Insurance Sector: Discussion

We are joined this morning for our consideration of the insurance industry by representatives from Allianz, Axa and FBD. They are Mr. Seán McGrath and Ms Marie Corry from Allianz; Mr. Philip Bradley from Axa; and Ms Fiona Muldoon, Ms Kate Tobin and Mr. Jackie McMahon from FBD. I welcome the witnesses and we thank them for taking up the invitation to come before us. We are doing considerable work on insurance with the Minister and other committee involved.

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.

I call Mr. McGrath.

Mr. Seán McGrath

I thank the committee for the opportunity to discuss important matters relating to the insurance market in Ireland. On behalf of Allianz, I very much welcome the time and effort that the committee is putting into this, as it is an important topic for businesses, consumers and the economy as a whole. I confirm for the committee and for businesses and consumers that if the cost of claims in Ireland falls, insurance premiums will fall. Today’s meeting is a further and important step in the continuing work to bring about a mechanism to appropriately and fairly reduce the cost of claims and, therefore, the cost of insurance.

Before looking at the claims issue, it would be appropriate to give a little background to Allianz and our long-term and deep commitment to Ireland and our customers on a 32-county basis. I am the chief executive of Allianz in Ireland, which has had a continuous presence in general insurance in Ireland for 117 years. We have served businesses and consumers since 1902. Currently, we employ 660 people in the provision of general insurance. We provide a wide variety of products serving small businesses, large companies, social, voluntary and community organisations, as well as personal consumers. We are proud to have made a contribution to Irish business and community life over those 117 years. Our contribution goes beyond serving the insurance needs of our customers and we do this through our long-standing programme of sponsorship and support for arts and community-related projects throughout the country. Allianz Ireland is a wholly-owned subsidiary of the Allianz group, which is one of the largest global multiline insurers. It has a proven market leading position and a very solid capital base. It operates high standards of governance and risk management practices and it requires all its subsidiaries to adhere to these principles. In Ireland, the Allianz group employs a total of close to 1,700 people through its many different businesses.

Regarding today's agenda, we share the committee's concern and the concerns of many members of the public about the cost and availability of insurance in the Irish market and, in particular, the high cost of claims here compared to other jurisdictions. Claims costs are a core driver of the availability of insurance cover and premiums charged. Many business owners and individuals have understandably been very vocal on the topic, so how do we fix the problem? There are a number of factors to consider, including the high level of injury awards made for claims in Ireland, the legal costs incurred through those claims and the level of fraudulent and exaggerated claims, which are a consequence of the high level of awards.

The biggest issue to be addressed is getting the high level of injury awards under control. In case there is any doubt, we now have a clear and independently assessed picture of the scale of the problem based on the Personal Injuries Commission, PIC, report published last year. The findings of that report were clear and demonstrated that the awards for general damages, excluding special damages and legal costs, in the Republic of Ireland are 4.4 times those in the UK. Addressing this issue is a complex challenge and it involves addressing the claims environment in Ireland. Meaningful reform of the claims environment will ensure a stable and sustainable cost of insurance for businesses and consumers. We welcome the progress made to date and, in particular, the recommendations of the cost of insurance working group. These recommendations have the ability to recalibrate the level of awards and associated cost of claims in the market. This will have a material impact on premiums paid by businesses and consumers.

To address the level of awards, we need to examine the role of the book of quantum currently used by the Personal Injuries Assessment Board, PIAB, which is directly influenced by the awards set in the courts. We welcome the provision in the Judicial Council Bill which will give the judicial council responsibility for setting new guidelines for personal injury compensation by the courts and reviewing them regularly. In this scenario, both the courts and PIAB could use one single and consistent set of guidelines for the level of awards. We believe such a change will bring the Republic of Ireland more in line with other jurisdictions, including Northern Ireland where the judiciary establishes the guidelines for awards in the courts, known as the green book, leading to awards there which are lower than they are here for comparable injuries. The Civil Liability (Capping of General Damages) Bill 2019 from Senator Lawlor on the capping of general damages is a significant proposal which we would like to see implemented.

While these changes will help to bring consistency in the awards levels, lower premiums will only be possible if the level of awards, especially soft tissue awards, are significantly reduced. A reduction in the level of awards, coupled with the establishment of an efficient process for the settlement of claims, is vital if we are to reduce premiums.

I thank the committee for its work in this area. I reassure the committee that Allianz is committed to doing whatever it can to assist in the reforms that we believe are necessary in the Irish insurance market. It is only with real and substantial reforms, especially addressing the single biggest issue, the disproportionately high level of awards, that we will be able to move away from the abnormally high cost of claims in Ireland and towards a lower cost of insurance for businesses and consumers. I will be happy to take questions.

Mr. Philip Bradley

I am here today to represent AXA Insurance which is the key operating business in Ireland of one of the world's largest insurance companies, the French headquartered AXA Group. AXA has been present in Ireland since 1999 when we acquired the Guardian Royal Exchange company which had itself previously acquired the business of PMPA, so we represent a business which has been providing insurance in this market since 1721, almost 300 years ago. The wider AXA Group employs more than 2,000 people in Ireland in various businesses. Those businesses include AXA Partners, AXA MPS, AXA XL, Architas, AXA Global Health and AXA Life Europe. AXA has a long, growing and deep commitment to this market. In AXA Insurance, we employ 1,200 staff across both the Republic and Northern Ireland. We operate in all channels of the market here and we offer products directly to consumers and via intermediaries and partners. Through these products, AXA provides critical support to the social and economic life of the country. AXA has one of the widest underwriting acceptance criteria in the marketplace in motor insurance for both personal and commercial purposes and our products enable companies and individuals to go about their business with confidence.

I understand the committee is particularly interested in the difficulties being experienced with the cost and availability of motor, home, business and public liability insurance. There has been a very significant focus in recent months on the cost and availability of insurance and some strong criticism of recent trends in the market amid suggestions of excessive profitability by insurance companies such as us. The reality is that the Irish market is relatively small in international terms. It is equivalent to less than 10% of the UK market and it is very competitive, with more than 30 different companies competing here. It has also proven to be a difficult market in which to develop a sustainable and profitable business with high and volatile claims costs. We are all aware of the high-profile companies which launched in this market only to withdraw or fail as times got tougher.

The Irish market was not profitable for motor and liability insurance between 2013 and 2017. The Irish insurance industry paid out €1.1 billion more in this period than it collected in premiums from customers for motor and liability insurance. The overall insurance market results improved in 2017 when, for every €100 we collected from customers we paid out €96 in claims and expenses, leaving the industry with an underwriting profit of €4 for each €100 collected. For our part, we believe we have developed a strong business model that can sustain us through various economic cycles that we expect to encounter. In the motor and home insurance markets, we have grown to a relatively strong position compared with the market generally. We continue to seek to compete and grow in new market areas, and we are currently competing very strongly to grow our position in the agriculture and small business sectors where traditionally we have had a small presence.

We are currently profitable, but by its nature insurance is a long-term business and we measure our performance over cycles of years rather than months. Over these horizons, we have had good years and poor years, and on average we have made profits adequate to justify the significant investment which our parent company has made in this market. This is an important point as there have been examples recently of companies offering insurance products in this market which were not regulated here and which went out of business, resulting in difficulties to consumers and to other market participants.

On the steps that might be taken that could facilitate reductions in premiums, I will highlight three areas which are especially relevant to our core market of motor insurance. First, there could be reform of how the courts decide damages in cases of whiplash and soft tissue damage. Awards for minor whiplash and soft tissue injuries in this market are 4.4 times that of our nearest neighbour and most comparable legal system. AXA supports the efforts of the Government to set up a judicial council with the task of redrawing guidelines for awards in injury cases. It is hoped that whatever guidelines emerge would be regarded by the public as fair and reasonable for the various categories of injuries. The guidelines should be sufficiently well-defined that everybody should know with reasonable certainty the value of any particular claim. Should this happen, then the problem of judicial inconsistency should cease, leading to less recourse to the court and reduced legal fees, meaning lower claims costs.

Second, there could be reform of the workings and legal basis of the Personal Injuries Assessment Board. PIAB was a success when introduced and directly led to a fall in insurance premiums of approximately 40%, but in the years since the legal profession has found ways to work around PIAB and the system encourages lawyers to do just that. Its effectiveness has been significantly undermined as a result.

Third, we should do more to contain fraud. I am greatly encouraged by the increasing focus on this issue in the wider community and in the media. For our part, we have invested very substantial resources to tackle fraud and to discourage those who might consider it. Our special investigations unit was established in 2002 and was the first dedicated unit in the insurance industry set up to tackle this issue. We note with some concern that even in cases where a judge may dismiss a case due to evidence of fraud or exaggeration, there seem to be no consequences for the plaintiff or their legal counsel. None of these issues will transform the cost or availability of insurance but each has an important role to play. I look forward to any questions.

Ms Fiona Muldoon

I thank the committee for the opportunity to allow FBD to give a view on the cost and availability of insurance in Ireland. FBD is the only Irish insurer. It is also the only public insurance company operating in the Irish market. We do not conduct any business outside the Republic. The original share capital to start this company was in £50 stakes, gathered throughout the country from thousands of farmers, who, along with their families, to this day remain among FBD's most loyal customers. We have 34 branches and employ 900 people in Irish towns throughout the country. We have direct relationships with our customers, writing 95% of our business directly and not through brokers.

Farm, food and agriculture remains our most important customer group to this day. Some 85% of all our premiums are with small and medium businesses - we are writing insurance for the shops, the pubs, the restaurants, the tradesmen and farms that make up the backbone of the economy. Our customers’ businesses are predominantly those that are family-owned and managed. We survive and prosper on Ireland’s economic growth and success and on our customers’ growth and success. It is the strength of our relationships with these customers and the quality of the service we provide them that has underpinned our business for 50 years. Like all good businesses, we know that our success is linked to our customers’ success.

We are proud of our contribution to and track record in Irish business life. We believe in the social utility of our product. Opening and operating a business in Ireland today is not for the faint-hearted. There is plenty of risk in it, as any business person will say. However, no small business could even start to hang out an "open for business" sign, no individual could borrow to buy a house, unless the risk of a fire or the risk of being sued if someone trips is taken away from them. Insurance is a cornerstone of entrepreneurship. FBD has served many Irish businesses and continues to do so. We want to grow our business. FBD competes through our risk selection and our pricing, and through the men and women who meet the customers, work up health-and-safety practices and underwrite those businesses and farms. We compete again and again with the huge multinationals that operate here and also with naive foreign capacity that is not regulated here and that comes in with unrealistically low prices for a few years in the belief that Ireland will behave in the same way as the greater Manchester area, and then, after a few years, when the losses are unsustainable, they quit, leaving a destruction in their wake and the rest of the market with no background or expertise in the classes of business they wrote. This is what happened with play centres.

FBD is writing difficult risks and writing some of these at a loss. Examples of the risks include marts, piggeries, poultry farms, pubs, shops, hotels and agricultural contractors. We are committed to our sectors and we are providing stability. FBD very much wants to write more business. For example, we wrote over 200 new shop accounts in 2018. We want to grow geographically, particularly in the major urban centres, and we recently opened new offices in Limerick and Cork city and two in Dublin.

There are many factors which influence the cost of insurance for the Irish customer but chief among these is the high cost of bodily injury claims. Injury awards are also significantly higher in Ireland than elsewhere. At the simplest level, and if we take the example of the play centres again, the average public liability award at the Personal Injuries Assessment Board, PIAB, is €27,000. If the premium for a business is €2,500, then, if there is even one claim in ten years, the ten-year premium will not exceed one single average PIAB award, never mind a claim that goes to court. How many businesses in today’s environment, where the courts apply a duty of care so high and where modern standards for health and safety place all onus on the operator - and, sadly, in the context of the absence of individual responsibility once the person walks onto the business premises, not to mention those who may be trying it on - will withstand that test of one claim in ten years, let alone one where minors are involved?

It is our belief that structural reforms are necessary in order to moderate the cost of such claims in the future. The current one-way bet in the courts system must change. It provides an incentive for those who want to have a go and each and every case, no matter how spurious, must be defended. That costs money. Absent such structural reform and in this prevailing interest rate environment, the current high cost of insurance is solely a function of the cost of its current inputs, which means predominantly claims costs, particularly soft tissue claims. As a society, we have a choice: we can encourage entrepreneurship and business through lowering the cost of insurance or we can continue to be the most generous payer in Europe. Our current injury compensation system is directly at odds with business. We cannot have it all. Cheap insurance is an economic impossibility in this environment. Society must choose.

FBD is charging more than it was five years ago – that is incontrovertible. However, I would like to tackle the false idea that we are making outsize profits at the expense of our customers. It is difficult to sell price increases and no business likes to lose customers. However, if we take it as a given that, unlike other businesses, on the day we make a sale, we do not know the cost of goods sold because we do not know how many claims we will have, we can see that an insurance business can be inherently risky and difficult to get right. FBD has come out of a period of five years in which we have written cumulatively €1.8 billion in insurance premia. Our underwriting profit for that period was €22 million. This represents a tiny net margin of 1.2%.

FBD is an open book in transparency terms. As a result of the fact that we are a public company, all of this information is published on our website. These are not outsize profits. The company and its employees have completed a major turnaround to make a profit of €50 million in the last two years, and we are proud of that. For these two years, this represents a normal double-digit return on equity. What we have accomplished has been difficult. All our customers are paying more, we have lost some customers, we have lost 150 jobs, we shut down some businesses, we sold our hotels, we raised capital, we stopped our dividend, we changed our board structure and changed management and we invested in technology and skills. We are now healthy and stable and paying a dividend again. FBD is a business. It has shareholders who put their money at risk and they expect us to make a return. Like all businesses, we do not apologise for making a profit.

FBD is ambitious for growth and success. We are targeting specific markets for growth, including farms, homes, shops, pubs, restaurants and motor. However, if we are to survive as the last remaining Irish company competing with gigantic international names, like some of those the committee has just heard from, we must observe the rules of business, reward those who put their capital at risk and provide a service that differentiates us from the competition. FBD does this by being close to its customers, understanding their business and operating alongside them in our communities. We are open for business. We want more customers but we do not and will not sell below cost.

We believe the economy and the customer are best served by a strong, independent local operator focused on long-term relationships with its customers. In other words, a company just like ours. This means that we must continue to survive and thrive in this crowded market, where lawyers take home 40% of all court awards made, where international names disclose little and operate to different capital standards and where foreign-regulated competitors come and go at will, with little thought for the market disruption they leave in their wake.

FBD is charging an economic price for an excellent product and service. We are contributing to the economy. After much work, we are finally making a fair profit. FBD shares the frustrations of our customers. I have been in this job for more than four years, calling for reform. To encourage business and entrepreneurship, to lower insurance costs, there is no quick win. Tackle the legal system, the level of awards, the speed of access to court and the amount it costs to access it. Tackle the impossible standards that small businesses are held to in a personal injury court case, and the total responsibility they must take for anyone crossing their threshold. Look at the enormous sums of money being made by the legal profession on bodily injury awards. Look at the vested interests. This is not an easy problem to solve and only hard yards on complex issues will solve it.

I thank Ms Muldoon for reading here her statement into the record. If I may, I will ask the clerk to arrange to receive a copy of it. I compliment Ms Muldoon on her contribution. This is a very worthwhile engagement. It is a two-way street. While the members will have questions for our guests, there is an opportunity for them to set out the issues that face them in their business in order that the public will have a clearer picture in respect of insurance costs and what can be done to reduce them. I call Deputy Michael McGrath.

I welcome our guests. I thank them for coming before us and for engaging on what is a really important issue for homeowners, motorists and so many business owners. I will start with the key issue all of our guests have highlighted, namely, the cost of claims and award levels.

Mr. McGrath and Mr. Bradley spoke about the possibility of premium reductions in the event of the cost of claims falling. Mr. McGrath might tell us more about his pricing model. Essentially, he is in the business of pricing risk. If we see, say, a 10% or 20% reduction in award levels over the next number of years, how will that feed through into premium reductions for his policyholders? What is that relationship?

Mr. Seán McGrath

As was pointed out, when we price insurance, and we are pricing insurance for the next 12 months, we have to set out our premium on the basis of what we expect to happen in terms of the number of claims over that 12-month period. We then have to estimate and project what those claims will cost to settle up to another eight-year period. In that time, it is subject to many influences and variations, whether due to inflation, changes in the courts, changes in regulations and so on. The vast bulk of what drives the big premiums is the cost of claims. For each €100 of premium, overall, 94% is paid out. That is the target we have and we expect, in total, that 67% will be claims costs. Any reduction in claim awards will affect that 67% part of it and that will be passed on to our customers.

Will Mr. McGrath quantify that for us? If we see a 20% reduction in award levels over a period of time, what will that result in for the policyholder?

Mr. Seán McGrath

That will vary by the different types of business. Depending on whether it is a commercial account, a motor account or a pure injury liability account, the impact is different but the full effect of it would be passed on in terms of our pricing.

In effect, ultimately, when all of it washes through the system, is it euro for euro?

Mr. Seán McGrath

We have to be careful in terms of our pronouncements on this because the Competition and Consumer Protection Commission has indicated that we have to be very careful about making pronouncements in public on pricing direction. Going beyond that, saying the full effect and benefit will be passed on to consumers is as far as I can go. I cannot give the Deputy a number to say exactly what-----

Mr. McGrath is saying it will be the full benefit.

Mr. Seán McGrath

The full benefit.

I take that to mean that a certain percentage reduction in award levels over time will result in the same percentage reduction in-----

Mr. Seán McGrath

The best way of putting it is to say that from Allianz Insurance's point of view, we are making profits as well. We are making the level of profit we believe is sustainable for an insurance market.

What are Mr. McGrath's figures? Will he put the figures for, say, 2018 on the record?

Mr. Seán McGrath

For 2018, in the Republic of Ireland we wrote gross written premiums of €499 million and we made profit before tax of €37 million.

Will Mr. Bradley put his figures on the record also and give us his response to what will be the impact for policyholders of an overall reduction in award levels?

Mr. Philip Bradley

First, on the profit, the profit after tax for last year was €89 million based on our turnover of €770 million. As I mentioned in my opening statement, we need to look at profitability over a period of years. If we were to look at profitability over a period of five years, on average, we make a profit of approximately €38 million. For every €100 we have collected from customers, we have paid out €98 in claims and expenses.

Is that €38 million per annum?

Mr. Philip Bradley

Per annum, yes. Our target as a group is that for every €100 we collect, claims and expenses comes to approximately €95 so there is €5 left for profit and to reward our shareholders. If the cost of claims comes down, premium costs will come down also. As I mentioned in my opening statement, when the Personal Injuries Assessment Board came in, prices reduced by more than 40%. If claims costs reduce, prices will come down.

By the same amount.

Mr. Philip Bradley

There are many constituent parts of premiums. For instance, because vehicles are getting more expensive, the current cost of damage claims is increasing to between 8% and 10% per annum. In terms of the cost of very serious injury claims where there is a lot of medical inflation and cost of care, we have 60 claims of more than €500,000, with more than €100 million of estimates. The cost of those claims are increasing. If the cost of any new claims comes down, then premiums costs will come down accordingly.

Will Ms Muldoon indicate if we are on the right track overall in terms of the cost of insurance working group and the reforms that are being introduced? Will they work? She gave a hard-hitting and frank opening statement, which I welcome, but will she give us her perspective of the changes that have been brought in so far, the changes that are in the pipeline, the pace of changes, but overall, if they are in the right direction and if they will they work?

Ms Fiona Muldoon

From FBD Insurance's perspective, some of what has been brought in so far increases transparency. Insurance is complicated for a consumer or a business to understand. If the Judicial Council Bill is passed, it will be welcome but we have to see action from that council. The setting up of the council in and of itself will not lower the injury awards. We will have to see the council operate and implement standards, and the Bill is wide-ranging. I will ask my colleague, Mr. McMahon, to make some comments on claims. While it is difficult, as Mr. Bradley said, to extrapolate from a drop in the awards to a drop in the prices, and we are being investigated, as the CEO of Allianz Insurance has said, and we have to be careful around price signalling, within the courts system, that is almost unaltered in terms of behaviour. From our perspective, none of the reforms that have been implemented so far has had much impact in the courts system.

Ms Fiona Muldoon

We are seeing some moderation in awards at the upper end by the Judiciary itself. There was a notable Court of Appeal case where a lower court decision was overturned in terms of the quantum of the award, but it is patchy. I ask Mr. McMahon to comment further on that.

Mr. Jackie McMahon

We are aware that the cost of insurance is too high. We know there are too many claims and that those claims are costing too much. One part of this equation is the discussion around too many people taking claims, the awards being too high and then the cost of getting to a decision being too high. Of those three elements, if we focus on the award being too high, the compensation element, we have discussed the need for the judicial council, the need for it to come up with a book of quantum, the need for that book to value claims at approximately one fifth of what they are now, and the need for the courts to apply that consistently.

The other side of the equation, which probably is the subject of less debate, is the cost of getting to a decision. That is quite onerous and expensive. To colour it, so to speak, I will give some quick examples around the cost versus the settlement amount. What I am talking about here is the need for reform of the legal system. These are recent enough cases. The settlement amount in a work related stress claim was €60,000. The plaintiff costs were €73,000. Compensation of €15,500 was awarded for a slip and fall in a car park. The plaintiff costs were €16,200. The settlement amount for a finger injured unloading a product from a lorry was €12,500. The agreed plaintiff costs were €20,000. The settlement cost for an equine related employment accident was €81,000. The plaintiff legal costs were €108,000.

When Ms Muldoon talks about the hard miles, there is a good deal to do, and it is difficult, to reform the legal system. It is slow, antiquated, costly and, frankly, very protected, and there is very little motivation to change it. What we are doing, with good intent, is bringing in more legislation, which increases complexity and obligations on citizens and businesses.

It is this complexity and these obligations that create a lot of room for argument. It is an adversarial system that loves argument and profits from that argument.

I greatly welcome the review of the administration of civil justice announced in March 2017. I look back at the concerns in this area that have been highlighted for more than 40 years and talk to issues such as the Restrictive Practices Commission in 1982, the Fair Trade Commission in 1990, the legal costs working group in 2005, the National Competitive Council in 2010, 2011 and 2012 and the troika requirements in 2010. There are a host of other reports before and after that. It is an absolute requirement to grab that nettle to bring down costs of insurance. I support the group carrying out the review of the administration of civil justice. I am an optimist but I my holding my breath and I am afraid I might get a little red in the face.

Will Mr. McMahon to repeat the figures he gave earlier?

Mr. Jackie McMahon

Apologies, I will copy of them to the committee as well. This settlement amount in the work related stress claim was €60,000 and the agreed plaintiff costs, not the defence costs or our costs of administering the case, were €73,400. Compensation awarded for a slip and fall in a car park was €13,500 and the plaintiff costs were €16,220. The settlement costs and compensation payment for a finger injury in unloading a product from a lorry were €12,500 and the plaintiff legal costs were €20,477. The settlement costs in an equine related employment accident were €81,313 and the plaintiff costs were €108,918.

When were these cases?

Mr. Jackie McMahon

These are all recent settlements. The date of accident might be anything up to six or seven years ago.

When were they settled?

Mr. Jackie McMahon

They were settled recently.

How long ago did the claims happen?

Mr. Jackie McMahon

The cases were settled in recent months but the incidents occurred between three and seven years ago.

Will each of the witnesses indicate from his or her own perspective how prevalent fraud is? For every 100 personal injuries insurance claims that land on the witnesses' desks, how many are typically exaggerated or downright fraudulent?

Mr. Seán McGrath

If I make one comment on the previous issues discussed, Allianz has a global view of many markets and what happens around the world. Every single market has potential issues and issues arise similar to the ones we struggle with here in Ireland. The one issue where we stand out compared with other markets is the level of awards. That is the single biggest issue that we need to reform in Ireland.

With regard to fraud, on the personal injuries side, up to 20% of cases have potential issues or signals that we would have to look at and investigate further. We investigate probably one in five cases and not all of these progress to being-----

When the company reaches a conclusion after its assessment, how many of each 100 cases, in Allianz's view, are fraudulent?

Mr. Seán McGrath

I do not have that number with me today.

Mr. McGrath is saying that up to 20% require investigation and follow through-----

Mr. Seán McGrath

They require further investigation.

This is because there are some red flags. Mr. McGrath cannot say how many, at the end of that process, are-----

Mr. Seán McGrath

I do not have that figure with me.

Can any our witnesses give the committee a sense of the prevalence of fraud?

Mr. Philip Bradley

It is very difficult to know because one only finds what one finds. We have a fraud team of 18 people, with 15 investigators around the country. Last year, our identified fraud savings were just over €19 million. This is about 4.5% of our premium. This is what we found but we do not know what we did not find.

These are savings of 4.5% of premium.

Mr. Philip Bradley

Yes.

How does that translate as a proportion of claims?

Mr. Philip Bradley

Approximately 20% of our claims have an indicator and about 10% of claims go to our specialist fraud teams for further investigations.

What is the position at the conclusion of that process?

Mr. Philip Bradley

The conclusion is a saving of €19 million, or approximately 4.5% of our total premium, which is identified as fraud.

What is the position with FBD Insurance?

Ms Fiona Muldoon

I will pass this question to Mr. McMahon as well. Exaggerated claims are at least as big an issue, if not a bigger issue, than fraudulent claims. We too are not aware of what we do not find. If we could lower the court awards, we would lower the incentive to take a fraudulent case. It is a one-way bet at the moment. If people have a go and lose, they will not pay costs in any event. There is a one-way incentive at the moment. Lowering bodily injury awards in the courts would help with tackling fraud as well. Perhaps Mr. McMahon will provide some of our statistics on that.

Mr. Jackie McMahon

I agree with those broad estimates. Fraud savings, which are made in cases that we have absolutely identified as being fraudulent, are slightly more than €20 million. We reckon fraud is running at about 20%, of which we catch approximately half.

Do 20% of claims involve fraud?

Mr. Jackie McMahon

Yes, they involve fraud. The Deputy asked an interesting question on fraud versus exaggeration and where the line can be drawn between fraud, for example, staging an accident, and a case where someone is exaggerating significantly. First and foremost, we are in the job to pay claims and look after people who are injured and suffer loss or damage. The amount of exaggeration and how our system is feeding that is much more significant than what I might call the pure fraud, although I do not like to use that term. To give an example, we hardly see a soft tissue injury in a very minor accident that does not have psychological trauma associated with it. MRI scans are being widely used to look for degenerative change and beef up the claims that are coming through to us. There is much more use of pain management consultants to find the pain and then treat it. This all feeds into a very long process that can be stretched out over three, four, five, six or seven years. Essentially, what is happening is that a case is being built and that case is resulting in very exaggerated claims. One other example of exaggeration that would not have been a feature previously is the cost of care. This care cost is absolutely necessary in cases where people are badly injured, and we pay large amounts in catastrophic and very sad, tragic cases. What we now have are claims that are coming in for cost of care for people with very minor soft tissue injuries. They need people to do their gardening and domestic chores. That is not classified as fraud but to the man on the street and certainly from my perspective, that exaggeration is driving up the cost of the claim and the payouts.

Mr. McMahon makes the point that 20% of claims are fraudulent or suspected fraudulent claims. How many claims does the insurance sector get per month?

Ms Fiona Muldoon

It is very hard for an individual company to answer on behalf of the whole sector.

How many claims-----

Ms Fiona Muldoon

Another issue in the area of fraud is that we are not allowed to share our data with any other company. While the GDPR rules protect citizens, in this case they work against us being able to say that this person did something while with a different company and has now have come to FBD Insurance.

How many claims does FBD Insurance get per month?

Mr. Jackie McMahon

We get about 65,000 claims a year.

Mr McMahon is claiming then that one fifth of those are fraudulent.

Mr. Jackie McMahon

I have given that percentage on value rather than on hard count of numbers but it is 20%.

There is a correlation between them.

Mr. Jackie McMahon

Yes, absolutely.

Approximately 15,000 claims are fraudulent. The experience of consumers is very different from that presented by the representatives present. We need to cut through some of the murkiness on this issue. I wish to go further into the detail. On the figure of 15,000------

Mr. Jackie McMahon

The figure of 15,000 might be slightly high because it includes claims involving damage to property, including windscreens, and other such claims in which there is less fraud.

Let us say the figure is 10,000, which is being generous to Mr. McMahon given that he stated the figure is 20% of claims. How many of those 10,000 claims per annum have been reported as fraudulent?

Ms Fiona Muldoon

The Deputy may have misunderstood. The number my colleague provided refers to the cases in which we suspected there might be fraud or a severe exaggeration or which warrant further investigation. It is important to come back to Mr. McMahon's point regarding outright fraud, the staging of an accident or pretending versus an exaggeration of one's injuries.

I acknowledge that, but people are being fleeced and gouged by the insurance sector which has experienced a big increase in profits. The insurance companies are pointing the finger at customers and state it is all about fraud and levels of claim. We have been given a startling headline figure that 20% of claims are fraudulent. That is the impression I got, as, I am sure, will members of the public. The witnesses may wish to revise that figure. How many fraudulent claims do they think FBD gets per year? The real question is how many of them have been reported by FBD.

Mr. Jackie McMahon

There are a couple of things to consider. First, we require proof beyond reasonable doubt, which is the criminal level of proof to convict for fraud.

Is there a system for reporting fraudulent claims?

Mr. Jackie McMahon

We have such a system, yes.

To whom are the claims reported?

Mr. Jackie McMahon

To the Garda.

Is it the case that a level of proof is not required by the insurance companies as it is up to the Garda to investigate suspected fraudulent claims?

Mr. Jackie McMahon

That is correct.

How many fraudulent claims has FBD reported to the Garda? It is definitely not 10,000, 15,000 or the 20% figure to which reference was made. I want to get to facts instead of spin from the industry. It does not add up. These questions will be asked of representatives of all insurance companies which are making these accusations. Some 19 cases were reported to the Garda by the industry between October 2018 and March 2019. That does not add up with FBD's claim that between 10,000 and 15,000 cases are fraudulent. Allianz and AXA will give us roughly the same figure of 20% of claims. If their claim is accurate, they do not give a damn about fraud because they are not reporting these cases. How many cases of fraudulent activity has FBD reported to the Garda? Is it less than five?

Mr. Jackie McMahon

I can give a few examples.

How many cases have been reported?

Mr. Jackie McMahon

I do not know off the top of my head.

Is it less than five?

Mr. Jackie McMahon

Less than five reported to the Garda-----

Between October 2018 and March 2019.

Ms Fiona Muldoon

We will get the figure for the Deputy. My colleague stated that he is not aware of it off the top of his head.

As 19 cases were reported by the entire industry, do the representatives accept that FBD could not have reported more than 19?

Ms Fiona Muldoon

Obviously.

I am not suggesting that there is no issue with fraudulent claims. However, I am suggesting that the industry is completely exaggerating the issue of fraudulent claims in order to justify the level of premiums being charged and the increases in premiums in certain sectors. If there is such an issue with fraudulent claims, why has FBD only reported a maximum of 19 suspected fraudulent claims when it gets 65,000 claims per annum?

Ms Fiona Muldoon

The Deputy is portraying the issue in a rather black and white fashion. We stated that the number given by my colleague relates to claims involving a component where we believed there was exaggeration, fraudulent activity or some element of overstatement of the actual injury suffered. The Garda would not thank us if we brought each of those cases to it before we investigated them further. We deploy significant resources to investigate and manage those claims into a position whereby the business owner or individual will have the claim paid and the matter managed and taken away from him or her. That is why people pay us the premium. Our numbers are more transparent than those of any of our competitors. We are a public company and all of our numbers are available for all to see. We made €22 million on €1.8 billion collected. The vast majority of what was paid went on claims and associated claims costs.

I am not referring to exaggerated claims because that is an issue of dispute between the insurance industry and the person making the claim on a matter of opinion which is eventually settled by the industry or in court. Rather, I am referring to fraudulent claims, which are a criminal issue.

Ms Fiona Muldoon

We stated that we do not have those numbers. We are happy to get them and provide them to the committee.

I appreciate that. The reality is that the witnesses confirmed that over a period of six months, FBD did not report more than 19 such cases.

Ms Fiona Muldoon

We secured the only conviction in this area in 2018. That related to an arson case in Cork.

I welcome that, but I wish to get into the issue of fraudulent claims rather than exaggerated ones. Fraudulent claims are a separate issue. It is a nice headline from the industry. Do the representatives believe that the insurance industry only reporting 19 fraudulent claims to the Garda in a period of six months is an accurate reflection of the level of suspected fraudulent claims within the industry? Are such claims not being reported? What is happening in that regard? The representatives are telling us it is about fraud. How many such cases have been reported by Allianz?

Mr. Seán McGrath

We have reported 48 claimants to the Garda since June 2018.

That is over a period of one year from June 2018. How many claims have been received by Allianz?

Mr. Seán McGrath

We receive 5,000 injury claims annually.

That indicates that 1% of claims are reported by Allianz.

Mr. Seán McGrath

Yes.

There is a suspected fraudulent-----

Mr. Seán McGrath

As stated, 20% of claims involve indicators of potential fraud which we need to investigate further.

Why are those cases not reported to the Garda if they potentially involve fraud?

Mr. Seán McGrath

The indicators must be investigated to ensure we do not waste Garda time.

The claims are investigated by Allianz.

Mr. Seán McGrath

We investigate the claims to a certain level before we pass them on.

In 19% of cases, Allianz concludes there is no fraud. As such, the real figure for cases involving suspected fraud is 1%.

Mr. Seán McGrath

That is not totally accurate. It depends on what happens along the way. Some of them do not turn into------

Surely, Allianz is not settling fraudulent claims.

Mr. Seán McGrath

We do not accept fraudulent claims, but some of them turn out not to be provable or lacking in evidence------

Allianz is not required to prove that there is fraud. It is not for the industry to do so but, rather, to report suspected crimes to the Garda. Surely the industry reports suspected crimes to the Garda in order that it can investigate them. Mr. McGrath stated that after carrying out internal investigations, only 1% of claims are reported to the Garda. Is that an accurate figure in respect of suspected fraud?

Mr. Seán McGrath

That is the figure for the past 12 months. Many other claims are still being investigated.

The figure for a one-year period gives us a good sense of the true position. How many fraudulent claims has AXA reported to the Garda?

Mr. Philip Bradley

We fed 50 files to the Garda.

Over what period?

Mr. Philip Bradley

Since 2013. There have been 13 prosecutions, with four individuals receiving a jail term.

Over a six-year period, AXA has reported 50 claims or approximately eight claims per annum. How many claims are being processed by AXA?

Mr. Philip Bradley

We process approximately 5,000 injury claims per year.

The figure for suspected fraudulent claims within AXA is a fraction of 1%.

Mr. Philip Bradley

That is the percentage of claims where we think there is sufficient proof to bring them to the Garda.

I mentioned to the Deputy earlier that we identify about 4% of our claims costs as fraudulent, so fraud is not the biggest issue by any means. We are not portraying it as the biggest issue. Only a small number of claims are referred to the Garda where we think there is a realistic possibility that they will be proved and prosecuted

If an insurer believes that a claim is fraudulent, should it not report it to the Garda regardless? AXA has carried out its own internal investigation, it believes that the claim is fraudulent and it is willing to come before this committee and provide figures on what it suggests is the number of potential fraudulent claims. When we drill down, however, out of 5,000 claims per annum, AXA is only reporting eight. Eight is therefore the accurate figure for the number of claims AXA suspects to be fraudulent.

Mr. Philip Bradley

A number of fraudulent claims are withdrawn and-----

It does not matter whether they are withdrawn. The crime has been committed. It may save AXA, but someone is committing a crime. AXA must report fraudulent claims to the Garda whether or not they are withdrawn.

Mr. Philip Bradley

I take that point.

This is the issue. We have listened to discussion on this issue for quite a while. As I said, I know there are issues with fraudulent and exaggerated claims but they are not occurring on the scale the witnesses are suggesting, and the last ten minutes have just proved that. We have heard figures such as 20%, 10% and so on. Ms Muldoon is shaking her head, but either FBD is failing as a company to report fraudulent claims or it is completely overestimating the number of fraudulent claims in statements to the public because it has reported fewer than 19 of them.

Ms Fiona Muldoon

The Deputy is conflating two distinct issues.

I am not. FBD's claims number 65,000 per annum. Is that correct?

Ms Fiona Muldoon

We are going around in circles. We have already said we will have to come back to the committee on that. We have not brought the numbers with us.

I refer to the reforms for which many of us in these Houses are arguing and which would see the issue of fraudulent claims dealt with by the Garda fraud squad or the establishment of a variation of it. When will the insurance industry give us some transparency and tell its consumers and us as politicians bringing in these types of reforms what this will mean for customers? In October 2002, we had before the committee representatives of the Irish Insurance Federation, for example, which was the predecessor of Insurance Ireland. They gave us a list of reforms which would match price reductions from the industry. They told us that the road safety strategy, for example, would result in a 10% reduction in claims costs, that a reduction in the number of uninsured drivers would result in a 5% reduction, that anti-fraud measures would result in a 1.75% reduction, and so on. The industry is completely unwilling to provide what it provided over 15 years ago. Why? If we are willing to bring in the reforms, why is the industry not willing to say, "If you do this, we will reduce premiums by X, Y and Z"? Surely insurers can calculate the risk component of all these factors. I ask Mr. McGrath that question.

Mr. Seán McGrath

As I alluded to earlier, the Competition and Consumer Protection Commission has indicated that insurers are not to make public pronouncements on the future direction of pricing. We would love to assist the committee and highlight the potential savings but we believe we are precluded from doing so. I again give the guarantee that should claims costs come down, Allianz will reduce its pricing. Again, we price to deliver a margin of 6% on underwriting. If claims costs were to come down, the additional margin would be passed on to consumers in the form of price reductions. We will not change our target margin so we will pass on any savings to consumers. I do not believe we can go any further in saying publicly how much or when.

Allianz argues that claims costs are not coming down. Its profits are increasing quite sizeably, but premiums will not come down.

Mr. Seán McGrath

Our profits are now at a level that we believe is sustainable. They are at the target level we require to make sure we will continue in business in the long term and to pay out all those claims, which will take five or ten years.

Is Mr. McGrath saying that if next year indicates another increase in profits - say, by 50% or 10% - Allianz will make sure that is passed on to the consumer?

Mr. Seán McGrath

Absolutely. We target delivery of a 6% margin on underwriting. It is not a simple exercise, as I outlined earlier, in that pricing is fairly complicated and involves a lot of projection. It is, however, constantly re-examined and refined, and we will pass on any savings that arise.

This is my last question. Mr. McMahon gave an indication of very clear figures regarding some claims that were made. I presume all those were settled in court and that none was settled by the industry. Is that correct?

Mr. Jackie McMahon

Some were settled in court and some settled out of court.

Were they FBD claims?

Mr. Jackie McMahon

Yes, they were claims against FBD.

Mr. McMahon referred to the slip and fall in a car park. One can look on the Internet and find there was a slip and fall in a car park involving a 74 year old woman, there was wet paint, the area was not cordoned off, there was no signage or anything else, she was seriously damaged, she dislocated her shoulder and so on. Why are the representatives of FBD trying to shock us by telling us the amounts it has settled cases for? If their company settled these cases, and if they think there is something wrong with that, why did they not challenge it? One of the issues people have is that insurance companies are settling too easily. Can the witnesses explain that? They presented these figures in a kind of shock and awe, "look at this" way but they forgot to tell us that they actually agreed to them. They did not involve a judge. We can pass legislation such as the Judicial Council Bill, but if the insurance industry is still going to settle the kinds of claims the witnesses have decided to pull out and show to the committee, what is the point?

Ms Fiona Muldoon

My colleague gave those examples to focus not on the amount of the award but on the quantum of legal costs associated with it. I think that was the point of highlighting both the bodily injury award that was made and the plaintiff's costs associated with that award. It is important to remember that we are an insurance company and we are in the business of paying our claims. That is why people come to us and give us a premium. It is our business to settle claims at the best and earliest possible opportunity for a fair amount of money given the relative injury or loss of property. That is the business we are in, so I think-----

I will finish on this point. We heard evidence before the committee from the marts, which FBD insures. We had a number of pieces of evidence, but the one I recall was of a claim whereby somebody was injured by a horse in a field, FBD settled with that claimant and, obviously, the mart's premium went up dramatically. The mart does not own a horse. The incident had nothing to do with the mart. It argued with FBD not to settle the claim, but FBD took the easy way out. I am saying this to the witnesses present but we have countless examples of other insurers that settle such claims.

Ms Fiona Muldoon

I cannot and will not talk about a specific case in a public forum. What I will say is that our loss ratio on marts is 160%. We are the only company willing to insure marts. If FBD were to withdraw on the basis of how much money it is losing insuring marts, those marts would no longer be viable and would not be able to open. I do not think anybody in another business is going to step in charitably and offer to insure them. Therefore, we remain the only market for marts in the country, and the reason we write them at a loss is that they are so important to half our customer base, the farming community and agri-related sectors.

There are enormous health and safety issues in the mart environment with regard to animals, where they are kept, how they are handled, the employer liability the co-operatives that operate the marts are subject to and how they are held accountable.

I wish to return to a figure Mr. Bradley gave us earlier. He said there was €19 million in fraudulent claims last year. He described that as 4% to 4.5% of the premiums.

Mr. Philip Bradley

That is right.

Mr. Bradley would contend that the level of fraudulent and exaggerated claims is one of three factors to consider with regard to the high premiums people face.

Mr. Philip Bradley

It is a factor, but it must be put in perspective. It is €19 million out of our total claims cost of €500 million. It is important and is a factor, but a much bigger factor is the level of awards for soft tissue injury and whiplash.

Okay, but I will stay with the €19 million and the fraudulent claims, which are an important part of the narrative of the insurance industry. What were the company's profits last year?

Mr. Philip Bradley

The profits last year were €89 million.

Is €89 million four and a half times €19 million, approximately?

Mr. Philip Bradley

Yes, the Deputy's mathematics are right.

That is about 20% of the total premiums. Would Mr. Bradley say it is fair to say that the extortionate profits made by the insurance companies are a substantially greater contributor to the very high levels of premiums than fraudulent claims?

Mr. Philip Bradley

No, I would not. We must look at profitability over a period of years. Last year was a very strong year, but on average for the last five years the profit we made was approximately €38 million per year. That is the level of profitability required for a shareholder to wish to continue to operate in this marketplace.

Last year the company's profits made up approximately 20% of its total premiums whereas what Mr. Bradley described as fraudulent claims made up 4% to 4.5%.

Mr. Philip Bradley

Our total premiums last year were €770 million.

Mr. Bradley describes €19 million as 4% to 4.5% so doing the mathematics upwards one ends up with close to 20% of the company's total premiums. Mr. McGrath referred to three factors and Mr. Bradley also referred to three factors. Why does Mr. Bradley not mention the very high profit rates in the company as being a contributing factor?

Mr. Philip Bradley

As I mentioned in my statement, in the motor and liability market over the years from 2013 onwards the Irish insurance industry paid out €1.1 billion more than it took in premiums. I do not believe the market can be characterised as one in which there has been excessive profit. There have been some very large losses and some companies were forced into liquidation as a result. This is not a market where profitability is excessive when one looks at it over a reasonable period of time.

Let us look at it over a reasonable period of time. For example, the Central Bank figures, which are accurate, indicate that from 2002 there is a total profit of over €3 billion for insurance companies operating in Ireland. Is that not the case?

Mr. Philip Bradley

I do not have a number to hand on the total market profitability.

I am certain that is the figure. We used it in the report we produced. At that stage it was €2.8 billion according to the Central Bank but since then there have been a couple of years of good profitability so it is over the €3 billion mark. That is a healthy enough profit.

Mr. Philip Bradley

The profit margin we aim for is €5 for every €100 we take in from customers.

If that €3 billion had not gone in profit to shareholders since 2002, would that not have resulted in a collective reduction in premiums of approximately €3 billion? It is the profit people pay for in their premium. They do not get any benefit from it.

Mr. Philip Bradley

If one wants companies to compete and continue in any market they need to make a profit. Our shareholders would expect us to make a return from this market. If it is a market where there is no profitability, there will be fewer companies wishing to compete and bigger problems with supply. I would distinguish a profit margin that is reasonable to reflect the investment we have in this marketplace. I do not believe we have excessive profits.

That is if one accepts that the insurance industry must be run on a for-profit rather than a non-profit basis. That is the premise and it is a private company. To follow that logic, the company's shareholders expect the company to make a profit so if the cost of claims were to be reduced, would the company not be under some pressure from its shareholders to see that a portion of that reduction in claims goes to increased profits?

Mr. Philip Bradley

It is important that we offer value to our customers. In the case of motor insurance, the average renewal price that a customer is paying this month is 7% less than the customer was paying this time last year. When we see a small reduction in claims frequency we adjust our prices because it is a competitive marketplace with over 33 companies competing.

If Mr. Bradley could see that a large portion of a reduction in the cost of claims could go to profits, would he not do that? That is how a company operates. It operates to maximise its profit.

Mr. Philip Bradley

Partly, but partly it is to invest for the future. We are using some of the profit we have made to develop the new sectors of the market, on new systems and on premises and infrastructure. We have to make a profit to support the ongoing success of our business. The market, because it is a small market with many players, is very competitive. If margins were excessive, more companies would come into it.

Dr. Cyril Roux appeared before the committee during our hearings with the Central Bank and he described that as an act of faith - it is faith in the market that a high rate of profit will result in more entering and so forth. However, it is not the case that there is an automatic correlation between the cost of claims going down and premiums going down because there is an intermediate factor which is the level of profits that the companies need to take.

Mr. Philip Bradley

It is a factor, but I return to something I said earlier. When the PIAB was established in the early 2000s there was a 41% reduction in premiums. Clearly when there was a major change previously which reduced the cost of claims, that fed through to customers. It will happen again.

Mr. McGrath and Ms Muldoon should feel free to respond. I believe that the insurance companies have a deliberately crafted narrative about why people face such outrageously high premiums and it is about fraudulent and excessive or too high claims. What is always left out of the narrative, not coincidentally, is profit and the substantial profits made by the insurance companies over an extended period of time. I accept it is an industry in which profit can go up and down, but over the last couple of decades very substantial profits have been made by the insurance companies. That is a significant contributing factor which the companies do not like to mention. Is that not the case?

Mr. Seán McGrath

I disagree. In Allianz Insurance we price to a margin of 6%. That is a target the company operates in the 80 markets across the globe in which it operates. It does not seek a different level of profitability in the Irish market from what it seeks in China, the US, Mexico, Germany or elsewhere. We believe that is a fair level of profit and a level that is required to remain a sustainable insurance company that remains solvent and is run in a fair and balanced way in the longer term. We have had many examples in this market of companies that have taken more maverick approaches and have cost Irish businesses and consumers many millions. We are still paying for most of them in the form of levies.

With regard to passing on savings from a reduction in claim costs, I reiterate that we will pass on any reduction in costs in our premiums. This market is very competitive-----

The company will not take any of it in profits.

Mr. Seán McGrath

No. We have a target level of profitability and we will adjust our pricing based on that if claim costs come down. Insurance companies need capital to ensure they are in place for the long term. Shareholders need a return on that capital. That return does not change and that is what we have priced. If claims come down they are passed on to customers.

As Mr. Philip Bradley from AXA pointed out, that is exactly what the industry did the last time there were reforms.

When one looks at it realistically, the eight big companies have a very significant presence in this market, but there are many more companies operating through brokers and through freedom of services. If we did not pass on the pricing reductions we would lose business, and lose it very quickly, as we would be open to other companies coming in and pricing at lower levels. Allianz is not in the business of shrinking. We want to grow our business sustainably for the long term. Those cuts will be passed on and it is not a leap of faith to think that the market would bring on capacity. It is exactly what happened in the past decade or 15 years that was spoken about. Much of that capacity has been described as naive capacity that has come here on a freedom of services basis, but many of those companies came in and priced below cost, driving prices down to a level that was unsustainable, which was a factor in where the crisis began.

Ms Fiona Muldoon

I do not have much to add other than to say it feels like I would have to mount a defence of capitalism. It is a business, it seeks to make a profit. The only alternative to that is the State provision of insurance and I suppose we would have to go nine rounds on whether the State could be as efficient as a privately run business seeking to make a profit and a return for its shareholders. In the absence of a State run system and the inefficiencies that a State run system would be likely to bring with it, we have a heavily competitive capitalist, free market based system, where we are making modest return on equity to reward our shareholders. Our shares are for sale everyday in the public market and our shareholders are putting their money at risk.

I believe we are heavily competitive in the farm sector, which is the sector we know best. I apologise for using it as an example again. We have heard from our French colleagues that they have entered the farm market. There are others competing, including the Swiss and the British. If we are charging a price that is unsustainable, I am sure my German colleagues will join us. It is a competitive market and the market sets the price. If one is inefficient or if one is not making a profit, one is out of business. That is the system in the insurance industry.

I thank the witnesses for coming in today and I commend them on that because there are others we would like to come in here but who have not done so. The most useful thing to come out of today's meeting relates to causation and fraud. If one sees somebody commit a crime, whether an assault or otherwise, one will report it to the Garda Síochána. What makes insurance fraud any different? We see from the numbers that fraud is a minute number so we need to take it off the table. We need transparency. We have been working on this for approximately three years to try to get to the bottom of things and achieve transparency. The messages we get all the time, depending on who is before us, is "Do not look here, we need you to look there." The media have a role to play in terms of the headline figures and in investigating, in drilling down, like my colleague, Deputy Pearse Doherty, did this morning, and obtaining actual facts and not headline figures. I think our session this morning has been useful.

I agree with Ms Muldoon's comments on profits. There is nothing whatsoever wrong with any company making a profit. That is what companies do, profit maximisation. There is no problem with that whatsoever, but the industry has to take cognisance of the very many businesses, some operating for generations, the insurance industry has pushed out of business. The mental and financial stress that these small businesses have had to go through because of the significant premiums, although it is not the only contributing factor, imposed on them by Government in the first instance because insurance is compulsory and by insurance companies which set the premiums without any explanation as to why they have to pay the amount. We have said right from the beginning, in terms of the mistakes of the industry, the consumers are the collateral damage.

If one is looking at a 50% profit, people do not expect to get a 50% increase in their wages in one year. It is too much and too soon and it is not reflected in the premiums. I welcome the fact the witnesses said that when they look at the profits for next year, they will be directly reflected in the reduction in insurance premiums. I want to ask each of the witnesses about the deferred tax assets. How much can each company right down in those profits? I want to establish how much tax each company pays on the profits it makes. How much can each company write off in tax for deferred assets?

Mr. Seán McGrath

In terms of the write-off, I do not know but I know that in 2017-2018, Allianz paid €4 million in corporation tax, which is almost 12.5%. We pay our full level of tax.

Does Allianz not have deferred tax assets to make up for losses in previous years?

Mr. Seán McGrath

No.

Does the company not have deferred assets to make up for losses in previous years?

Ms Marie Corry

Not to any great extent.

That is an unusual situation. Perhaps Mr. McGrath can confirm that to the committee afterwards.

Mr. Seán McGrath

I can.

I will now put the same question on deferred assets to FBD.

Ms Fiona Muldoon

We made very significant losses, as I pointed out in my opening remarks, so we would have some level of deferred tax asset from those losses.

Does Ms Muldoon have the figure?

Ms Fiona Muldoon

I do not have it in front of me.

Would Ms Muldoon let the committee have the information?

Ms Fiona Muldoon

Yes. There is no problem with that.

We just want to get an honest picture.

Ms Fiona Muldoon

All of our financial information, our full profit and loss and balance sheet is published on our website. We are a publicly quoted company so all our information is publicly available. There is nothing that is not available.

I want to discuss the situation in the marts. How many claims have been made by marts in the past year, both the number of claims and the payouts?

Ms Fiona Muldoon

We do not publicly disclose the quantum of premium on marts. It is a heavily loss making sector and I have given the committee the loss ratio. We are paying out €1.60 for every €1 in premium we collect. We are the only mart insurer.

I know that Ms Muldoon has said that. I find it interesting. In terms of the number of claims, why would we not know the number of claims that have been made by marts? It is for the good of FBD, and its reputation, to be able to have confidence in what it said.

Ms Fiona Muldoon

We have great confidence in what we are saying. We have worked closely with ICOS to develop a health and safety approach in marts. We have offered price guarantees to any mart that will work within the confines of the health and safety standards we have brought out with ICOS, which, as the Senator will know, is an umbrella co-operative and most of the marts are members of ICOS. We would be very happy that we are on the right trajectory with the marts but they are still heavily loss making. They face very particular issues around animals and animal management.

That is right. I am really interested in figures. Given the changes that have been made in respect of CCTV, other health and safety measures in the marts and the other investments made, I want to be able to see that the number of claims has been reduced, and that the number of false claims has been reduced. That is the reason I am asking Ms Muldoon for the figures. I would like to see that in 2015, there were X number of claims to Y value because all these interventions have been put in place and that they are effective. I want to know whether they are effective in reducing premiums.

Ms Fiona Muldoon

We are very much on the same page on that, given that we are losing money on them at the moment.

I am sure the Senator will appreciate that no individual mart would thank us if I gave her the individual figures.

What about an overall figure for marts?

Ms Fiona Muldoon

I ask my colleague, Ms Tobin, to comment further on the underwriting acceptance criteria and where we are going in health and safety.

No, I just want the figures. A lack of data has been a problem since we started investigating this matter. I seek the raw data and we can analyse it ourselves.

Ms Fiona Muldoon

FBD is a public company.

Ms Fiona Muldoon

All of our data is published in a fully transparent way. We have more data out there than any competitor.

Yet Ms Muldoon cannot tell me the number of claims from marts.

Ms Fiona Muldoon

I compete against the people who are seated at this table.

Ms Fiona Muldoon

I already have more data out there than any other company.

I want the raw figures so I know that the interventions work. I do not dispute what has been said. I want to know the figures otherwise we are all busy fools. People are investing in marts but that is not being reflected. That is all I want to know.

Ms Fiona Muldoon

I will ask my colleague to comment. We are happy that we are on the right trajectory with the marts.

Ms Kate Tobin

Yes.

The marts are not happy because their premia has not come down.

Ms Fiona Muldoon

Yes because they feel that they are paying too much.

Yes. I am really glad that FBD is happy.

Ms Fiona Muldoon

No, I said that we are happy that we are travelling the right path. We have worked very closely with the Irish Co-operative Organisation Society, ICOS, to help. We have invested in health and safety officers, given price guarantees and are working very closely. I am not happy that the situation is what it is. It is a very difficult situation.

I am going to move on from discussing marts because I can see that I am not going to get raw data.

Let us say somebody makes a claim. I get what has been said that an insurer does part of the investigation because one does not want to go to the Garda with bits and pieces as, God knows, they have enough to do. Why do insurers not approach the policyholders and check very simple things with them? Why not say to policyholders "We are thinking of doing a payout based on A, B, C and D". Policyholders are often the main witnesses on the day. Why is there no contact with the policyholder whose premium will escalate as a result of the decision made by his or her insurer? Why not make contact as par for the course? If that happened then money could be saved by both the insurer and policyholder.

Mr. Seán McGrath

That is exactly what does happen. In our case we speak to people and get evidence. We do not accept a claim from a third party without checking with the policyholder that the incident has taken place and getting an account of what has happened. I am not sure what the Senator's information is based on.

No, that is not our experience at all and I am speaking from personal experience. Not at all. That does not happen, I can tell you, and there is no going back to the policyholder to say how much has been paid out from his or her policy.

Mr. Seán McGrath

In terms of checking whether a claim has happened and the account of it, we check with the policyholder. In terms of going back to him or her in advance and saying what the settlement is, no, we do not do that but at that stage the claim has gone through the PIAB or is going through the courts and is being pursued.

That is what I am talking about.

Mr. Seán McGrath

That is the normal way the industry operates.

It is not normal if an insurer's decision is going to have such an impact on my premium. An insurer establishes whether an accident or incident has happened but that is it and there no more engagement with the policyholder-----

Mr. Seán McGrath

No, not unless-----

-----to say: "This is the decision we are thinking of making based on what we have in front of us. Is there anything further that you can add to that or do you dispute any of this?"

Mr. Seán McGrath

No, because from our point we have established the facts of what has or has not happened. The level of settlement or its quantity is not something, I think, the insured can give us any assistance with.

How does one know if one does not ask?

Mr. Seán McGrath

I know because if a whiplash has been claimed, proven and medical records exist, we have books of quantum and our own experience. Allianz employs 650 people who are very experienced, qualified and professional. They know what these claims cost as they deal with them on a day in, day out basis.

There could be contributory factors in terms of the other person and his or her liability.

Mr. Seán McGrath

We would have gathered that information at the start.

I put it to Mr. McGrath that insurers need to consult policyholders throughout because if one makes a statement it might be two years before anything happens.

Mr. Seán McGrath

It is a fact that claim costs are too high. Nobody ever feels that he or she is at fault when there has been an accident.

Yes, and that is why I am trying to-----

Mr. Seán McGrath

Everyone thinks of himself or herself as being a good driver. As much as 90% of people think they are better than average with driving. That is impossible but that is the way it is.

Like women drivers.

Mr. Seán McGrath

Nobody ever thinks that he or she is at fault when there has been an accident. The system is adversarial enough as it is without making things worse.

Mr. Seán McGrath

In terms of keeping customers up to date about what happened and the impact, that is something we do. Perhaps we could be better at doing so.

Mr. Seán McGrath

Involving customers in the settlement is not something-----

I do not think insurers have enough contact with their customers in terms of that. Is there anything stopping insurers, as a matter of routine, from providing a five-year schedule to customers on how their premia and claims have been dealt with? I suggest that customers are given a five-year picture of their relationship with their insurers.

Mr. Seán McGrath

That probably happens with commercial business and definitely through business that is transacted through brokers. It depends on the type of business. It would not be in personal lines business. With a normal personal motor-household business probably only one in ten policyholders has a claim in any one year. The vast bulk of people will not have a claims history. It would bring a lot more administration into a system for no real benefit.

Insurers need to consult their customers. Does FBD check with its policyholders before claims are paid out?

Ms Fiona Muldoon

My colleague, Ms McMahon, will describe the process. In general, FBD keeps its customers informed. The system is adversarial. We are well aware that many of our insured parties are upset at the level of awards that end up being made. It is a difficult thing for us because they are our customers but we sometimes have to pay heavily disputed claims.

Employer liability was mentioned in the letter from the committee as being one of its areas of focus. It is very difficult for an employer to provide any sort of contribution to the accident because, by the nature of the fact that an employer has employed a person and he or she is on the premises, and the only reason he or she is there to do his or her job, then it is almost certainly going to be the employer's fault no matter in what circumstances the accident occurs.

The Senator's time is up.

I know. It is a pity. I would like to comment later.

Mr. Jackie McMahon

I emphasise that FBD conducts very thorough investigations into any claim presented before us as we want to understand the circumstances and liability issues. We have a team of investigators who talk to all of the parties involved, including our insured. From a personal lines perspective, we write to our customers when each claim is settled outlining the financial settlement. In commercial businesses, by and large we discuss the matter with customers. It is really important that we keep those customers. We also want them to know what we do on their behalf in terms of settling their claims, which is important to us.

Insurers do not do so and that is the problem.

Mr. Jackie McMahon

I take issue with what the Senator has said.

There are huge payouts on people's premiums without them having any-----

Mr. Jackie McMahon

Often an issue arises in discussions around the settlement quantum. Frankly, people are shocked that they could be liable as they firmly believe they have done nothing wrong, shown a reasonable duty of care so nothing should be paid and that what we are paying is astronomical. I am afraid our response to that whole discussion is that we have many people who have a lot of experience of precedence and know what is paid for, and what type of edits. I agree that most of the time there are large payout amounts. The conversation goes along the lines of saying this is going to cost us €100,000 in a settlement with fees of 40% but very often it goes as high as 70% or lower amounts. We offer them, say, €150,000 and ask whether they want to take the risk on.

None of them would take the risk on at that stage. It really is a frustration with the system. It is a system of high payouts and high costs and no one feels in control. I feel that pain.

I read the conclusion of Ms Muldoon's statement. She referred to the enormous sums of money being made by the legal professions from injury awards and the vested interests. One thing comes to mind. We have deliberated on this a long time. It continues to amaze me that the insurance companies blame the legal profession and the legal profession blames the insurance companies. The only person losing out is the consumer.

We have been given myriad figures. The insurance industry is part of the vested interests. The figures do not add up. The companies here are Allianz, AXA, and FBD. What percentage of the Irish market do they each have? I want to get some idea of that. Will the company representatives give me the figure? The question is for Mr. McGrath, Mr. Bradley and Ms Muldoon. What percentage of the Irish market do the companies have?

Ms Fiona Muldoon

It is difficult for one company to know for sure but as an estimate it is between 8% and 10% of the total market.

What about Allianz?

Mr. Seán McGrath

The figure is 15%.

What is the figure for AXA?

Mr. Philip Bradley

It is 17.5% of the general insurance market.

The companies are not too far off having 50% of the Irish market between them. Allianz and AXA representatives told us the companies are looking for a given margin. AXA is looking for a margin of 5% and Allianz is looking at 6% on the premiums. What does FBD look for as a margin on the premiums?

Ms Fiona Muldoon

The guidance we give the capital markets annually is that we aim to deliver a combined operating ratio in the low 90s. That means we meet a targeted return on equity in the low teens.

The margin is low teens. What is the premiums figure FBD is looking at?

Ms Fiona Muldoon

It is the low 90s.

Is that a margin of 10% or 11%?

Ms Fiona Muldoon

No, it is less - somewhere around 8%.

The FBD margin is slightly higher than the other two companies. What profit did FBD make in 2018?

Ms Fiona Muldoon

We were very proud to make €50 million after, as I have said-----

Ms Fiona Muldoon

Yes. We paid a dividend of 50 cent per share for the first time in years.

On average, what premiums did FBD charge between 2007 and 2018? Does FBD regard the premiums as coming down in all areas? Between general insurance and motor insurance, have the company's premiums fallen? Someone referred to a figure of 7% lower. Does Ms Muldoon believe, on average, the premiums the company is charging customers for motor and general insurance have fallen between 2017 and 2018?

Ms Fiona Muldoon

Is that for 2017 and 2018?

Yes, and the current year as well.

Ms Fiona Muldoon

I would believe that premiums are coming down marginally at the moment.

What about Allianz and AXA?

Mr. Seán McGrath

In the case of past movement in the past year or two, our motor premiums have been relatively stable or slightly reduced. It is very much sector specific for businesses. Some sectors are still receiving increases while others are stable.

Mr. Philip Bradley

Home insurance is stable. We are a smaller player in the commercial and small and medium-sized enterprise areas. In motor, as I mentioned earlier, newer premiums are 7% lower than they were this time last year.

Would it be fair to say that motor insurance premiums have come down and general insurance has more or less stayed stable? Would that be correct? At the same time the profits of the companies in 2018 were €37 million for Allianz, which was 7.4% of a margin and AXA had 11.56% or €89 million with €770 million of premiums. What premiums were written by FBD in 2018?

Ms Fiona Muldoon

The figure is €372 million.

FBD made a profit of €50 million. What was the margin on €50 million?

Ms Fiona Muldoon

Our combined ratio was 89.1%.

I am more interested in the net margin on the premiums. That is how I am looking at it.

Ms Fiona Muldoon

That is 10.9%

That would be 50 divided by 372. That is a 13.4% margin. That is well above the figure sought. Allianz was looking for a margin of 6% and made 7.4%. AXA looked for a margin of 5% and got nearly double that at 11.56%. FBD was looking for a margin of 8% and had 13.4%.

Ms Fiona Muldoon

The FBD figure is 10.9%.

I am looking at €370 million of premiums written with a net profit of €50 million. I am looking at 50 divided by 370, which is approximately 13.4%. This is the question I am posing. The company representatives say they are looking to make margins of 6% for Allianz, 5% for AXA and 8% approximately for FBD. They have made well above those margins in 2018. Why was some element of the profit above the margin sought not passed back to reduced premiums? The companies cannot simply blame it on legal fees or the fraudulent aspect. The company representatives need to explain it to me and to the ordinary person. The companies are profitable.

Insurance companies have to make a profit but they cannot be fleecing the customer. This is the question for us. We have a body of work to do. It is not personal. This is an issue. We have had the legal profession in. Their fees are excessive. I also believe there is an issue within the insurance industry. We are coming here looking at figures on the day. I have not had hours to prepare but we can see the figures in stark terms. The companies are profitable. In fact, I would say they were super-profitable in 2018. The companies earn well above the margins they are required to make. Why was that increased profit in some element not passed back to the consumer? The company representatives might deal with that question. I have limited time.

I am being specific for a reason because I think it is all about facts. The facts are that the insurance industry is before us today. We have to probe the figures. The figures show that the companies are profitable above the margins they are required to make. Allianz got approximately 7.4%. It was looking for 6% and made €37 million. AXA made €89 million and looked for 5% marginal but secured 11.5%. FBD looked for 8% and got 13.4%, which is well above the target and corresponds to €50 million. Will the company representatives deal with that specific point? It is not about blaming other elements of insurance fraud but specifically the area the companies have direct responsibility for and control over.

It is about the margins.

Yes, it is about the margins the companies say they need to be able to operate in. The actual margins are well above those figures.

Mr. Philip Bradley

Certainly, last year the margins were better than they had been historically. First, it is important to look over a period of time and not only one year. If we look over five years, then we have not achieved our target margins. Second, from the perspective of AXA, we are primarily a motor insurer. Prices have come down 7%. We see that margin thrown back to customers.

The company is still making above the margin that it sought to make, which is 5%.

Mr. Philip Bradley

In an individual year we might do so, but over a period of time that is not the case.

I accept that point. However, the backdrop we see is premiums being quoted for older people and younger people at exorbitant rates of €1,000 or €2,000. We have to ask why.

Mr. Philip Bradley

The answer is that the margins were better last year and prices are now coming down.

How much further does Mr. Bradley anticipate they will come down during the course of 2019?

Mr. Philip Bradley

I cannot talk about future price changes but I can talk about what has happened so far up to June and in that period they have come down 7%.

Does Mr. Bradley anticipate they will come down further in the coming weeks?

Mr. Philip Bradley

The other market statistics for motor insurance are the Central Statistics Office, CSO, statistics. They show motor insurance costs have come down 21% over the past-----

I am not denying they are coming down but they should have come down at a higher rate. That is an observation. It is AXA's business but I have to ask the question. I will move on to Mr. McGrath.

Mr. Seán McGrath

First, to be clear, while there has been much talk about fraud and other matters today, I reiterate that the single biggest issue by far is the level of awards. I am not talking about legal or other costs. Many of those issues will be mitigated by bringing down claim costs.

The book of quantum.

Mr. Seán McGrath

The level of awards is the biggest issue. We price to a target level of 6%. We were very close to it in 2018. It is not an exact science. We have to settle for-----

Allianz was close to it and above the line rather than below the line.

Mr. Seán McGrath

If the Deputy was to check back another few years, he would note we were below the line on it as well. We continually recalibrate our pricing depending on the trends we see in claims. That is a process that takes place quarterly in Allianz.

Mr. Seán McGrath

Our prices are being reduced where we can do so and, as I said, that process is continual. There is a lag between insurance profits emerging in the accounts and what we have to price for, but it is a continual process, and lower claims costs are reflected in lower premiums.

Would it be fair to say that operating in the insurance market in Ireland at the moment is a profitable business?

Mr. Seán McGrath

At the moment it is a profitable business but it has not always been in the most recent past, as the Deputy will have seen.

I am asking about as of now.

Mr. Seán McGrath

As we stand now, the market looks to be in a profitable position. From our assessment, the market is at a level of profitability it needs to be at to be sustainable in the long run, and it is a level of profitability we, as part of the Allianz Group, see in markets across the world.

Does Allianz consider it has any role to play with respect to the fact that premiums are very high even at this time?

Mr. Seán McGrath

Until claims costs come down, premiums must reflect the level of claims in the market at the moment. While we want to help and be part of the solution, and we are delighted with where the committee is going in terms of the book of quantum and reforms of the judicial commission, which is the right way to go, and Senator Lawlor, who is here, has introduced the Civil Liability (Capping of General Damages) Bill, until those measures are implemented and we see the evidence, we have to price to the level of claims currently in the market.

I will move on to Ms Muldoon.

Ms Fiona Muldoon

I do not have much to add. We made a profit last year and paid a dividend for the first time in three years. The technical issue of what one is pricing at versus the emergence of the profit is what makes insurance difficult, and that is why we are all here. We have adjusted. We are fiercely competed with in our core areas. Our average premiums in those areas are down. My colleague, Ms Tobin, might want to comment further on pricing.

Ms Kate Tobin

I do not have much to add on pricing. In terms of the numbers for 2018, we would have had a fairly benign year in terms of the weather, notwithstanding Storm Emma, but the management of it helped in terms of the overall claims cost than otherwise would have been the case. Looking forward in terms of costs, we have talked about injury claims but we must bear in mind there has not been inflation in the property space at the level there has been in the injury space. There is inflation and that-----

Define inflation. What does Ms Tobin mean by it?

Ms Kate Tobin

Increased costs of labour for rebuilds on property and increased costs for parts for replacement on newer cars. Those factors are taken into account when we consider pricing and setting policy.

I have two further questions. To take the example of €100 of a premium that comes in, which is one Mr. McGrath used, roughly 94% of that is paid out.

Mr. Seán McGrath

Yes.

Will Mr. McGrath break that down in terms of claims, injury costs and awards together with the breakdown of legal fees? We speak about it in the abstract. I would like to know the make-up of it. Of €100 of a premium taken in, 94% is paid out, but of what is that 94% made up?

Mr. Seán McGrath

The biggest part of it is claims in total.

How much of it is that?

Mr. Seán McGrath

It is 67%.

Mr. Seán McGrath

How much of that is broken down between the award and legal fees?

Mr. Seán McGrath

If I may finish the point I was making, I will then break that down further. Another 10% goes on commissions. Another 13% goes on the cost of running our operation.

Mr. Seán McGrath

Our overheads. There is also a 4% reinsurance cost.

A reinsurance cost. Two thirds of the cost is make up by claims.

Mr. Seán McGrath

Yes.

What is the breakdown between the awards and legal fees?

Mr. Seán McGrath

Legal fees account for 30% on the injury side.

Some 37% is the awards and 30% is the legal fees.

Mr. Seán McGrath

I will split the 67% figure; 42% goes to damages claims and 58% goes to injury claims.

Mr. Seán McGrath

Goes to damages claims. That would be property, commercial and so on.

Then there is the 58% figure.

Mr. Seán McGrath

Some 58% of that is injury costs.

Am I correct in saying that of the 67%, 37% is in terms of awards and 30% goes on legal costs? I want to compare that with the figures Mr. McMahon has given us. Of the awards that are paid out in personal injury cases, I want to establish the breakdown between the awards and legal fees.

Mr. Seán McGrath

Of that 58% which goes to injury claims, our estimate is that about 80% of that goes on legal costs and other costs such as-----

Some 80% goes on legal costs and is it only 20% that is the award?

Mr. Seán McGrath

No, 30% of the 58%. One has to do the multiplication.

Some 30% of the 58% is legal fees.

Mr. Seán McGrath

Legal fees, medical fees and engineering fees.

That means 28% is the award.

Mr. Seán McGrath

No.

I am trying to establish in terms of the paying of a personal injury award what percentage is the compensation award and what percentage is legal fees.

Mr. Seán McGrath

Some 70% of the 58% goes to pay the injury award and 30% of the 58% goes to pay costs.

Mr. Seán McGrath

Yes.

I will move on to Mr. Bradley.

Mr. Philip Bradley

Of every €100 premium that comes in, between 65% and 70% goes to pay clams, 13% goes to expenses, 7% goes in commission to intermediates and there is few percent for levies and about 3% on reinsurance.

Of the 65% to 70% figure, on the personal injury side, Mr. McGrath said that for Allianz the figure is 70% and approximately 30% goes on legal fees. What is AXA's breakdown for personal injury claims?

Mr. Philip Bradley

Our breakdown would be similar for personal injury claims. Obviously with some claims we pay-----

The breakdown ratio is roughly 70% and 30%.

Mr. Philip Bradley

Yes. Some goes to the Motor Insurers Bureau of Ireland, MIBI, some to damages claims, but in terms of injury claims the breakdown ratio is 70:30.

I will move on to Ms Muldoon of FBD. The representatives of AXA and Allianz have said they get approximately 5,000 personal injury claims each year. I ask Mr. McMahon how many personal injury claims FBD would settle a year.

Mr. Jackie McMahon

It is around that amount.

Based on the figures, can I have a breakdown of how much is paid out in terms of €100 of premium taken in? In the case of AXA, Mr. Bradley indicated that of €100 premium taken in, 95% is paid out. In the case of FBD, will Ms Muldoon indicate with respect to €100 of premium taken in how much is paid out?

Ms Fiona Muldoon

According to our figures for 2018, it is 89%.

Some 89% is paid out. What is the make-up of that 89%?

Ms Fiona Muldoon

Some 25% goes to running the company and branch network. We do not pay commissions.

So it is equivalent.

Ms Fiona Muldoon

Some 65% was on foot of all the claims, including those related to Storm Emma.

What is the breakdown on the personal injury side between the awards and the legal costs?

Ms Fiona Muldoon

We think it is slightly higher than 30%.

What does Ms Muldoon think it is?

Ms Fiona Muldoon

It is 35% to 40%.

We paid over €150 million in the past five years in plaintiff legal costs.

I accept that. I want to be fair. Has Mr. McMahon been selective in what he has picked? He picked four claims, one of which is a stress claim. There was a settlement of €60,000, and €73,000 in costs, which means that 55% of the overall payout was in legal costs. The second case related to an injury that occurred in a car park. Mr. McMahon stated there was a claim of €15,500, and €16,220 in legal costs, meaning that such costs comprised 51% of the total. The next case involved a finger injury. The claim was for €12,500 and the legal cost was €20,477, which is 62% of the total. The final case involved an equine-related employment accident. The claim was for €81,313 and the legal cost was €108,918, which is 58% of the total. These figures do not match Ms Muldoon’s figure, which appears to be consistent with those of both AXA and Allianz and which point to proportions of roughly 70% in awards and 30% in legal costs. Mr. McMahon might comment on that. He might also indicate which of the four cases went to court and which were settled outside court.

I am probably being somewhat bit direct but my main purpose is to get to the truth. The problem is that we are led to believe by the insurance companies that it is all about legal costs and we are led to believe by the legal profession that it is all about insurance costs. The truth is somewhere in between.

Ms Fiona Muldoon

I have stated that this is a complex issue. I agree with the Senator-----

When people use the phrase “complex issue”, it is normally a way of not wanting to-----

Ms Fiona Muldoon

Well-----

Ms Muldoon is a representative of a large company. Such companies have access to data to which we do not have access. They analyse data and employ actuaries to examine projections and costs. Ms Muldoon should not state that it is complex.

Ms Fiona Muldoon

I did not mean to irritate the Senator.

She should not come in here and say that an issue is complex. The facts are known. I need our guests to explain the inconsistencies.

Allow Ms Muldoon to respond.

Ms Fiona Muldoon

I did not intend to irritate the Senator.

Ms Muldoon did not irritate me.

Ms Fiona Muldoon

What I wanted to say is that there are a lot of different things going on here. Mr. McMahon has given a few examples.

They were selective.

Ms Fiona Muldoon

They are selective to make a point. We reiterate that the legal costs are a significant component but our central message, no more than that of Allianz, is that FBD is stating that the level of bodily injury awards, particularly for soft tissue injuries, made by the courts is too high. That is our central message. We provided some selective examples to demonstrate what is going on with legal and medical costs as well. Our central message remains that the best way to lower insurance costs is to lower bodily injury awards.

If the book of quantum comes back with a reduction in the awards that can be offered in personal injury claims, will our guests provide a guarantee that they will reduce their premiums? If the book of quantum is revised, we cannot have circumstances in which insurance companies, under the cloak of awaiting the book of quantum, can make massive profits from hard-pressed consumers. Could AXA, Allianz and FBD deal with this?

Ms Fiona Muldoon

The Irish insurance market is the subject of very heavy competition. I can state without doubt that if the cost of input is lowered – the main cost input in insurance terms is the cost of bodily injury claims – the cost of insuring with FBD will decrease. We want more customers.

For consistency, Mr. McGrath and Mr. Bradley should also respond.

Mr. Seán McGrath

As stated earlier, Allianz is committed to reducing the cost of insurance if the cost of claims comes down.

Mr. Philip Bradley

If the cost of claims comes down, the cost of insurance will come down. I make that commitment on behalf of AXA.

I welcome our guests. I have a few questions. We have had all the groups in here over the past three years. Certain allegations were made to the effect that cartels existed in the insurance business. Do any of the delegates have a view on that assertion? I did not hear anybody refute it. They might get an opportunity today to refute the claim that there are cartels operating within the insurance business.

Mr. Seán McGrath

I can certainly say from an Allianz point of view that I have never seen any such cartel-type activity. The industry has been investigated three times by the Competition Authority and there has never been any finding of any cartel-type operations in the business. It is a very competitive market, as is evident from the competition and the variation in prices.

We had haulage industry representatives before us. In many cases, they had to go to the UK to get insurance for some of their lorries. This was very sad, to say the least. Does Mr. Bradley have a comment on that?

Mr. Philip Bradley

There is certainly no cartel operating. It is a competitive industry which, over a number of years, going back to 2015, 2016 and 2017, was loss-making. It is a competitive market and I see no evidence of a cartel. The competitiveness of the market can be seen. If the local companies are not able to offer a competitive price, people have access to the international markets and London to access premiums and capacity.

In the insurance industry, companies project the running cost for the following year, based, I suppose, on the number of claims and the amount to be paid out. Are premiums raised or reduced according to whatever the projections are?

Mr. Philip Bradley

We do. We forecast what we believe the cost of claims will be. The challenge we have as an industry is that we charge a premium today and will not really know how profitable this year has been for three or four years. We make assumptions based on what we believe the cost of claims will change and factor these into our premiums.

The people who have claims against them are really hammered, however. There are a few cases in my constituency of individuals who had to go out of business because of the rising cost of the insurance premiums. An incident might have occurred through no fault of theirs. The industry, in addition to raising the premiums for everyone, really hammers those against whom claims have been made.

Mr. Philip Bradley

Certainly, a premium would reflect the claims history. If the Senator has individual cases he would like us to examine, we will certainly do so but premiums reflect the history. Just as someone with a very good claims history expects a lower premium, those with a poorer claims history usually pay more, particularly if there are frequent claims, rather than a one-off incident.

While someone with claims is being hammered, he or she is also subject to an annual increase because of everyone else's claims. Is that not the case?

Mr. Philip Bradley

We would have some general pricing principles, and we would price based on individual risk. There are two elements.

Does the industry refuse to insure people?

Mr. Philip Bradley

Different companies have their own acceptance criteria. We have a very wide acceptance criteria. We would try to quote motor insurance for well over 90% of the market.

None of the companies represented here today refuse to cover companies. Would that be the case?

Mr. Seán McGrath

In Allianz we would consider our pricing and planning into the future on an annual basis. Pricing would be considered on a quarterly ongoing basis in terms of adjusting. When we set out our plans we must decide where we believe we can best compete and where we have the expertise to compete. The Senator mentioned the haulage business. That is not an area in which we would operate. We do not have the expertise to underwrite that properly and therefore we would not underwrite that area. We would take a view as to whether we can operate in any particular sector sustainably and professionally over the long term because we like to get into a market and stick with it. We do not like to withdraw from markets or cause issues to arise in that way. If we can see a long-term future, and again it comes back to the cost of claims, if the level of claims come down, many of these sectors experiencing problems would find there would be more competition and more capacity for their businesses. It links back to the cost of claims being very high, and for some industry sectors that causes capacity issues.

Did FBD refuse insurance cover?

Ms Fiona Muldoon

Our underwriting risk appetite would not be nearly as wide as 90% of the market. It would definitely be the case that our acceptance criteria would be narrower than that. Likewise, we do not operate in the haulage area, which is the example the Senator has given. We operate in other difficult risk sectors where we believe we have expertise and something to bring in underwriting terms to the table. Our main criteria are that we want to support the markets we are in and we underwrite what we know. A very large part of that is the direct relationships we have with men and women throughout the country where the customer comes into us and we get to meet them and understand their business. My colleague, Ms Kate Tobin, might have something further to add.

Ms Kate Tobin

On the specific point of claims with respect to FBD's process of risk selection, with any individual risk we will consider a great deal of information relating to that risk to determine whether we will take it into the portfolio and the pricing to be charged individually. Claims experience is one factor in that. For a smaller business which has had one claim in a long period where we expect claims to be made because we are in the business of insuring people who will have claims against them, it may not affect the premium, but where there is a repeated instance of claims against a business and we believe this may be an indicator of, say, poorer than average health and safety practices or something different from what is otherwise being experienced in the sector, that may lead to a premium increase.

If there is a claim made against a customer, does the company notify the person who pays the premium the full costs paid out in respect to the claim and the legal expenses? Does the person know exactly what was paid out against him or her on that premium-----

Ms Fiona Muldoon

I believe so.

-----in detail?

Ms Fiona Muldoon

Yes.

By all companies? I know people who had claims made against them and they do not know the full cost of the legal expenses against them.

Ms Fiona Muldoon

It can take a long time. One might know there is a claim outstanding but it might take three or four years. That is part of the difficulty in the current system. It is adversarial. It takes a long time to go to court.

Even after the claim is agreed.

Ms Fiona Muldoon

No. If it is settled, payment should be made reasonably quickly.

Yes, but is the breakdown of the costs notified to the person who pays the premium?

Ms Fiona Muldoon

I am not sure it is broken down.

Mr. Seán McGrath

I am not sure that it is. We would definitely notify the person of the award but sometimes it can take quite some time for the legal costs-----

Whose responsibility would it be to notify the person paying the premium of, for example, the awards made against him or her, the breakdown of the costs, the amount paid in legal fees, and the amount paid to the injured party?

Mr. Seán McGrath

Again, it depends. In the commercial market with commercial clients, it would be normal every year when their premiums come up for renewal to discuss their claims.

At the very least should the person paying the premium not get a breakdown of the costs involved in a case?

Mr. Seán McGrath

I am not sure what the regulation requirement is on that but in terms of being notified of a claim and what the settlement is, I absolutely believe-----

The representatives come in here and make allegations against the legal profession to the effect that legal expenses are out of control. How does the person paying the premium know that unless they are notified of the claims made against them and the legal expenses?

Mr. Seán McGrath

In terms of transparency for the industry, the industry database has begun to be populated and that information has started flowing to the market. That was one of the findings of the cost of insurance working group.

That would not be broken down on a legal basis.

Mr. Seán McGrath

There is a full detailed breakdown of claims and claims costs within that database.

If a claim is made against me or my property, would I get a full breakdown of that after the case is open?

Mr. Seán McGrath

In terms of the industry and the issue of costs and the significance of costs, that would be available through the claims database that has been set up through the Central Bank.

Can Mr. McGrath not give a simple answer as to whether I would get a breakdown of the costs in the case?

Mr. Seán McGrath

If a person is a commercial customer, he or she probably does. If a person is a personal Allianz customer or a retail customer, he or she probably does not. That person would be notified of the claim being settled.

That is not good enough from the industry. I would like to know the exact amount of the claim made against me, the amount of the legal costs and legal expenses to both sides, and if it was paid to both sides.

What is stopping the company from doing that?

Mr. Seán McGrath

Currently, it is not part of the regulations in place.

We are not talking about the regulations. It should be proper business practice for a customer of Mr. McGrath's company who has been sued to be given full information regarding the cost associated with his or her premium having increased. That should be standard practice.

Does Mr. Bradley or Ms Muldoon wish to comment?

Ms Fiona Muldoon

I am not sure I disagree but we are here to discuss the costs and availability, and that in and of itself would not lower the cost. What will lower cost would be lowering the bodily injury awards and cases being brought to court quicker.

The representatives have said that the legal costs are out of hand. A person who has had a claim made against them needs to know the breakdown of that claim and the amount of the legal costs. As public representatives, people who have had claims made against them have contacted us about getting that information but we cannot get it for them. We are in the dark here as to the claims the representatives have made about the legal people.

Ms Fiona Muldoon

I do not disagree with the Senator but what I would offer him is that knowing that, it will be knowing it after the event and it will not lower the cost.

It may well help to lower the costs.

An issue that has come across through all the hearings is the lack of or limited information on this. The suggestion made by Senators Paddy Burke and Lawlor relates to information. It may not lower the cost of the premium but it would inform the customer. I am on the same line as Senator Burke on this. If the customer wants to be made aware of the details of a settlement in any case, surely it would help the representatives' industry and the marketplace over time to understand what has happened. The industry might have fewer customers giving out about individual insurance companies. I have a simple question. On a voluntary basis or on the basis of good business practice, would the industry not undertake to make that information available and, if not, why not?

Mr. Seán McGrath

On an industry basis, the database that has been set up will answer those questions in an overall sense.

No, I am asking Mr. McGrath on the basis of Allianz, as a business, dealing with its customers.

Mr. Seán McGrath

On an individual basis, Allianz as a matter of course regularly consult with our policyholders and gets feedback on what complaints they have had, what the issues are and what they would like. That specific issue is not something that has been raised among our customers.

It was raised here today and I am asking the witnesses to address it or tell me why they will not. Will the witnesses undertake to examine the issue or tell me why not? Will the witnesses undertake to give information to customers relative to a claim if they ask for it? What is wrong with that?

Ms Fiona Muldoon

I will undertake to look at it. I am being caught on the hop a little bit. I cannot commit to anything today but we will undertake to look at it. I would have some reticence if FBD was the only company to provide that level of disclosure. I feel very strongly that we are publishing far more of our data than everybody else.

I understand that.

Ms Fiona Muldoon

We will have to look at the unintended consequences, but it is not an idea that has been put to us before. I am willing to commit to looking at it.

If someone came in to me and said they were charged too much for sweets, I would have to explain the reason for the cost. If one is selling a suit, insurance or a stick of furniture, one would have to explain the reason one is charging double the price of others or whatever it might be.

Ms Fiona Muldoon

Yes.

For some reason, the insurance companies are reluctant to go down that route. One can forget regulation and everything else, it is simple, good business practice and a case of keeping one's customer onside, and informing the market. Many people who take out insurance policies of one kind or another are not fully aware of the fact that in the three cases Mr. McMahon gave us, the legal costs are so high. It might be a constructive way of exposing the costs to the market, and it would have a reasonable reflection on the insurance industry because it would be helping with the information.

I understand Ms Muldoon's point but why can the insurance companies not all jump together and provide the information? I am not asking the witnesses for a commitment today; I am just making the point on behalf of the people who come to me in the cases of claims having been made.

The second piece is that if an individual's premium doubled, which I have seen in various sectors, would the company not write and explain the reason it has doubled if there is no claim history? Taxi drivers come to me. I know that is a difficult market. Hauliers also come to me. Other individuals have told me their insurance premium has doubled or gone up by so many percentage points. They ask for an explanation but they do not get it. Is there a reason for that?

Mr. Seán McGrath

We do explain as well as we can to our consumers the reason for increases. We do that in many different ways, such as newsletters, and we try to give them as much of a breakdown as we can on their policy.

Regarding commercial business, most of the discussion would happen with the broker, in terms of trying to explain the rationale for movements in pricing over time. Often, when we have a sector that is difficult, the discussion with brokers has gone on for a number of years. We try not to just react in a knee-jerk fashion to any one bad year. It is usually an area where we have had profitability issues over a number of years and we cannot find a solution other than having to increase. That discussion takes place with the intermediary who has been appointed.

There might not always be an intermediary, and even if there is, that does not explain the situation.

Mr. Seán McGrath

There is in the commercial area.

Let me put it this way; if I go to my broker with whom I have done business for years and I have no claims, my taxi insurance is €6,000 but this year it is increased to €12,000 so I ask my broker what happened. I am a good customer who goes to him every year and I have not gone to any other insurance company. I want to know the reason my premium has increased by €6,000. Whether I get my insurance from a broker or directly from the insurance company, it goes back to the same point that was made, which is surely the person is entitled to an explanation, out of courtesy if nothing else, on the reason it has increased by so much. I do not want the witnesses to respond by putting it down to the market. That is fine, but what about the explanation for individual customers? Why is the industry reluctant to go down that road?

Mr. Seán McGrath

It is not a question of reluctance on our part. If we are approached on an individual basis, we always explain the rationale it.

No, the companies have not, because the taxi driver who came to me was not told the reason his premium went up.

Mr. Seán McGrath

I cannot comment on an individual case as I do not know the details.

I know Mr. McGrath cannot.

Mr. Seán McGrath

I can only speak for Allianz.

Mr. McGrath and all the witnesses have been very helpful this morning but the two key pieces that keep coming back to us is information on how a claim was settled. Surely customers are entitled to that. They are also entitled to information on why their premium has increased. If a premium goes up by a significant amount, surely people are entitled to know the reason. It may be that the particular industry, for example, taxi driving, is out of kilter and it must be loaded, but it is not the case that every taxi driver is being loaded with a 100% increase. Why are individual customers, who have had a serious increase in their premium, not being told the reason for the increase? From a business perspective I cannot understand why the insurance companies do not just tell them.

Mr. Seán McGrath

I can only answer on behalf of Allianz. We do explain those situations to our customers.

Does Allianz write to them and say their premium has increased by €6,000 because it was necessary to put it up by that much or is it done verbally? Could the witnesses not write to their customers as they are asked for an increased premium to explain the reason for it?

Ms Fiona Muldoon

A total of 95% of our business is direct, so we do talk to our customers and explain what is happening.

Does the company explain the reason for the increased premium?

Ms Fiona Muldoon

We do not write to them.

But there is one-to-one interaction.

Ms Fiona Muldoon

Yes.

Do Mr. Bradley and Mr. McGrath do the same thing in terms of interacting with the brokers and when directly engaging with customers?

Mr. Seán McGrath

We do in relation to our direct customers. We talk to them all the time and we write to them. We are constantly in discussion with brokers and we debate pricing levels and other such issues.

Is the information passed freely to the broker and the customer?

Mr. Seán McGrath

Yes, but I cannot comment on what the broker relates to the client.

Could an explanation not be included as part of the proper way of doing business?

Mr. Seán McGrath

To be clear, once a client has applied to a broker, he becomes the client's agent and we have to deal with the agent. We cannot legislate for what happens between the agent and the client.

Mr. Philip Bradley

We have that discussion with direct customers. We do not formally set out in writing the reason for the change in cost but, invariably, we have a debate with our customers. For intermediated customers, we have long discussions and negotiations with a broker about why the price has changed and the reasons for that.

On a point of information, I am an Allianz customer and that is not the case. Where are the telesales or customer service sections of both companies based? My premium increased and I tried to find out the reason but there was no information available. I speak from personal experience. Where are the data centres?

Mr. Seán McGrath

I am surprised to hear that. I will deal with the matter later if the Senator wishes.

Mr. Seán McGrath

Our operations are based in Dublin 4, in Elm Park.

Mr. Philip Bradley

Our staff are split 50:50 between the Republic of Ireland and Northern Ireland. We have a contact centre in Derry. We have a total of 1,200 staff, 600 people are based in Northern Ireland and 600 are in the Republic of Ireland.

Has it always been the case that the contact centre for Allianz has been based within the State?

Mr. Seán McGrath

Absolutely, yes. That has been the case in my 30-odd years with the company, we have always been based in Dublin.

That is okay. I cannot dispute that.

I thank the Chairman for allowing me to contribute to this debate on insurance. While I have been here on several occasions for this debate, I am sorry I was not here when the committee heard from the legal profession, as I was in the Seanad Chamber at the time.

I welcome the witnesses. They have indicated they comprise only 50% of the industry. It is sad that the other 50% refused to turn up.

That is not true. We invited the industry and we were able to accommodate this meeting today. It is not fair to say the others refused to attend. It was because we could not find a suitable time and date. As can be seen from this morning’s meeting, it takes a considerable length of time to talk to the three companies with us. We will get to the others on a different date.

That is fair enough.

The sad part of all of this investigation is that one of the sectors responsible for a fair whack of this problem, namely, the judges making awards in the courts, is not here. The book of quantum is based on the historical awards made in the courts. That is one area we cannot investigate but it is a problem.

We can send out a message to them that we are having this review and that they are more than welcome to come forward or send a representative to explain how it is all happening in the courts. That might be helpful to the process as well.

This would ensure we do not have any Chinese walls or lack of information from the centre. Likewise, with the legal profession, as Ms Muldoon said, it is responsible for 40% of all awards made. From this meeting, we can extend that invitation to the Judiciary or its representatives. We can certainly send it to members of the legal profession. If they want to respond, they are more than welcome to attend the committee to give their side of the discussion.

That would be excellent. I thank the Chairman for accommodating that.

As most people know, there are many legs to this stool, one of which we have here today. Will each company indicate how many levies are paid per €100 of a premium? They have gone through all the costs but nobody has indicated how much the Government levies come to?

Is it €2 out of every €100?

Mr. Philip Bradley

No. The Government levies do not include the Motor Insurance Bureau charge which would be another percentage.

Can the companies indicate how much per €100 of a premium is a levy?

Mr. Philip Bradley

It is €7.

Ms Fiona Muldoon

It is €7.

It must be remembered, therefore, that 7% of all premiums are Government levies as a result of failed insurance industries in the past.

What is the average time for a claim from when the event occurs to when it is actually settled?

Mr. Jackie McMahon

Some complex claims involving young children can take 19 years. Cases in litigation, on average, take between three to five years. Cases we settle directly would take between one to two years.

Ms Fiona Muldoon

Property cases would be settled much more quickly.

Mr. Jackie McMahon

They would be settled in a number of days

Mr. Seán McGrath

Property claims are settled quickly, usually days or weeks. Injury claims – if one takes out evaluated - take two and a half years to three years on average to be settled.

Mr. Philip Bradley

It is similar in our case. It is quick for property claims. Two and three quarter years would be the average lifetime of a personal injury claim.

On personal injury claims, several people have come to me saying that they have been frontloaded almost immediately when the claims have been put in. There is a cost associated with that. Is that built into the company’s profit? No one knows what one will pay out at the end of the year or the whole claim period but the companies frontload many clients who have claims against them.

Mr. Seán McGrath

Again, we would price to a target level of a 6% margin. Somebody who has a claim will get a loading. However, the loading is not going to pay back the claim amount because that would be the given average injury costs or €20,000. One could not possibly get that back from the individual. The insurance works off the fact that the claims of a few are paid by the premiums of many. We price to get an overall margin of 6% across the portfolio.

Does that include the overloading of the claims of individuals?

Mr. Seán McGrath

Whatever loadings for claims or however the premiums are calculated are all built into that.

Mr. Philip Bradley

We are in the same situation. Clearly, if somebody has a claim against their motor insurance, they could lose their no-claims bonus at the start. The claim might be settled three or four years later. Those additional premiums are built into our standard target profit margin.

The European Commission is investigating the insurance companies’ overarching body regarding competition rules. When I was at the Naas races last week, I noted all the bookmakers were charging the same price for a bet on a particular horse. They are supposed to be individual traders per se. I am concerned there is not much difference between the cost of insurance for a car across all the companies.

Mr. Seán McGrath

The investigation from the EU is into access to the Insurance Link database. It is not about pricing consistency.

I am aware of that.

Mr. Seán McGrath

In our experience of any of the surveys done on pricing, there was quite a variation of the pricing across different risks in the market.

Ms Fiona Muldoon

In this discussion about prices, a point that is often lost is the strength of the claims paying ability. If one shops only on price, one can end up in a situation similar to what happened to all van customers with Setanta where the company was not around to pay the claims. The quality of the cover, what is covered in the policy and whether the company will be around to pay are an overall component of value and as important as the price. The price of a pint of milk is almost the same in all supermarkets. Competition drives prices but the quality of the cover and the product drive price too.

If the judges decided the book of quantum was too high and put in place a new book with reduced awards, would the insurance companies reduce their premiums immediately? It would be preferable if the Judiciary reviewed this on a voluntary basis rather than having to put it through the whole legal process. Will the insurance companies reduce their premiums by what the Judiciary reduces the book of quantum?

Ms Fiona Muldoon

There is an important nuance about the point if the book of quantum comes down. As we have said many times in this session, our biggest issue is that the quantum of bodily injury awards made at court is too high. If the book of quantum comes down on its own, the Judiciary must take the next step and use it as the ceiling for awards. The Judiciary must not just alter it but apply it in the court situation. Should that all happen, I would be happy to confirm that I believe FBD will.

If all the judges got together tomorrow and agreed that they were going to reduce the payouts for the soft tissue and whiplash injury claims made, which make up the bulk of claims, to the current level of such awards in the UK, the witnesses would reduce their premiums proportionately.

That question was asked earlier.

I am looking for clarification.

Ms Fiona Muldoon

Like my colleagues here from other companies, FBD Insurance is under investigation by the Competition Authority for price signalling. We are under a High Court equivalent summons in that respect but we are happy to confirm that the cost of insurance is driven by the cost of the inputs. If the cost of the inputs is lowered, and the main cost is the cost of bodily injury awards, and that cost comes down, I am confident that FBD's insurance prices will follow those input costs.

Ms Muldoon is saying that if the judges reduced the awards in the courts tomorrow morning, FBD Insurance would follow suit. What is Mr. McGrath's view?

Mr. Seán McGrath

The answer is the same, yes. As I said earlier, Allianz will reflect the cost of claims in its pricing. As soon as those claims costs reduce, we will reduce our prices.

If the judges did that, Allianz would reduce the costs.

Mr. Philip Bradley

We would, and if the cost of claims came down, the cost of insurance would come down. It is important that, after the agreement between the judges, they consistently apply what has been agreed, and we see that happening.

If the judges were to reduce those tomorrow, the companies would reduce their insurance costs. That is all I wanted to find out.

Senator Horkan.

I thank all the witnesses for being here. Many of the points have been covered fairly comprehensively.

So there are no further questions.

I would not go that far.

I am sorry.

To make the point on the cost of insurance, various witnesses who own play centres, pubs, restaurants and so on have come before this committee and this issue is changing the way people are living, children are playing, playgrounds are being designed and night life works. The impact the cost of insurance cover is having is phenomenal. I am aware the witnesses know that but it is very important to remember that when we talk about this issue. I am not here to bash the insurance industry. If the witnesses were sitting on this side of the table or they were members of finance committees and legislators, what would they do? I was in the Chair for the Judicial Council Bill last week in the Seanad and we got through the Final Stages in less than two hours. It has gone back to the Dáil and will be taken, it is hoped, today. I hope that Bill will have an impact.

The witnesses have said that the legal costs are very large. Legal witnesses have come before the committee and stated that the issue has nothing to do with them, everybody is entitled to make a claim and so on. We have heard the argument about the incentive to claim in that there is no downside and that if soft tissue injury awards were €3,000, it would be much less of an incentive than if they were €17,000, €18,000 or €25,000.

I have made the point previously that the person who robs a bank and gets caught will probably end up in jail for a little while at least. He or she will certainly have a criminal record. Where a person makes a fraudulent claim, it appears that, most of the time, the majority of the companies do not pursue the claims to the last degree. I am not here to discuss what the companies might do about the 19 cases or whatever number it was in the past six months. I would like the process to be much more systematic in that any claim the insurance companies reject is sent to the Garda. I would like the witnesses to tell me why they do not do that because it is clear they do not. I know it is difficult to prove, but they should allow the Garda to do that. If the witnesses have rejected the claim and the claim is not paid, they have clear grounds for that. The witnesses might outline the reason any or all of them do not pursue fraudulent claims. I was a little concerned when Ms Muldoon said she is not able to share information about, say, multiple claimants. Perhaps people are accident prone. I am not saying they are all doing it, but some people seem to have a history of many more accidents and claims. I thought the purpose of this famous insurance database was that all the insurance companies would pay a fee to be members of it, which meant that they could share information. Is Ms Muldoon now saying that general data protection regulation, GDPR, prevents her from sharing information about serial claimants?

Before Ms Muldoon answers, to go back to what Deputy Doherty was talking about earlier, and she might deal with it when replying to Senator Horkan, we were talking about fraud. My understanding of what Ms Muldoon said was that FBD processes the claims, that as it does that, it examines them for the possibilities of fraud, exaggerated cases and so on, and that that represents the 20% figure. The ones it refers to the Garda are the ones on which it has sufficient evidence for it to pursue. The ones it does not have sufficient evidence for are those where FBD believes there is wrongdoing but it cannot get enough evidence for them. Ms Muldoon might explain that because that was lost in the exchange with Deputy Doherty. I am sorry, Senator Horkan.

No. The Chairman is right. The point I am trying to tease out is if 20%, which is 10,000 or 12,000, of the famous figure of 65,000, of claims were fraudulent, why so few were sent to the Garda. Ms Muldoon has rejected the claim. She said FBD is not paying out. It has reason to do that. It must have some evidence because people who make a claim will not just walk away when an insurance company does not pay them even though they paid their premiums. I would like to know why most claims do not end up being sent to the Garda fraud squad.

I want to make a final point. In my opinion, and I have had this row with the Minister and have said it on the record, exaggeration is fraud. There is this idea that fraud is only fraud if the claim is staged. Saying one drove 200 miles when one drove 20 is fraud. It is an exaggerated claim. It may not be as bad as staging an accident involving three cars where the people involved know each other and everybody drives at two miles an hour into a pothole, roadworks or something like that, but it is fraud.

We might start with Ms Muldoon.

Ms Fiona Muldoon

From our perspective, the exaggeration issue is more complicated to try to work through. People can exaggerate the extent of an injury. An increasing phenomenon is adding a psychological aspect, even to a very minor injury. The 20% is the total number of suspected fraud and exaggerated claims that are examined. It is important to say that we only discover what we discover. There could be others also.

On the database, that is checking for claims and it is a flag. It does not give quantum. It indicates whether there has or has not been a claim in respect of a particular insured person. When I talk about sharing data, we are not allowed to share our suspicion that, say, Fiona Muldoon might have made three claims with another insurance company and now she is claiming against FBD. The other insurance company is not allowed share its suspicions or any data in respect of that customer other than what the regulator stipulates.

What is in this famous insurance database?

Ms Fiona Muldoon

A flag to indicate that a claim has been settled.

If, say, my name goes into the database, it will flag that I have had a claim.

Ms Fiona Muldoon

A claim against it.

That is all. FBD does not know the size of the claim. Would it indicate that I have had seven or 12 claims?

Ms Fiona Muldoon

I believe it will indicate the number, yes.

It will indicate that a person has had 55 claims in the past three, 20 years or whatever.

Ms Fiona Muldoon

Yes.

How far does that database go back? Is it a six-year period or is it historic? Can FBD go back and look at my-----

Ms Fiona Muldoon

I would have to check that. I am sorry. The Senator has got us with that question.

It is just a point. What are the companies doing in terms of telemetry technology? I refer to putting devices such as cameras in cars to watch people's driving or check their speed. We can argue about the need for better road design and engineering, which is an important aspect, but in terms of better driving, speed, alcohol and all the other aspects we know are part of the reason for road crashes, what are the witnesses doing to keep a better eye on their customers to make sure they are not doing what they should not be doing and to reward those who are behaving properly?

Ms Fiona Muldoon

The primary mechanism for rewarding those who drive well is that up to 75% of a no-claims bonus discount can be awarded.

We had telematics technology previously. The take-up was poor. We believe there is more potential for that system and we are developing two products. These would be relevant for driving and other aspects that might help to lower the costs of insurance for individuals based on the manner of their driving or how much they drive.

Do the representatives of Allianz and AXA have any thoughts on that?

Mr. Seán McGrath

Allianz is a part of a group and is leveraging group technologies and developments, particularly in the area of telematics technology. We have an Allianz safe driver app, which monitors the level of braking, acceleration and speeding and records details of the trips undertaken by drivers. That is being rolled out and it will be a feature used increasingly in future. It is, however, a developing technology.

Mr. Philip Bradley

AXA also offers telematics technology and has for some years. Some €20 million of business is based upon it. People get an initial discount of 20% for having the technology in their cars and a further 10% reduction if the technology reflects good driver behaviour. In addition, regarding some simpler technology, we have a partnership with a dash cam company under which a 10% discount is applied for installing an approved dash cam.

How does that work? Is everything uploaded automatically?

Mr. Philip Bradley

Information from the telematics technology is uploaded automatically and footage from dash cams is uploaded in the event of a claim. The dash cam footage is owned by the person insured, the driver.

There is a certain amount of visibility when cases go to court. In one case a person who was injured while carrying tea under her arm was awarded €85,000 against Starbucks. In another case, somebody made a claim for injury after having hot chocolate on a Ryanair flight. We know that about 70% of claims are settled, 20% are dealt with by the Personal Injuries Assessment Board, PIAB, and 10% go to court. Insurance Ireland usually informs us that it does not have the information we are seeking. Will the representatives of the individual insurance companies indicate whether they identify clusters of claims based on geographic areas, such as parts of counties or cities, or by particular families to find out the reason for these clusters? Does it identify areas where there have been a history of claims? How is that done? It is clearly in the interest of the insurance companies to reduce payouts. We all pay the premiums. What are insurance companies doing to tackle areas where people seem to be much more accident prone? Is anything being done in that regard by the insurance companies?

Mr. Seán McGrath

There are two approaches. We, in respect of pricing, examine different geographic areas in a detailed way. The second concerns fraud. We have to be careful about the definition of what we are calling fraud. We run sophisticated statistical analysis in the background on the 20% of exaggerated or suspicious claims to find those clusters and links connected with different families or areas. That is how we investigate that aspect.

Is it fair to say that those links exist? In some parts of the country, for example, in particular areas of cities and towns, people are more prone to make claims than in other areas.

Mr. Seán McGrath

There are definite links to various groupings. They could be geographic, familial, occupational or whatever but such links can be found.

Are those links ever reported to the Garda?

Mr. Seán McGrath

They are reported. We reported 48 such cases in the past 12 months. It is ongoing and something we are developing and improving all of the time.

Does the same apply to AXA?

Mr. Philip Bradley

Many factors go into pricing. The frequency and severity of claims are two. Those types of factors allow geographical or family connections or any other factor that stands out in a segment to be picked up.

Can insurance companies refuse cover or is cover priced in such a way as to ensure the people concerned will never want to buy a company's product?

Mr. Philip Bradley

It is possible to choose to refuse cover. We have a wide footprint, however, and we offer cover to more than 90% of the market.

AXA will not offer to cover 10% of the market.

Mr. Philip Bradley

We will not offer cover without referral.

The Senator's time is almost up.

I need two more minutes. I am the chairman of a school board and I know of other schools that were in a group insurance scheme. I think it was an Allianz group scheme. The scheme finished and the cost of insurance increased from €27,000 to €34,000. The school was informed that it had been in a good scheme but that scheme was over. No new scheme would replace it or the previous good price. That was the excuse given for the increase of €7,000 in insurance costs. That school had no claims. How can that significant increase be explained to a school where there had been no major incidents or accidents?

Mr. Seán McGrath

This again comes down to sector specific issues. Allianz has been a big insurer of schools for a long time. We recognise that schools are under pressure due to the level of capitation grants. It is not open to schools to raise funds from year to year. We take a long-term sustainable approach to our pricing in these sectors and we try to limit the level of increases as much as we can. We are back, however, to the issue of the costs of claims. Those costs have to be priced for.

There is a vote in the Dáil and I agreed to conclude the meeting by 1.30 p.m.

The witnesses have been with us since 10.30 a.m. The vote in the House is connected with the topic we are discussing. I am sorry for cutting across Senator Horkan.

We will have another day.

I thank everybody for attending. I especially thank the witnesses for being present and for their open and frank statements. I hope they will engage with the committee again.

The joint committee adjourned at 1.25 p.m. until 1.30 p.m. on Tuesday, 9 July 2019.