losing. People are entitled to be compensated for their loss, and we do that with property and material damage. It is when we get into soft tissue and the smaller end of injuries that the level of payouts that we are giving and what we say is acceptable compensation for that level of pain is too high.

Before Senator Lawlor speaks, there is a division in the Dáil and Deputies are obliged to go. I ask Senator Horkan to chair the remaining part of the meeting. I thank the witnesses. Since the judicial system and lawyers have been mentioned umpteen times, they are welcome to come to the committee to make a case for themselves if they wish.

Senator Gerry Horkan took the Chair.

I am grateful to the Chair for the opportunity to contribute. I am not a member of this committee but I have a fierce interest in it. I also have a Bill going through the Seanad that passed Second Stage. There are questions about it but its purpose is to cap awards in the courts. I have done a fair bit of research. I think I might have been speaking with Mr. Cahalan regarding this. The problem is fourfold. We all pay insurance levies and up to 7% of a premium is a levy. That is related to Quinn Insurance and all those insurance companies that failed. Profits are also part of the problem. People have spoken about excessive profits. I am not anti-profit but there is a problem when they are excessive. Fraudulent and over-exaggerated claims are a problem. Insurance companies are not doing enough to go after fraudulent claims. We as legislators have to do something with regard to people who bring fraudulent claims that are thrown out in court. We should pursue them through the courts for making fraudulent claims.

The issue that is key for me is the awards. I agree that the rewards are excessive. They are four and a half times more than in the UK and way out of sync with Europe. The awards are high across the board, especially for soft tissue injuries. People have mentioned changing the book of quantum, which has been highlighted here. It is not a matter of changing the book of quantum but changing what the judge's award. I will not go on too much about it but I will ask Mr. McMahon two questions. If his company is defending a claim and judge A or judge B is hearing it, and it knows that judge A will make an excessive award while judge B will give a reasonable award, does it settle before it goes into the courts if it knows that judge A will make an excessive award? If judge B is taking the case, who will make a reasonable award, does the company let it go through the courts? Is that a fair assessment?

Mr. Jackie McMahon

When we have a strong case, we will fight that case regardless of which judge is involved. There is variability between different awards and relating to decisions on liability. Ultimately, it is down to a set of facts on both sides and cases on both sides, and how somebody interprets both cases. There will always be a level of variability.

If two claims are identical, with a similar incident happening and the same injuries associated with it, do certain judges make different awards from awards made by other judges?

Mr. Jackie McMahon

There is variability in what is awarded.

So is there no consistency among the Judiciary for awards for similar types of claims?

Mr. Jackie McMahon

I would not say that there is no consistency. An interesting point is that there is significant variability, especially in the Circuit Court, with regard to the level of costs awarded by the court registrars. It is not understood why.

Irrespective of what we do with the book of quantum, judges do not have to adhere to it. The issue is more about the awards judges are making. Did Mr. McMahon ever feel that we should name the judges who are making excessive awards above the norm for similar injuries? Should they be called out? If judges make excessive awards, it impacts on all of us who pay for insurance premiums.

Mr. Jackie McMahon

It is not for me to comment on but we have more recently had some good judges in the Court of Appeal. That is one way of calling it out but it is a lengthy and expensive process for us to appeal something. We have had some good judgments from the Court of Appeal relating to people taking reasonable care of themselves.

Most of the claims are at the lower end of the book of quantum. More than 90% of claims going through PIAB are for less than €50,000 and they cause all the problems.

There is a lack of consistency in the Judiciary in awards for similar claims. Some judges will award more and some will award less.

As members will be aware, they should have a certain amount of regard for the Judiciary.

I have total regard for judges.

I believe the Senator has made the points well, but a certain amount of respect must be held for another arm of the State.

I have no problem and I have great respect for them. However, we need consistency. As a former referee in rugby, I understand the problem with adjudicating in games. I would prefer to see consistency. I reiterate that if awards are reduced, premiums will be reduced accordingly.

I have considerable experience in the insurance industry. It is very easy to kick the industry. Given what has happened with PMPA and Quinn Insurance, Ireland has not had a great track record with Irish-owned insurance companies. We need to be mindful of that. If FBD were not in the insurance market in Ireland, we would be totally at the mercy of the German, British and French insurance companies. People might like to bash them, but FBD is an Irish-owned company listed on the Irish Stock Exchange which provides many jobs here. Many of its competitors are totally Internet based and provide few, if any, jobs in Ireland. It is good to have an Irish-owned company that has a face. FBD has an extensive operation in my town, Mullingar, including an extensive call centre. As members will be aware, many call centres are not based in Ireland, the staff are not Irish and it can be frustrating to try to get one's point across. That has not been overlooked, certainly in the business community.

Is FBD very vulnerable, as the only real Irish entity in the insurance business? These larger European conglomerates can squeeze the markets. There was common abuse with the undercutting of prices to try to squeeze competitors out of the market. Is FBD still vulnerable to that? Is much of FBD's book being underwritten by some of these larger insurers? FBD used to do most of its own underwriting but I do not know if that has changed. Could it be bullied at the will of some of the bigger British, German or French operators? I am sure the company faces financial constraints on how it positions its cashflow, etc. How does it stand in an international market in a free open-trading society like Ireland as part of the EU? How does that affect FBD as an Irish operator?

Mr. John Cahalan

I thank the Senator for his remarks. We are very proud of being Irish and we have been in business for 50 years. As we do not have a wealthy parent like our competitors, it is very important for us to get our pricing right. We cannot go to London, Germany or France to ask for a bailout. Unfortunately, over the past ten or 15 years new entrants have come into the insurance market and driven prices down. The Senator knows of the companies whose parent organisations had to put large amounts of money back into their reserves. Most recently, we had the experience of Setanta and Kudos.

As an Irish indigenous insurer, it is important for us to charge a fair price for our product. We do not have the comfort of a wealthy parent. Are we being bullied? We feel that we are very agile. We need to be more disruptive because we do not have our competitors' budgets. As we are led by a very capable CEO, we feel that we are very much up for the fight. We have a unique distribution model with a branch network that our competitors do not have. We feel our closeness to our customer base gives us a unique advantage which we need to leverage as best we can. As Mr. McMahon mentioned, the sector is highly competitive. Maintaining our pricing discipline is critical because we do not have a wealthy parent to come in and bail us out.

Regarding FBD's network, it would be remiss of me not to mention Barbara and the team in Mullingar. I encourage FBD to keep up the good work. It is easy to criticise insurers, but if we did not have the Irish-owned FBD, we would be in a very precarious position.

The Solvency II directive requires higher reserves and so on, which may be reflected in higher premiums. Has its impact settled down at this stage?

Mr. Jackie McMahon

The Solvency II directive prescribes how much we can invest and how much capital we must hold. There is no doubt it has some impact and we are absorbing that impact, as are all of our competitors.

Does that include higher premiums? Were they in the past a requirement to get to the reserves FBD needed to hold? Is that greater now than might have been before?

Mr. Jackie McMahon

It is also related to what we can do with the capital we are holding and what kinds of assets we can invest in. Essentially our ability to generate returns from those assets is lower because we must invest in safer assets. It is more driven by the investment climate at the moment, but certainly where insurance companies would have made money from investing-----

Mr. Jackie McMahon

In a higher interest environment there are higher returns in the end. Obviously we need to make our money from pure underwriting.

The balance has, therefore, shifted from equities towards safer-----

Mr. Jackie McMahon


The bond yields are low, so FBD is getting less return.

Mr. Jackie McMahon

As it is lower, the overall return to our shareholders-----

The return to FBD shareholders needs to come through higher premiums and higher profitability in other sectors because it is not getting it from there. The witnesses can disagree with me if they want, but when interest rates were better from an investment point of view or when bonds were paying out more, that effectively subsidised the shareholder return to an extent or subsidised the general insurance business to the extent that companies could afford to make less, lose more or whatever.

Mr. John Cahalan

That is a fair summary.

Is FBD in a position to offer insurance to businesses like play centres, activity centres and so on or is that something it does not do? I took the point the witnesses made earlier that it is generally the farm business and by extension it might be a small pub or a takeaway business attached to the farm or the farmer.

Mr. John Cahalan

That is not within our current appetite.

I accept FBD has a remit, a mission statement and a core business and I am not telling the witnesses what to do. However, it seems from the figures we got this morning that €5 million has been collected in premiums in the past five years, about €200,000 had been paid out and about €800,000 has been placed in reserve against potential future claims. I am sure they are reasonably prudent returns. Our earlier witnesses seem to think that €4 million out of the €5 million is leaving the State because no company in the State, including FBD, is willing to take that risk. While I am not telling FBD what to do, I hope that somebody will be able to facilitate these businesses in the provision of family activities.

I hope that somebody will be able to facilitate these businesses in the provision of family activities. They may be obliged to close their doors because, at present, no one is facilitating them. Mr. McMahon made the point that FBD has 34 offices across the country and is involved with marts, farms and everything else. I am not telling him what to do. That is not the committee's role. However, it is something FBD should consider. I think I am right in saying that there is only one insurer dealing with the public house and restaurant industries at this stage. I am not saying that this is an area in which FBD wants to get involved, but I would prefer Ireland to be making the money.

Mr. Jackie McMahon

We are involved with pubs.

We have had a good session of approximately an hour and a half. Are there are two or three points Mr. McMahon would like to make to sum up before we conclude this session? Getting the level of award down is crucial, obviously.

Mr. Jackie McMahon

I thank the Vice Chairman. Ultimately, there is a great deal that can be done to improve and lower the cost of insurance, which is the overall aim. However, the fundamental and key issue is the high level of payout and the high cost of getting to that payout. The more we divert ourselves on other ancillary areas around that, the more we stay away from the core issue that is affecting us. The committee will appreciate that the challenge is in trying to address that. That is essentially what needs to be addressed.

It is reasonable to state that there are vested interests at play here. If someone is making 40% of payouts, which was €190 million last year including legal costs, it means FBD paid out between €40 million and €60 million in legal costs last year. Is that a fair assessment?

Mr. Jackie McMahon


Somebody is doing okay out of it.

Mr. Jackie McMahon

Therein lies the challenge.

I thank Mr. McMahon and Mr. Cahalan from FBD Insurance for their contributions. We will suspend proceedings until 3 p.m., when we will begin our engagement with the chief executive of the Bank of Ireland and her team.

Mr. Jackie McMahon

I thank the committee for its time.

Sitting suspended at 1.33 p.m. and resumed at 3 p.m.