General Scheme of Insurance (Miscellaneous Provisions) Bill 2021: Discussion

We are dealing with the pre-legislative scrutiny of the general scheme of the insurance (miscellaneous provisions) Bill 2021. We are joined by representatives from Alliance for Insurance Reform and representatives from Insurance Ireland.

I would make the usual citations before we start. Everybody has heard the mobile phone notice previously. I ask everybody to switch off their mobile phone. I also have a notice on the identification of speakers. For the purpose of the Official Report, I have been requested to identify members, or they should identify themselves if I cannot see them, in order that they can be appropriately identified for the record.

Apologies have been received from Deputy Matthews, the Chairman, who is otherwise engaged-----

Deputy Doherty also.

-----and Deputy Doherty.

The first item of business are the minutes of the joint committee meetings of 8 and 9 December, which were agreed at the committee's private meeting yesterday. Are they in order and agreed? Agreed.

The second item is pre-legislative scrutiny of the insurance (miscellaneous provisions) Bill 2021. I welcome the members and viewers who may be watching our proceedings on Oireachtas TV to the public session of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. The purpose of today's meeting, which will be in three separate sessions, is to undertake pre-legislative scrutiny of the insurance (miscellaneous provisions) Bill 2021 with the Minister of State, Deputy Fleming, representatives of the Alliance for Insurance Reform and representatives of Insurance Ireland. We are joined first today by the Minister of State at the Department of Finance, Deputy Fleming, and his officials. The format of the meeting is that the Minister of State will make brief opening remarks that will be followed by a question and answer session with the members.

Witnesses need to be physically present or in the environs of Leinster House. Witnesses are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official either by name or in a way such as to make him or her identifiable. Members who are attending remotely are reminded of the constitutional requirements that members must be physically present within the confines of the place which the Parliament has chosen to sit, namely, Leinster House.

I invite the Minister of State to make his opening remarks.

I thank the committee for facilitating pre-legislative scrutiny of the insurance (miscellaneous provisions) Bill and for the invitation to appear before it today. My script has been provided to the committee in advance.

Insurance reform is a priority for Government. In the programme for Government there are 21 measures related to insurance reform. The Action Plan for Insurance Reform, published in December 2020, is the Government’s plan improve the insurance market and to bring down costs for consumers and business through 66 actions. I am pleased to note substantial progress has been made in implementing the reform agenda. New personal injuries guidelines have been introduced, the Government has made perjury a criminal offence, and we have created the Insurance Fraud Co-ordination Office within An Garda Síochána. In the Department of Finance, I chair an office within government tasked with encouraging greater competition in the Irish insurance market. The reforms are having a positive effect. Motor insurance premiums dropped by 8% this year so far. Early indications by the Personal Injuries Assessment Board’s data showed an average reduction of 40% in personal injury awards covered by the new injury guidelines five months after their introduction.

The Government recognises the difficulty faced by some businesses with regard to the availability and cost of insurance. This affects certain sectors of the economy, some of which are considered high-risk activities by some insurance companies. Brexit may also have exacerbated supply issues for certain sectors in the economy which were covered by specialised insurance underwriters that previously passported into Ireland from the UK. There are still important priority actions to be completed such as reform of the Personal Injuries Assessment Board, PIAB, and the duty of care legislation. As Minister of State with special responsibility for insurance, I continuing to support my colleagues on the Cabinet committee subgroup for insurance reform to get these key items over the line as soon as possible.

I would now like to provide a brief overview of the insurance (miscellaneous provisions) Bill and some important context for the main provisions set out in the general scheme, and then deal with any questions that members may have.

First and foremost, the Bill responds to an issue that came to light during the pandemic. This relates to deductions of Covid-19-related State payments within some business interruption claims. While such deductions may be lawful and in line with the principle of indemnity, Government was concerned that such behaviour could be seen as insurers in some way pocketing taxpayers' money. The Department of Finance examined this issue closely and conducted a detailed scoping exercise of how insurers more generally treat State supports. This revealed that in most other instances, this issue does not arise because measures already exist whereby State supports are either not provided if losses are already covered by insurance or are refunded to the State, such as in the case of personal injury claims within the Department of Social Protection recovery of benefits and assistance scheme, commonly known as the RBA scheme. Notwithstanding this, it is important to have much greater oversight of State supports deducted from insurance claims settlements in order to identify any instances, now or in the future, where this might become an issue, especially in the case of any new State supports. Accordingly, the Bill enables the Central Bank to collect and publish data about such deductions by insurers through the National Claims Information Database. Members will know that this database is an important tool in holding insurers to account. It can also be used to provide increased information on this issue and to enhance policymakers' understanding of this matter in order to facilitate targeted, evidence-based measures, if needed in the future.

It was also clear that the deduction of State supports from pandemic-related claims was causing confusion and uncertainty for consumers, especially small businesses. We are, therefore, seeking to close this gap in head 8 of the general scheme by requiring insurers to inform consumers if they have reduced the level of an insurance pay-out due to any State supports received by the claimant. These are appropriate and proportionate measures to deal with this issue, which will avoid unintended consequences and will not pre-empt any legal ruling on this matter which is currently before the courts.

Second, the Bill supplements the Government’s intention to tackle the loyalty penalty by examining the Central Bank’s review and taking any action deemed necessary in light of its findings. There are currently 2.2 million private motor insurance and 1.3 million home insurance policyholders in the country. The Central Bank review found those who stayed with the same insurer for nine years or more pay, on average, 14% more on private car insurance and 32% more on home insurance than the equivalent customer renewing for the first time. As the committee will be aware, the bank's report concluded that price-walking, a form of differential pricing, is causing unfair outcomes for some consumers who remain with the same insurance provider over several years. The bank has, therefore, proposed to ban this practice for personal home and motor insurance customers from mid-2022. This targeted and significant measure will eliminate the practice, but allow insurance companies to continue to offer promotions and discounts for new customers. This is a positive outcome for the consumer. As Deputies and Senators are aware, this was a commitment in the programme for Government and we have always insisted that the bank be given sufficient time to allow it to complete its work. Committee members will be aware that I have offered the bank any assistance it may need in legislating for its proposals, through this Bill. The bank has confirmed that it can introduce measures for this through its existing powers. That said, the Government is keen to ensure that any measures taken are effective and, therefore, the Bill will require the bank to report to the Minister for Finance six months after the first anniversary of its commencement about the impact of any action it takes. I will also write to the bank asking it to provide interim data on progress to the Department at the earliest date. This will allow us to identify, in a timely manner, whether more needs to be done and ensure that Government can then move swiftly so that consumers are properly protected.

Third, the Bill will resolve certain technical issues that have been identified in the Consumer Insurance Contracts Act 2019. Post-enactment, two technical drafting issues were brought to the Department's attention, which this Bill seeks to address. First, there is an amendment to clarify that legal privilege is protected in the disclosure of information requirements. Second, head 9 contains an amendment to section 18, which addresses exclusions for property damage in certain circumstances and the agreement of this amendment will allow for this final subsection of the Act to be commenced. This is the only Part not yet commenced.

Finally, the Bill will make important technical amendments to the legislation underpinning the temporary run-off regime, TRR, for UK and Gibraltar-based insurers. Members will recall that the TRR was established to enable insurers and intermediaries to continue servicing their existing contracts in the State after the UK's departure from the EU. This was an important consumer protection mechanism to ensure that Irish policyholders would continue to receive protection. The Central Bank has identified a number of technical issues regarding some firms that are seeking to run-off their existing business within this framework but, legally, are not allowed to do so because they also provide reinsurance business or are in liquidation. It has been brought to my attention that this has the potential to impact negatively their policyholders here in Ireland. I agree with the bank that these are vital amendments in order to ensure that Irish policyholders continue to have their policies fully serviced and do not suffer any unintended disruption. Part 5 of the Bill aims to address these issues so that these firms can complete their application to run-off their existing business within the TRR.

I hope that this overview of the general scheme has offered some useful context which will assist the committee. I am hopeful that the Government would be in a position to publish the Bill early in the New Year. This will, of course, depend on the work of this committee in scrutinising the Bill. Insurance reform remains a priority issue for everybody in the country. Therefore, I believe it is vital that this Bill be advanced promptly. I thank the committee for its attention. I would welcome any questions about the detail and nature of the provisions of the Bill, but I would sincerely hope the committee will conclude this pre-legislative scrutiny process today so that we can publish the legislation to help all consumers in Ireland as early as possible in the New Year.

I thank the Minister of State. I invite Deputy Jim O'Callaghan to put his questions, followed by Deputy Mairéad Farrell.

I welcome the Minister of State. I share his objective in that I am hopeful that the committee can complete pre-legislative scrutiny of this important legislation today and that we can get the legislation onto the floor of both Houses of the Oireachtas early in the New Year.

I have a number of questions in regard to heads 3 and 8. As outlined by the Minister of State in his opening comments, both of these heads deal with deduction of State supports by insurers. For the benefit of people listening to this debate, it might be beneficial if I gave an overview of how this operates in an insurance context. The Minister of State will be aware that very many businesses have what is known as "business interruption cover". They pay a premium to insurance companies to ensure that if their business is interrupted in accordance with one of the provisions of the policy they will be covered for the losses they have sustained. This has become particularly relevant in the past 19 months because of the Covid-19 pandemic, as a result of which very many businesses have been closed and there have been consequential claims on business interruption policies. There are disputes as to whether or not a business interruption policy arises and that is not something I am going to ask the Minister of State about.

However, let us take a standard example. Where a business closes as a result of an interruption to its business, in respect of which its insurance policy covers it up to a figure of €100,000, then if it is the case that that business has lost profits of up to €100,000 the insurance company should, under that policy, cover the business for that €100,000. However, the State may have provided generous supports to that business through the employment wage subsidy scheme, EWSS, or the Covid restrictions support scheme, CRSS, to the value of €25,000. In that context, the insurance company is saying that the business's loss is €75,000 and not €100,000. I would state that the loss is €100,000 and the fact the State has paid the business €25,000 should not bail out the insurance company. That is the background to it.

I note that in head 3, it is proposed that data in respect of any such deductions that are taken into account by insurance companies will be made available to the Central Bank.

Under head 8, the Minister of State says it will be a requirement for the insurance company to inform the business of how much the State reduction has been relied upon by the insurer.

I agree with both of those and commend the Minister of State. Why do we not go one further, as we do in respect of recovery of benefits and assistance in the Department of Social Protection and personal injuries claims? Why is the State not trying to ensure that moneys the State pays to the business cannot be taken into account by insurance companies? The insurance companies should pay the full amount and the €25,000, in my example, should be paid back to the State by the business. I apologise for the elongated question but it is an important point and people may wonder why we are not going that extra step.

I thank the Deputy. That is a perfect question and the exact question I raised when this issue came to light. What the Deputy has just said explains the current situation concisely and accurately. In practice, where a business had a loss of the order of €100,000, to use the example the Deputy gave, and there is State support through TWSS, CRSS or rates not being levied on that business for the period, there may only be a net loss of €75,000. The insurance company policies in many cases only require them to cover the net loss, rather than the gross loss.

When I came into this office last year, I spotted there was an issue here. I was conscious of the measures the Deputy mentioned in the Department of Social Protection that apply when somebody has a car accident, ends up being awarded the equivalent of €100,000 as a result of his or her injuries and, during the two-year period that is going through, receives State support through disability or other payments of the order of €20,000. In that situation, the insurance pays the net loss of €80,000 to the person and pays the €20,000 directly to the State. That works solely in that situation because there is legislation in place to deal with it prior to the event occurring. We have a scheme in place there but there is no such scheme available to cover this type of issue. Those recoupment measures were not envisaged for business interruption policies before Covid came along. Nobody envisaged that the State would support business interruption losses in the normal course of events but Covid changed that.

We would have liked if it was possible to backdate the effect of this so that we could get the benefits of the State supports refunded to us by the insurance companies. Unfortunately, the policies may have been issued a year or two in advance. That was a legally binding contract. There was no legal requirement as part of the schemes where the State made the payments to have a recoupment measure in place. We could not have made the legislation retrospective.

This is a lesson from Covid for the State. We are learning the lesson and want to implement it as early as possible. We will gather information on this for any future scheme. It could be any issue in the construction or agriculture industries or the environment or health areas. We will gather the information to know the extent of the issue and to build this recoupment measure into future legislation and schemes. However, it does not exist at the moment and we cannot make it retrospective.

The Deputy is right that, effectively, the taxpayer has subsidised parts of the insurance industry, which have not had to pay out the full gross loss and are using the State subsidy. We need to correct that. Many companies had themselves covered so that did not arise but one or two companies were in a position to use that situation. In head 3, we are gathering the information we do not have to be able to use it in future and lead to greater transparency. It will be published by the Central Bank as part of its regular reports. We will have that.

The second element of head 8 is that insurance companies will notify customers of the amount of deductions. We are introducing this as a new requirement immediately once the legislation commences. I have seen cases, for example, where there was a loss of €100,000 and the insurance company specified in the cheque they sent out that certain losses were made good by the State under various schemes and they listed those. In other situations, as happens in some personal injury cases, there is an all-in figure agreed of €100,000 as an overall settlement without breaking down the components of how that figure was arrived at. This legislation will ensure that information is separately shown and identified so the Central Bank can report to us and the customer will be aware in the beginning.

This is a lesson from Covid that we are learning for the future but, unfortunately, it cannot be backdated. I hope I am answering the question as best I can.

The Minister of State did answer the question. I am not suggesting that the legislation should apply retrospectively but consideration should be given to introducing legislation that will apply prospectively. All we are doing in the legislation is requiring the data to be collected by the Central Bank and for the consumer to be informed of the deduction. The Minister of State could introduce a scheme similar to the RBA scheme that operates in respect of social welfare payments made by the State. Insurers have to pay for those payments under that scheme. EWSS is, at present, going on until the end of March. Who knows but that business interruption claims this time next year may seek to recoup money in respect of State payments made throughout the coming year? Consideration should be given to putting in place a scheme that will operate prospectively. At present we get the data but we are still, to use the Minister of State's words, in a situation where insurers can be seen as pocketing taxpayers' money. That is not something that I or the Minister of State wants to see.

I agree with the Deputy but we do not have sufficient information to draft robust legislation on it now. That mechanism can work in the future immediately, prospectively and in relation to any new scheme introduced across any Department, like in social protection. That measure should be included in the scheme being brought forward through legislation. If there was a new scheme introduced in an environment, agriculture or construction area, we in the Department of Finance would insist that there be a requirement in the detail of each new scheme to cover this area, like we have with social protection. It has to be done through legislation, through the Department that is paying out the money, that we have this mechanism in place. This can be done for new schemes in the future.

I thank the Minister of State. Head 7 is an interesting provision. It deletes section 16(10) of the Consumer Insurance Contracts Act 2019 and puts in a new section, section 16A. Under it, there is a requirement on the insurer and consumer to disclose any document to the other side after a claim is made. That could be of benefit or of disadvantage to that claim. A similar provision was included in section 16(10) but it has been changed here to ensure the document must be disclosed by either side within 60 days of its receipt. Is the Government trying to ensure under that provision that reports such as private investigators' reports will be disclosed promptly or what type of documents is it considering?

We are deleting the section in the existing Act and bringing in a new section to give legal privilege to certain documents. We were concerned that, the way the 2019 legislation was drafted, any new information would be required to be shared. That might have compromised the important principle of legal privilege so we are bringing forward measures to ensure such documents have to be shared providing they do not breach legal privilege. Documents which have legal privilege will not have to be shared but those that do not require legal privilege can be shared. The existing regime was unclear on that and that is why there was a situation where no documents could possibly have been shared because of the legal privilege issue. We are separating documents that require privilege from those that do not.

It is a consequential provision and it will be interesting to see how it plays out. Previously insurers or the insured would only disclose documents that they intended to rely on in court proceedings but here there is a requirement to disclose documents even if they are not going to rely on them and, more important, if they are of disadvantage to the claim they are making.

I want to wish everyone a happy Christmas and new year. We have seen a lot of each other over the recent weeks and months. I hope everyone has a good one.

I want to raise the issue of price walking. On 21 October on "The Claire Byrne Show" on RTÉ Radio 1, the Minister of State repeatedly said that this legislation would ban price walking. However, that was not the case. On 16 November on "Morning Ireland" on RTÉ Radio 1, the Minister of State said that he was introducing legislation to eliminate the loyalty penalty in motor and home insurance and said again "we are going to eliminate it entirely". He was referring to this legislation. However, that was not true either. Head 4 of the general scheme relates to dual pricing or price walking. It will require the Central Bank to hand a report to the Minister. It will not ban the loyalty penalty. Am I correct? The Central Bank has the regulatory powers to end the loyalty penalty. This is what it is doing. Its representatives confirmed that to the committee last week. However the legislation itself will not end the loyalty penalty. It will produce a report. I am trying to understand why the Minister of State has gone to such great lengths to say that the legislation will ban dual pricing, as he has said publicly on national radio, when all the Bill will do is put a report on his desk. Does he accept that he has made a number of misleading statements on the legislation and the loyalty penalty?

I thank the Deputy for her good wishes for Christmas. I utterly reject that I have misled anyone except those who chose to misinterpret what I said. The situation is very clear. In the programme for Government we said that we would deal with dual pricing. It is in the programme for Government and the national plan for insurance and we are following through on that. It is important that the committee get a quick pen picture on this. It is why we have a whole-of-government approach to dealing with insurance reform. It is not just the Department of Finance, because it is an industry regulated by the Central Bank, but also the Departments of Enterprise, Trade and Employment, Justice and Public Expenditure and Reform. Much of what is happening in the action plan is not being done by the Department of Finance specifically. My job, as I see it, is to make sure that everybody else plays their part in the area. We can talk about a duty of care. It is nothing to do with the Department of Finance. It is part of the overall measures being taken.

We are doing exactly what we did with the judicial guidelines. The judges were dealing with their issue and we just imposed a timetable in the legislation along which they would have to produce a report which they did. That ensured that the job was done. We had a legislative insurance policy in place to ensure that the work that could be done was done according to a specified timeline. We are doing exactly the same here. We are giving a timeline for the production of a report. A report can only be produced if the Central Bank has taken these measures. A fair question would be around the Central Bank having had the powers to do this all along. It does not require any new powers. It is a valid question. The report highlights motor and house insurance policyholders who are suffering a loyalty penalty for being with a company beyond nine years. The question is why was this not dealt with long before now given that the powers to deal with it did exist? Our only role is to assert that yes, the powers are there and the Central Bank is going to do it and we will ensure that a report must be produced. It is about ensuring that the job will actually be done. That is the principal thing that we are doing. We are ensuring that all the agencies involved in the area step up and do what is in their powers. Sometimes they need new powers. We just want to ensure that it will done. The job will be done by the Central Bank using existing powers. The legislation ensures that there is a timeframe and a deadline to ensure that it is done.

I did quote exactly what the Minister of State said on the radio. I have the direct quote from "Morning Ireland", where to me, it is clear to me that he was saying that this legislation would deal with it. It is good that he has clarified that it is not and that the Central Bank will do so and that a report will be done. This is something that my colleague, Deputy Doherty, has raised consistently. He even made a complaint in 2019 on this, which played a significant role in this.

As this meeting is only scheduled for an hour, I will move on to another issue. The personal injury guidelines came into effect on 24 April with a view to significantly reducing the cost of claims. The latest information from the Personal Injuries Assessment Board, PIAB, shows that since it came into effect, the average value of personal injury awards has fallen by 40%. As soon as the guidelines came into effect the insurance industry warned that premiums would not fall immediately. Consumer surveys conducted by Sinn Féin and the Alliance for Insurance Reform found that these reductions are not being passed on to policyholders in the form of lower premiums. Deputy Doherty introduced the Judicial Council (Amendment) Bill in April, which has been delayed by this Government for nine months. The legislation would have required insurers to inform the Central Bank of whether a reduction in claims costs as a consequence of the person injury guidelines have been passed on to consumers and if so by how much. The Government justified its opposition to the legislation saying that the national claims information database, NCID, would provide this information. However, yesterday, several insurers were before the committee and when I asked about this they replied that the NCID could not provide this information. The Central Bank said the same last week. Will the Minister of State accept that the Bill is a good tool to apply pressure on insurers to ensure that cost reductions arising from the guidelines are passed on euro for euro to consumers?

That will certainly happen. People get confused in this debate. Some talk about differential pricing and others about dual pricing, which is a subset of that, price walking while others refer to loyalty bonuses or loyalty penalties. They are all quite different. I can understand that sometimes people use these terms interchangeably. We gave a commitment in the programme for Government and the action plan on insurance that we would deal with the dual pricing issue, which is the most egregious aspect of this. We did not want to do it in such a way as would have a negative impact on young drivers in particular who might not be able to get discounts as easily as they can up to now. That could happen under the kind of strict regime that the Deputy and her colleagues have suggested. We felt it would prevent new businesses from coming into the Irish market and offering reduced rates below the insurance base cost rate to build up market share and increase competition. We want to avoid all those negative impacts from things suggested by others and stick to the good bit in the legislation, namely eliminating the loyalty penalty. That is precisely what we are doing.

At the committee earlier this week, two companies said they had reduced prices by 10% this year and a third company said it had reduced prices by 5%. Those reductions are a result of the improved insurance environment that is the result of the Government's action plan. We made it clear that this was one key element. Legal costs will come into it and another factor will be increasing competition. To separate out one aspect of all the measures that will lead to cost reductions will leave out lots of other issues that will lead to cost reduction such as legal costs. For example, increased competition can lead to reductions that would not be captured. The instability around the costs of claims was one reason new insurance companies did not want to come to Ireland. They wanted stability and predictability and that is what they will get through the personal injury guidelines when they are fully implemented. Some companies have said that the price reductions they are giving this year is in anticipation of what PIAB will do. That is 40% based on the preliminary figures. Many people are not happy that they are not getting the same types of awards as they would have received last year and are challenging them in the courts.

The good news is that when the awards are confirmed by the courts there will be further reductions in addition to the 10% that some of the companies have already applied next year.

I am aware that there are two more speakers but only 20 minutes left so I will leave it at that for now.

Senator Casey is next.

I welcome the Minister of State and acknowledge the work he is doing on the insurance sector. It is a complex and diverse sector that needs a huge amount of reform. Such reform will eventually pay dividends for everyone. My colleague, Deputy Jim O'Callaghan, raised the issue of Covid payments. I want to focus on that issue too. The way in which the insurance industry behaved towards businesses was absolutely disgraceful and there is no doubt about that. First they said that they did not cover business interruption in the context of a pandemic and businesses had to drag them through the courts before they agreed that they did have to cover business interruption. As businesses progressed their claims, the next clanger was that insurers would deduct any Government supports given to businesses during that period. I know of some businesses that are now being challenged with a claim that once they reopened their doors, despite the business being interrupted by Covid, they were no longer covered for business interruption. The insurers are no longer accepting that period within the claim. It seems to be all about insurance and the insurance industry.

As my party colleague mentioned, collecting data is fine but not being able to go after these companies into the future is a concern. I would like to point out that no business will ever get insurance again for business interruption in the context of a global pandemic. I wish those businesses trying to include such cover in their policies the best of luck in terms of the price they will pay. My follow-on concern is whether the insurance industry will reflect the Government's support for businesses in the premiums they will be asking them to pay. At the moment, insurance companies are calculating premiums on the basis of a full payment and not on a payment minus any Government support. We are now almost two years into this pandemic. Some businesses had cover for two years, some for one year and others for 18 months. They are now coming out of the cover period and are facing huge premiums but those premiums are based on a 100% claim of exposure by insurance companies even though the State has covered a significant portion of the loss. Another problem with insurance companies is that it takes so long to progress claims and businesses are paying premiums based on claims that have not been finally settled. That is a concern going forward. I appreciate that under head 8 some form of transparency in terms of what is happening will be available to businesses. The level of transparency between insurers and clients is not up to standard.

Again, I thank the Minister of State for taking on the challenge of reforming the insurance industry. Insurance is a noose around the neck of businesses at the moment. It is strangling them in terms of remaining operational.

I thank Senator Casey for his general comments regarding insurance reform. We all hope that it will lead to a much better environment. Insurance has been such a big issue in this country for a number of years. That is why it features so prominently in the programme for Government and why a Cabinet sub-group across a number of Departments is dealing with it.

On the issue of Covid, the Central Bank's Covid-19 business interruption supervisory framework sets out the bank's expectations of insurance companies in their handling of Covid-related business interruption claims. The bank has insisted that customers have an entitlement to claim under such a policy and it is the bank's expectation that such claims would be processed and paid promptly and in full. The bank has stated that a number of insurers accepted and settled claims as a result of its supervisory interventions. We are relying on the regulator to do the work about which we have just been speaking. I welcome recent data indicating that to date more than €130 million has been paid to 4,371 policy holders through both settled claims and interim payments. Obviously, there is more to follow and the Central Bank has indicated that its examination team is continuing to actively monitor compliance with the guidelines that it, as regulator, has issued. Claims have been paid, but I accept that there are issues with some companies which did pocket some taxpayer funds because legislation was not in place in advance to capture all that. The Central Bank is actively following this up and it is important to put on record that €130 million has been paid out under business interruption clauses to date.

A number of cases are currently before the courts which I will not get into now. It should be noted that a number of insurance firms have made very significant settlements.

I thank everyone who participated in the first session of today's meeting. We will suspend briefly to allow the witnesses to leave and new witnesses to join us.

Sitting suspended at 4.16 p.m. and resumed at 4.28 p.m.

I thank the Minister of State, Deputy Fleming, for attending the previous session. We will now proceed with the next business.

I must read the following in respect of the second session, which relates to pre-legislative scrutiny of the Insurance (Miscellaneous Provisions) Bill 2021. I welcome members and viewers who may be watching proceedings on Oireachtas TV to this second part of the public session of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. We will now discuss the general scheme of the Insurance (Miscellaneous Provisions) Bill with representatives of the Alliance for Insurance Reform. I welcome to the meeting Mr. Peter Boland and Ms Tracy Sheridan, directors of the Alliance for Insurance Reform. I understand Mr. Boland intends to go first. The normal procedure is for our guests to make a brief opening statement, followed by questions and answers.

Mr. Peter Boland

I thank the Chair and the members for inviting us here today. We very much appreciate the invitation.

When the Alliance for Insurance Reform first presented to this committee in May 2018, it consisted of 21 representative organisations highlighting the negative impact of persistently high premiums and calling for real reforms that will quickly reduce liability and motor insurance premiums to affordable levels and keep them that way. A measure of the scale and scope of the crisis facing us on insurance is that the alliance now consists of 46 civic and business organisations from across Ireland, representing over 55,000 members, 700,000 employees, 622,000 volunteers and 374,000 students, as outlined in appendix 1 to the presentation that committee members have in front of them.

Since we last presented to the committee, in April 2019, the insurance crisis for our members has worsened considerably, albeit in a way that has been masked by the impact of the pandemic. In particular, liability insurance premiums continue to increase, despite recent reforms and a collapse in economic and social activity, neither of which are being reflected in renewals. Increasing numbers of sectors and sub-sectors cannot get cover or are reduced to one underwriter, which inevitably results in large increases in premiums. A current list of 44 such sectors and sub-sectors is included in appendix 2.

The crisis is existential in many of these sectors. On this point, I strongly contest the characterisation the Minister of State made in his presentation of some of these sectors as being high risk. Some of them may be characterised by the insurance industry as high risk but, inevitably, when that is examined, they are not truly high risk. They manage their risk exceptionally well. In fact, they are subject to a high level of claims, which is completely different, and to necessary ongoing reform. To characterise them as high risk runs the risk of having them dismissed as in some way uninsurable. If that kind of characterisation is applied to areas such as childcare, home care, nursing homes, the night-time economy or road haulage, it will be a very depressing day for the economy and society. That is just a brief tangent from my presentation.

Following some positive progress on issues such as judicial guidelines, the establishment of the Garda insurance fraud co-ordination office, IFCO, and the commencement of the Criminal Justice (Perjury and Related Offences) Act 2021, there is increasing alarm among our members regarding the slow pace of other key reforms, such as rebalancing the duty of care, reforming PIAB and the establishment of a State-controlled claims database. Furthermore, resistance to meaningful reforms is increasing, with a large number of legal challenges to the new judicial guidelines lined up. Ultimately, it is clear neither the economy nor the fabric of society will fully recover from Covid-19 unless insurance is sorted out.

With regard to the Bill, while we welcome the emphasis on greater transparency, more robust enforcement of elements of the Consumer Insurance Contracts Act 2019 and more clarity regarding the temporary run-off regime necessitated by Brexit, the Bill will merely tweak existing arrangements, and we do not believe any of the measures included will increase the availability, or bring down the cost, of insurance. As for what will, the answer is competition. While it will not be at a level that will bring us in line with England and Wales, never mind other European jurisdictions, the judicial guidelines that were implemented on 24 April are expected to deliver significant reductions in premiums. That process has begun in the motor insurance sector, as the Minister of State mentioned, where there is meaningful competition, with respondents to our ongoing policyholder survey reporting a 10% reduction on average in motor premiums on renewals since 24 April, a percentage that tallies with the CSO data he cited.

In the liability sector, however, where there is markedly less, and often no, competition, policyholders are experiencing average increases of 16%. It is clear to members of the alliance that additional underwriting capacity and competition are urgently needed in the liability insurance market. While the Cabinet committee sub-group on insurance reform has acknowledged this by establishing the office for insurance competition in December 2020, the work of this office has not yet had any impact on the affected sectors. That office has a positive story to tell the international insurance markets in terms of the judicial guidelines, the Garda IFCO and the perjury Act, but these gains must not be undermined by incumbent insurers settling above the new judicial guidelines. The State must not allow the reform process to be derailed by the multiple legal challenges to the judicial guidelines launched by that sector. With this in mind, the latest statistics I am hearing from members suggest a logjam of claims is beginning to appear in litigation because some feuds are being settled in anticipation of some clarity from the court challenges. We urgently need to resolve those challenges, but we fear the public interest is being undermined by a rush to protect legal fees in the personal injury area. The challenges, in our view, are clearly motivated by greed on the part of the legal profession and not by any genuine concern for plaintiffs' interests. This has been backed up by multiple NCID reports.

The sales pitch to attract additional insurers to the Irish liability market must also include the rebalancing of the duty of care, reform of PIAB and the establishment of a State-controlled fraud database freely accessible to all insurers. The attractiveness of the Irish market to insurers must be protected and further developed through holding firm on the new judicial guidelines in settling claims, by protecting the guidelines from multiple legal challenges and by pursuing other key reforms, one of which relates to the duty of care. In essence, when injuries or alleged injuries occur on a premises, occupiers such as SMEs, charities, sports organisations or event organisers are now regularly assumed to have an absolute duty of care when it comes to visitors such as customers, clients or others, whereas the concept of personal responsibility has been significantly diminished in the courts and in the interpretations of insurers in recent years.

The Cabinet committee subgroup on insurance reform published its most recent implementation report in July 2021. In it, the subgroup reported that the Department of Justice was working on a general scheme to give effect to the proposals on the duty of care and expected to bring these to the Government in September 2021 for approval. However, the general scheme has not yet been published and no revised timeline for its publication has been given, other than a worrying reassurance from some Ministers that the proposals are at an advanced stage. My colleague, Ms Sheridan, will gladly share her specific experiences with the committee in respect of the duty of care. The duty of care must be urgently rebalanced in a manner that is fair, reasonable, practical, proportionate and in the public interest.

Turning to PIAB, which is overlooked by the Department of Enterprise, Trade and Employment, the alliance believes the board is a sound concept rooted in the common good that has been fundamentally undermined by numerous and ongoing challenges by the legal profession. As such, we welcomed the public consultation on enhancing and reforming the board carried out in April of this year by the Department of Enterprise, Trade and Employment, and we believe radical reform is necessary to give PIAB the meaningful status it deserves. The Cabinet committee subgroup on insurance reform, in its July report, stated it was intended to publish in July a general scheme of a Bill to reform PIAB, but we have still not seen that general scheme. Radical reform of PIAB must be pursued as a matter of urgency.

In conclusion, the Government acknowledged the seriousness of the insurance crisis in establishing the Cabinet committee subgroup for insurance reform in September 2020, chaired by the Tánaiste and including many of the key Ministers and Ministers of State involved in this issue. After some initial progress on issues such as the judicial guidelines, the subgroup appears to have regressed to a box-ticking exercise, recently focusing on the number of actions that have been carried out among the 66 that were initially targeted, when what is needed is an intense focus on key reforms relating to the duty of care, PIAB and the claims database. Regrettably, the Bill being scrutinised today will not provide those key reforms.

If we continue to lose momentum on the key issues, we fear the war against unsustainable insurance costs will be lost.

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

We will bring in the members first and the witnesses can respond in kind.

I thank Mr. Boland for his presentation; it was very interesting. Will he give his assessment of Government actions on insurance reform since taking office last year, the progress that has been made, and whether it has been sufficient to drive reform and deliver affordable insurance for policyholders?

Mr. Peter Boland

I will respond on that in the round and will ask Ms Sheridan to come in from her own perspective on this. We were very hopeful when the Cabinet subgroup on insurance reform was established. As I said, it has most of the relevant Ministers and Ministers of State on it. We were quite positive about it at the time. We welcomed the list of actions in its action plan, with a certain number of caveats. We have experience of its predecessor - the cost of insurance working group - which was an intensely frustrating box-ticking exercise that regressed into administrative changes rather than genuine reform. The early moves, which already had some momentum before the establishment of the subgroup, have been very positive. The judicial guidelines, in particular, those implemented by the Judicial Council in April this year, are a big step subject to all the challenges thrown against it at present. The big concern is that, since then, the momentum seems to have dissipated. We have outlined the two most important by far of these issues. There were deadlines in place, which we welcomed, and both those deadlines have been missed. We are very concerned at this stage about whether we are making any real progress.

To be honest, this is not an à la carte process. The progress we have made to date will have some impact, but unless the reforms in the round are implemented, we will be looking at this issue in another ten years and another ten years beyond that. There have been several half-hearted attempts to reform the insurance market in previous decades. If this is done right, it has a chance to get it right and get it off the agenda. We are laughed at when we talk to our European colleagues and we tell them that insurance is an existential issue in the country. For most of them, it is like suggesting the electricity bill will put them out of business. It is unprecedented and it will continue to be unprecedented unless we get it all right. Right now, we are concerned that we are not. I will ask my colleague, Ms Sheridan, to give her insight into that.

Ms Tracy Sheridan

Clearly, from a business owner's point of view, the two areas that are a big concern and about which change is not happening quickly enough are duty of care and PIAB. On duty of care, I would like to give an example of an incident that happened recently in our play centre. It demonstrates very clearly the difficulty businesses have with duty of care. A couple came into the play centre with their four-year-old son. The parents went to get a coffee and the child went off to play. A while later, the parents called the manager over and said that their son had injured himself and that he may have broken his arm. They said they would head straight to Tallaght hospital and that they would let us know how they get on.

We got an email the next day that stated:

The x-ray confirms the arm is fractured. Suffice it to say at the very least he will be spending Christmas in a full arm cast. How could this happen? Did I put my child in danger by bringing him to your facility, which we love by the way, or is there something wrong that would allow this to happen? Is that slide really age appropriate to a four-year-old? I mean you expect your kids to be safe when you go to play centres. So I really don't understand what happened. The large frame says it is for three- to ten-year-olds so he should have been safe to use the facilities.

I picked up the phone and I spoke to the dad and I explained that our frame was custom built, it is health and safety approved for children over three years old, it is annually inspected by an external inspector, and we inspect the entire frame every morning before opening, so there is no fault in the frame or the slide. I had a cursory look over the CCTV and all I could see was that lots of children had used that slide without injury or incident that day or any other day. That slide has been in place for a couple of years. Hundreds of children have used it thousands of times. The dad seemed happy enough with this.

A week later, we received another email which states:

The hospital today confirmed that the haematoma at his elbow was not in fact hiding a fracture and thus they were able to remove the cast. So other than being stiff from being immobilised, he is fine. We are delighted, as I am sure you are, that there are no long-term impacts for him. I do think you should strongly consider doing something about the black slide. The experts that are certifying your slide as safe are simply wrong. How do I know this? Well, because my son went down your slide and ended up in hospital. I think some modification is appropriate to improve visibility and safety. Granted, the kids won't like me for suggesting that you remove the thrill factor but safety has to come first.

I rang again and said that we would look into it and I offered him some passes, but they came back and said:

I don't think we would be willing to take a chance to go back. I have no way to stop the kids from using that particular slide and I would not be comfortable with them using it for obvious reasons. I do think it is a great amenity to have in the area and I hope it does not take more kids getting injured before it becomes pertinent enough to take action.

We are starting to reap what we have sowed. Any incident or injury is now considered by the public to be proof of either something being unsafe or someone being negligent. There is no such thing as an accident anymore. We have to report the likes of that to our insurance company that will not doubt put a reserve in place. We will pay for that ultimately in our renewal. More important, these people could make a claim up to the point at which that child turns 18 years old plus two years, so it is a guillotine hanging over our heads all the time. Most important, that could be the claim that closes us. It is that simple. The point I want to get across is that this is not something that is getting better. Incidents like this that are clearly potential claims by the language being used are happening more and more often. This is something that is not getting slowly better but is rapidly getting worse. Something has to be done on duty of care immediately.

Another area I have great concern about is insurance settlement strategy. We had an incident a couple of years ago where a lady came up to reception with a piece of glass in her hand. She said that it went into her foot out of our ball pool. We were shocked and said we would do an incident report immediately. While the manager was doing the incident report, another customer called me over and said that they saw that person take that glass out of their pocket. Regardless, we reported it to our insurance company and heard no more. When I rang to get our renewal, my insurance company said it was perfectly entitled to refuse me insurance because I did not report a claim. I said that we did not have any claims. The company said that there was a payout of €12,000 to a person who got glass in their foot. That claim managed to bypass us entirely. It does not take a genius to figure out who our insurer is; we only have the one. The solicitor went around us and directly to the insurance company, which proceeded to settle it without giving us any opportunity to defend a claim on our policy. I felt we were just a means to an end where everyone got paid and our renewal went up.

It cannot be like that because what will happen is that the whole system will be unworkable for policyholders. It is a constant fear. It is a weekly fear. Every incident you are imagining what might happen. Most important, one by one we are closing. Play centres are closing, crèches are closing, and preschools are closing: one, because of the stress, two, because of the cost, and three, because we are being told we are high risk. We are not high risk. We are a soft touch for claims and the reason for this is because of how duty of care is being applied. That ultimately needs to change and the insurance companies need to get on our side and not use us for fees harvesting or claims harvesting.

That was really powerful. I thank Ms Sheridan for that. When people work in different sectors, it is very good to hear the real-life experience of the stress and concern they naturally feel. It is a very powerful tool to be able to give those examples. I thank her for sharing that.

It was powerful. I have a question about the personal injury guidelines. We were discussing it with the Minister earlier and with insurance firms yesterday. It was about a reduction in claims costs arising from personal injury guidelines and those being passed on to customers in the form of lower premiums. Will the witnesses give their views on that?

Mr. Peter Boland

The logic is that insurance premiums are calculated on the basis of future risk. From 24 April, the future risk applicable to every policy in the country was reduced because the judicial guidelines were implemented. The first port of call for the majority of claims is PIAB. Where PIAB has managed to settle claims, it has usually settled using the new guidelines. That further reinforces the argument that all premiums, whether motor or liability, should have been coming down from 24 April. A couple of caveats must be applied. The vast majority of claims are not assessed by PIAB; they go on to litigation. The vast majority of claims are not settled by the courts either, but in the grey area in between, where private deals are done between insurers and the plaintiff's solicitors. They account for over 80% of all settlements, by value, in the country every year. Those are the key matters.

Ms Sheridan outlined a powerful example of what we as policyholders have found over the years, where it came as something of a surprise to her. It is that insurers will settle as a financial expedient and cost it as part of the policy. If it looks as if it will cost them to pursue a claim that is fraudulent, exaggerated, or just a try-on, then they will typically not do so. They will settle it, close the file and move on, and the policyholder pays. It is essential, if these guidelines are going to have any credibility, that the insurers hold firm on them. We are hoping, in the report that the Department of Justice is scheduled to publish this month, which summarises the early impact of the guidelines, that there will be data from the insurance industry. That is where the action is right now; it is not at PIAB, regrettably, because that is where the action should be.

The second caveat that has to be applied to the judicial guidelines is the lawyers queueing up to challenge the guidelines, the Judicial Council, and PIAB. We are only at the case management element of that. The Government, Judicial Council and the courts need to do everything in their power to speed up that process, select the test cases and get them heard as a matter of urgency. We are seeing a long queue developing of cases where the settlement has already been offered by PIAB. We know from Central Bank data that that is typically as much as the plaintiff is going to get. Lawyers are determined to take them into litigation because it is only when it gets to litigation that they are paid big money. That is precisely why they are holding all these up now and waiting for the courts to see what happens with the guidelines. It is a matter of extreme urgency. Our understanding is that the next mention of these cases in the High Court is on 19 January. Every month that goes by heaps additional pressure on policyholders. The likelihood is that we will not get any proper relief from these guidelines until they are bedded down and the challenges are dealt with.

Is it okay for me to ask another question?

I thought the Chair was indicating that my time is up.

No. Go ahead.

I thank Mr. Boland. That was quite interesting. Another thing that we discussed was the Judicial Council (Amendment) Bill. I asked whether the Bill would require insurers to provide audited reports to the Central Bank detailed whether these reduced claims costs arising from personal injuries guidelines have been passed on to consumers. In the past two weeks, both insurers and the Central Bank have come in front of this committee and made it clear that the national claims information database cannot provide that information. What are Mr. Boland's views on that Bill and whether its enactment would have helped?

Mr. Peter Boland

We appreciate the committee's work on this. As we have maintained from day one, any transparency in this industry is welcome. It frustrates us that, typically, we only get transparency when legislation is put in place. Insurers typically have to be dragged kicking and screaming into a position where they will actually provide data. Any legislation that would provide additional transparency is welcome. We understand that the Department of Justice's upcoming report on this area may have some data from insurers. That would be timely. We need data on the settlement strategy right now. One concern that we have is, given the time that it takes for legislation to go through, is that there would be a time lag in getting the data. That is not to say that we are dismissing the idea. We think it is a terrific idea, if it copper-fastens the data that is hopefully being provided casually.

Those are all the questions that I have for now. I thank the witnesses for coming before the committee. I hope they have a wonderful Christmas.

Before we conclude, I have a couple of remarks as well. I thank the witnesses for coming before us. The scenario that was presented was interesting, particularly that of Mr Sheridan. Her description of her experiences was very illustrative in making the committee aware of the differences that exist. I am aware of the comparisons with our European colleagues. I am also aware that there are some differences in the extent to which cover exists for various incidents in Europe. I know that the extent to which cover is available for the motor industry in some countries is not comparable to this country. In other words, some people have very little or limited cover, or it is left between the parties. That is not contradicting the reference to Europe.

We have all had experiences. There is no doubt that the rapid settlement of cases is important. The witnesses and many other people have referred to that. The manner in which insurance companies encourage the settlements might contribute to many other things. For example, saying to the person who reports an accident on the spot that he or she is liable or not liable, as the case may be, is very arbitrary for people who were not there. It creates problems. It is often unfair. Perhaps the offending party has no responsibility or is given no responsibility with regard to the issue and gets clean away. That is a problem.

The witnesses refer to repeat offenders, which are a serious issue. I know that, in law, one cannot very well say that a person has a record and ask for it to be taken into account. It is a dangerous thing to do. However, some regard must be had to the fact that a person has had ten successful claims beforehand and appears innocuous enough. Why is that not taken into account? Can or should it be taken into account? We have seen cases where judges refer to that. We have seen other cases where people boast about how successfully they managed to circumnavigate the system. That is another difficulty relating to providing a service that is fair, equitable, comprehensive, and sufficient to meet the needs of any growing country's economy. Do any of the witnesses want to respond before we move to the next session?

I will take a quick response before we move on to our next session.

Mr. Peter Boland

The Vice Chairman spoke about European comparisons. From day one we have argued that if somebody is injured due to someone else's negligence, they must be compensated. The basic structure we have in place is a good one. Unfortunately, it has been undermined by a couple of pots of gold in the sense that when unsustainable amounts of money are added to the level of damages that can be achieved for minor soft tissue injuries, we then get much of the blackguardry the Vice Chairman mentioned, particularly where there are no meaningful consequences to making fraudulent exaggerated or vexatious claims. We have a good system. In ways it is better than in other places in Europe. However, we do not have a system that is sustainable. It is about getting the balance right.

Of course, the other pot of gold is the level of legal fees. While this is not necessarily an issue over which this committee might have direct responsibility, it is a very important issue from a finance and economic point of view. It has been acknowledged for some time, most notably by the troika, that legal costs in this country are unsustainable. There have been no significant moves to get them under control since the troika came to town in 2010. They are at the heart of the attempts to undermine the new judicial guidelines. Until that nettle is grasped, we are concerned that the current issues will continue as they are.

I thank the witnesses and members for attending. I wish them a happy Christmas. They should celebrate carefully under the strict guidance, rules and regulations. We will have a brief suspension before further witnesses join us.

Sitting suspended at 3.03 p.m. and resumed at 3.07 p.m.

I welcome members and viewers who watching the proceedings on Oireachtas TV to this third part of our public session. We are discussing the general scheme of the Insurance (Miscellaneous Provisions) Bill 2021. I welcome from Insurance Ireland Ms Moyagh Murdock, CEO; Ms Jacqueline Thornton, director of regulation and policy development and company secretary; Mr. Florian Wimber, director of advocacy, communications and public affairs; and Mr. Mike Curtin, manager of regulation and policy development. Ms Murdoch will give a brief opening statement to be followed by a question-and-answer session involving others.

I will read the usual notice of privilege. Witnesses should not mention persons who are outside the House. They are reminded of the long-standing parliamentary practice to the effect that they should not criticise or make charges against any person or entity either by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as being damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in relation to the identifiable person or entity, they will be directed to discontinue their remarks. Witnesses attending remotely from outside the parliamentary campus have been made aware that full privilege may not apply in those circumstances. 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 House or an official either by name or in such a way as to make him, her or it identifiable.

I invite Ms Murdoch to make her opening remarks.

Ms Moyagh Murdock

I thank the Vice Chairman and members of the committee for the opportunity to contribute to the pre-legislative scrutiny process for the upcoming Insurance (Miscellaneous Provisions) Bill 2021. I am joined today by my colleagues, Jacqueline Thornton, director of regulation and policy development; Mike Curtin, manager of regulation and policy development; and Florian Wimber, director of advocacy, public affairs and communications.

I am joined by my colleagues Ms Jacqueline Thornton, director of regulation and policy development, Mr. Mike Curtin, manager of regulation and policy development, and Mr. Florian Wimber, director of advocacy, public affairs and communications.

Ireland is a thriving global hub for insurance, reinsurance and emerging insurtech companies. Ireland’s insurance market is the fifth largest in the EU, and our reinsurance market is the second largest. Our members represent around 95% of the companies operating in the Irish market, making Insurance Ireland a very strong leadership voice for the sector.

Insurance Ireland members are progressive, innovative, and inclusive, providing competitive and sustainable products and services to customers and businesses across the life and pensions, general, health, and reinsurance sectors in Ireland and across the globe. In Ireland, our members pay more than €13 billion in claims annually and safeguard the financial future of customers through managing €112.3 billion in life and pensions savings. In addition, our members contribute €1.6 billion annually to the Exchequer, and the sector employs approximately 28,000 people in highly skilled careers.

The primary role of Insurance Ireland is to advocate on behalf of our members with policymakers and regulators in Ireland, Europe and elsewhere to ensure a sustainable and stable market; to promote the value our members create for individuals, the economy and wider society; and to help customers understand insurance products and services available in the market so they can make informed choices. Insurance Ireland represents over 130 members, serving 25 million customers in Ireland and globally across 110 countries, including 24 EU member states, providing protection and peace of mind to individuals, households and businesses and a firm foundation for the success of the Irish economy and wider society.

When I joined Insurance Ireland as CEO in April 2020, it was made very clear to me by the board that it wanted me to lead the organisation to represent the interests of members and advocate for a sustainable and stable market that is attractive for new entrants and new products while retaining existing loyal providers. The board also made it clear that it wanted me to have a strong consumer focus and to build this into the new five-year strategy for Insurance Ireland.

With regard to today's discussion on the Insurance (Miscellaneous Provisions) Bill, I am delighted to have been asked here today to share our thoughts. Overall, our members support the general intention of the Bill as it can provide some clarity on certain aspects of the current legislation, such as the proposed technical amendments to section 18(4) of the Consumer Insurance Contracts Act.

It is worth noting that, in respect of the proposed enhanced disclosures to policyholders, insurers continue to develop clearer and more explicit disclosures to policyholders while also bearing in mind the legal nature of insurance contracts, and the regulatory framework that insurers must operate within, such as complying with the consumer protection code, CPC, which provides comprehensive protection for consumers regarding how claims are accepted, processed and settled. While our members are always working towards more streamlined, jargon-free information for policyholders, this is sometimes challenging considering the legal and regulatory framework we are subject to.

Other heads of the Bill enable the Central Bank to collect data from insurers where they deduct State supports from settlements paid in respect of insurance claims, in such instances where an insurer may be contractually entitled to make such deductions. Under the proposed Bill, insurers will also provide enhanced disclosures regarding deductions of such State supports that are made in regard to the settlement of such policyholder claims.

We note the requirement for the Central Bank to report on differential pricing, and we are very happy to have been given the opportunity to discuss this important issue with the committee. It is important to discuss the Central Bank report in the context of the miscellaneous provisions Bill.

We welcomed the final report and public consultation following the Central Bank review of the private car and home insurance markets. In our view, the proposed reforms are balanced and proportionate. Our members have proactively engaged with the Central Bank over the course of the review to ensure all market participants operate in a consistent and consumer-friendly manner, and we were pleased that the Central Bank acknowledged that to insurers last week and at this session. The insurers reacted promptly to the “Dear CEO” letter. Our members did not wait until the outcome of the review to implement changes.

From the outset of the review, we have been proactive in providing feedback on the proposed legislation. I assure the committee of the importance that our members attach to continuing to deliver fair consumer outcomes through the provision of a continued range of innovative products and services and the fact that we believe the proposed rules outlined in the Bill should support this objective.

The Central Bank report found that differential pricing benefits some consumers who are engaged and shop around for their insurance to obtain the best price for their needs. It is important not to disincentivise this engagement.

On foot of their initial report regarding differential pricing and the impact it could have on some consumers, Insurance Ireland and the members of the general insurance council undertook to implement a comprehensive and well-publicised shopping-around campaign throughout 2021. We engaged with Age Friendly Ireland and Age Action to obtain more insight and target all cohorts to ensure the best outcomes and help secure the best deals for policyholders renewing insurance policies. We plan to continue the awareness campaign in 2022. Our latest consumer campaign is Insure Yourself Wisely, the essence of which involves being insurance savvy.

As part of our ongoing commitment to address the issues raised within the Central Bank’s report, Insurance Ireland has commissioned a comprehensive consumer research exercise considering the experience and perspectives of Irish adults regarding insurance generally.

Insurance Ireland welcomes the Central Bank’s proposed reforms, which are balanced and proportionate. We agree with the approach outlined by the Central Bank whereby “price walking” is banned for consumers who remain with an insurer beyond two years. The pro-competitive option for new business discounts is retained, which will benefit consumers.

The effect of the proposed measures is difficult to predict but it will be for each insurer to independently assess how it will implement them and determine the implications for it and its respective portfolios. Ultimately, it is about how its customers will be protected.

Insurers are now providing five-year premium information on their policies, which brings enhanced visibility and transparency. This, in itself, will help with making more informed decisions.

I would like to address the provision and development of the National Claims Information Database, NCID, under the Bill because it is important to point out the importance of the database. It has been a key element in understanding the drivers of the costs of insurance and of underpinning policy measures to address those. The establishment of the NCID has served to significantly improve data availability in the Irish insurance market and support policy analysis, which is contributing to addressing the issue of the high costs of insurance in several areas.

The high-level trends we have seen in the reports published so far include the considerable legal costs and significant time period associated with settling injury claims through litigation. We heard about this from the previous speaker, Mr. Peter Boland. As acknowledged by the Central Bank, the data outline that the significant differences in legal costs greatly outweigh the differences in compensation outcomes. The performance of the sector since 2009 and the profit- and loss-making periods over the intervening period demonstrate great volatility.

As with any business, insurers cannot sustain indefinite losses and have to take steps to return to stability. A loss-making and volatile market is not in the interest of policyholders. Our members wish to operate in an environment that is less volatile and that delivers more consistent outcomes for consumers.

Insurance Ireland sees the analysis provided by the NCID as an important and valuable tool for legislators and the regulator in understanding practices in the insurance market in Ireland, thus allowing for more informed decisions to be made on how to address the issues driving the cost of insurance.

The proposed measures in the Bill amount to a significant change for the market and how insurance has been traditionally managed. We expect significant IT system changes, and that will probably be the biggest challenge to implementation. We do not want there to be any negative impact for our ongoing projects, in particular our motor third-party liability database, which is an important initiative that want to be delivered in 2023 as a priority. Therefore, we consider it important that appropriate implementation time is given and we will propose that 18 months be the timeframe to implement all measures. I thank the Vice Chairman for the opportunity to contribute to the pre-legislative scrutiny process and look forward to engagement with the members on any questions they may have.

I thank Ms Murdock. I understand Deputy Farrell has agreed to give way to her colleague, Deputy Conway-Walsh.

I will be as succinct as possible. I want to take this opportunity to address the situation around mortgage life protection insurance for people with eating disorders, in particular cases where people are availing of counselling on a monthly basis, which is being used as a reason to refuse them insurance. Is Ms Murdock aware of the difficulty faced by people with eating disorders in getting mortgage policy protection? How do insurance companies in Ireland measure and access recovery? What kind of oversight is there to ensure that firms are not discriminating against people with eating disorders?

Ms Moyagh Murdock

I thank the Deputy. We have been made aware of the cases and issue in question and are tracking that. My colleague, Ms Thornton, is a director in this area and I will ask her to comment because we can provide some clarity on that for the Deputy.

Ms Jacqueline Thornton

I thank the Deputy for the question. The first thing we need to be clear about is that regardless of the condition, be it an historic eating disorder or something completely different, there is no one cohort of customers suffering from a condition who would be automatically declined for mortgage protection life cover. Each applicant who submits an application will be assessed individually on his or her individual circumstances to understand the risk posed to an insurance firm. The insurance firm then applies underwriting standards based on the information it needs, including very sound medical data and up-to-date information not just on medical matters and conditions but also on the latest medical technology and treatment options available. A decision is then taken as to whether the level of risk is in line with the risk appetite of the insurer and current book the insurer has. In some instances, that risk will be deemed to be too high and beyond the appetite of the insurer. In those cases, the explanations and reasons for the decline will be set out to a customer in the response he or she receives.

As we understand it, and as has been confirmed by the Central Bank to the committee, there are, in effect, very low levels of decline in mortgage protection in Ireland. For those who are declined, there is a major impact because they need to get mortgage protection to secure a mortgage. A provision in the Consumer Credit Act 1995 makes it very clear that if an individual cannot obtain life cover, such as the constituent to which the Deputy referred, or can only do so at a cost that is unreasonably high, an exemption from the requirement can be granted. That is something that can be discussed with a lender. I note a recent statement regarding some Banking & Payments Federation Ireland, BPFI, data, which stated that only 0.05% of mortgage application approvals do not proceed because of a lack of mortgage protection. This indicates that the level of decline is very low.

I am not dealing with just one case. We have to consider this in the context of the significant premiums charged. It is not a case of refusing someone on a particular basis. I am concerned because it may act as a deterrent for people accessing the help and support they need for fear of not being able to at some stage in their life own their own home. I ask the witnesses to acknowledge that it is not about just one case, and to examine the situation and put insurance firms on notice that while there is flexibility, it is not being used and there needs to be fairness in their approach to people undergoing counselling. I see it as a very positive thing when people take charge of their health, be it their mental or physical health, and get the support and treatment they need and are then able to have a home of their own. It should not be a case of one or the other. I ask the witnesses to do everything they can to make sure that this situation is addressed for people across the board so that they know they will not be penalised later on in life.

Ms Jacqueline Thornton

That is fair. We work very closely with our members on the life side in respect of the underwriting criteria and issues that tend to come up, whether that is, as the Deputy mentioned, historic eating disorders or anything else. It is important to note that even if there are issues, conditions or risks that have an impact on a person's ability to obtain life cover, the exemption exists. It is to be hoped that we are not in a position whereby people are afraid to look after their mental health because it may have an impact on their ability to own their own home. That is why the exemption exists. If there is a condition, treatment, etc. that may exceed the risk acceptance level of any insurer, that is why the exemption exists. It is there to try to ensure that individuals who are affected will still have the opportunity to own his or her home at a later date.

There needs to be transparent measures. If somebody has had no issues arise for many years that should be recognised. If a person is getting counselling and has everything in place, he or she should be rewarded rather than punished in terms of insurance. I will leave it at that.

I thank the witnesses for coming in front of the committee today. I will start with questions on the personal injuries guidelines.

We have had a number of sessions on insurance, and this feels slightly like Groundhog Day because I am teasing out the same kind of questions. It is important because we need to get everyone's view. The personal injuries guidelines came into effect on 24 April and significantly reduced the cost of claims. From the latest information we have since the guidelines came into effect, the average value of personal injury awards has fallen by 40%. We know the insurance industry warned that premiums would not fall immediately, and that is what I want to tease out with the witnesses. What percentage of the total cost for the insurance industry is absorbed by gross claims incurred for personal injuries? I can ask a few questions or the witnesses can come back in on that one.

Who wishes to answer?

Mr. Mike Curtin

I will take that question. In terms of the personal injuries guidelines, as Deputy said we have heard a lot over the past couple of days about the position of individual insurers and different stakeholders. We welcome the guidelines wholeheartedly. Since they were adopted on 24 April, insurers have stated that there have been material decreases in premiums in conjunction with the guidelines. The NCID report from Central Bank suggested that between quarter 4 of 2017 and the end of 2020 there was a 16% decrease in the cost of motor premiums.

CSO figures for the period suggest that there was a significant decrease of 8% over 2021 so, thankfully, they are having a material impact on consumers and it is good to see. The one concern from an industry perspective is that there is a high level of claimant rejections of the awards being made directly from insurers and PIAB. One thing we advocate is for them to be swiftly settled and adjudicated on. The benchmark for all these awards will be set by the courts in the land and the sooner these cases are heard and if we get more certainty regarding pricing in the future, the better from an insurer perspective.

If claims under a certain category have fallen by 40%, what does Mr. Curtin expect the percentage fall to be in terms of the costs even on a euro-to-euro basis? When people hear that costs have fallen by 40%, they expect to see something quite significant in their own costs. Could Mr. Curtin tease that out?

Mr. Mike Curtin

As the Deputy will appreciate, we cannot really get into future pricing arrangements. From an insurer's perspective, it concerns them acting upon the adoption of the guidelines so far. Some categories of injury have seen a fall of 40% while others have seen differences regarding different injuries. The insurers will factor in their claims experience and the history across a number of injury categories. They will also take stock of how these settlements go through over the next 12 months once they are heard in the courts. It is hard to predict what is going to happen. With any transformative change like the adoption of the guidelines, there is a transition period where there is uncertainty. That seems to be the situation so far.

Will the national information claims database be able to monitor whether the savings companies make as a result of the personal injuries guidelines have been passed on to customers euro for euro? Mr. Curtin may be aware of the Judicial Council (Amendment) Bill, which would have required insurers to provide audited reports to the Central Bank detailing whether these reduced claims costs have been passed on to consumers. What are his views regarding the national information claims database?

Ms Moyagh Murdock

I can answer that question. The national information claims database is an excellent tool. It has been evolving over the past three years. We have had two years of motor reports and the first year of employers' and public liability and property. The miscellaneous provisions Bill will introduce further enhancements to it. The trends coming out of insurance portray the trajectory of motor insurance but it also provides a lot of clarity on profit and loss making, as was pointed by the Central Bank. It is a very informative tool and does what the Deputy refers to, namely, providing clarity. The consumer will feel that in his or her pocket. Consumers are feeling in their pockets with motor insurance. Employers' and public liability remains a very challenging market, as was presented in the most recent report in July, which showed a loss of 3%. When one takes account of the investment income out of that, it is an actual loss of 6%. Mr. Boland outlined the other measures we need to deliver on to ensure that the whole package of reform produces the actual desired outcome from the reform agenda. We would concur with everything the Deputy said.

The next topic springs out of what was discussed in the previous session by Ms Sheridan. We could all say that we would have been very much impacted by her real-life story. It concerns the topic of insurance fraud. The insurance industry has repeatedly claimed that 20% of all claims are fraudulent with Insurance Ireland and Allianz claiming that insurance fraud costs the industry €200 million per year. In response to a parliamentary question, the Minister for Justice confirmed that 63 fraudulent claims were reported to An Garda Síochána in 2019 and that 48 were reported in 2020. In 2019, 177,000 claims were made in the area of motor insurance while 26,000 claims were made across employer's and public liability and commercial property insurance. This means that 0.003% of claims across motor insurance and employer's and public liability were reported to An Garda Síochána on the grounds of fraud in 2019. Either misinformation is being put out or the insurance industry is acting contrary to its obligations under section 19 of the Criminal Justice Act 2011. Does Ms Murdock recognise that the actions insurers have taken regarding insurance fraud do not correspond to the message being fed to the public?

My second question relates to the point made by Ms Sheridan. Under section 16(4) of the Consumer Insurance Contracts Act introduced by Deputy Pearse Doherty that was signed into law in 2019, insurers are required to notify a consumer of a claim made against his or her own policy, give him or her an opportunity to submit relevant evidence and inform him or her if a settlement has been made. Can Ms Murdock confirm whether she believes these insurance companies are now operating each of these requirements?

Ms Moyagh Murdock

Fraud is an important issue for the industry. I am not familiar with the figure of 20% quoted by the Deputy. I wish to convey to the committee that we signed up to a new memorandum of understanding with An Garda Síochána and the Garda National Economic Crime Bureau in September. It is a much more streamlined and clear agreement where we all know what we need to report to An Garda Síochána, which can either follow it up centrally or divert it to the local office depending on the category of insurance fraud it falls into. This is the first thing we must point out is that it is all criminal. Probably one of the challenges we face is the threshold we must meet with evidence. Something we can see is clearly fraudulent does not always meet that threshold with An Garda Síochána in terms of its ability to investigate it. We can see cases in very recent days that would clearly be fraudulent but we must come up with the evidence to say they can be investigated. That said, in the first three months of that new memorandum of understanding, the feedback has been very positive from An Garda Síochána, which intends producing a report on what it is delivering, the quality of information coming through from the insurers is good and An Garda Síochána will be reporting to the Department of Justice in the first quarter of 2022. It is very important that we have the right guidelines and evidence that we can pursue fraud. There are certainly attempts at fraud in terms of application fraud and not providing the insurer with the correct information at the outset. The new legislation makes it important that insurers ask the right questions. The onus is now on the insurers to ask those questions and we have bought into that fully.

One of the things I would point out regarding the numbers quoted by the Deputy is that many of those cases have multiple applicants within one case. A Ford Zafira with seven seats could involve seven individuals in the same case. These all have legs and there are a lot of other parties involved in individual claims.

My figures would suggest that it is 0.003%. What is the percentage according to Insurance Ireland?

Surely if it is such a big issue, Insurance Ireland is aware of the percentage of claims that are fraudulent. For 2019, we have the figure of 0.003%. What is Insurance Ireland's figure?

Ms Moyagh Murdock

As I said, I do not have a figure here. It is important to get the first period of execution of the new memorandum of understanding to see how that is panning out. The Garda will receive reports of fraud from multiple sources, whether they come from the insurer or members of the public. There are different sources. The members of Insurance Ireland will report fraud to the Garda. They will also deal with it themselves. There are other sources for the reporting of insurance fraud, so it would be difficult to give the Deputy a comparative figure.

Ms Murdock might furnish the committee with that after the meeting. That would be fine. We do that regularly at this committee. The figures I am seeking are for 2019. If Ms Murdock could furnish us with those figures after the meeting, it would be great.

Is that possible?

Ms Moyagh Murdock

I still think the source of fraud reporting would have to be the Garda and what it has that can be investigated. That would give the Deputy a comparable figure. It would be a challenge. I will certainly examine what we can provide for the Deputy on fraud.

It would be great if Ms Murdock would provide that.

Ms Moyagh Murdock

I would point out that it is also important, and we are working closely with the Garda on this, to ensure the Garda has the resources to follow up every individual report it receives. That is also key.

That is absolutely so.

Does any committee member wish to make further remarks?

I was going to ask a second question relating to what Ms Sheridan was talking about. Her story during the previous session stood out to me. I am not talking about Ms Sheridan's case at all. I do not mean it that way. I just mean it was a fine example in the broader sense.

Ms Moyagh Murdock

It is an important point to come back to because what Ms Sheridan experienced was not necessarily fraud. However, if someone experiences an accident and that slide was in one's back garden-----

I was referring to what Ms Sheridan said about consumers not having the opportunity to submit relevant evidence and that she was not informed of the settlement. It was that issue I was referring to. I could be wrong and am happy to be corrected but it is my understanding that under section 16(4) of the Consumer Insurance Contracts Act, sponsored by my colleague Deputy Pearse Doherty and signed into law in 2019, insurers are required to notify consumers of a claim made against their policy, give them an opportunity to submit relevant evidence and inform a consumer if a settlement has been made. Are insurers following that requirement? It would be important for us all to know that.

Mr. Mike Curtin

I can take that question and I thank the Deputy for asking it. One part of the new miscellaneous provisions Bill is to clarify that section because there was a concern around legal professional privilege. Insurers have an obligation to disclose under section 7 of the consumer protection code on claim handling. Insurers are bound by that obligation.

We would suggest that the section to which the Deputy referred applies to policyholders. Obviously, we cannot go into any individual circumstances and I am not sure of the facts of the situation mentioned earlier by Ms Sheridan.

I did not mean to personalise the issue.

Do any of the committee members or our guests want to make any final remarks? No. In that case, we will proceed towards conclusion. I thank our guests and the committee members for attending, especially considering the times we are in. I thank both sides for their participation. I wish them all a very happy, Covid-free and otherwise safe Christmas and new year. I urge them to take full precautions at all times. In the event of there being a dispute between insurers and the insured, I urge all sides not to come back to the committee first but to talk to each other.

That concludes the pre-legislative process on the insurance (miscellaneous provisions) Bill 2021. Our guests have been fully participative and we appreciate the efforts made by everybody.

The joint committee adjourned at 3.45 p.m. sine die.