I thank the Minister of State for coming into the House tonight. Insurance is a huge problem in the tourism industry. It is not an optional extra for those who run the industry because they cannot operate without it. While it goes without saying insurance costs are not the only reason for a relative lack of competition, it seems clear that the price of premia is a significant factor. All sectors of the industry are worried about the cost of insurance and the level of concern seems to be increasing with each passing year. These worries are not helped by the fact that, in a large proportion of cases, the increase in premia does not seem to be warranted.
The tourism market has decided to opt for a more activity-driven approach. More facilities were developed to provide a whole range of activities for tourists. As more and more opened, tourists began to flow back into the country. When one considers this, it is plain that the expansion of leisure and other activities is vitally important to the tourism industry, yet they are the very businesses being hardest hit by insurance costs. For example, I know of a local venture where the cost of insurance has gone up by 240% in the past year. This has resulted in a premium of €50,000 for a centre that is by no means large and has had no significant claims.
Another centre nearby was quoted a premium of €274,000. Therefore, it would need to earn more than €250,000 before it could even start to pay off the rest of its expenses, never mind make a profit. In the end, it managed to negotiate with the insurance company and reduce its premium to €100,000 with a loading of €20,000 for every additional claim. When it is put like this, there can be very little economic sense in having insurance considering every claim will cost the centre €20,000. One might claim insurance costs were always high, but two years ago this centre was paying the equivalent of €65,000 per annum.
When one thinks of the jump in cost, it is apparent just how significantly the cost of insurance is affecting competitiveness in the tourism industry. However, it is not just the more energetic aspects of the industry that are being affected by this spiralling of insurance costs. This year alone, the cost of insurance in bed and breakfast establishments rose by one third. In some cases where minor expansion work was carried out, the increase has been as much as 70%. This means the average bed and breakfast establishment with three to five bedrooms in a rural setting is now paying €1,500 to €2,000.
This is obviously quite an imposition on bed and breakfast establishments when one considers that they may be in relatively isolated locations, the small markets available to them and, in some cases, the very limited tourism season in which they have to operate. Such a figure also accounts for a very large amount of their annual turnover. This is clearly an inhibiting factor that only results in preventing the more balanced spread of tourism. Will the Minister carry out an investigation into the effect insurance costs are having on the industry and ascertain the means by which we can revert this clearly detrimental trend?
