Rising Cost of Motor Insurance: Discussion (Resumed)

I welcome Ms Dorothea Dowling, formerly of the Motor Insurance Advisory Board, and Mr. Ciaran Phelan and Mr. Paul Carty from the Irish Brokers Association. We look forward to their contributions. As agreed previously, the witnesses will make a five-minute opening statement after which members will interact with them for questions and clarifications. I advise the witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing ruling of the Chair 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 or her identifiable.

I invite Ms Dowling and Mr. Phelan to make their opening remarks. They may toss a coin. I suggest ladies first.

Mr. Ciaran Phelan

Does Ms Dowling want to go first?

Ms Dorothea Dowling

No.

In that case I call Mr. Phelan.

Mr. Ciaran Phelan

The Irish Brokers Association, IBA, would like to thank the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach for asking us to attend seeking our views in respect of the rising costs of motor insurance in Ireland.

The IBA represents over 500 insurance brokers in the Republic of Ireland and our members sell motor insurance policies to over 700,000 Irish consumers. Attending with me today are two of our most prominent members and large players in the motor insurance market. Mr. Paul Carty is managing director of ARB Underwriting and wears two hats here today: one as a managing general agent and the other as a broker; and Ms Caeva O'Callaghan of O'Callaghan Insurances Limited, whose broker business has a large personal lines client base. Also with me are our director of general insurances, Mr. Brian McNelis, and Mr. Frank Lahiffe, our public affairs adviser.

Our members are at the coalface and have had to deal with the many confused and angry motorists whose premiums have increased by over 70% in recent years, although the majority remain claims free. The reasons for the dramatic increases in premium have at this stage been well documented and what I would like to focus on in this brief presentation to the committee is what we consider as remedies to spiralling premiums, and, ultimately, to what will lead to a more consistent pricing model.

Insurers have failed in the past and probably will fail in the future. We, in Ireland, have had too much experience of insurers failing. The root cause has always been unsustainable pricing models to win market share. In the 1980s, we had the collapse of PMPA and Insurance Corporation of Ireland, and in the past number of years we have seen the collapse of Quinn Insurance, Setanta and Enterprise and have also witnessed insurers having to be recapitalised by parent companies and investors to stay in business, namely RSA, FBD and Liberty. Five years ago, drivers could get comprehensive car insurance for as little as €230 which is approximately a third of the price in the 1980s. Putting this pricing into context, it was well below most individuals' motor tax and also if the policy included windscreen cover, the cost of replacing that windscreen was more than the cost of the policy.

To arrive at a sustainable affordable price, certain market dynamics need to be urgently addressed. We, as a body, have witnessed first-hand the dysfunctional nature of the present market whereby we have seen prices increase and margins improve, and yet insurers like Zenith are leaving the market while at the same time there is not a queue of insurers seeking licences from the Central Bank of Ireland to enter, or passport in to, the market. This is because, apart from the small scale of the Irish market, the ability to make a return on capital is too uncertain. If we are to have a functional market that is competitive, we need greater certainty to allow companies price properly and make a return for the shareholder. In the Irish market today, capacity is reducing which inevitably leads to price increases and if the limited capacity is to continue, prices will inevitably rise further.

All stakeholders have a role to play in normalising the market - the Government through policy changes, the Central Bank through proper oversight of pricing and reserves, the insurance industry by being more transparent on claims and the sharing of data, the courts in respect of awards, the broker in providing choice and claims support, and the consumer with regard to driving behaviour and fraudulent or exaggerated claims. In particular, the Government has an important role to play and we believe these important first steps need to be taken as soon as possible.

In essence, the Government needs to take the following action. It should ensure the market is attractive to new entrants and competition by removing uncertainty, and tackling the claims culture that currently exists. Greater capacity in the market avoids the cherry-picking of perfect risks, increases competition, reduces price and improves choice for the consumer. It should increase the powers of the Injuries Board, ensuring fewer cases end up in the courts and if they do, that the courts refer to the book of quantum. This, we believe, would reduce significantly legal costs which could amount to approximately 50% of the overall claims cost in disputed cases.

Any innocent third party should be adequately compensated for injuries caused in a road accident. However, up to 70% of all claims are for soft tissue injury with no long-term detriment to health or lifestyle. There is undoubtedly an element of exaggeration, or indeed fraud, in many of these cases and therefore, if the incentive of cash was replaced with treatment for injuries, many of these claims would disappear from the system. We would, however, reiterate that people seriously injured should get adequately compensated.

The Government should remove retrospection with regard to changes in legislation. Insurers price on the factors that apply at the time of taking the risk. However, we have seen in recent years changes that have affected claims not yet settled, examples of which are where they change the discount rate, court award limits and compensation rules.

The Government should appoint the Central Statistics Office to gather information regarding claims data. The co-ordination of existing databases holding claims data, penalty points, driving licence and NCT information is essential in the efforts to fight fraud, improve processes and ultimately reduce costs to the benefit of the consumer. Data protection rules are often used as excuses, but if the availability of data allows for better and fairer pricing models then in our view the majority of motorists will agree to allow visibility of relevant data.

The Government should set up a compensation fund to cover the inevitable future failing of an insurer. It could be funded through contributions from insurers who operate in the market relevant to their market shares and by the current insurance levy on premiums. This would ensure a level playing field for all operators in the market, take pressure off the Exchequer when a failure occurs and ensure the industry does not have to cover the liabilities of an imprudent competitor, which makes no sense and would be a major inhibitor of new insurers entering the market.

Fraud needs to be punished to deter offenders. If a case is fraudulent, wasting time, money and, more importantly, ambulance, fire and Garda resources attending an accident, the perpetrators should be heavily fined and in certain cases, receive custodial sentences.

The Central Bank needs to make the public aware, from May 2017, of the solvency and financial control report, required under Solvency II regime, for all insurers operating in the Irish market which will greatly enhance transparency of their financial standing. This will enable consumers and their advisers make more informed decisions regarding from whom they purchase insurance.

Insurers need to become more transparent and provide the relevant data on claims so that the whole claims picture is in the public domain. The settling of claims early, and outside the courts, is acceptable if all parties are happy but the absence of data causes distrust when the industry is trying to explain the actions it is being forced to take. Also, policyholders should be more involved when an insurer agrees to settle on their behalf. In many situations, this only becomes apparent at renewal. We all have heard stories of minor damage being exaggerated and settled without any recourse to the policyholder to defend the settlement.

Courts need to be mindful of the book of quantum as a fair assessment of injury compensation so that there is a consistency in awards. Also, if cases are found to be fraudulent, they should be sent to the DPP with a view to criminal prosecution.

The Garda should be resourced to reduce the numbers of uninsured drivers who take chances knowing their chances of being caught are negligible. All gardaí should have APNR equipment so that they can scan registrations to see if cars are insured, and the requirement for insurance discs should be abolished. If vehicles are not insured, they should be confiscated and the driver banned from driving for a number of years.

Drivers also have responsibilities. They need to provide accurate details when acquiring insurance. Education is required with regard to fronting, whereby the parent insures the car as the main driver, even though it is the son or daughter's car and he or she will be the main user of that car. Parents think they are saving their children money when, in fact, their children are driving without insurance.

With insurance costs so high for young drivers, the premium is now often in excess of the value of the vehicle they purchase. We tend to allow the most inexperienced drivers drive the oldest and less roadworthy vehicles. Most of these older cars do not have the safety features of modern cars and may have previously been crashed or renovated. There is also a strong correlation of older cars being used for fraudulent or staged claims. We also need tougher penalties for speeding, careless driving and the use of mobile telephones when driving.

Brokers play an important role in the arranging of insurance. Indeed, unlike an insurance company, they shop around at time of renewal to ensure their customers are getting the best cover at the most affordable price. As a result of the current hike in premiums, members have seen an increase in new business. However, with reducing capacity, their ability to find better priced products has reduced. Also, certain insurers operate a differential pricing model whereby they offer different premiums for the same risk through different distribution channels. They often also discriminate between new and existing customers. In our view, a risk is the same irrespective of which channel it comes through or whether it is new or renewal, and the price charged should be the same. In fact, purchasing insurance through a broker not only provides a wide choice of product, but also ensures a fairer settlement as the customer is often represented in the claim.

It is a dysfunctional market with no new entrants and the incumbents are losing money. Unfortunately, we have a system with high awards, which, unless tackled, will lead to further premium increases. The insurance industry not only provides significant employment but invests heavily in the economy and facilitates daily living and business through the transfer of risk. It is imperative that we address the issues highlighted to the committee if we are to continue to have a competitive and profitable industry. In the past, premiums were too low. Consumers must realise the new norm will see average premiums closer to 1990 levels than what we have been used to in recent times. The correction in premium size was warranted but in a functional market it would have been more gradual and less discriminatory. I will be delighted to answer any questions that committee members may have.

Ms Dorothea Dowling

I thank the committee for the invitation to appear before it. I stress that I am here in a personal capacity. Committee members may know I was chair of the motor insurance advisory board, MIAB, which reported in 2002.

I ask people to take their phones off the desks, as they cause interference.

Ms Dorothea Dowling

My phone is turned off. The MIAB statutory investigation into the cost of motor insurance started in 1998. We had a very strong board and a particularly strong statistician. We had to threaten to resign en masse as a board because of the non-co-operation of the insurance industry at the time in providing data. Our excellent statistician - I know I am not supposed to name anybody - was able to disprove some of the actuarial data models submitted to us and subsequently gave evidence at the Equality Authority on actuarial data produced to justify age discrimination, which turned out not to be age-related. I give these examples from the point of view of how important it is not just to get data but to interrogate it. At the time, the joint Oireachtas committee had an extremely important role in establishing the Personal Injuries Assessment Board, PIAB. It is important to stress the Long Title of the Act, as its objective is the making of assessments to prohibit in the interests of the common good the bringing of legal proceedings. This is the sole function of the Injuries Board in this context. Representatives from the Injuries Board came before the committee yesterday, and much has been achieved, as was anticipated at the outset. There was never any question of its being a lawyer-free zone. We do not see that anywhere in the legislation and I never said it. The heads of the Bill regarding section 7 made it very clear that nothing would stop people from getting their own advice from any agent or expert, but they would do so at their own expense.

The risk of introducing a streamlined quick personal injuries redress system is what is called the expressway principle - that is, that it would be made too easy. The balancing measure is the Civil Liability and Courts Act, which is the deterrent to what I call exaggerated claims. We need to discuss the word "fraud," because it can be quite misleading. In 2007 the PIAB experienced a situation whereby a small number of high-volume solicitors rejected PIAB awards but took the same money the next day and received litigation costs. Unfortunately, the industry did this. Legislation was introduced in 2007 whereby if someone rejects a PIAB or Injuries Board award the amount stands as a tender or lodgement in the court system, in accordance with existing court rules, and if the court does not award any more than this the party ends up being liable for both sets of costs and will probably receive no compensation.

In 1986 a joint Oireachtas committee examined this issue. At the time, litigation overheads were considered to be a mouth-watering 25% of the cost of insurance. That committee was chaired by Ivan Yates. We now know that by the time of the MIAB report this had risen to 46%. I understand the Injuries Board uses a figure of approximately 60%, based on data from the National Competitiveness Council. In October 2008, I told a joint Oireachtas committee that we had come a long way from the 1996 Deloitte report, when it took five years for people's cases to reach compensation settlement. Perhaps during that time insurers used investment income to delay paying out claims, but it ceased to be a good business model to rely on investment income from the time the PIAB came into operation, when the maximum wait would be nine months and the statute of limitations was adjusted to two years.

In April 2014 I carried out my final function as chair of the PIAB before I retired very early. It gives me no pleasure to say I saw this coming and had seen it coming as far back as 2013, particularly with regard to increasing the compensation limit in the Circuit Court from €38,000 to €60,000. The last time that happened, in 1999, for supposedly the same objectives, it did not work and the Central Statistics Office index increased by 81%, but that was over a decade and not over three years as we see here. When I challenged the Irish Insurance Federation as to why it was not pressing for this not to happen, I was told it wanted to focus its lobbying of the Government on the single issue of the introduction of compulsory private pensions.

I have been asking myself what questions I would ask if I were a committee member. One is what success would look like for this project. The first element would be to stop the further increases that apparently have been signalled. I will be cautious about what I say about this, because I understand the Competition and Consumer Protection Commission will investigate it. I note with some irony that some representatives of the insurance industry in this morning's newspapers state that they relish the fact that the Competition and Consumer Protection Commission is to investigate the high level of awards in Ireland. I understand from the press release from the Competition and Consumer Protection Commission that what it will actually investigate is megaphone collusion.

The next question to consider is the real reason we have seen the increases that have taken place. If it is because of unpreparedness for Solvency II, we will not like it, but it is a one-off and we will not have further increases. Let us put a price on Solvency II, as we really need to get to the bottom of this. The data I have point in a different direction. Longer term, because there are urgent actions that need to be taken, we should stop the boom-and-bust economics that seem to operate in the insurance industry. We have seen elsewhere where it can lead.

I am here to assist the committee because I feel I have unique expertise in this area. I have experience of implementing successful reforms. I am here solely in a personal capacity. As I have stated publicly, I am very concerned that insurers are being allowed to dictate the reform agenda without any empirical evidence to support their arguments - in fact, to the contrary. I have provided the committee with some data on this and comparisons with other EU member states on average claims costs and average premiums. If insurers had been allowed to dictate the reform program with regard to the MIAB and establishing the PIAB, we would not have had the 40% reduction in the CSO index in the following decade, which was to the end of 2013. It has all gone pear-shaped since then, which has nothing to do with the fact that I retired at the same time. I have no confidentiality issues because it was before the PIAB was a statutory body. I see indications that the Irish Insurance Federation is making demands for the Injuries Board to do a whole lot of things that would be offensive to the separation of powers and would usurp the position of the courts, and these must be resisted. According to international research I undertook as part of my PhD, this type of thing has happened before. The unsuccessful reforms in the UK have been a disaster, as is the case in some US states. The most seriously injured have been the biggest losers and policyholders have not gained anything.

The real pressing issue for today, in my view, is that reputational damage is being done to Ireland Inc., and I can provide the committee with many examples. This is putting the frighteners on potential entrants. I also suggest that there is a potential constitutional challenge with regard to the quantum as planned, for reasons of principle and pragmatism. I am sorry to say prices are not the only problem with the insurance industry, and I will quite happily discuss this with the committee.

In its 2004 report, the MIAB had to state that matters had got worse regarding victims' rights under EU motor insurance directives. The Motor Insurers' Bureau of Ireland, MIBI, was given special powers which, in the opinion of the MIAB, are contrary to rights under EU law. As the MIBI is an emanation of the State, it has been charged with this responsibility by the State. In 1999, Mr. Justice Brian McMahon found that there was a danger of Francovich damages against Ireland and, if there are, it will go on the bureau and the policyholders. It is another emerging bomb that we need to defuse.

I have thought about measures the Dáil could take next week. I suggest a review of ministerial portfolios. We should reverse the Act that increased compensation in the Circuit Court from €38,000 to €60,000.

If we pass a law and it is not working and if it is not done in the European Union - we have sovereignty here - then I think we should reverse it. We should simply say that we have tried it but it does not work because it has not fulfilled any of the objectives and it is having numerous unintended consequences. We should take it on the chin, reverse it and bring back stability because stability is what we all need. Certainly, it is what insurers need. Moreover, we should not operate the book of quantum as currently set out, and I have explained why.

We really need to beware of rhetoric, anecdotes, hearsay and short-term thinking. Insurance is a long-term business. We should stick to the available data and then chase the missing data. There is plenty of data. I have given the committee much of it. I have stacks more but I did not want to inundate the committee. Having read the transcripts I have been surprised by some of the contributions, especially at the extent to which the existing data has not been referred to by people who would present themselves as professionals in this business. If they are not looking at this data when they are doing their job, then I am sorry but I have to call into question the governance structures within the industry.

My experience on reform is that we need to define the challenge properly before designing the reforms. It is very important to uphold the rule of law. I will set out two examples. One involves an insurance company. The details are in the public domain and the case, involving Aviva, has been mentioned in the committee. The excuses the company gave were extraordinary. There is no fact in any of it except for one point of fact, supposedly, which is the 34% increase in High Court awards in 2014 compared to 2013. Frankly, I consider that to be schoolboy mathematics. It is misleading. Are those responsible speaking out of both sides of their mouths? Are they saying to their staff that they should pay 34% more in High Court cases because the company will not get rid of them otherwise? Are they saying something completely different to our Government and their shareholders? It is not that they do not know because the figures were announced at an actuarial company breakfast briefing which I attended. I stood up and challenged the calculations because I had the raw data. I knew the median, which is the figure we use if there is big range. Let us suppose there are 500 cases and numerous are at the €5 million level as well as some down at the bottom. The median is actually the technical statistical term we use. The median had gone down. I stood up and explained that I was sorry to be awkward but that it was altogether misleading. I actually approached the actuary afterwards and suggested that those responsible should not go with those figures because it was bad for their credibility. I also approached Michael Horan of the Irish Insurance Federation and pointed out that although numerous problems needed to be solved, the approach being taken was not credible and that I intended to keep saying that it was wrong.

There are things the committee members could do in the Dáil to stop this rot. I have tried to show in some of the data I have presented that Irish motor underwriters are making far greater profits than their United Kingdom counterparts. We saw the same in the Motor Insurance Advisory Board back in 2004. I am conscious of the fact the Competition and Consumer Protection Commission is, according to the press release, signalling for next year a further 20% change. That has to stop.

What we really need to focus on - I know this from speaking to people - is making Ireland a benign environment for new entrants. My view is that many of the things being said about many situations, including uninsured driving, amounts to giving out deliberate bad messages about Ireland as a place to do business. It was really embarrassing when Royal Sun Alliance had to put in extra money. I think there were perverse incentives in the bonus structure. That is a personal view - I am not making any accusations. The chief executive got €1 million from the Employment Appeals Tribunal for unfair dismissal, so I do not know anything about the rest of the situation there. People who are in the business read the trade journals. That applies whatever the business. The international trade journals painted the situation as being the Irish problem, again. Actually, it was nothing to do with the Irish market but rather it had to do with lack of governance at board level. Let us suppose a person is sitting in the head office of a European or transnational company in London. If most of the company's profit is coming from little old Ireland, then those on the board need to ask themselves some governance questions. Chopping off the head of the chief executive, in my view, is not a sufficient response.

I thank the two deputations for their presentations. They were very informative. I am sorry I missed the programme Ms Dowling spoke on the other night. I must look back on it. My first question is for Mr. Phelan. We will hear later from Insurance Ireland that operators in the sector are underpricing and have been underpricing for some time now. At any point in recent years, did brokers point this out to insurers? Given that he operates at the coalface, did Mr. Phelan point out the question of the low-price culture? If you do not mind, Chairman, I will ask individual questions and get the response rather than asking them all together.

Mr. Ciaran Phelan

We have been very concerned about the pricing models over the years. As I said in my presentation, they started to drop significantly approximately four or five years ago, especially when several of the online distributors started to come into the marketplace. It was as if they had found a new way of pricing motor insurance. We took the view that the pricing was very aggressive. On several occasions, we talked to the Central Bank about the pricing models to ensure those responsible were happy that those pricing models were actuarially calculated and that there was a basis behind them.

We are price takers in the marketplace; we are not price makers. We take the price from the various underwriters that come into the marketplace. We saw aggressive pricing policies and we have lived through failures in the past. Many brokers were around when PMPA failed and certainly many were there when Quinn failed. The Quinn model was based on charging low, settling quick and hoping everything worked out at the end of the day.

Is there a written record of the association's correspondence with the Central Bank?

Mr. Ciaran Phelan

No. It took place in meetings we had with representatives of the Central Bank on various topics at different times.

It was not documented at any time.

Mr. Ciaran Phelan

No.

Ms Dorothea Dowling

I will cut across, if that is okay. The Central Statistics Office index is a published and reliable statistic and it is in the pack supplied to committee members. The index of motor insurance inflation has been coming down every year from 2003 to 2009. In 2009, the Central Bank asked all the non-life insurance companies to undertake a stress test. We all know from the banking inquiry what that is. Then, the price index actually went up in 2009. There was nothing in the claims market that I could identify which would have caused it. The fact that two elements of data correlate does not mean they are causative but my reading is that a stress test was done by the Central Bank. The sense was that there was too much price cutting in light of the new Solvency II Directive regime, which had been flagged since 2007. Then the index went up in 2009. I do not know the outcome of those stress tests but I imagine Central Bank representatives can tell committee members. However, it is history now; it is from the old regime. I cannot agree that this is only from past four or five years. In fact, I believe the difficulties started earlier. According to the data, following the stress tests, it started to go up a little. Then, the gender directive came in from January 2012, according to which men and women had to be charged the same. According to the data I have given the committee, this has caused insurance premiums to go up by 25% for males under 35 years. There are other factors as well but I was keen to point out these facts as a matter of data correctness. I am sorry for cutting across.

Again, we hear about the claims culture. Surely, the insurance sector blaming a claims culture is like police blaming a criminal culture for crime. At the end of the day, we have insurance in order that people can make claims; that is the sector. An insurance sector with a no-claims culture would surely be of no use. There is nothing wrong with making claims. Let us consider whiplash, for example. Do the deputations accept that there would be a serious constitutional issue moving towards a care not cash system, regardless of whether it is a good idea? It is simply not possible in Ireland, or is it?

Mr. Ciaran Phelan

Since I am not a constitutional lawyer, I cannot really answer from a constitutional perspective. However, I can outline what we have seen and what has been documented, although Ms Dowling may dispute these facts. In Ireland, apparently, compensation for whiplash is far higher than in other jurisdictions, including the United Kingdom and France. I am pleased Mr. Carty is at the committee. He is a manager in a general agent, a quasi-insurer. If the committee is willing to hear it, he can share some of the actual cases of exaggeration of fraudulent claims. Senator Conway-Walsh is perfectly right: insurance is all about covering financial loss when the insured body or person suffers a catastrophic event. Claims should always be paid but if there are exaggerated or fraudulent claims in the system, it impacts on all of us negatively. It will feed back into premiums and we all end up paying more than we need to on the basis of that.

What part do brokers play? Where there are fraudulent claims, what part do brokers play in ensuring that they are investigated and prosecuted?

Do brokers have a role in following it through?

Mr. Ciaran Phelan

No, that would be between the claimant and the insurance company. Brokers may suspect that there is a fraud at play but it is not within their remit to deal with it.

It seems like it is within nobody's remit. It is just thrown out there that there are all these fraudulent claims and everybody who has whiplash is somehow claiming falsely. There are people with very serious neck and back injuries, which is why we have insurance, so putting them in the whiplash category and claiming that all the problems relating to rising insurance prices are down to that is done to hide many other things that are happening within the system.

Mr. Ciaran Phelan

It is a component but it is just one component.

Ms Dorothea Dowling

I have carried out an analysis of the number of cases that have been fought under the new deterrent for what are called misleading claims because fraud is very difficult to prove involving as it does the criminal burden of proof, which is beyond a reasonable doubt, whereas under the 2004 Act, this is just the balance of probabilities. From its introduction to June 2016, only 32 cases were fought by defendants and not all of them were insurance industry cases. A total of 19 cases were dismissed. There is a pretty good chance of them being dismissed if the industry pursues them but short-termism arises. I think the AA said that the industry is not really concerned about fraud as long as it can price for it because it can pass it on to policy holders. It is important to emphasise that of the 19 cases that were dismissed, 12 were what is called assessment only where the person who was being sued agreed that they caused the accident but they felt that the claim was exaggerated. I will give members an idea of the type of injuries involved. Two cases involved fractures. In one case, a man maintained he was in a wheelchair for life, video surveillance showed that this was not quite the case and the case was thrown out. In another case, a person was an amputee. That counts for four of the 19. The remainder were what are called soft tissue injuries so there is an issue. There is some very good socioeconomic analysis of that. A total of 14 of those cases involved the building trade. One can understand how during a recession, the building business goes bust so soft tissue injury claims could be an alternate. I am speaking from the records of the written judgments rather than expressing a personal opinion.

In respect of care versus cash, as a Master of Laws, I would say that this would probably be unconstitutional and would also not be compliant with the EU directive on motor insurance, which says that victims in motor insurance claims are to be dealt with in compensation terms under national law in no less favourable terms than any other injury. I am sure the Attorney General could answer that question. I am also counselling against something completely different which might be very disruptive and create volatility and uncertainty when the solutions might be far simpler.

Again, this is my concern in terms of care, not cash in that we are presenting this as a solution when it will not be a solution at the end of the day. We should try to get to the real solutions. We might be better equipped to do that when we get the real information and data.

Mr. Paul Carty

An awful lot of common sense is being offered here. As everybody has said, there is no one single solution. It is a combination.

I will comment on some of the comments that have been made. One area that is very hard to manage involves soft tissue assessment-only cases where there is no liability. In this scenario, it has been determined that an accident, frequently of a very minor nature, has occurred. It can involve soft tissue injury or a psychological impairment of some kind. From the insurance industry's perspective, what is a bit frustrating is that sometimes one can have an engineering report that shows that an accident was of an extremely minor nature but those making the assessment such as the Injuries Board, the courts subsequently or the system must take on board the medical opinions here. In our experience, the medical opinions are not often read in conjunction with the engineering reports showing that they are very mild. As a consequence, one can have some dramatic cases where the actual assessment of the physical damage done to two vehicles can be under €500 but the award can be €80,000 or €90,000. People can suffer significant injuries in those circumstances but I think it is overplayed and we need some system that allows us to better assess the combination of the actual circumstances of an accident and the ultimate award provided. It is very difficult for the medical profession when members of the profession interview an individual who is trying to explain to them the nature of their injuries, for example, that they have a stiff neck. They cannot judge it. It is very difficult. Naturally, they tend to reiterate what the client has told them in the medical report. Producing evidence to that effect is always much more difficult except in severe cases, which are all too easy to identify and which we all accept must be properly compensated. However, there is a huge range with regard to what we are talking about and right now and I am not sure we are handling it properly.

Again, there is an over-emphasis on that solution but I appreciate the point Mr. Carty is making. I need to ask about the point made that older cars do not have the safety features of modern cars and may have previously crashed or been renovated. Surely with older cars, it depends on who is driving them. Older cars cannot go at the speed of newer cars so how can somebody with years of experience driving a ten or 12-year-old car at a reasonable rate and obeying all the rules of the road be a higher risk than somebody who is speeding in a new car? How do brokers calculate that?

Mr. Ciaran Phelan

My reference in this report was to young drivers. Unfortunately, many young drivers tend to buy ten, 12 or 14-year-old cars. What I was trying to say is that we put the least experienced drivers into the oldest cars. I have a son of that age and see the constant fear of him wanting a car and his friends buying cars registered in 2000 that do not look roadworthy to me. My reference was to young people driving very old cars.

If young people were driving newer cars, would that suggest that the price would go down for younger people?

Mr. Ciaran Phelan

The price is based on statistics. If someone has more accidents, they will pay a higher price. Statistically, younger male drivers have more accidents. What I am referencing is more the fact that the fatalities and injuries might not be as great in a more modern car than in an older car. Ultimately, it was purely just to reference the fact that these young people might not have the experience to drive as well as more experienced drivers and are driving cars that might not be as safe as others.

From speaking to drivers all the time, experience would tell me that it does not matter what age they are. People driving an older car, be they in their 40s or 50s, are being refused quotes or being quoted huge amounts. How can Mr. Phelan still relate this to older cars?

Mr. Paul Carty

Everything is driven by our statistics so statistically, certainly in my business, we can see that there is a direct link between older vehicles and accidents. When one breaks it down to individual cases, I understand the point the Senator is making but the statistics ring through. In so far as there are fraudulent cases or set-up accidents, there is a direct correlation between older vehicles and fraudulent activity. This is simply the reality. It is also because the value of older cars is clearly less than that of new cars. One could argue that there is less of an incentive to behave and protect one's vehicle. We are not driven by any malice towards old cars. It is simply because the statistics show that the greater difficulties are concentrated in the older vehicles.

I am conscious of my time. I thank Mr. Carty for his reply. However, he could also say that it costs less to replace an older car.

Mr. Paul Carty

It is not the cost of the car that causes the problem. It is the third party injury.

I am really concerned about the issue of fronting where parents are insuring cars for their sons and daughters. They are being forced to do this, particularly in rural areas because their sons or daughters cannot get insurance or have to pay huge amounts and they cannot get to work, an employment scheme or anywhere else without their cars.

Will Mr. Carty explain why they are saying they are not insured?

Mr. Paul Carty

Again, the problem is that the main driver of the car is the person who uses it most, who will drive the most miles, who will drive at night time and so on. A named driver only drives it on an intermittent basis. Fronting is where the insurer considers the driver to be the parent when, in reality, the main driver on the car, though only named on the insurance policy, is the son or daughter. It is a very serious issue and is becoming far more prevalent. Again, given the fact my own son has reached that age, I have seen this situation arise with a lot of his friends, in that the son or daughter is the named driver on the car insurance, but it is his or her car and he or she is the one driving it most frequently.

The problem is that people are being forced into these situations. I will leave the questioning of Ms Dowling to my colleague, Deputy Pearse Doherty. I wanted to also ask about the position of returning emigrants.

The Senator can come back in again later.

I thank the witnesses for coming before the committee. I want to drill down to this issue of data. It seems there is not perfect knowledge in terms of how the industry operates. We do not have perfect knowledge except through the reports we have from the PIAB. Its submission to the committee gave the average award from 2009-15, which was approximately €23,000. The PIAB submission stated there is:

...no public information available relating to overall numbers and costs of claims for personal injuries and the only figures that were made public did not contain any information on the costs of directly settled cases. Without access to that information, a full picture of the impact on insurance premiums is difficult to establish...

The Irish Brokers Association, IBA, submission states the same thing. I am trying to grapple with the issue. Insurance Ireland through its public utterances in the past 48 hours or so has been quoting from "independent data sources", from the Injuries Board figures, from the bodily injuries review published by the Central Bank and from the OECD report which states that Ireland is the eighth most expensive country in which to enforce a contract, given the average award of a Circuit Court increased by 21.2% in 2015, following a 13.5% increase in 2014. The point I am getting at is that I do understand why Insurance Ireland is not sharing data. First, I am making an assertion that is it not, so the witnesses can correct me if I am wrong and I would like to get the IBA position on that. If we had perfect knowledge in regard to all of the claims, we would be able to drill down to the reason people's premiums have gone up by 70% to 80% or why some people are not being insured at all. To give an example I have used before, if a premium goes from €500 on a Thursday to a cost of €800, which is a surcharge of €300, what percentage of that €300 is what I call super-normal profit and what percentage is attributable to the cost of the historical decrease in insurance and the provisioning that is necessary? The witnesses should correct me if my analysis of the situation is wrong.

I am directing my questions in the first instance specifically to the IBA. The second element I need an answer on is in regard to Zenith. There seems to be a contradictory position between what Insurance Ireland is saying and what Zenith is saying. If I understand Mr. Humphreys correctly - he is on the public record so I have no issue about naming him here - he is saying Zenith is exiting the market because it does not have access to proper data. If so, I would like to have an assessment or a view from the IBA as to why that is the case or what its take is on that.

I was very taken by a point in the IBA submission, which states: "All gardaí should have APNR equipment so they can scan registrations to see if they are insured, and the requirement for insurance discs should be abolished." If we think about that logically, the driver gets the insurance disc in the post and slots it into the pouch on the window, and the technology now exists to scan or copy it in order to create a false disc. If we are depending on a garda at a checkpoint with hundreds of vehicles passing through to intimately examine the disc, there is a case to be made for the APNR model so this can be based on checking of registrations, and we can look at the enforcement procedures thereafter.

What this committee is trying to do is to drill down into what it is that we need to recommend by way of solutions. I will come back to Ms Dowling in the second part of the meeting as she suggests there is a potential legislative solution to this. Those are my opening remarks and I will come back in again later, if I may.

Mr. Paul Carty

There are three questions within that. At the outset, I want to point out I am a managing general agent and I represented Zenith in Ireland, so I have to be careful. I wanted to put that on the record so we know where we are. I want to deal with the disc piece first. I liken discs to the old airline tickets in that it is time they were gotten rid of. It is a paper chase, given we need special printing, we have to stick in them in envelopes and get things to hold them up on windscreens, and so on. We have gone way beyond that. Gardaí should be able to go to a car and know it is insured, taxed and registered - that is where we should be. I do not think we should be deflected from that target, so let us go for that. That is the way it should be.

On the question of the hypothetical €300 increase, the Deputy is looking for some sort of apportionment of how much one could blame on the various factors. The Deputy knows we cannot give him more than a view. I believe a significant portion is that it was underpriced in the first place because the market had just gone down. Whereas we hear lots of quotes about a hypothetical Mrs. Brown whose premium has gone from €300 to €460 in a year, maybe it should not have been €300 in the first place. Whether it should have been €340 or €360, I do not know, and perhaps six years earlier, it could have been lower again. We are taking it at a particular point, so there is a correction.

There is the question of the environment we are in, to which Ms Dowling and my colleague, Mr. Phelan, referred. We do not know the effect of Solvency II, which historically was very important here. We have to remember that under Solvency II, all insurers next May have to publish what is called an SFCR - a solvency and financial control report - on their figures for 2016. We do not know what balance sheet re-jigging is going on this year to make sure it looks the right way, but that can have a bearing on what insurers might do. They will hardly publish that they are doing that for the purposes of their SFCR.

As to Zenith and Mr. Humphreys, whom I know well and who is a very nice man, they have signalled they are withdrawing from the market. They have said that, for a variety of reasons, they are simply unhappy with the courts system and the uncertainty, they are unhappy that the Injuries Board is not dealing with the number of cases they would like it to deal with and they are unhappy - their words - with the co-operation they have been getting from the industry. All I can say is that my company is an associate member, not a full member, of Insurance Ireland and we have access to the data enrichment and risk intelligence to help us underwrite the risks.

Those are the facts.

I want to make a separate point.

The Deputy will have an opportunity to come in again.

Is Mr. Carty telling us he has access to the data?

Mr. Paul Carty

By virtue of our associate membership of Insurance Ireland, we have access to two databases: the risk intelligence database and the data enrichment database. This helps us to look at and underwrite the individual cases we are going to underwrite.

I just want to drill down into this. If Mr. Carty has access to risk intelligence, presumably that forms the pricing mechanism.

Mr. Paul Carty

Yes, it makes a contribution. It is just another piece of information. It does not give us the pricing. It is just another piece of information regarding the claims in the background, or the vehicles.

Mr. Ciaran Phelan

For clarification, Mr. Carty is talking as a managing general agent rather than as a member of the Irish Brokers Association, which does not have access to any information of that type. I want to clarify that for the record.

I think it is best that we make this distinction now. We are beginning to drill down into the nub of this now. If the insurance I am paying for suddenly increases by 20% or 30%, I will scratch my head. Most people will accept that historically, it might have come down for a certain demographic. Where is the loading? Mr. Carty has referred to the SFCR. If I am interpreting him correctly, he hinted that the corporates are rejigging balance sheets and preparing for the Solvency II rules. It seems to me that the victims in this, if I can use that word, are the people who are driving cars in Ireland. Regardless of the age of their vehicles or their own ages, their risk profile has not increased over a short period of time. It does not matter if their cars are three months old or 30 years old. If they have passed the NCT, they are roadworthy. This is the point. It seems to me that ordinary people are becoming victims or pawns in a bigger corporate game. There is a bit of re-provisioning going on. There is pressure to adhere to the SFCR rules or the Solvency II rules. There is a bit of naked profiteering going on as well.

This is why the joint committee wants to drill down into the issue of public knowledge. The market is not perfectly competitive. If it were, anyone who wanted to enter the market tomorrow would have perfect knowledge of all elements of data. The Injuries Board is telling us one story. As it is a public body, we absolutely believe in the veracity of its figures. Not everybody is going through the Injuries Board. Why are the insurance companies settling? We know there was a constitutional case relating to the right to legal representation. I have sympathy for the IBA position in respect of transparency around the insurance system and the measures that can be taken. Everyone is saying the same thing with regard to data. We do not have perfect knowledge from the insurance industry. Maybe we have to wait for Insurance Ireland to come in later on to drill down into that element of it. Until we have that, we are really at nothing here.

Ms Dorothea Dowling

Can I make a point on the collation and sharing of data?

Yes, please.

Ms Dorothea Dowling

An EU regulation exempts insurance specifically from anything to do with collecting data. Such an exemption is normally considered to be contrary to competition. It is because of the nature of insurance that there is a specific EU regulation that provides for an exemption in the instance of insurance. It is important that there is symmetry of information. I should also say, in response to the reference that was made to Zenith, that the company which approached me when it was trying to break into the Irish market, but was concerned because it could not get access to Insurance Ireland's three data-sharing databases without becoming a member of that body, which was something it did not want to do, was not Zenith. After I said to the company in question that they were not going to listen to me, I brought the matter to the attention of the Competition and Consumer Protection Commission, which said that it could not prosecute because its function is not to create competition, but to prosecute if it has evidence to facilitate that.

I ask the Deputy to let Mr. Carty in at this point.

Before he comes in, I would like to say it appears that the data are proprietorial, in effect. It is questionable whether we can legislate to make that data available to all comers. I would welcome a view on that. If the data are of a comprehensive nature, and if they profile every single purchaser of insurance, we can crack the nut here by getting access to them. That is really what we are trying to drill down into.

Mr. Paul Carty

I cannot comment on what Insurance Ireland does or does not make available. All I can do is give the facts as I have them from my perspective. We must understand the macro-level context in which Solvency II is being introduced. I understand and have a great deal of sympathy for the Deputy's comment about the impact on the individual insurer. The flip side of that coin is that the rationale for Solvency II is to prevent collapses in the first place, so that we do not have to end up discussing cases like that of Setanta Insurance. There is clearly an upside to what Solvency II is seeking to achieve. That has to be taken into account as well. I ask the Deputy to bear in mind that many of these decisions are not being taken domestically here. We have a very small domestic insurance base. Most of the head offices where these decisions are being taken are external.

Ms Dorothea Dowling

We can tell the committee, based on the statutory returns, what the average motor claim cost is here. The details are set out in slide No. 9. In 2013, which is the most recent year for which I have data, the average overall claims cost was €4,472. This includes claims for windscreens and theft, etc. The equivalent figure in the mid-1990s and late 1990s, before the MIAB was established, was approximately €4,900. It has come down below the level it was at back then. Slide No. 14 gives details of the average cost across certain EU member states. Figures are not available for all the member states, but that is another discussion. These figures are price parity adjusted to take account of the purchasing power in various jurisdictions. The average across all the EU member states that provided data for 2013 was approximately €4,000. I cannot adjust for price parity because I am not sure of the methodology. I can make a comparison between our figure of over €4,400 and the EU average of €4,000. That is a margin of 10%. I do not know to what extent an adjustment for price purchasing parity in countries like Bulgaria would skew it in either way.

I thank Ms Dowling for coming in because I think she has given us an angle with which to question Insurance Ireland on the issue of data. I suppose what I want to ask is whether it is possible.

Ms Dorothea Dowling

Yes.

If it is supposed to be a perfectly competitive market, those who want to enter the market should have access to all the information they need to do so. If there is a blocking mechanism, there is a suggestion that cartel-like behaviour could be at play. We will have an opportunity later to discuss whether that is the case. I want to get a sense from Ms Dowling and the representatives of the IBA of whether they believe this sector is operating in a cartel-like manner. If Insurance Ireland is not giving us access to all the data we require in the interests of transparency and to enable the Oireachtas to make a set of recommendations that can potentially be legislated on, it is arguable that we are on the back foot.

Ms Dorothea Dowling

The Minister can give the Injuries Board additional functions under section 54 of the Personal Injuries Assessment Board Act 2003, which sets out the functions of the board. That section of the Act provides that the board has a data-collecting function and a cost-benefit analysis duty. In my view, additional functions can be provided for under that Act without any need to amend legislation.

With regard to transparency, the MIAB made recommendations in 2002 about providing a breakdown of the motor sector. I will not go into the detail. This would have provided more transparency to those of us involved in public policy and to external parties that might have been thinking of looking at the market. The Central Bank published such a breakdown from 2002 until 2009, but it stopped publishing it in 2009. When I challenged it to ascertain why it had stopped publishing this information, it emerged - reading between the lines - that the insurance industry had told the Central Bank it was too much hassle and it did not want to do it anymore. In its 2005 report on the insurance industry, the Competition Authority said not only that what the MIAB had recommended should be done, but also that it should be done in respect of public liability and employers' liability as well. That is relevant to the motor sector because they all involve injury. We can see the injury trend here. Rather than taking the advice of the MIAB, the Central Bank did a consultation process, largely with the industry. Anybody could have been involved in the consultation process, but I am sure those who were most interested in it were involved in the industry. As a result, the MIAB recommendation died a death. It never became a reality.

On a similar point-----

I ask the Deputy to be quick. I remind him that we agreed a format before the meeting.

I will be very quick. I would like to ask about the SFCR reporting for 2016 and the Solvency II rules. I presume they must be met in the other jurisdictions where these products are offered.

How can that be offered as a reason for a rise of X percent in premiums? If that were the case, the rise in premiums and profits in other countries and jurisdictions should be similar to here.

Mr. Paul Carty

The committee should probably have somebody in before it who is an absolute Solvency II expert.

I am not asking about that. I am saying if it applies in those other jurisdictions, should the percentage rise in premiums and profits not be in line with ours?

Mr. Paul Carty

No, not necessarily, as there is a link between capacity, or volume of business that is written, risks taken on board and the solvency ratio. For instance, they might decide to reduce capacity and take on less risk, and at better pricing their ratios will be enhanced. It depends on such factors, no matter what is the jurisdiction. It could mean an insurer might decide to stop writing a particular line of business that is not particularly profitable. They would write less business and would require less capital to support the business they are writing. There are external issues at play here, which will be revealed in this particular year as this is when Solvency II bites. Starting from 1 January, it will be published next May.

In the main, we should not be talking about multiple times the profit or premium rises.

Mr. Paul Carty

No, I never said that. I said it was a contributory factor. That is all.

The rises and profitability here are multiples of those in other jurisdictions. The witness is offering Solvency II as the evidence-----

Mr. Paul Carty

They are different jurisdictions; that is all.

Will Ms Dowling offer an opinion on this?

I will allow the Deputy to develop this later as Senator O'Donnell, in fairness, has some questions.

I welcome the witnesses. I will follow up Deputy Sherlock's points. What type of business is underwritten by Mr. Carty's company, ARB Underwriting Limited? Does it underwrite motor insurance?

Mr. Paul Carty

We do.

In which market does it underwrite? Is it the Irish market?

Mr. Paul Carty

The Irish market.

Purely the Irish market.

Mr. Paul Carty

Yes.

We represent people across the spectrum, including young drivers. The witness has access to the databases. Why have premiums gone up by 60% in some cases in the past three years?

Mr. Paul Carty

The underwriters have looked at prior years and some of the underwriters I use lost money in 2013 and saw they were underpriced. They also saw they were underpriced in 2014. They increase the prices for that reason. It is simply because they were losing money.

I shall put a question to Ms Dowling. The data she is showing us appear to indicate the average level of claims with the Injuries Board and in the courts has not gone up in recent years. The level of value of claims certainly did not go up to that level. This is really the nub of the matter. We are here today because motor insurance premiums have skyrocketed for people in the past three years.

Ms Dorothea Dowling

We must be very precise. I bring the committee's attention to page 27 in the circulated presentation. It is very easy for the market to say it has made a loss but I have broken that down. In 2013, the year referred to by Mr. Carty, the industry representatives argued it made a terrible loss of €281 million. This can be said because Royal and Sun Alliance got into difficulty, with a hole in the claims reserves of €270 million from the head office. Taking that out as a statistical outlier, the rest of the market made a profit of €73 million. If that is expressed as a percentage of the earned premium income, it is a return of 5%. Some will have made more than that and some will have made less.

How did that compare with the return, percentage-wise, in 2012?

Ms Dorothea Dowling

The English motor insurance market has not even broken even since 1993. There was a period of super profits for quite some time. It is a real case of share the pain, share the gain.

I know there is limited time. Would it be fair to say, in Ms Dowling's expert opinion, that the motor insurance industry in Ireland has continued to make profits from 2013 to date when we take out the outliers like Royal and Sun Alliance?

Ms Dorothea Dowling

The Senator need not rely on my expert opinion as he can examine the data. In the appendices, at page 63, there is the actuary analysis of the returns in the Irish and English markets. The 100% mark is break-even, meaning premiums coming in match claims, management expansions, etc. The page is titled Irish and UK Motor Market Results, and the sources are the databases we have spoken about, Risk Intelligence Ireland, INCA and Deloitte. The green line represents Ireland and was over the break-even point from 2002 to 2008. I mentioned the Central Bank stress test done in 2009 and perhaps that is why it came down. The sector went into profit again. Looking at the red line, the combined ratio for the UK is well below break-even.

For a layman, did they continue to make profits on the motor insurance business?

Ms Dorothea Dowling

Yes. That is a market aggregate figure. Some will not have made a profit. These are independent data.

This is the nub of the matter. We had representatives from road hauliers, the taxi federation and others before us. The witnesses may have seen the presentation. I asked them the direct question of whether they believed a cartel was operating in the motor insurance industry in recent years in Ireland. They all stated categorically yes. The competition authority, about two hours later, moved to instigate an investigation. The witness comes from the other side of the equation and he is an underwriter, the person effectively providing access to motor insurance in Ireland. Is there a cartel in operation at the moment?

Mr. Paul Carty

Not that I am aware of. I am not an underwriter but rather a broker, so I represent certain insurers who write business in Ireland. I assist by providing a facility to do that. Zenith was mentioned specifically. I am not questioning Ms Dowling statistics-----

Ms Dorothea Dowling

They are not mine. They are independent.

Mr. Paul Carty

Even with the statistics she quoted, I am simply saying it lost money in 2013, 2014 and 2015. It is one specific insurer mentioned today. It is not a figment of my imagination but a reality. I cannot give any evidence that there is any form of collusion. All I know is I compete day in and day out with everybody else in the market.

It is extraordinary that the level of increases appear to be disproportionate to the level of incremental changes in claims in motor insurance between 2014 and now, relative to previous years. Ms Dowling mentioned three databases.

Ms Dorothea Dowling

Yes.

Mr. Paul Carty

They are not the same databases.

Ms Dorothea Dowling

They are run by the federation of insurers through different consultants.

Ms Dorothea Dowling

The data is gathered from the industry.

Does Mr. Carty pay a fee to access them?

Ms Dorothea Dowling

This relates to underwriters. In fairness to brokers, although Mr. Carty might use them, he would not put in the data. I have given the figure for brokers' commission every year.

We just do not have time to go into a comprehensive explanation. I want to cut to the nub of the matter. Do underwriters pay a fee for access to the database?

Mr. Paul Carty

I am a broker. We have recently been admitted to associate membership of Insurance Ireland and we pay for that.

Does Insurance Ireland own that?

Mr. Paul Carty

The Senator will have to ask Insurance Ireland. I assume it does but I cannot answer definitively. I am merely a recently admitted associate member of Insurance Ireland.

Can Mr. Phelan tell the committee whether the Irish Brokers Association has access to that database?

Mr. Ciaran Phelan

No.

If an insurance broker operating in a small town has been dealing with a customer for ten or 15 years and that customer wants to renew his or her motor insurance, what happens in practice and how does the broker come back to the individual? How does that differ from what Mr. Carty does?

Mr. Ciaran Phelan

My colleague, Ms O'Callaghan, who is actually a broker dealing with these things, might be able to help.

We have to distinguish between Mr. Carty as an underwriter and the IBA position for the purposes of this.

Mr. Carty might elaborate. He says he works for an underwriter.

Mr. Paul Carty

There is a fundamental difference. I do not carry the risk. I am not an insurance company. I am an insurance intermediary and an insurance broker. I have a retail brokerage and what might best be described as a "wholesale brokerage". We provide access to the Irish market to insurers who might wish to enter it without going through the full rigours of establishment and hiring of staff, including claims settlement people and administration staff.

For argument's sake, if insurers are entering the Irish market-----

Mr. Paul Carty

Such as Zenith.

Such as Zenith. If Ms O'Callaghan as a broker wishes to get a quote from an insurance company which Mr. Carty's company represents in Ireland, does she contact Mr. Carty?

Mr. Paul Carty

What will happen typically in a situation in the Deputy's town-----

It is the city of Limerick.

Mr. Paul Carty

In the city of Limerick.

Never call it a town.

Mr. Paul Carty

In the proud city of Limerick if one goes down to the Crescent, one will find some very fine brokers. One will walk in there and deal with highly competent staff.

Mr. Carty is doing well so far.

Mr. Paul Carty

They will have to be trained up and will have their APA accreditations. They will listen to what one's requirements are and carry out an analysis of them. Having done this, they will inquire of their computer system or, more typically probably, computer relay, enter the details and be provided with the names of the various insurers the broker can offer. I might be listed as just one of those. The broker will then try to select the best deal.

Typically, a person comes into Ms O'Callaghan. What changes has she seen in the last three years in terms of the different companies? Are they all quoting the same rates? Has there been a change in the way they are quoting? What has she seen in terms of the increase in premiums? What is it like at the coal-face?

Ms Caeva O'Callaghan

We have seen increases in premia, restricted acceptance criteria and, in the last few months, only one insurance company in Ireland right now will provide a quote for a person who has a non-EU licence. Somebody coming back from Australia, or an Australian coming here, can only get insurance from one company in Ireland right now. That is different.

What about someone from Limerick who went to Australia for three or four years, was insured there and comes back to Limerick?

Ms Caeva O'Callaghan

He or she would not have a no-claims bonus so he or she would be starting out. We would advise the person that it would be useful if he or she had proven driving experience from the period during which he or she was in Australia and could document that for us. It would be difficult and expensive for the person.

Can Ms O'Callaghan explain the trend? I am more interested in the trend. Is there a consistent trend among all the companies?

Ms Caeva O'Callaghan

Yes, it is getting more difficult for returning emigrants.

Is there a competitive market any longer?

Ms Caeva O'Callaghan

For returning emigrants, no.

Not for motor insurance. Was there a competitive market in 2012 and 2013?

Ms Caeva O'Callaghan

It was more competitive than it is now?

Has it become less competitive?

Ms Caeva O'Callaghan

In my opinion, it has.

Are the rates being quoted almost identical across companies?

Ms Caeva O'Callaghan

No. I could not say that without looking at my system. It would be very easy to do that, but I think there is variation in prices. However, the trends are that they are all going up and that there are more restrictive acceptance criteria.

In certain categories, will there be only one insurance company which will quote?

Ms Caeva O'Callaghan

Yes, that often happens.

Has that become a feature more and more?

Ms Caeva O'Callaghan

Yes.

How many years has Ms O'Callaghan been in the business as a broker?

Ms Caeva O'Callaghan

More than 20.

As such, Ms O'Callaghan is hugely experienced. I presume she operates with all driver age groups.

Ms Caeva O'Callaghan

Yes.

Has it gone up consistently across the board for all age groups?

Ms Caeva O'Callaghan

It has gone up for everybody but the worst affected are elderly people and anybody with an outstanding claim. They are in a nightmare position this year. Anybody with a young driver is affected. It is any of the smaller, more vulnerable groups. They have real problems.

Anyone putting in a claim on a motor insurance policy will go through his or her broker first.

Ms Caeva O'Callaghan

Absolutely, yes.

Has there been an increase in the level of motor claims from 2013 to date?

Ms Caeva O'Callaghan

No, but we do not keep track of that.

Yes, but Ms O'Callaghan would see it.

Ms Caeva O'Callaghan

I do not see any big difference in the number of claims reported to us or with which we are dealing.

In Ms O'Callaghan's considered opinion, what is the reason for the incredible spike in the cost of motor insurance premiums?

Ms Caeva O'Callaghan

In 2013 and 2014, each of the companies had big ambitions to become the biggest insurance company in Ireland. The fastest way to achieve that goal would be to sell many below-cost car insurance policies. Car insurance, believe it or not, constitutes over 40% of the whole insurance industry. The more a company controls that segment, the more it controls the whole market. Below-cost selling was a big feature. It does not make sense to anyone to sell a car insurance policy for €300.

Ms Caeva O'Callaghan

The cost of replacing a windscreen alone, which is covered free in everyone's policy, is €300 and that is without paying the man to come out to replace it.

How many motor insurance companies are on Ms O'Callaghan's system at any one time from which she can get quotes?

Ms Caeva O'Callaghan

There are approximately 11.

Does Ms O'Callaghan believe there is a cartel in operation with those?

Ms Caeva O'Callaghan

I would not like to say.

Has the market become significantly less competitive?

Ms Caeva O'Callaghan

My view is that it has, but I do not think a cartel is involved. The insurance companies are very nervous at the moment.

Ms Caeva O'Callaghan

It is the cost of the awards. Before we came in here, Mr. Carty was talking about two particular cases which are so interesting and so telling that it would be very useful for everyone here to hear about them.

Mr. Carty might enlighten us.

Mr. Paul Carty

I had not intended to but they illustrate what is happening day to day. We can be hidebound by statistics and fail really to grapple with what it is like.

That is what we want to hear.

Mr. Paul Carty

With the Chairman's permission, I will disguise the parties to ensure that the appropriate rules are observed.

Mr. Paul Carty

By their nature, these are extreme examples, but they illustrate a point. I ask the members to imagine a Transit van about to pull, rather than reverse, into a parking space. If one is pulling into a parking space, one will be going pretty slowly. As this Transit van was pulling into a parking space in rural Ireland, it glanced off the front of a people carrier in the space behind. Whether the people carrier was moving out at the time is another matter. Our chap moved in and claimed liability. As such, it was assessment only and one is not arguing about who was to blame. The garda who attended said it was hardly an accident at all.

According to the engineer's report we got, there was a pencil mark on our Transit van. There was some scraping on the other vehicle.

The bottom line is that the person in the other vehicle claimed €950 in damages for a car, which is neither here nor there, and actually got €380. There were two ladies in the car - one was pregnant - and four children. The final award was approximately €85,000 because of claims of psychological impairment to the four children. The courts have to rule on any award that one provides. We offered more than €3,000 per child, for example, but the judge would only rule for a minimum of €7,500 because of allegations that the children were wetting their beds. Nevertheless, €380 of physical damage was done to the vehicles and the cost was approximately €84,000. I am not saying that the children might not have deserved that but what questions were asked and how would one challenge that?

I have a case this week involving a Jeep. Our insured driver ran into the back of a Jeep. It was a tap. Our insured driver had a cracked number plate. The Jeep had a tow bar. There was an impact on that and damage done to the radio. The Jeep's driver is claiming €500 because orange juice spilled on the radio. Two people were in the Jeep and we have received a solicitor's letter. The process will go to the Injuries Board but the dance has started. God knows where it will take us.

Given our day to day experience, we believe that the Injuries Board was a terrific revolution under Ms Dowling's guidance - it needs to be reviewed and we would like to see it enhanced in some shape or form - but many assessments are rejected by clients. This means that cases automatically enter the court system. Hypothetically, if the Injuries Board offers €15,000 and the person feels that he or she can get more, we must pay two sets of lawyers. We are threatened with a Circuit Court action. Given that court's jurisdiction, we are threatened with the certainty of having to pay out approximately €20,000 in costs. We would not want that action to proceed in the court, particularly given the medical and legal costs, so we would put an extra few bob on top of what the Injuries Board was going to give. In an economic sense, one would be rewarding the non-acceptance purely to avoid costs running out of control.

Ms Dorothea Dowling

The acceptance rate of Injuries Board awards has been stable for the past eight years at 61%. That is a hard piece of data. I have listened to what Mr. Carty stated. Part of the reason that the industry has not supported the Injuries Board is because the industry does that sort of thing. With the assistance of the Houses of the Oireachtas, we introduced amending legislation. If one rejects the award, which is a statutory award and has the same status as a court order, it stands as a tender or lodgement. If one does not get more, one is at risk in terms of both sets of costs. Short-termism on the part of the insurance industry means that it offers someone €600 for fees. It is the same amount of compensation. This is a hypothetical example. The person will not accept the Injuries Board award tomorrow because the industry has just told him or her that it will pay a little bit more if he or she rejects the award.

There should be a higher level of consent to Injuries Board awards, since only 6% of claims go to trial. Given what someone called the bizarre behaviour of underwriters, however, the Injuries Board does not have full data. It should have full data on all claims in 94% of cases. I do not know whether this was a strategic decision on the part of the industry but I will say no more on that. Mr. Carty is correct about the cost-benefit analysis. If one engages in short-termism, one must consider the cost of going ahead with something.

When I worked in the self-insured sector and we were an identifiable defendant, one would go all the way with it because two messages would go out quickly, the first of which was "soft touch". The second was that, if we went hard at them, got an award for costs and went to collect €5 from them every Friday night, they would be asking whether we had nothing better to be doing. They would be in the pub complaining about a utility coming to collect €5 every week. This sends out a good message to the effect that it is not a free ride and there are downsides. However, the insurance industry does not follow this type of model like it used to in the old days when I worked in the industry.

What should be done with the Injuries Board?

Ms Dorothea Dowling

Very little in this sense. I have made a number of suggestions, which were-----

Ms Dorothea Dowling

The first is not to publish the book of quantum as planned. We were told that it was based on data, which is a problem in itself, from 2013 and 2014. In November 2015, the Court of Appeal stated that Ireland needed to do this in a completely different way. Using the maximum in a celebrity case - it was €400,000 for a quadriplegic, a person who, sadly, was not getting better; such people are the serious cases - as 100% on our scale, one would calibrate the other injuries down that scale to 1%. There are large official actuarial losses for care costs but if €400,000 is generally the maximum, then whiplash will probably be 1% or €4,000. This would bring us into line with the approach taken on mainland Europe, from where we want to attract new players, but it would require buy-in from doctors to prepare reports in a more scientific manner.

From Mr. Carty's perspective, what would reduce insurance costs for the ordinary motorist in 2017?

Mr. Paul Carty

What Ms Dowling outlined would increase certainty. In a practical sense, however, we cannot be certain. We do not volunteer our money easily but one is left in a climate of fear and might not be confident of getting support in the courts were one brave enough to fight many cases. One would be playing with someone else's money. It is stacked against us.

I agree with the proposal outlined by Ms Dowling, as it would increase certainty. We need to be able to predict with reasonable certainty, having taken all of the facts into account as well as properly analysed medical reports, not just recitations of what clients have told doctors. One needs to use common sense when taking what actually occurred and its impact into account. One should then try to avoid any form of confrontation or litigation.

I am outlining the assessment-only cases. We are not here to dispute the facts. We have already agreed that an award is to be made. It is only a question of deciding how much and what is reasonable. This is the approach that we would like to adopt.

I thank Mr. Carty.

I thank the witnesses for their presentations and the information that they shared with us. Ms Dowling's is the most comprehensive information that we have received, so I thank her for compiling it. This is not to say that we do not welcome all information but Ms Dowling has gone beyond the call of duty in presenting a great deal of interesting data to the committee, which will be useful in our deliberations and our report.

Mr. Carty cited an interesting story about a claim. As legislators, we all know that one story should not shape legislation and we need to approach it in the round but was that a court-awarded settlement?

Mr. Paul Carty

For the minors, yes.

The judge did-----

Mr. Paul Carty

It was a ruling.

A court judge believed that the children were affected.

Mr. Paul Carty

Yes.

I do not know the children from Adam and I am sure that the way Mr. Carty presented the figure will make for great headlines but if children were affected in such a way and the case was tested in an Irish court of law with the insurance companies present to challenge it, it is not right for a broker, underwriter or director of an insurance company to suggest in one way or another that the children were somehow gaming the system. It is not appropriate.

Mr. Paul Carty

It is a judgment call. As I stated at the outset, the system is there for people with justified injury claims. That is why one has insurance. I am just calling-----

Mr. Carty presented that picture as if it were an unjustified, fraudulent or excessive claim.

Mr. Paul Carty

I am presenting a fact. I allow the committee to be the judge of that fact. Even court systems have to be judged. I am only trying to present the facts coldly. It could well have been the right decision. That is all that I am saying. In each of those cases in which €7,500 was awarded, the costs were €7,800 per child. I am only here to illustrate what can be a small case on the face of it.

Mr. Carty mentioned "our Transit van". Did he mean his company's own vehicle?

Mr. Paul Carty

The insured vehicle.

While we had a discussion here in the context of Mr. Carty representing brokers, he also is an underwriter and the director of an insurance company. Is that correct?

Mr. Paul Carty

No, Deputy. I am an insurance broker but a wholesale broker. I have both a retail service for some direct clients but many of my other clients are brokers themselves because we bring an insurer into the market, provide services to that insurer and consequently act in-----

Yes. Is that ABP?

Mr. Paul Carty

It is ARB.

As for Insure4Less, the company that is regulated by the Central Bank-----

Mr. Paul Carty

Yes, that is a subsidiary in Dingle.

Is Mr. Carty a director of that company?

Mr. Paul Carty

Yes.

Could I buy motor insurance from Insure4Less today if I wished?

Mr. Paul Carty

Yes.

Consequently, Mr. Carty is the director of an insurance company.

Mr. Paul Carty

No, an insurance brokerage. Both are registered and authorised insurance intermediaries. The key differentiating factor is we do not carry the risk.

Most people who saw the company's website would think they were getting insurance from the company. Is that correct? When such people receive their insurance particulars, would Insure4Less appear on the top of the page?

Mr. Paul Carty

Yes, if they were trading with Insure4Less, it would be on top of the page as the intermediary with which they were dealing.

Were I to take out insurance, would I believe I was insured with Mr. Carty's company?

Mr. Paul Carty

No, because we would send the Deputy the insurance company's documentation. We could send the Deputy, for instance, a Zurich policy or an Aviva policy, as appropriate.

Mr. Paul Carty

It would be as though the Deputy was dealing with any other broker. He would be dealing with a broker; it is just called Insure4Less.

I refer to the issue mentioned regarding the discs and any of the brokers can answer this question. I agree completely with the view that we should get rid of paper discs for both motor tax and insurance claims. When an insurance company issues a disc and an individual decides to pay by direct debit, as most people cannot afford the prices insurance companies now are asking of them, if that individual cancels the policy a request is made that the disc be returned. Is that information shared with An Garda Síochána when the policy's cancellation has taken place?

Mr. Paul Carty

No.

Ms Caeva O'Callaghan

I think it is done by the insurance companies.

Mr. Paul Carty

The insurance companies do it but it is not done by the broker.

The insurance company does inform-----

Mr. Paul Carty

That is by the insurance company. The Deputy was asking about the broker and the broker does not.

Consequently, the Garda is informed of all cancellations of insurance policies.

Ms Dorothea Dowling

Yes. It actually is a European Union rule that it cannot be regarded as cancelled unless the insurance company has told the Garda.

Very well. As for the data, the problem is when an individual still drives a car with an insurance disc for which he or she paid for the first month but for which the other 11 months now are cancelled, a garda who looks at or shines a torch on that disc has no way of knowing it is cancelled unless he goes into-----

Mr. Paul Carty

That is right.

Ms Dorothea Dowling

There is another issue regarding the payment by instalments. In my view, that is a credit arrangement and should be compliant with European Union and national law on consumer credit such that one gets to see how much is the annual percentage rate, APR, and how much extra one is paying. I am a chartered insurer but for many people, they get documents stating they do not need to do anything if they wish to continue and they think that is great. However, were people to see a large interest rate APR, it would be a different issue.

Mr. Paul Carty

There should be joined-up systems. An individual garda should be able to read and see straight away and many discs are not returned.

Ms Caeva O'Callaghan

Even more than that, there should be a single database that contains all the details pertinent to that vehicle in order that a garda can pop in the car registration number and confirm it is insured with insurance company X, passed its national car test, NCT, one year ago and is taxed. Consequently, the garda would know it is insured, it is on road legally and is roadworthy. This information should all be held together on a single database. Insurance Ireland is working to collate this information and to have it available but brokers are finding it difficult to break in to use this system with Insurance Ireland.

However, it is not the reason for large insurance increases. Uninsured drivers and how they might be-----

Ms Caeva O'Callaghan

No, it is not a reason for high insurance costs but it could be a large contributing factor to reducing the cost of insurance.

I agree with that. I welcome the fact, which is why I said I agreed with it but I just wished to tease out that issue about the discs.

Ms Dorothea Dowling

I think the insurance industry is stating it is a cause. In the media recently, the industry stated there was an increase in the number of uninsured and that it was part of the reason for the premiums going up.

Yes, but in my view, the argument the industry is making is not valid.

I will move on to some other areas. On the example Mr. Carty gave about the high payout in the courts, does he accept the statistics put out on the median payments to the effect that the increases are not at all significant?

Mr. Paul Carty

I can only speak from our experience. Given that I do not have access to industry-wide data, I can only speak from my experience that we have been taken by surprise by the level of awards. I agree with Ms Dorothea Dowling's remarks regarding the jurisdiction of the courts having an impact right in this critical period. We have seen the awards increasing because we price to try to make money; not to lose money, and the reality is we have been losing money for some of those years. We now believe the market hopefully is correcting and that should stop.

Mr. Carty believes that High Court awards have increased substantially. Does he believe comments from some insurance companies that they have increased by 34% in the past year?

Mr. Paul Carty

I believe there has been an increase and I cannot put a number on it but I would like the statistics to be revealed.

What does Mr. Carty believe to have been the level of increase?

Ms Dorothea Dowling

I have to hand the raw data from the courts. One uses the median value and it has not gone up.

Does Mr. Carty dispute that?

Mr. Paul Carty

I stated that in my own experience, the awards have been higher than we anticipated based on the pricing we put in during those years, that is, in 2013, 2014 and 2015.

Mr. Carty is representing brokers, he has an underwriting facility and has his own Insure4Less company.

Mr. Paul Carty

Yes.

He has come before the committee to make a point about the High Court awards and has given two examples, which he has presented colourfully here. However, hard data are being given to him stating that the argument being made for the industry and his own argument do not hold up at all. I need to get to the bottom of this. Does Mr. Carty believe in the High Court data in respect of the median instead of the highest award that is paid, which is what the industry wants to put out because that gets the headlines and everybody thinks this is crazy stuff? However, does he accept the data on the median award which, as people like Mr. Carty understand, is what one should do?

Ms Dorothea Dowling

My slide No. 17 shows the median in 2013 was €65,000 and fell in 2014 to €63,400. While it increased last year to €67,121, we do not know how many of those involved motor insurance or how many are cases against the State-----

Yes, personal cases.

Ms Dorothea Dowling

-----or whatever. They simply are the data.

Mr. Paul Carty

I do not dispute Ms Dowling's data and nor am I commenting on those data; I am stating that Ms Dowling's data-----

Ms Dorothea Dowling

The court's data.

Mr. Paul Carty

The court's data are the court's data. I can only relate it to the experience we had specifically with Zenith, which is that the awards increased and that is one contributory factor in its decision to leave this market. That was our experience.

Ms Dorothea Dowling

I stress that I am pursuing a PhD on this subject and it is just academic that I happen to have access to these raw data for an entirely different project. However, I believe that people who are in charge should be looking at that sort of level of detail to run their own businesses.

The job of this committee is to consider the official court data in the whole, instead of the individual personal story that an industry might wish to put out that could help to skew the impression of what is happening when the question is considered as a whole. Ms Dowling makes a point about the book of quantum and suggests it should not be done by the consultants but should be taken from them. I am not sure about that and have some issues I wish to deal with regarding the book of quantum but does it really matter who puts together the book of quantum?

Ms Dorothea Dowling

Hugely, yes.

I understand the Judiciary and the Central Bank will become more involved in this regard. I questioned the Injuries Board yesterday on whether legislation should be brought in that would ensure the Judiciary was obliged to pay more regard to it.

Ms Dorothea Dowling

Separated powers.

Ms Dorothea Dowling

I will be blunt. There are two reasons I do not believe it should be based on High Court awards. I heard from the presentation that it was the data from 2013 and 2014. The Court of Appeal has changed completely the manner of assessing compensation from November 2015. In the first of half a dozen cases, Payne v. Nugent, the Court of Appeal has stated one takes the maximum severity, which is €400,000, to be 100% and one puts everybody else on the scale all the way down. I am explaining it very simply.

No, I understand.

Ms Dorothea Dowling

The whiplash awards will end up being a lot lower than is the case now and that is the way it is to be done in the future. The law has changed; that is the Court of Appeal.

Since then, from looking at the published judgments, the High Court judges are not following that direction from the Court of Appeal. If the High Court judges are not following a direction from the Court of Appeal, they are most certainly not going to follow a direction from the executive or from a book prepared by the PIAB. The second reason why it should not be based on settlements by insurers is that insurers are telling the Government - and this committee, I suspect - that High Court awards have gone up by 34% when they have not. That would mean that they have been telling their staff that they are going to have to pay up to 34% more on High Court cases to get rid of them. They have actually been throwing money away.

Alternatively, when we produced the original book of quantum to take the "guessing game" out of it, as one academic called it, we did not rely on data. We had a professional person who is expert in this area, Dr. Brian Greenford, who went in and examined the actual files. He also went over to England to examine files there. At that time, our damages were 12 times what they were in the UK. They are now twice what they are in the UK. There may be reasons on a insurer's file why a certain amount of money is paid out. The claimant does not feel confident about the case and takes half the value. If one only takes the data, which is the final settlement figure and seems to be all the PIAB have, one does not see that nuance or realise that a claimant thought that he or she was on the back foot or that the insurance company paid less that the claim was worth. Therefore, data in itself are not sufficient. There has to be the qualitative and well as the quantitative aspect. I also have a trust issue in regard to data from the industry, in light of the MIAB's experience over the years.

Before I call on Ms O'Callaghan am I right in saying Ms Dowling is arguing for a different approach? The book of quantum-----

Ms Dorothea Dowling

No, I am saying the Court of Appeal has said-----

I understand that. However, the book of quantum is only based on what was paid out on these claims over the last period.

Ms Dorothea Dowling

Historically.

Yes, historically.

Ms Dorothea Dowling

But the Court of Appeal has changed the future.

Yes. So the witness is basically saying to scrap that idea of what we paid out in the past and look at what we should be paying out in the future based on the maximum going down, which would actually bring some of the soft tissue injuries down to an appropriate level.

Ms Dorothea Dowling

That is the separation of powers. That is what the Court of Appeal has said is to be the law in this country from now on. It is not up to the PIAB to contradict the Court of Appeal. The Court of Appeal has said that what we have been doing in the past is not proportionate, is not treating like cases alike, is not scientific and is too arbitrary. There are issues with doctors who are appearing here all the time. They simply change the name on the top of the form, whether it is a whiplash report, soft tissue or whatever.

However, there are issues around the value we put on injuries in this country. For example, the Northern Irish book of quantum is much higher in compensation than the UK average. There are no reasons for these things. They are just historic but that is not necessarily the way we want to go in the future. The Court of Appeal has said that this ought to be the way of the future. It is also the way it is done in mainland Europe - the percentage of disability. It would make this market much more attractive to new entrants who would be used to that scale and would know where it slots in. Predictability is the big issue for everybody, both claimant and defendant.

Yes, that is fair enough.

Ms Caeva O'Callaghan

I just wish to point out that one of the IBA's recommendations is that we would very much like to hand over the collection of claims data to the CSO. In that case the whole market, whether it is brokers, insurers or lawyers, will always get an independent and unbiased interpretation of the facts.

That is something with which I agree. I have written personally to the CSO to ask it to consider taking that over under its new work programme.

I wish to ask questions on two final areas. They relate to the submission by the MIAB. There is so much in it and so many recommendations. That is very helpful for us. Ms Dowling mentioned that there are sections of the PIAB and the civil liability Acts that have not yet commenced and that commencing them would help to solve the data issue we keep coming back to. It was mentioned there again by the IBA.

Ms Dorothea Dowling

The database can be done through that Act.

Is that a silver bullet? Is that a case of-----

Ms Dorothea Dowling

Just commence it.

-----one of the silver bullets actually commencing a piece of legislation that we already voted on many years ago?

Ms Dorothea Dowling

Yes. There are several pieces in that Act alone as well as in the PIAB Act. In the civil liability Act, they have to be activated, such as setting a discount rate, as they do in England, mediating conferences and strengthening special offers. I have gone through some of them in the recommendations. The idea of the central database is that all settlements have to be registered somewhere. The Central Bank produced an analysis of settlements and found that the average settlement had gone up by only 8%. When one has the data, one can come up with something very-----

Are these ministerial orders? Are they ministerial orders that are needed to authorise the section of the Act that has already passed?

Ms Dorothea Dowling

No. I would suggest that this one could be activated through the tax consolidation Act in the forthcoming budget. While receipt of compensation would still be tax free, the payee would have to pay the top rate of tax if they do not register the details of the claim settlement in this central database. I suggest that the PIAB run it because it has most of the data. All claims must be registered there. This would not only be helpful with data in the insurance industry, it would also tackle money laundering because there is organised crime involved in some of these cases. It would also tackle the situation which can arise in which some claimants receive an award for medical expenses, put that money in their back pocket, make a claim for tax relief on medical expenses or get money back from the hospital, which is entitled to charge the full economic rate for a hospital in a road traffic accident. They put that in their back pocket as well. These payments would all be registered. For example, if somebody wanted to make a tax relief claim for their medical expenses, Revenue would have the details and be able to say the person in question had already got that money back in a claims settlement. From the point of view of the Exchequer and hospitals, if the full economic rate is due to a hospital for a claimant being there for five nights or whatever, that amount is paid straight to the hospital. At the moment, the HSE has to chase the plaintiff to get the money. Administratively, it has so many potential advantages.

Okay. I would like to come back to the purpose of this and what people want, which are solutions. They also want to figure out what is going on here and why it has gone on. Ms Dowling mentioned an area at which I have been looking. If the cause of this is Solvency II, the insurance industry should just say it, apologise, get on with it and stop all this pretence that it is about something else that is not related to the issues that have appeared over the last two years. The European stress test that took place in 2014, which 60% of the insurance market in Ireland voluntarily took part in, found that we were very vulnerable to a period of low interest rates. We know that is exactly what happened as a result of quantitative easing.

My own assessment of looking at the core data here is that the median of High Court awards has not gone up, legal fees have not gone up - indeed it is argued that they have gone down - the amounts paid for whiplash have been paid historically at that level so it cannot be the factor, and the frequency in claims has not gone up. All of these issues do not stack up. Fraud has not increased in the last number of years. It has always been suggested that is has been €50. Whether one believes it is €50 or not, we will leave that for another day. Ms Dowling made those arguments in her presentation. Therefore, what is the factor that has driven a 70% increase? I ask Ms Dowling, as well as the IBA, to comment on that.

From my view, it is the issue of the investment arm of these insurance companies which lost over €100 million in their investment or had their investments reduced by €100 million over a two-year period. Solvency II kicked in and meant that they had to increase their capital base. This is not based on risk at all. It is based on the fact that the companies have to ramp up their profitability. They have had to do it over a very short period of time because they acted in my view recklessly up until then. The people that are now feeling the pinch are those who are getting a 40% premium, if they are lucky enough to be on the average, and the outliers who are seeing 200% or 300% increases. That is my own assessment from what I have heard so far and from what I have investigated so far. I ask Ms Dowling to comment on that.

Ms Dorothea Dowling

I would give Deputy Doherty questions to ask of the Central Bank when it comes before the committee as the regulator because there was a stress test done on non-life insurance, or so we were told, back in 2009. Presumably, the companies passed that stress test in regard to claims reserves, etc. That seems to be reflected in the CSO. There was a bit of a hike as well. Back in 2009, we were all fine on the question of solvency. At an actuarial briefing in November 2013, on which I have given the committee slides, there was a survey among those who were there as to how many companies were ready to implement Solvency II. Only 13% of companies had it fully implemented. We are not talking about some little accounting thing that can be done overnight. It is raising capital and it is a long process. Some 40% of the companies in the survey had partially implemented it. How did we not know this was coming down the tracks? We had a stress test, or so it seems, by the Central Bank in 2009 and everything looked rosy. There is a real data question to put to the Central Bank. Remember that the extra requirements in Solvency II are not just the EU-imposed ones. As the MIAB stated in its report, the regulator in this country has a habit, in order to sleep well at night, of requiring much more than what the EU requires.

I am not sure if that is the case now, but it is a question that might be asked. Another question is of the €1 billion motor premium income, how much extra would have been required on that to bring it up to solvency? Is it an extra 30% or 40%? We then park that. It is a one-off. It will not happen again. They are bold boys. We must look now at the rest of them that we need to do something about rather than starting off by cutting victims' rights and doing many other difficult things that are probably doomed to failure.

My research shows that the rehabilitation system which was introduced in the United Kingdom in 1999 turned out to be a disaster because the medical professionals were arbitrating the system. There was as much fraud that way as any other, and that has been the experience in some parts of New Zealand as well with their no-fault system.

Do the brokers have a view on the reason for the 70% increase? I have given a view in terms of what I have learned so far.

Mr. Paul Carty

The pricing was irresponsible for the reasons we covered here today. It certainly went below where it should have been. That is probably indisputable now. I believe the courts jurisdiction made a contribution, and I agree with the Deputy - I cannot put a finger on it but I suspect it is very significant - on the effect of the adjustment to Solvency II, with all the impacts we are talking about here. The investment market is very difficult for the insurers. They must value their assets at market value, whether it is marked up or down. All of that will be revealed right now. This is the year it has first taken effect. The Deputy mentioned the stress tests. All of this will be published on 1 May next year when they have to publish something in a comparative sense. I can only remark that this is a fact. I do not know what contribution it will make but I suspect it is making a contribution.

Ms Dorothea Dowling

In case I misled the Deputy, I want to clarify that the court data on the awards made to date has not gone up to the extent the insurance industry has maintained but I can tell him, as a chartered insurer, that it took the volatility out of it. We had a Circuit Court award. A reserve of €38,000 could be put on it in terms of costs, and that was it. They are probably all being reserved now at €60,000 because we do not know what will happen due to the volatility created, but it is not happening yet. It is possible that it has inflated-----

Yes. The potential to-----

Ms Dorothea Dowling

All the costs that insurers talk about are mostly estimated costs.

I know. If it could be at that level, they have to provide for that.

Ms Dorothea Dowling

Exactly.

Mr. Paul Carty

A recurring theme here is statistics. We are operating blind. I do not know whether it is true, but I can only quote what is written here. It is by one of the largest players in the market here, Aviva. It is a slide. I cannot stand over it but it simply states that personal injury awards increased by 34% in the High Court and 13%-----

(Interruptions).

Mr. Paul Carty

I understand. These are not my statistics; I am merely quoting. I am using this example to indicate that we do not have the information we require to categorically say that this is or is not a fact. I wish we did have those.

Hopefully, the committee will be able to adjudicate on that in due time.

I thank all the witnesses for their presentations and the papers they submitted in advance of the meeting. Some of my questions are for both organisations, Ms Dowling and the brokers, and some are more specific to one or the other.

It is clear that Ms Dowling has a vast amount of experience in this area over many years, and I thank her for her contribution to the sector, including setting up the Injuries Board and so on. We have been meeting on this issue since last Wednesday. We have heard from various people; we are probably on our 20th witness. We started last Thursday morning by hearing about those in the insurance industry earning super profits, and by the afternoon we were getting out the violins for them. It has been that way ever since. Everybody has come before the committee and blamed everyone else to a certain extent. It was never the fault of the person in the room; it has always been the fault of many other people. If that is frustrating for us after a week, it must be very frustrating for people like Ms Dowling, who has been doing this for years. She has done it all before. I refer to the Injuries Board-----

Ms Dorothea Dowling

It is slightly different in the sense that on the last occasion accidents and safety was the big issue. That is not the issue this time.

That is one of my points. We have been discussing this all week and I do not think we mentioned speeding or road conditions at all. That might be fair enough because that is not the issue.

Ms Dorothea Dowling

I have given some statistics on that and the rate at which the frequency of accidents has reduced but it is three interlocking circles in that we have accidents, claims and then regulation of the insurance market. In slide No. 47 I have given the members some connections to an increase in profits being announced by these companies and projecting profits for 2017. Whatever has gone on in the past, it cannot go on forever because it seems that with regard to the suspicions some people had about restoring profitability, talking out of the other side of their mouths, they are actually telling shareholders and investors that they will be in profit or that in one place they are already in profit.

It is also ironic to be complaining about "passporting" insurers when some of the insurers who were based here have now shifted to head office in England, and they are "passporting" into Ireland. Brexit will be important for us. We have to look after ourselves. We have partners in England. If many insurance companies decided that they can no longer be located in England, and companies do not like uncertainty - they want to plan for tomorrow and next year - they will base themselves in Ireland to do the European market. We then have the potential to have many new players in this market, provided it is benign. Currently, however, we are sending out all the wrong signals to potential new entrants, and we are depriving them of the data which exists but is only available to members of the Irish Insurance Federation, and companies should not be obliged to join the federation in order to get the data. The Central Bank should have it. The overwhelming opinion of the insurers at the briefing I referred to was that it should be an independent body nominated by the Central Bank. I want to stress that it is all anonymous. I was questioning the methodology of something they said and they replied that they could not do any more than that because of data protection, which is not true. There are many exemptions under section 2 of the Data Protection Act. If someone is doing something that is required by legislation, by ministerial order, in the public interest such as prevention of crime, and there is an entire list of them, everybody seems to say, "Oh, data protection. We cannot do that". That is not true. There is no barrier to the collating of data. The 2005 Competition Authority report specifically states that there is an exemption under an EU regulation because in all types of insurance it is vitally important that there is not information asymmetry and that all the information is available publicly so that public policy as well as new entrants have access to it.

We were told by the representatives of the law society yesterday afternoon that it was not valid for us to compare costs across Europe because most of Europe, other than the UK, does not have a legal system like ours. In other words, it just does not happen. Whiplash does not exist, so to speak, because there is not an at-fault culture or concept. All health costs are socialised and so on. We are told constantly about judges' constitutional right to award what they want and so on. That is true, but they are basically saying it is not comparable to compare whiplash in Ireland with whiplash anywhere else in Europe because whiplash in the rest of Europe does not exist because they do not have a legal system that does that kind of thing.

Ms Dorothea Dowling

I will give the Senator a quick response on that. Dr. Peter Bacon did a report for the Bar Council when it was trying to stop the Personal Injuries Assessment Board being set up and it estimated that it would cost ten times what it actually cost and that it would require 30 times the staff it actually did need. He did an analysis of Ireland versus the other member states, which wais helpful because they are not comparable. It is apples and oranges for a number of reasons. Some studies on that have been done with regard to costs also. Nevertheless, I have given the committee in the data the comparisons of the average motor claim in Ireland compared to the other member states, and we are within tipping distance of it.

For example, they do not have whiplash and we do. Why are their premiums relatively comparable if they do not have all these costs?

Ms Dorothea Dowling

It is an entirely different system and one we might have to consider moving to in the long term. In mainland Europe, the vehicle is insured. End of story. They get very little uninsured driving cases. There are very few legal disputes. If the Senator and I were identical insurance risks, and gender no longer applies, and I drive his car and he drives mine in an emergency and I have an accident, technically, I am uninsured even though the Senator has paid a premium and I have paid a premium, but in mainland Europe-----

Unless the policy allows open driving on all vehicles.

Ms Dorothea Dowling

I am talking about what is compulsory. It is very important that when people get their renewal notices, and I gave the Senator the number of the statutory instrument that can be used for that, they should state that of the premium quote, this is the amount that is compulsory insurance and this is the money for all the other bells and whistles.

It is the same when it comes to one's car. My car is 12 years old and those in the industry would write it off. What is the point in my paying for comprehensive cover? I would not submit a claim in any event because I would be afraid of losing my no claims bonus. One can see from an insurance renewal the insurance cover that is compulsorily required by law and one can pay that amount. However, one would say, for example, that they do not want the breakdown cover as they already have AA membership and that they do want personal accident cover as they have that cover on their household insurance. All that is enforced by law is the compulsory insurance component. In other member states of the EU, that cover can be unbundled whereby one can get compulsory cover with one company and comprehensive cover with another. One can get cover for one's test and one would lose one's bonus on that but one would not lose one's 60% no claims bonus on the big part of the premium, which is for third party injury cover.

Many people do not understand the insurance cover they buy. The compulsory insurance cover is nothing to do with themselves or their car, it is to cover for somebody else being injured. One gets a huge number of documents with one's renewal, which is mandated by the Central Bank. I got 19 pages with my motor renewal. I could understand the detail because I am a chartered insurer but it did not give me any of the information I needed. It is a complete waste of money, a burden on the industry and of no benefit. I always haggle. I telephoned another company regarding household insurance and I got a scripted call from the person to which I responded that I was busy, I am a chartered insurer and that I understand all about averages and the duty with respect to misrepresentation. The person apologised and said that they had to go through all that. Most people have to listen to such scripted calls and we have no regulation effectively where we need it. We have lots of burdensome, costly regulation. That is not doing anything except doing a CYA for the insurance industry whose staff say that they told the caller about the small print during the course of a scripted telephone call. It is meaningless.

Ms Caeva O'Callaghan

There is a huge difference between insurance brokers and people working for direct insurers in call centres.

Ms Dorothea Dowling

Absolutely.

Ms Caeva O'Callaghan

Those people are not trained, they have no qualifications and they read from script on scripted calls.

Ms Dorothea Dowling

They do not understand it.

Ms Caeva O'Callaghan

If one contacts an insurance broker, one talks to a qualified person who has been trained, whose business is regulated by the Central Bank and with them it is all systems go where they can answer any question that is put to them. There is a big difference between the two.

Ms Dorothea Dowling

I support the comments made by Ms O'Callaghan.

I am driving more than 20 years and I have seen my insurance increase by the same percentage as most other people, from less than €300 not that long ago to more than €300 and then by a further additional amount. I had an increase of exactly 33.3% with a premium increase from €390 to €520 this year and the car is getting older, I am getting older and no claims have been made on my policy.

Ms Dorothea Dowling

To support that point, research shows that there are passive renewals. Many people who do not have a broker who would give them a wake up call every year will think they have had insurance cover with a company for many years and having spent half a day telephoning other companies and not getting any great offer of a discount they will just renew with their company. Once a company sees a policyholder renewing, it will give that policyholder a higher premium than a new applicant. The same happens with broadband fees.

I interrogate my insurance company about my premium and I end up changing my cover and I do it through an intermediary who, apparently, is not a broker but is nearly one.

Ms Dowling referred to when insurance companies gave data previously.

Ms Dorothea Dowling

To the Motor Insurance Advisory Board, MIAB.

Ms Dowling was able to prove that the data given were inaccurate-----

Ms Dorothea Dowling

Yes.

"Inaccurate" being the parliamentary word for what other people might call it.

Ms Dorothea Dowling

Subsequently actuarial models were presented to us that were not what they were presented as being. The third instance I quoted was when a more mature person was being discriminated against. That is only permitted if the insurance company can produce data which justify that extra charge and that was presented to Equality Authority and our MIAB statistician disproved that actuarial data as well. That is in the public domain.

We have spent the entire week saying that access to data and improved sharing of data would be vital.

Ms Dorothea Dowling

Raw data-----

Ms Dorothea Dowling

-----not data that somebody else has crunched, the results of which they have given.

Ms Dowling said that the raw data or somebody else's number-crunched data were inaccurate. If we were to put in place laws and if this committee was to recommend-----

Ms Dorothea Dowling

What we ultimately got were the raw data. Efforts are made to give us interpretations.

I am trying to interrogate the concept of that. If we got raw data through some anonymised source or black box type scenario, would it be workable and useable?

Ms Dorothea Dowling

Yes.

Ms Dowling said that she got data from insurance companies and even that data was unreliable.

Ms Dorothea Dowling

I know the man who could crunch it for the Senator.

Yes. I am sure the committee would benefit from that person's existence if we get that far and I hope we do.

Ms Dorothea Dowling

He is a statistician and that profession is different from the actuarial arts.

We had representatives from that profession before the committee yesterday and we heard from them as well. If we get and process all that data, hopefully we will get improved transparency on the insurance industry with respect to what it is saying versus, for example, the letters Aviva is sending out detailing the cost of whiplash claims. My argument regarding whiplash awards, albeit that the average award here is €15,000 compared to €5,000 in the UK, is that they have always been €15,000 here and €5,000 in the UK.

Ms Dorothea Dowling

Exactly, there has been no change.

That has not caused an increase in premiums. Also, road safety statistics have not really changed.

Ms Dorothea Dowling

They are better.

The road network has not really changed, nor has the number of vehicles on the road, albeit there is a larger number.

Ms Dorothea Dowling

There are more premiums.

There are not 70% more vehicles on the road and I accept there are more premiums.

Ms Dorothea Dowling

There is more spread.

The early days of the national car test would have flushed out the old cars.

Ms Dorothea Dowling

Yes.

We get all the data and we still wonder why insurance premiums have gone up by 70% over the past two to three years. Some 10% of claims are resolved in the courts, 20% are resolved with the Injuries Board but we have no visibility on 70% of claims. On those 70% of claims, is it credible that all of the increase the industry states is required, separate from the elements of Solvency II and less investment income, could be due to resolving a greater number of claims at a higher level? If all the Injuries Board claims are reasonably static and the courts claims are reasonably stable, it is hard to believe that all the extra increase is warranted because the industry has decided to settle a great number of claims out of court, some 70% of them, at a much higher level than it used to. That is possible but I doubt it. It does not seem to me to probable.

Before Ms Dowling responds, I would point out that it is 1.15 p.m. and we have agreed to resume at 2 p.m.

I am the last member to speak but that is the way it worked out.

Ms Dorothea Dowling

It is a matter of consistency of messaging. If the industry is telling this Oireachtas joint committee and brokers that High Court awards have gone up by 34%, it must be telling staff that they have to pay more in cases that could go to the High Courts. Otherwise it is telling the committee something and it is telling its staff something completely different. I know from handling a very big risk involving 290 million passengers journeys a year where every single penny went, how much was spent on doctors, barristers, court fees, third party costs, on our own barristers and solicitors and on compensation. I assume an insurance company would have the same kind of system and if it is telling the committee it does not, then the law and economics model that indicates that handling this through the insurance industry is the most efficient way has broken down in Ireland and we have to look at something else.

Ms Dorothea Dowling

There are many other things we can look at.

I am conscious of the time and there are many other questions I could ask.

Ms Dorothea Dowling

I will come back.

Ms Dowling might be asked to do so. In terms of legal cases, if say the Injuries Board makes an award €16,000 and the courts make an award of €15,999, the plaintiff does not get their costs covered.

Ms Dorothea Dowling

The plaintiff is also responsible for the other side's costs.

If the courts make an award of €16,001, then-----

Ms Dorothea Dowling

There is also provision in the Civil Liability and Courts Act 2004, which is not being used and may need to be strengthened, that provides that a plaintiff was required at quite an early stage to state what their minimum terms were. The plaintiff might say they are not happy with an award of €16,000 and they want €20,000. However, what is happening is people are coming forward with stupid offers saying they want €100,000. They have done their bit and made their offer, but that provision in the Act needs to be strengthened. If one does not get more than 25% in that respect, one will not get one's costs covered.

Is it valid to say that if a person refuses an award of, say, €16,000 from the Injuries Board and subsequently is given an award of €15,999, that they will have the burden of covering their costs and the other side's costs, but if they have been given an award of €16,001, they would not have the burden of those costs?

Ms Dorothea Dowling

Yes, but the awards do not usually work out like that.

I accept that but is that not part of the problem?

Ms Dorothea Dowling

This is where section 19, I believe it is, of the Civil Liability and Courts Act, which provides for a plaintiff making a reasonable offer as to what their minimum terms are, could be strengthened and that would put them on risk. They are not on risk at the moment, that is true.

I have a brief question for the brokers. Reference was made to Quinn Insurance, which is gone now. It charged a low premium and settled claims quickly. It was fine if one did not have a claim and but if one had a claim, it might have been a bit difficult. I am not sure that Ms O'Callaghan's point about windscreen cover is particularly valid. I have been driving more than 20 years and I have had never had a windscreen replaced. If motorists are not getting their windscreens replaced, it does not matter what is the replacement cost. If 20% or 30% of drivers were getting them replaced, that would be a different figure. I do not have the statistics on the number of windscreen replacements.

Ms Dorothea Dowling

Some 90% of policyholders every year do not make a claim. That is set out in the statistics.

The figure we were given last week is 92%. It appears that 90% to 92% of policyholders are paying for 8% of claims. That is the purpose of insurance, so fair enough. My question to Ms Dowling and the brokers, although the brokers may not be able to answer it, is do they believe current behaviour in the insurance market is like a cartel? I am sure all of the witnesses have had dealings with many different insurance companies and underwriters.

Ms Dorothea Dowling

Given that the Competition and Consumer Protection Commission has started its process it may be best if we do not answer that question.

Ms Dorothea Dowling

Another question which the committee has posed to other witnesses is what questions they would like it to ask of Insurance Ireland

Yes. What question would Ms Dowling like us to put to Insurance Ireland?

Ms Dorothea Dowling

When will it provide me with access to the three databases?

Would there be value in having a public database from which, when people input a car registration, they could find out whether a car is taxed, insured and has a valid NCT. It is important that type of information is publicly available and not only available to An Garda Síochána.

Ms Dorothea Dowling

Under an EU directive, we should be already doing that. However, that is probably a discussion for another day.

On a point of clarification, what are the three databases to which Ms Dowling requires access?

Ms Dorothea Dowling

The Chairman would be well advised to put that question to Insurance Ireland.

What are the databases?

Ms Dorothea Dowling

They are referenced in some of the slides. There are different sources of data mentioned. The Chairman will see from the slides where the actuaries got their data.

There are three databases.

Ms Dorothea Dowling

Yes. They are also referenced on the Insurance Ireland website.

Does the association, by virtue of its membership of the insurance group, have a right to access the three databases?

Mr. Paul Carty

I do not know which databases the Chairman is referring to and so I cannot comment.

That is why I sought clarification in relation to the databases.

Mr. Paul Carty

The databases relating to no claims bonuses relate to previous claims. In terms of insurance links and data enrichment we are given access to the databases.

The association would have access to what Insurance Ireland-----

Mr. Paul Carty

Not in terms of the detail of which Ms Dowling spoke.

The association has access to the data that others do not have.

Mr. Paul Carty

All other insurers have the same access. They are all members of the insurance-----

Yes, but outside of that they do not have it.

Mr. Paul Carty

That is correct.

Does the fact that the Irish Brokers' Association is an associate member limit it to the range of data that is available through its associate membership?

Mr. Paul Carty

I cannot comment because I do not know the full range of data that is available from Insurance Ireland. I cannot comment as to whether the association is being given full or part access.

The data to which the association does have access informs companies from outside of Ireland that engage with it what the market is like.

Mr. Paul Carty

One has to reduce it to the individual motor insurance case that one is underwriting. It means that when I am deciding to take on a particular case on particular terms I am armed with the information I need to be able to make a value judgment.

In respect of a company from outside of the country that avails of the service of the Irish Brokers Association, the association has access to data that insurance companies from outside of Ireland which do not avail of its services do not have.

Mr. Paul Carty

Yes.

Therefore, in respect of a company coming into Ireland and availing of the association's services the association would be able to provide it with the data for Ireland and whether to come or not?

Mr. Paul Carty

Yes.

Ms Dorothea Dowling

The Competition Authority recommended it could be direct.

How much does associate membership cost?

Mr. Paul Carty

I am not sure but I think it cost us €10,000. We are willing to put the cost on the record but I do not have it to hand.

That is fair enough. In the context of big insurance companies, €10,000 is very little.

Mr. Paul Carty

That was the cost for membership. In addition to that, there was a charge related to scale and size. I am happy to put on the record that the full cost of access to the data was €120,000. The cost of membership alone is €10,000 and the access cost for the two databases is €120,000. I do not have the information with me because I did not expect to be asked for it but I can forward it to the committee.

Knowing what Mr. Carty knows about the databases in terms of what information they contain, would he say people should contact him or-----

Ms Dorothea Dowling

The Competition Authority was of the view that it should not be a requirement that companies coming in would join an organisation which basically in this context is dominated by the six existing players. Companies should not have to be brought into that tent. There is no legislative requirement to join the federation. One is required to contribute to the MIB and the Insurance Compensation Fund but the federation is a type of gentleman's club that a company might not want to join and should not be forced to join.

That is fine. I had to ask the question because the information informs us in terms of what questions to pose to other contributors later today.

Ms Dorothea Dowling

That was the view of the Competition Authority in 2005 and is not my personal expression of opinion.

Does Mr. Phelan wish to comment?

Mr. Ciaran Phelan

We need a profitable insurance industry operating in the marketplace. Companies want to make money and that is why they exist as private limited companies, plcs. If they are making money it will attract other competitors into the market. We need more capacity in this market if prices are to stabilise. The less capacity there is the more prices will increase.

On that point, surely a more profitable industry than currently exists will not be possible without policyholders being required to pay more than they are already paying.

Ms Dorothea Dowling

I would question whether they are the two main stakeholders. This compulsory system does not exist for return on capital for shareholders in financial services companies. It exists in theory and in practice as supposedly the most efficient way of ensuring that people who are injured on the road receive appropriate and proportionate compensation and of ensuring policyholders get a good quote. Everything else is secondary. All businesses have to make a return on capital but those that compete in a competitive market will find a way of doing that on quality or in some other way. Motor insurance is completely different from any other business. We need to be very aware of that.

Would Mr. Carty like to make a final comment?

Mr. Paul Carty

I agree with Mr. Phelan and what Ms Dowling said at the outset. I am in the business of trying to introduce new carriers into Ireland. That is what I do. We need certainty in the Irish market. This is very bad publicity for us in the round. We need to be able to resolve many of the problems that have been highlighted today if we are to be able to introduce new players into the market. We also have to realise the scale of operations in this country. Ireland is a small country. The major players are not focusing on this market. It is simply not big enough to attract them. That will only be possible if we can show them that they have a reasonable prospect of making an underwriting profit.

Ms Dorothea Dowling

Qatar obviously determined that it can do that because it is coming into the Irish market.

Mr. Paul Carty

Yes, on a limited basis.

Ms Dorothea Dowling

It is putting its toe in the water.

Mr. Paul Carty

As I understand it, it is doing so on a very limited basis and for a very limited capacity. I agree, it is a toe in the water but it is a very good sign and one to be welcomed.

I thank all of the witnesses for their contributions. The committee now will suspend until 2 p.m.

Sitting suspended at 1.30 p.m. and resumed at 2 p.m.

I welcome Mr. Fergal O'Leary, Mr. Patrick Kenny and Ms Karen O'Leary from the Competition and Consumer Protection Commission. Ms O'Leary will make an opening statement of five minutes, which will be followed by questions.

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

Ms Karen O'Leary

I am a member of the Competition and Consumer Protection Commission. I also have responsibility for criminal enforcement and corporate services. I am joined by fellow members, Mr. Patrick Kenny, who is responsible for competition enforcement and advocacy and Mr. Fergal O'Leary, who is responsible for consumer enforcement, communications and market insights divisions. Our chairperson, Ms Isolde Goggin, is unfortunately unable to be with us today.

We share the concerns of consumers, this committee and the Government about the rising cost of motor insurance. Our consumer helpline has received 1,466 queries since the middle of last year about motor insurance, 227 of which were specifically about increasing motor insurance premiums. We have closely followed this committee’s deliberations and that of the Department of Finance working group. We are grateful for the opportunity to discuss our work and views.

I will briefly outline our structure, functions and work in the broader insurance sector. The committee will be aware that the Competition and Consumer Protection Commission, CCPC, consists of a chairperson and membership structure, which together form a collegiate decision-making commission. In addition, each member has individual executive responsibilities. The CCPC is the statutory body responsible for enforcement of competition and consumer protection legislation across the economy. With a few important exceptions, such as groceries, our economy-wide remit means that we do not regulate individual sectors. In relation to the financial services sector, Government policy means that, along with consumer protection, the Central Bank imposes the sectoral rules and codes of conduct under which financial services providers and the market must operate. The CCPC enforces competition legislation which, in contrast to regulation, provides for intervention after a breach has happened. We also have a specific remit in terms of personal finance information and education for consumers.

Sectoral regulators such as the Central Bank are usually the first port of call to address sectoral issues, given their in-depth expertise and sector-specific powers. The exception to this is where the CCPC's remit and powers specific to the problems at hand, such as competition enforcement and public awareness, are not replicated by the sectoral regulator.

The CCPC has been active in the insurance sector over the years. In 2005, the then Competition Authority undertook a major study which identified a number of reasons competition among insurance companies was not as strong as it could be. For example, consumers were slow to switch to another insurer. The study recommended greater disclosure of risk related data as a lack of data acts as a barrier to entry. New entrants would find it extremely difficult to assess the overall market risk without accurate data. We have on several occasions investigated complaints relating to alleged anti-competitive behaviour by industry participants. These included an investigation into whether private motor insurance companies had regular access to competitor future pricing information through a shared IT system. This was resolved by means of legally binding agreements and undertakings obtained from the relevant parties involved. As part of our statutory personal finance education role, we provide information to consumers to help them make informed choices. Along with conducting consumer awareness campaigns, we publish periodic insurance surveys which help consumers become aware of the options available to them and we regularly publish switching reports to encourage consumers to find the best deal available to them.

In regard to the open investigation, in October 2015 we engaged with Insurance Ireland with regard to concerns about price signalling. No immediate enforcement action was required but we implemented a strategy to monitor the sector more closely and establish whether there were grounds for suspecting a breach of competition law. The industry has in recent times openly signalled upcoming increases in premiums. We have noted public statements made by insurance companies forecasting, with confidence, that premiums will rise, at times specifying the amount of the predicted rise and that these increases were inevitable. Statements signalling future pricing intentions may result in a degree of unspoken co-ordination which may breach competition law. We have been very concerned by these statements and this week, after detailed planning over a number of months, we issued, under our powers, summonses and formal requests for information to players in the sector. The evidence collected will allow us to establish the facts and take appropriate action.

On the question of what would make things better, our views on the market are informed by our activities. It is clear to us that there are significant issues of transparency, disclosure and confidence in the sector. Parties that have come before the committee have offered different, often conflicting views on what is happening. This does nothing to promote confidence in the market, and the frustration of motorists facing sustained increases is understandable and well founded. We are extremely active in the sector, but our actions alone will not explain what is happening in the market. We are glad, therefore, to see that the Department of Finance working group, on which our parent Department is represented, is studying this issue as a matter of priority. We are available to assist either this committee or the working group as necessary.

As for what we would like to see, it is clear that publication of more detailed, up-to-date and extensive statistical data, particularly relating to claims and settlements, would allow for a better diagnosis of what is happening in the sector. This could be done perhaps by either the regulator or the Injuries Board and it should restore some confidence. It may also, in turn, promote the entrance of new firms to offer competition, something which is vital to the long-term health of the sector. We must also ensure this competition is healthy, and both the regulator and ourselves have different but complementary roles in this regard. We would welcome any initiative that would allow for consumers to switch provider more easily, thus encouraging competition and greater choice.

We urge the committee and the working group to scrutinise the cost of legal services, an area in which we have advocated for years, and their impact on the cost of insurance. We will be represented on the board of the Legal Services Regulatory Authority which is being set up at present. We are of the view that the work of this committee and the working group is shining an important light on the issues in the sector which we hope will result in recommendations, legislative changes or co-ordinated action that will have a positive and lasting effect on this vital market.

For clarification, Ms O'Leary said the commission was very active in the insurance sector and that, as part of its work, the Competition Authority had undertaken a major study in 2005 which recommended greater disclosure of risk related data because a lack of data acted as a barrier to entry. That is exactly what we have heard since we started these hearings. Is it not anti-competitive to withhold information and not to disclose it to possible entrants to the market? Is this not also the case when individuals in the market can obtain it for €120,000? If somebody is active in the market, they will know that the recommendation the authority made was not acted on. They will know that, for a fee, a member or associate member of Insurance Ireland can get the information. However the information is compiled, its owners are selective about it.

Ms Karen O'Leary

The recommendation was that policy-makers make it mandatory for the information to be published. We maintain that doing this would assist, and the Personal Injuries Assessment Board and other market players have said the same thing.

It is, therefore, something for legislators.

Ms Karen O'Leary

At the moment there is no law requiring the publication of such information.

The authority recommended it, however. Has there been any follow-up on the recommendation since 2005? Is the commission asking why it has not been implemented?

Mr. Patrick Kenny

I think there were 47 recommendations in total and there were four outstanding. That is one that was outstanding. Other issues have emerged in the market that probably were not covered by the recommendation - information on cases that are settled outside the system and things like that - but I accept that this recommendation, along with a number of others, has been outstanding since 2005.

Finally, would the witnesses consider that the withholding of that information by Insurance Ireland, thus preventing an entrant access to the market, is anti-competitive?

Mr. Patrick Kenny

In general, where an industry has information that is necessary for entry, such the cost of claims or other information in other sectors, the withholding of information could be considered a breach of competition law.

Why has the commission not taken action since 2005?

Mr. Patrick Kenny

I do not believe we have had any complaint from an insurance entrant saying they could not get access to information. As the Chairman said-----

Mr. Kenny should ask the insurance companies. They have been here over the past few days telling us that, without data, they have nothing. They do not understand the market because they do not have data on it. Everyone knows Insurance Ireland has that data. Ms Dorothea Dowling, who was here earlier, gave us slides and information that would show this is not news. It is a fact that they have not been co-operating and it would appear that Mr. Kenny's organisation did little or nothing about that lack of co-operation, thereby preventing people from entering the market.

Mr. Patrick Kenny

I am fairly confident that we have never received a complaint along those lines.

That is not the question. The question is whether the Competition and Consumer Protection Commission, CCPC, knew that there was little or no movement in the market and that companies were actually leaving it. As an authority, should the CCPC not have been proactive in alerting the legislators of this House to the difficulty, or should it not at least have brought in Insurance Ireland to ask why it was not sharing the data? Everyone who has come before us has raised the issue of sharing the data and it would appear to me that the CCPC did nothing about it.

Ms Karen O'Leary

There is a distinct difference between sharing market data and excluding a competitor from the sharing of that data, which could indeed breach competition law. Insurance Ireland has no legal obligation to publish data and make it freely available. It goes back to what the Injuries Board and other commentators have said about the gap in respect of the cost of claims. The Injuries Board is very clear about the cost of claims that are assessed under its remit and the Courts Service publishes the cost of claims. What is not published is data about claims that are settled directly by insurance companies and there is no legal-----

Ms O'Leary knows what I am saying to her. The data is there and it is held by Insurance Ireland. One individual represented the brokers this morning. He had a business whereby someone coming into the market might use the services offered by his company to access the data that Insurance Ireland has - at a price, I am sure. We know Insurance Ireland holds the data, we know it is critical to the examination of the market by an outside company, and the CCPC knows that, but it did not take any action to say Insurance Ireland is holding the data and not sharing it and to at least question Insurance Ireland on it. That is the point I am making. As a result of that, we have all these companies, some of them withdrawing from the market, which is contracting, with very little competition. The witnesses represent the CCPC. They should not be waiting for a phone call if they are on top of their game.

I want to come at the data issue from a different angle. Let us start at the beginning, because the CCPC has said it is going to open up an investigation into, to use Ms O'Leary's term, the issue of pricing predictions or intentions that "may result in a degree of unspoken co-ordination". What does the expression "unspoken co-ordination" mean, in layman's terms? Could the witness speak to the punter who has seen a 50% increase in their insurance premium? What does "unspoken co-ordination" mean?

Mr. Patrick Kenny

I will take that question. When we look through the prism of competition law, we would have agreements that are formally made in smoky rooms where people actually sit and make agreements. That is one type of offence, a very serious one. Another type of offence is just reducing the amount of uncertainty in a market by making announcements that people take on board and in accordance with which they adjust their behaviour. It is when somebody says they intend to raise their prices next year by X% and they throw that into the open. It is in a public forum, so their competitors can hear it. It is information competitors would not normally have, because normally the last thing one would want to tell one's competitors is what one intends to do with one's prices. One is, therefore, putting information that would otherwise be private into the public domain. If people act upon that, it can have an anti-competitive effect.

What Mr. Kenny is telling me, as somebody who has just seen an increase in their own premium, in layman's terms is that this could be adjudicated or there could be concerns around cartel-like behaviour in that instance.

Mr. Patrick Kenny

In layman's terms, the word "cartel" means many different things. We mean a hardcore cartel, where people meet and agree to raise prices or share customers, but from a layman's perspective it is some form of conspiracy to raise prices against their interests.

Mr. Kenny used the analogy of the smoke-filled rooms. If one fast-forwards to modern language, it is air-conditioned rooms in glass towers, on the 15th floor, but it is the same type of behaviour, where an influence is being brought to bear on the market in the context of pricing. Whatever way one parses the language, what Mr. Kenny is essentially telling us, on behalf of a statutory agency or body, is that there is a concern about cartel-like behaviour. Let us not be too prescriptive on the word "cartel" as Mr. Kenny has elucidated it to us. That is de facto cartel-like behaviour, where one is influencing the price determination for a project.

Mr. Patrick Kenny

This is a case that other agencies, including the European Commission, have taken in industries. As a joint consumer and competition agency, we also see it as bad in the sense that it reduces consumer resistance to price rises. The average consumers hear prices are going up X% in whatever market and then they ask themselves why they should look around. My colleagues will elaborate later on the topic of switching. Active switching is the only way consumers can protect themselves in this type of market.

The Chairman has raised the issue of data. We know what the Injuries Board pays out, but there is a whole indeterminable figure that we do not know in respect of settlements. We do not know the true cost of settlements because there is not perfect knowledge. If the CCPC is investigating this without having access to the three so-called databases, it could be argued - correct me if I am wrong - that it is on the back foot in respect of this investigation. Unless it can get access to what is on Insurance Ireland's databases, then, short of a legislative change, Insurance Ireland could block the CCPC out of that and not give it access to the database. I do not know how the legislation could be changed. Ms O'Leary alluded to this matter earlier, and forgive me if I am incorrect, but if there are any number of insurance houses in this country and they are all under an umbrella organisation and not everybody has access to the databases vis-à-vis settlements out of court - about which figure there is no perfect knowledge, generally speaking - then how is the CCPC going to crack this nut? What is it going to do? Where are the powers of compellability in respect of that data from the CCPC's point of view? If it does get access to that data, what can it do to assure consumers that their premiums will reduce as a result? I have been using the following analogy for the past few days: if my insurance premium has gone from €500 to €800, which is a €300 increase, what proportion of that €300 increase is reprovisioning or rebalancing?

What proportion of that is to deal with the Solvency II rules or the financial systems control review report? What proportion of it is absolute and naked profiteering? Where will the Competition and Consumer Protection Commission come in to shed light on that for the people we represent?

Mr. Patrick Kenny

The investigation announced this week relates to pricing. It relates to the prices all of us face. If there were a pool of data to which people were contributing but refusing access to others, then that would be a different case. The same powers we have used in respect of this or any other case will always be available to us.

Forgive me, I have no wish to confuse the issue. From a statutory point of view, does the commission have the power to go into any insurance house? The commission is investigating the sector, effectively. Does it have the power or remit to go in to any insurance house, any of the big names? Three of the biggest names in the world in this sector begin with the letter A. Can representatives of the commission go in to those houses and explain that they work for the CCCP and want access to all the data on pay-outs? We know what the Injuries Board is doing. There is perfect knowledge of its activity and the average level of claims. Can commission representatives ask these firms about what is on the databases?

Mr. Patrick Kenny

If we believe there is a reasonable suspicion of a breach of the Act, we can.

The commission obviously does believe that. Otherwise, it would not have notified of the fact that it is undertaking an investigation.

Mr. Patrick Kenny

Yes, and, as I have explained, that relates to potential price signalling on the retail market. That is what the investigation relates to.

Is that not the nub of it? We are talking about huge increases in premia. The commission has received complaints. We already know the scenarios. Let us suppose a person's car has an NCT certificate, he is over a certain age, the car is roadworthy and he has never been a risk before. Then, all of a sudden, he is paying a 50% increase in his car insurance. There is no justifiable reason for it if insurance pricing is based on risk and there is no change to the risk. Then, obviously, there is behaviour within the industry that is determining the investigation. Can the commission compel the insurance industry to yield onto Caesar their databases, which show the level of claims that are settled out of court? We, as ordinary citizens, have no knowledge of this. That is where the gap in data materialises. If we are talking about absolute transparency, then we need to have access to the data. Now, from where I am sitting, there is only one relevant entity, aside from the Central Bank reports and the Injuries Board. It is opaque and there is no perfect knowledge relating to the data.

Mr. Patrick Kenny

Let us suppose there was a case where we believed we were looking at abuse of dominance. If a firm was dominant and we believed there was individual pricing abuse, we could do those things, because we might have a reasonable suspicion that a given dominant firm was causing an excessive price. The difficulty we may face in a different situation is where we have a number of players in the market, none of whom are dominant. What we are asking in that scenario is whether their costs stack up. That is a different question.

Can the CCPC ask that question?

Mr. Patrick Kenny

We would have to have a suspicion of a breach of the law under the Competition Act.

From the consumer's point of view, the Competition and Consumer Protection Commission has issued summonses to the motor insurance providers. The commission press release clearly states that there was a signalling of price increases. If the commission cannot get access to the reasoning behind the price increases, even on issues like re-balancing, provisioning or the historical reduction in premia in recent years, then what does a successful outcome of the commission investigation look like, from the point of view of the consumer?

Mr. Patrick Kenny

Without talking about-----

Let us not couch language here. The people watching this online want a simple answer. The Competition and Consumer Protection Commission is going in now to take a look at the insurance sector, as it relates to motorists. That will give people some degree of comfort, but it will only give them comfort if they know there is an outcome that results in a reduction in premium prices.

Mr. Patrick Kenny

In a price signalling case the question we have to answer is whether the signals were sent, received and acted upon and prices changed, made higher, in response to that. It is the delta on the price that we will be looking at in this investigation.

What does that mean? What is the delta on the price?

Mr. Patrick Kenny

The increase that would have happened otherwise.

The commission can make a determination that there was an increase in price as a result of what criteria?

Mr. Patrick Kenny

In any case like this what we are looking for is whether the information was received and considered and whether it entered into the person's thought when he made a pricing decision.

In effect, there is no justice or restorative function of the commission in that regard. The commission can make a "Yes" or "No" statement.

Mr. Patrick Kenny

We would have to go to the court and the court would have to make a finding that there has been a breach of the law. Let us be clear about that.

Essentially, as far as the commission goes, this investigation could take how long, roughly?

Mr. Patrick Kenny

In any investigation we have a plan. We have planned for it over several months. From our experience and the experience of our colleagues abroad, we are conscious that speed is the friend of success.

We live in the political world. With all due respect, I am not satisfied with hearing that speed is the friend of success. The people watching this want to know. The commission is a statutory body and one of the commissioners, Mr. Kenny, is before the committee. Can Mr. Kenny give us a timeframe by which the investigation will be completed? What could the outcome potentially be after the investigations? If the commission makes findings against the insurance industry, what recourse does the commission have? Mr. Kenny has not given us a timeline. He has said months but we need to be more definitive. If it runs to court proceedings after that, then this could conceivably take years. I am pressing Mr. Kenny because if we have to wait for the CCPC to make a determination but the industry has already signalled a 20% increase for next year, then it seems to me the firms are not going to stop that increase pending the investigation the commission intends to carry out. Therefore, the consumer will still end up paying more. Not only will the consumer be subject to the 2016 increases, he will also be front-loaded with 2017 increases as well while this investigation is going on. Can the commission stop the increases while the investigation is going on?

Mr. Patrick Kenny

In the case of any investigation the fact that we have opened an investigation and taken a public step absolutely gets the attention of the parties involved. I am not talking about this particular case. It is a general issue. When a chief executive gets a summons and a request for information that is four or five pages long and he must appear in person, it make it very real for him and he takes it very seriously. In the case of investigations generally, agreement investigations can take up to a year. It depends on the complexity and the barriers put in our way. It could take up to a year or more. If we go to court subsequently, we are in the hands of the courts. To recap, we believe that when we announce an investigation it has a big impact on a market. It changes the dynamics in the market from the day that the investigation becomes public. People are very careful after that.

With all due respect, Mr. Kenny cannot say that definitively. That is a rather subjective statement. The proof of the pudding in that case will become evident. As Mr. Kenny has said, there is potentially a year in this. He cannot say for sure that premia will not actually increase as a result of the fact that the commission has signalled that it will undertake an investigation.

Mr. Patrick Kenny

It is in answer to Deputy Sherlock's earlier question. There may be a number of factors pushing premia up. People may decide independently and perfectly in compliance with competition law and that may still continue. What we are after is the degree to which in any market signalling accelerated or exacerbated a given price increase. That is where we come in for this purpose. I accept the Chairman's point that there may be other breaches of competition law that are separate.

I will close out on this point. What we are hearing is that the commission will look at one element of what is effectively a much bigger picture, if I am to sum up its contribution. As the Chairman articulated, there is still the issue of data, of having perfect knowledge within the sector. It is clear that in the absence of perfect knowledge, we, as legislators, are in the dark. If we are expected by the consumer to make a set of recommendations, until we have access to that data and those databases, in terms of the qualitative analysis of that data, the industry can continue to behave as it has behaved.

Mr. Patrick Kenny

If I may, I will use, as the Deputy says, the window on the world into our meeting to say that if anybody has information in that respect, he or she should come and talk to us as soon he or she can.

Has Mr. Kenny listened to, or watched, the proceedings here?

Mr. Patrick Kenny

We read them back after about a day's delay, or watch them back later.

Mr. Kenny has read them.

Mr. Patrick Kenny

We will see them. We are following it all closely.

Mr. Kenny will be aware of the fact that cartel-type behaviour has been cited, mentioned and discussed.

Mr. Patrick Kenny

Yes.

Mr. Kenny will be aware of all of the issues that were put before the committee relative to access to the three databases that are next to nigh impossible to get at by any outside company.

Mr. Patrick Kenny

Yes. We will track-up on all of that.

I am extremely disappointed that the commission's investigation will be limited to the commentary in the newspaper about the 40% increase suggested by the insurance companies because if one is looking at pricing, surely one must look at why they are saying that. They are saying that as a result of the information they have which the commission does not have. However, the commission does not seem to be of a mind to pursue them to get that information.

Mr. Patrick Kenny

If I may respond, I would think that in these investigations, the first thing that the companies involved do is state, "Here is everything that is pushing prices up and we will give you everything to show there is nothing else, except what is pushing these prices up.".

So Mr. Kenny thinks the commission will get that information.

Mr. Patrick Kenny

They will certainly say that they are giving it to us. Then we would ask the question, is that what it is?

Therefore, to be clear about this, because it is a question that Deputy Sherlock was pursuing as well, the commission will get access to this much-protected set of databases.

Mr. Patrick Kenny

I would say they will not give us line-by-line access to the database. What they will say is, "Here are the figures which show that what we are saying is not what has happened."

Surely the commission's investigation will test those figures. In testing the figures, they must drill down, presumably for the commission, to prove their point and to offer the commission the documentation necessary to prove their case.

Mr. Patrick Kenny

That is what they will do. They will try to show that there is nothing else.

Is that what the commission will do? Will it ask them for that? That is what I want to know.

Mr. Patrick Kenny

Of course, we will look at that. To be clear, what we will look for is evidence. I do not want to talk specifically about a case that is open but in a price signalling investigation, we will look at whether that information was considered, how it was considered and how it was used in the pricing decisions.

I return to the question I asked Mr. Kenny about becoming an associate member of Insurance Ireland and being able to access the databases, not knowing whether or not it is the full data one is accessing and then to be able to use that data to inform an outside company as to the market. Is that withholding information which, if given, would be in the public interest because it might create competition, bringing down the prices, etc.? Will that form any part of the commission's questioning in terms of a complaint such as this?

Mr. Patrick Kenny

There is nothing that could preclude us from looking at that matter separately.

Okay. Senator Rose Conway-Walsh is next.

I warmly welcome the commission's move to call the industry in on the signalling of the price increases in the future. The announcement during the week of the commission doing so will be reflected in the market - I suppose I do not share the commission's thoughts on that - and that is a positive step already. The commission is a key actor in what we are trying to get to the bottom of here and how we are trying to bring down prices. In order to be able to assess whether the main driver of the increases is down to risk association and analysis of the risk or, as we suspect, because of the compliance with next year's changes, which is what we are trying to get to the bottom of, one needs the raw data and that raw data will have to be supplied to the commission. I would see the commission's role evolving and becoming more pertinent as time goes on. Can the commission confirm that it wrote to Insurance Ireland in October last on the same issue? What was its response and what follow-up did the commission carry out?

If Mr. Kenny does not mind, I will ask a couple of questions in sequence. Is this week's statement about calling in the industry part of an ongoing investigation or is it the start of a new one? What powers are open to the commission if it finds evidence of cartelism? Can the commission do anything more than give it a slap on the wrist? Does the commission have a checklist against which to check an industry's behaviour to determine what constitutes a cartel?

Mr. Fergal O'Leary

Can I take the first question?

Mr. Patrick Kenny

Yes.

Mr. Fergal O'Leary

To take the Senator's first question, in October 2015, we wrote to Insurance Ireland. The response that we got meant that we did not open a formal investigation at that stage - we did not have grounds to do so - but what we did from that point onwards was keep a watching brief to monitor what was being said by the industry. Over the course of the summer, the statements that came out concerned us more. That happened in May, June, July and August, and as I had said to the clerk to the committee a few weeks ago, we were down to appear before the committee last week but we were getting ready to issue those summonses and we did not want to appear before the committee and be even more restricted than we are today. At least the fact now that our summonses and our action is out in the public domain places responsibilities on those who have received those summonses.

Going back to October 2015, that is when we started looking at this, and we have been looking at it since, but it clearly escalated as things happened in the market over the past number of months.

Mr. Patrick Kenny

Following on from that, we saw additional statements by CEOs in the newspapers. We spoke to our colleagues in the equivalent agency in the UK and asked whether this was happening there, and they said it was not to the same degree. When one is looking at a market where these things are evolving, one can have a starting point but eventually one says we now have to start investigating. Therefore, from the middle of the summer, the division under my direction prepared a brief for the commission and we asked if we could commit resources to this. This is how we work because if one is conducting one investigation, one is not doing a number of others. That was approved in the summer. It is the first public phase in an ongoing investigation.

I asked specifically about the powers and the checklist.

Mr. Patrick Kenny

When the Senator talks about powers, does she mean sanctions or the commission's powers to require evidence?

If the commission determines that there is a cartel in operation, what power has it?

Mr. Patrick Kenny

In the system in Ireland, the courts are essentially the commission authority. We go before the courts and ask a judge to make a finding in a case. That can be in the civil courts to make a declaration and get an injunction. If, in a case, we found that there was what we call a "hardcore" cartel, then Ms Karen O'Leary's division would produce a file to be considered by the Director of Public Prosecutions.

The "hardcore" cartel might warrant explanation. How difficult is that to prove?

Mr. Patrick Kenny

It must be proved beyond all reasonable doubt in the Central Criminal Court. What we are looking at there is a secret agreement to share markets, raise prices or divvy-up customers. It is hidden from the public. It is not done in public. I am afraid it is more common than most people would like to admit.

So it is a crime.

It is interesting that the commission's actions in this field have been with its competition hat on.

What about the consumer side? Surely this is as much a consumer issue. In terms of financial services, does the Competition and Consumer Protection Commission, CCPC, give way to the Central Bank? Wearing its consumer protection hat, has the CCPC discussed this matter with the Central Bank? Does the latter's mandate over financial services need to be removed? This may be a wider question but, in light of the tracker scandal, the mortgage rip-off and so on, that appears to be the case.

Is there a conflict of interest in the regulator also being the consumer protection body? As consumers, what rights do drivers have to query 100% or 200% increases? How does the consumer protection part of the CCPC represent them?

Mr. Fergal O'Leary

In the past 16 months or so, we have received approximately 1,400 calls to our consumer helpline regarding motor insurance.

How does that compare with the previous period?

Mr. Fergal O'Leary

It is steady. What is not steady, though, is the fact that 227 consumers contacted us about rising prices. That is not consistent with earlier periods. We were most contacted about the mortgage question, with motor insurance being second. That is part of what we do.

We have a role in enforcing consumer protection legislation. At this point, we have no evidence to suggest that it has been broken. We would examine anything that came to us. Anything that looks to us like a breach of legislation is generally escalated from our consumer helpline to enforcement teams and considered fully there. Currently, no investigation on our consumer protection side is ongoing.

We have a co-operation agreement with the Central Bank, which has powers complementary to ours in terms of consumer protection. We have a financial education role, which is funded by a levy on the industry. Through that, our helpline, our website and other channels, we give information to consumers about financial services generally, including insurance.

I do not want to take up too much time. The delegation stated that the previous investigations ended with agreements and undertakings. Will the witnesses provide more detail on the nature of those agreements and are they public? Was Insurance Ireland involved? How much has the CCPC spent on its campaign encouraging people to switch providers? Is there a contradiction in the CCPC putting its consumer hat on and telling people to shop around while, with its competition hat on, publicly announcing its investigation into industry collusion to keep prices up? Is the CCPC satisfied that it would get a variety of quotes across the spectrum if it sought them?

Mr. Fergal O'Leary

I shall answer the last question first. We last conducted this survey formally in 2015, when there was a wide variation. We have conducted smaller, more informal surveys since to get a sense of whether there are still differences. They do not appear to be as wide or large as previously, but there does seem to be some difference.

We have spent very little on telling people to switch insurance. It is almost nothing, in fact. There is no dedicated spend towards it. This year, we have spent money under our levy functions on giving information to consumers about their options in the mortgage market. One of the many solutions to increase competition in that market is for people to move around more. We conduct switching surveys across 19 markets. Motor insurance is the most switched service at approximately 25% or 26%. According to the CSO figures, the high increases seem to have topped out on average. I am not referring to any individual consumer's quote. A large part of the reason is that consumers have done the hard work of shopping around and ensuring they are not just getting one quote from one business. We advocate for consumers to continue applying this vital downward pressure on the market.

The CCPC has no plans for a further campaign encouraging people to switch.

Mr. Fergal O'Leary

Not specifically on switching motor insurance at this time.

It may be something that-----

I remind the Senator of her time.

That was my final question.

I thank the witnesses for their presentations and their papers in advance. I wish to get a flavour of the CCPC for the person who might happen to be watching this meeting online or on various other media channels. Is there a staff of 20, 200, 2,000 or 20,000? I wish to discuss motor insurance, but will the witnesses first give us a brief flavour of the CCPC's main areas of activity, for example, telephone costs, mortgages or motor insurance?

In the 1980s, there was talk of an airline cartel on particular routes and banks behaving in a cartel-like fashion. The car industry might also have been mentioned, although possibly not in this jurisdiction. It seems to be very difficult to prove cartel-like behaviour - I will use that phrase, as it will probably not get me into as much trouble - where everyone appears to be doing the same thing. When almost everyone goes one way but someone else goes a different way, a person might get suspicious. For example, a bank might do something that ultimately did not prove profitable despite looking like it would, yet other banks will have already followed it down the same line.

Given that this investigation seems to be just about price signalling, it is limited. The witnesses mentioned a year. How many bodies will be involved? I am not asking the witnesses what questions will be put to them, as that would not be appropriate. Deputy Sherlock asked about the outcome if action were taken. The investigation will be limited and I do not know how easy it will be to prove price signalling beyond what would be a reasonable doubt in court.

The witnesses might start with the structure, numbers, etc.

Ms Karen O'Leary

I shall answer the first 60% of the Senator's question. We have 90 staff and an approved head count of approximately 106. We are actively recruiting. Many vacancies arose from the moratorium on recruitment and the reduction in numbers. We are not enormous, but we are not tiny.

We have a broad mandate. We mentioned competition law and consumer law enforcement. We have four strategic goals. Enforcement is our top priority because sometimes we are the only enforcer of certain legislation. Regarding advocacy, we have a role in promoting competition and consumer protection. We provide information and education to consumers on their rights and personal finances. Our fourth goal concerns our development as an organisation and being a good public sector organisation.

I will cite a couple of roles we perform that might be of interest. Regarding the car sector, which the Senator mentioned, we have a product safety role as well as a role in helping consumers to make decisions when buying cars, which combines the personal finance aspect with ensuring consumers' rights are protected.

I am in charge of the criminal enforcement division. One of the areas in which we are active is prosecuting where we find clocking or crashed cars being sold to consumers by businesses. This is not indirectly related to the costs of accidents and so on.

In our product safety role, we are the Irish point of contact for European-wide product safety for consumers. We are active in that sector. It intersects with cars, including the selling of crashed cars.

We have a broad mandate. We also regulate certain aspects of supplier and grocery retailer regulatory obligations. We have a role in alternative dispute resolution. Our functions are very broad, but the core work is enforcing competition law and consumer protection law.

The CCPC's investigation is not currently into cartel-like activity.

Ms Karen O'Leary

No.

If it were, the CCPC would be signalling - pardon the use of that word - or indicating that it was investigating a cartel-like behaviour. It is just investigating price signalling, to which Mr. Ken Murphy of the Law Society alluded at the committee a couple of days ago. In a previous life, he had been involved with competition law. I was not particularly familiar with it beforehand.

This investigation has been ongoing; it is not all as a result of what happened on Tuesday.

Ms Karen O'Leary

I can explain it from the other side. How does a cartel usually come to the attention of the commission and other competition authorities? It is normally in one of two ways. The first is through an immunity application. We have an immunity programme with the Director of Public Prosecutions and we have a special hotline for immunity. That happens when an industry player decides it no longer wants to be part of a cartel. It phones us and asks to be first in the queue for immunity. In return it must tell us everything it knows about the cartel. This is known as a leniency application in other jurisdictions, and across Europe that is very often how agencies hear and find out about cartels. By their nature they are secret and hidden. A whistleblower is needed, or a cartel member who says "This is not working any more," or who fears someone will find out about it and so wants to be first in. The other way we find out about cartels is through bid rigging - for example, in procurement. This happens when several market players come together for a public or private sector procurement and agree on prices so that one wins this time and another the next time, or one gives the other the work afterwards. That kind of agreement is very serious and is a criminal breach of competition law in Ireland.

The DPP has agreed to prosecute a bid-rigging case we sent to her. It will come before the courts in the first quarter of 2017. We have another active investigation into bid rigging which came to our attention through procurement officials. In one case a disgruntled former employee made a phone call and blew the whistle. Cartels are secret by nature and very often we have to find out about them from an insider. That distinguishes them from other anti-competitive behaviour that is not criminal in our jurisdiction or in others, such as this case, which was made known through public pronouncements. Were those announcements followed by action? That is the differentiating factor: is it secret and private - does it need a whistleblower - or is it in the public domain?

People are probably signalling all the time, possibly unintentionally. Ms O’Leary stated:

We have been very concerned by these statements and this week, after detailed planning over a number of months, we issued, under our powers, summonses.... The evidence collected will allow us to establish the facts and take appropriate action.

That is fairly strong stuff. It is not the case that the commission heard someone on Marian Finucane's show or "Liveline" saying “We are likely going to have to put up our prices.” If they are allowed to, can the witnesses say what raised the level to “very concerned”? What was the flag that made the commission decide to bring this to a head? The commission can go to the courts, which can say something, but what happens then?

Mr. Patrick Kenny

As a general policy - I am not talking about this case - when we see what we think is price signalling, we always contact the company and make it public that we have done so. We think we have to fight the public announcement of the price going up with a public warning that it could be illegal, because nothing illegal has happened until people take the information and change their behaviour. We are trying to short-circuit-----

Am I correct in saying that signalling is not illegal, only behaviour on foot of it?

Mr. Patrick Kenny

If a company received a summons this week, the CEO’s general counsel would say, “I told you so many times, never mention price increases because you have put yourself in hazard. If somebody else acts on them you might as well have agreed with them.” The difference is that very often when we intervene in that way we track what happens and normal levels of activity are seen. In other cases, something else might happen. Then we have to ask whether that is the outcome that was predicted.

We will not pre-empt what is happening in this investigation, but has this kind of investigation into price signalling happened before?

Mr. Patrick Kenny

In other agencies, yes it has.

Are the other agencies here in Ireland?

Mr. Patrick Kenny

No. It has happened in other competition agencies in Europe.

In other countries.

Mr. Patrick Kenny

What we have seen mostly in our history so far is that by publicly intervening we put people on notice-----

People back off.

Mr. Patrick Kenny

----and people understand.

We have to watch and see. Has the commission ever before had a successful finding of price signalling leading to anti-competitive behaviour in this country?

Mr. Patrick Kenny

Not that I am aware, and I should be because I have been there for almost 20 years.

Some group, it may have been the Competition Authority or the Motor Insurance Advisory Board, got documentation earlier and had a chance to consider their stuff. What barriers are there to switching now? I know there is general inertia among people but motor insurance is becoming a more significant purchase for everybody from year to year as a result of these premiums if nothing else. It is a fairly hefty one-off purchase in a year, apart from buying houses and cars. What else can be done to improve that situation instead of having to dig out bits of paper? Surely everybody should be able to know what everybody else has got. I was dealing with a particular intermediary and was going from one insurer to the other within the same intermediary. I had to get the documentation and send it in, although it would have been on the intermediary’s records because I dealt with one agent. Are there other changes in bureaucracy that could help people to switch?

Mr. Fergal O'Leary

As I mentioned earlier, motor insurance is the most switched product. At the other end are bank accounts and mortgages. Unfortunately, people have the most to save on their mortgage. The Department of Finance working group is considering a range of matters, and the Minister of State, Deputy Eoghan Murphy, was widely quoted in the paper. We heard through our parent Department, which is represented on the working group, that it is analysing the amount of paper involved, making it easier for people to switch. In the mortgage sector it is considering giving people longer to switch. At the moment we have between 15 and 30 days to renew motor insurance. If people had longer, would that incentivise them to switch? The prices at the moment are a great incentive for people to look around. I hope that when people do that they are rewarded.

I understand the working group is also considering discounts and loyalty bonuses. From a consumer perspective generally in terms of switching there is inertia but we need to make it as easy as possible for people to switch and to get any barrier lowered. Technology can do that. The more paper we have the harder it gets. It is often in the industry’s interest for no one to switch. There may be a role for the regulator to consider how easy it is, as it does with current accounts and mortgages.

On the consumer protection side, each of us gets a policy and because the trend has been for a massive increase in the past few years we might haggle and fight with the insurer who then brings the price down a bit. We feel marginally better because we successfully negotiated a €200 increase down to €180 and saved €20 but in fact we have paid €180 on top of what was there before. The policy is generally just a figure. Can the commission, wearing its consumer protection hat, ask or require motor insurance brokers, intermediaries, ultimately insurance companies, to break down the policy to show why we get the quote - for example, our age, the area we live in, car type, and discounts because we have not had a claim, because it is shared with another driver, or because there is an alarm or electric gates around the house? At the moment we do not know what bit is for the free windscreen cover and what bit is for the no-claims bonus. It is all very vague. Some computer programme somewhere must have baseline figures, showing 45 year old accountants do X and 22 year old students do Y, typically.

Obviously, they then factor in that so-and-so does this or that. We have seen older people being hit when, in fact, they drive less at night and on motorways and generally drive slower. We are being told this statistically and most people would generally agree with those assertions, yet their premiums seem to be being loaded, as are those of young drivers and, in some cases, rural drivers.

Is there EU legislation or other legislation that stops the Competition and Consumer Protection Commission from inquiring into this? The more information a consumer has, the better. People should know what they are paying for the windscreen or for protection of their no-claims bonus. Most of us fear changing policies because, even if we do not know what is in our policy, we know we have had it, and when changing, we do not know what we will lose. It is very difficult, even for those who are numerate and well educated, to compare prices given there are some 2 million people insured to drive in the country. With that hat on, what can the Competition and Consumer Protection Commission do to make it easier for people to interrogate various different quotes and pick the best quote for them?

Mr. Fergal O'Leary

As far as I know, and I will check this, there is nothing within our consumer protection legislative remit that could mandate that kind of detailed breakdown of quotes. That is not a power I believe we have at the moment, although-----

Should the commission have that power?

Mr. Fergal O'Leary

We are always focused on what will make things better for the consumer. If that information gave some comfort to consumers, we would be in favour of it, but I am not altogether sure it would. From the calls we get, I know consumers are very concerned about these increases and it is the reason the Department of Finance set up the working group earlier in the summer, and this committee is obviously looking at it as well. I believe there is a loss of confidence around what is happening in the sector around data, claims and settlements. Obviously, as we said in our statement and as the committee has heard, there are conflicting views on the reasons. I certainly think there is a role in terms of finding that information in order that consumers can have a little more certainty about why prices go up. We have all looked at the data going back to 2003. Prices were very low then, they started to increase and now they are a lot higher than they were ten, 12 or 14 years ago. We would welcome any powers that might be granted to us, or indeed to the Central Bank as the regulator of the sector, that would make things better and give more confidence and certainty.

Many people may neglect this issue and I accept 70% of them are not switching. At the same time, this cost is a very big figure if it is a one-off payment, and even if people are paying by direct debit, it is still an initial bill which hits once a year. People really do not know why €390 has become €520. If a person had entered a different age bracket, moved house, changed car, changed job, or started working nights rather than days, that would be some explanation. I do not know as I am not an actuary, but the more information we can have, the better. This is a discussion we will have with Insurance Ireland and is one we have had with most other witnesses. However, given Mr. O'Leary's role in protecting the consumer, getting the most amount of information available would be helpful to the consumer.

Mr. Fergal O'Leary

I can say generally that the third of our four strategic priorities is to give information to people in order that they can make an informed decision. That is absolutely something we support. We know, however, that consumers are often overloaded with information, particularly in the insurance sector where a lot of information comes in through the door and hits the mat and a lot of disclosure information is required by Irish and European legislation. An honest answer would be that perhaps the Central Bank would be better placed to look at that type of disclosure information and to say what would make things better for consumers in terms of allowing them to make an informed choice and, one hopes, incentivise them not just to go with the supplier they were always with.

I remind the Senator about the time.

I thank the Chairman. Even though his role is in consumer protection, Mr. O'Leary feels the Central Bank has a role in protecting the consumer or that it is better placed to do that particular task.

Mr. Fergal O'Leary

It is the regulator of the sector. It has all of its consumer protection codes and the so-called know your customer process, and all of that type of thing is catered for there. I think it would be a quicker and easier process for it rather than us to look at it. As Ms O'Leary alluded to earlier, we have the economy-wide remit and that is the reality of where we are.

I am conscious we have to start the next session at 3.45 p.m. so we will finish at 3.30 p.m., if that is agreed. Are there other questions members want to ask?

I had deliberately stopped because I thought we were about to finish.

Please continue.

In terms of refusal to quote and the indication that an insurer can suddenly pull out of a particular market, whether it be a rural market, an over-70s market or an under-25s market, what role, if any, does the commission play in saying "You must..." or "You have to..."? Is it anything to do with the commission? In terms of consumer protection, what if a chunk of the population is being ruled out? If the average quote is €800 and some drivers are being quoted €8,000, that is not realistic.

Mr. Fergal O'Leary

There would be the anti-competitive angle if that was being done by a particular set of companies which were somehow agreeing to exclude a particular subset for whatever reason. On the consumer protection side, there would be a possibility in this regard. Anecdotally, it has been said at this time that certain groups or certain ages of vehicles are being almost priced out of the market. If we got evidence to that effect that we could pursue, we would do so. However, the way it is set up statutorily at the moment is that if a driver is refused by a number of providers, he or she goes elsewhere and gets a quote, and we do not police that.

I thank Mr. O'Leary.

The problem with that is they have priced them so high, they know drivers cannot afford it. The witnesses said previous investigations ended with agreements and undertakings. Can he provide more detail on the nature of those agreements? Are they public and was Insurance Ireland involved?

Mr. Patrick Kenny

I was going to reply to the Senator at the end as I had written down her query. This was an investigation into a software programme that was used by brokers. It was almost identical to an investigation in the UK some five or six years ago. The issue with the software was that it enabled brokers to see all competitors' prices a month before they came out. If they were then channelling that information back to the underwriters, they could adjust their prices. The investigation was brought to our attention by players in the industry telling us this had come up elsewhere. We worked with them in terms of getting an agreement or undertaking to ensure the software provider would not develop software that enabled that to happen, and the firms themselves said they would ensure they did not either send or receive information from other competitors. It was an example where the industry was in favour of having a reasonable compliance culture in regard to something that would have been quite serious if it had gone as far as allowing them to see each other's exact future pricing by risk category. That has been on our website since the summer. If the Senator wants further details, I can give them to her.

Was Insurance Ireland involved?

Mr. Patrick Kenny

No, it was just the insurance companies and the software house.

The Society of Actuaries in Ireland told the committee yesterday that it had approached numerous insurers to request data that would enable it to carry out data analysis. The insurers said they were willing to provide the information yet legal advice they received suggested there could be competitive issues around that.

Mr. Patrick Kenny

In both the case that is in the newspapers and the one I just spoke about, it was future pricing intentions that were really sensitive and critical because that is what is going to happen in two or three months. In all insurance markets, historical data is anonymised and shared because it is essential for the proper functioning of the market.

Obviously not in the Irish market - it is anonymised and shared but only among those who are in the largest organisation, which is Insurance Ireland.

Mr. Patrick Kenny

Does Insurance Ireland refuse to give anybody this under any reasonable terms?

We will have an opportunity to investigate that later.

They are not getting it.

Mr. Patrick Kenny

If somebody had the database that was necessary for entering a market and they refused entry on reasonable terms, that reads as a standard abuse of dominance concern.

The fact of the matter is that the data that would inform those who might come into the market is not being made available. It is being withheld. One can only get the data if one pays a particular fee to be an associate member or member of Insurance Ireland. Surely that is the formation of a club, or dare I say it, cartel-like activity which holds the information at the centre and holds the country to ransom because nobody will come in without the data. Everyone here has asked about the data and its release. The commission has been watching the proceedings. The consumer is suffering, the industry is suffering and contracting because there is no competition and they can get away with it.

Mr. Patrick Kenny

The question would be whether it is available under fair and reasonable terms.

No, it is not. That is the point.

To corroborate what the Chairman is saying, the Injuries Board has stated that there is no public information available in respect of overall numbers and costs of claims for personal injuries as the only figures that have been made public do not contain any information on the numbers or cost of directly settled cases. It stated that without access to this information, a full picture of the impact of personal injury claims on insurance premiums is difficult to establish. The witnesses can tell us that the commission is looking at the notified intention to increase pricing but that is still only one element of it. After this submission, we still will not know whether there is a legislative basis that can be provided or whether a case can be made for legislating for perfect knowledge within the industry aside from whether or not one is a member that is locked in or out of Insurance Ireland or whether one is a broker, an underwriter, a small indigenous insurance house or a large international insurance house. It remains the case that if there is a proprietorial element to that data, there could be all kinds of constitutional provisions around that in respect of who owns the data, who minds it and how one interprets it. We can have all sorts of assessments and can make a rough adjudication on what is in the book of quantum. We have already heard that the book of quantum needs to be updated. Ms Dorothea Dowling told us that one can go from €400,000 maxima, if I am not mistaken - she mentioned an injury to a quadriplegic level - to a minor injury like a soft tissue injury, add a percentage and extrapolate an award from that.

Perhaps we have to wait and see what Insurance Ireland tells us but I am trying to ascertain here whether or not we can provide a legislative base to compel the sector to anonymise the data and give it up. There is separation of powers but that would at least provide guidance for the Judiciary, where something is not settled through the Injuries Board, to allow it to quantify the extent of the damages so that there is no back-loading or front-loading on the cost of premiums. No matter what way one parses this, there must be an element of profiteering here if a premium increases overnight by 50%, 60% or 70% or if certain people have been locked out of the market when by any objective analysis their level of risk has not increased. My level of risk has not increased from 9 to 10 September when I renewed my car insurance. Do the witnesses see my point?

Ms Karen O'Leary

I wanted to respond because there is clear frustration and I appreciate why it exists. However, we must understand the distinction between public market information that is in the public domain and can be accessed by anybody and a proprietary system that industry players pay to access. Mr. Kenny is a bigger expert on competition law than I am and will correct me if I am wrong but my understanding is that where it is a proprietary system and market entry is being unreasonably or too expensively withheld from a competitor or potential competitor, that is a different issue to the need for the market and the stakeholders, including the public and public representatives, to know what is happening in a market we are hearing about from our own public.

Can the commission adjudicate?

Ms Karen O'Leary

They are not the same thing from a competition law perspective.

From a competition law perspective, can the commission adjudicate on the nature of the sharing of that information intra industry as opposed to the public domain in terms of the deliberations we have in this committee?

Mr. Patrick Kenny

That is something that would be covered by competition law.

If one makes a distinction between proprietary and pay to access and so on, I will make a distinction along the lines of the questions asked by Deputy Sherlock. In the public interest, it would appear that if this information was made available to the industry, we might have greater competition in the market. Therefore, it is a case of the country coming first. The information is necessary to get the country and its people right and, therefore, it should be made available to the industry.

The other side of that question is to make it publicly available across the board. We have heard that the Irish Road Haulage Association at an open forum asked questions of the insurance industry which the industry would not answer even though it knew the answers. The industry would not give a customer in the market the information that was required for the customer to make a commercial decision or to understand why the premium was at such a level. There is no flexibility on either side.

There is no doubt that Insurance Ireland withholds the information. That has been the complaint from the outset. On the other side in respect of policy holders, they never explain or will not explain it even to the largest players like the Irish Road Haulage Association or the freight carriers. On one side, it is competition. What is happening is anti-competitive. The consumer is being short-changed and is not being given the information they need to understand why the insurance premiums have gone up. Those two questions echo those asked by Deputy Sherlock. Yes, there is frustration and anger because it seems that nobody wants to challenge the insurance sector. We do not know what is going on.

Someone will correct me if I am wrong but to reinforce what the Chairman said, Zenith, which I can name because it is on the public record, is telling us through the Irish Brokers Association that it was de facto locked out of a process of data sharing relating to the market.

We are told there are three fundamental databases, but it appears that not everybody operating within the market, or seeking to become a member, can access them. It is like a club, I suppose. If somebody is in Insurance Ireland, he or she is away on a hack, so to speak, as the person would know the pricing mechanisms and how to game the pricing systems. I use the word "game" as the person would have perfect knowledge of reserves and how much of a profit can be made. Even taking historical factors into account, we were told there was a reduction in the market for premiums, with certain players trying to get to the top of the market or have the most market share, resulting in a reduction in premium costs, but all of a sudden there is a reset going on. If that is happening, one does not set a price based on an intention to earn super-normal profits. The price is clearly being reset based on the fact that there must be resetting of the market to meet reserves, the Solvency II rules and what we spoke of earlier.

It would appear the insurance sector is confining its behaviour to a certain number of larger firms, to the detriment of other players. On the face of it, that is what appears to be happening. They are using Setanta as cover for that. They are using the dysfunction in the market as a resetting mechanism to profiteer. That is the theory here. It comes back to whether we can legislate to get access to data. Ms O'Leary was beginning to elucidate the point that there is a difference between what happens internally within the market and what is in the public domain. That distinction has been made.

Ms Karen O'Leary

This responds, in part, to the Chairman's point about information on why premiums have increased, if the industry is the only player that can argue that increases are down to claims, with nothing to dispute that in the public domain, although not within the industry. That will not solve the issue and there is no external validation of whether those claims are accurate. That is the gap. I appreciate the information about the internal element of the industry, which could be a potential breach in competition law. We could examine that. There is also the issue of public information where the industry states one thing but everybody else wonders if that is actually the case. We will not know until the claims data that is hidden from the market is revealed. It is not Injuries Board or courts data but public with a capital "P". I do not know if legislation is required to mandate that, although I suspect it is. I suspect the Department of Finance working group or this committee may recommend that. From a competition law perspective, they are two different elements. That is why enforcement powers are focused on one area and advocacy powers calling for public data are in a different space for a different type.

We thank the witnesses for their contribution.

Sitting suspended at 3.35 p.m. and resumed at 3.40 p.m.

We are now joined by Mr. Kevin Thompson and Mr. Michael Horan of Insurance Ireland. I draw their attention to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. If they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given. They are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. I invite Mr. Thompson to make his opening remarks.

Mr. Kevin Thompson

I thank the Chairman and the members of the committee for giving me and my colleague, Mr. Michael Horan, an opportunity to present evidence before the joint committee on behalf of Insurance Ireland, which is the voice of the insurance sector in Ireland. Our members make up 95% of the domestic market and over 80% of the international life insurance market in Ireland. Our role is to represent and support the development of our sector in the interests of our members and their customers. To put the insurance sector in context, the overall tax contribution from the insurance sector to the Exchequer is approximately €1.8 billion. Almost 28,000 people are employed directly or indirectly in insurance. We welcome the work of the joint committee in the area of motor insurance. We eagerly await the publication of its report. The committee's efforts are in the interests of consumers and of the sector itself. We believe these interests are very much aligned. We have watched the proceedings to date with interest. We believe we can best serve the committee's work by focusing on two key questions. What is causing the volatility in the market? How do we address it?

The motor insurance industry is acutely aware of the concern and frustration that exists with regard to rising premiums. We want solutions, but if we are to find solutions we have to recognise the fundamental concepts of insurance. In essence, insurers price risk and liability; that is, the likelihood of something happening and how much it could cost to address it if it happens. At present, risk and liability are increasing. I emphasise that an annual rate increase in excess of 30% is not in the interests of the Irish motor insurance industry. This steep rate of increase is causing motor insurance to become unaffordable for some motorists. This is resulting in higher levels of uninsured driving, as evidenced by the recent figures from the Motor Insurers Bureau of Ireland. Would any sector reasonably wish to have to impose such price increases on its customers in the knowledge of the irritation and hardship this causes for consumers and businesses as they seek to go about their daily business? I cannot emphasise enough that as an industry, we are not happy with the current market dynamic. Consequently, we have been working for the last 18 months to call for structural reforms. We believe the proposals in our driving for change document, when taken with the cost restructuring undertaken by each of our member companies, will remove the volatility from the Irish motor insurance market.

Some commentators have made the point that the current situation is primarily attributable to two factors: previous under-pricing by motor insurers and the fall-off in the performance of investment returns. On under-pricing, a long-established underwriting cycle that is common to every insurance market and not unique to Ireland dictates that, following a soft market, there has to be a period of correction when rates are adjusted upwards to reflect the cost of providing the insurance. We have publicly acknowledged that this was the case in Ireland, with rates driven too low by over-competition in the market and insurers fighting to maintain market share. This process was accelerated by new entrants to the market. The subsequent collapse of some of these companies left a financial burden on customers, the State and prudent insurers. While we do not deny this was a factor - rates had become too low and a correction was needed - we stress that under-pricing on its own does not explain the level of premium increases we have seen.

With regard to the decrease in the performance of investments made by insurers, the low interest rate environment has an impact on the performance of insurers' investments. In the main, these are low-risk investments which are adequately matched against liabilities, including current and future claims. The reduction in yields has contributed to premium increases, but it is not the main reason for them. We have made it clear that the main factors we believe are leading to the current steep increases in premiums are the extreme volatility in the claims and compensation environment and the significant increase in the associated legal costs. The compensation situation was further compounded by the changes in court limits in 2014, which required insurers to increase reserves for claims in the pipeline and carry such costs into current premiums. The consequences of recent insurance liquidations such as the liquidation of Setanta Insurance may be added to this. The proposed solution is forcing responsible insurers to pick up the tab for the failings of less responsible companies. Put simply, there are more motor insurance claims and they are costing more. This is not solely my view or the view of my members, it is borne out by independent data sources, which we are happy to discuss with the committee. Details of those independent sources are included in our notes.

We believe the key factor in halting the upward spiral in the cost of premiums is achieving consistency and reasonableness in the awards regime. We have called for certain things to be done to that end. We believe there is a need for consistency in awards to help reduce volatility in the market. Inconsistent awards increase volatility, which is reflected in pricing. We think there is a need to tackle whiplash. Eight out of every ten motor injury claims in Ireland are for whiplash. Awards here are three times higher than those in the UK. The average award here is €15,000, compared to €5,000 in the UK. As premiums are a function of the cost of claims, high awards mean higher premiums. We believe the powers of the Injuries Board should be reinforced to resolve more claims and reduce costly legal fees. Insurance Ireland supports the Injuries Board and its good work, including the swifter settlement of claims, but it needs new powers because the claims environment has changed. For example, claimants should be compelled to provide loss of income information and to attend medicals. Insurance Ireland first made these points in 2014. They should be legislated for as a matter of urgency.

We believe the book of quantum should be internationally benchmarked. There is a need to ensure it is reviewed on a regular basis. As part of this review, the Judiciary should have a role in drafting the contents of the book of quantum, which is what happens in the UK. The size of awards should be internationally benchmarked.

We believe there is a need to fix Setanta Insurance. The Government’s proposed policy response to address the claims of an insurer in liquidation poses a systemic risk to the motor insurance market. This policy exposes insurers to unlimited liabilities of competitors. This would have to be factored into pricing. No other industry has to do this. It is the equivalent of Dunnes Stores bailing out Tesco. We believe there is a need to reduce legal costs. The National Competitiveness Council has said that legal costs are at a six-year high. Injuries Board costs are 6%, versus legal costs of 60% in litigated cases. We think there is a need to act to ensure fraudsters are deterred. Suspended sentences are not an adequate deterrent. Insurance Ireland believes that convicted insurance fraudsters should face the full rigours of the law in terms of custodial sentences. We believe the resources given to road traffic enforcement should be further increased because there is no substitute for enforcement.

High premiums are not in the interests of insurers because they raise the threshold of affordability, which leads to more uninsured driving. Our strong preference is for a more consistent and reasonable level of premium, sustained by a reasonable level of claims costs. We acknowledge that insurers also have their part to play. Rates had become too soft and returns from investments had declined. These factors alone do not explain what has happened with premiums. It is our view that the majority of the premium increase that we have seen in the motor market is due to volatility in the claims environment. As an industry, we have responded in the past when policies were put in place to reduce the cost of claims and we will do so again. In addition, the issue of industry data has been mentioned. We acknowledge that work must be done on this issue and we are committed to doing this. We thank the committee for the invitation to appear before it. We look forward to assisting the committee with its work.

Given that Mr. Thompson has been following the proceedings of the committee, it is interesting that he left it until the last paragraph of his submission before he mentioned the sharing of data. Can he comment on Insurance Ireland's databases? Will Insurance Ireland share its data? Most members want to know Mr. Thompson's thinking on those issues.

Mr. Kevin Thompson

It might be worthwhile for me to begin by explaining the data we collect and who we currently share it with. It is shared at very different levels and for very different purposes. First, we collect data in respect of uninsured driving and, more importantly, vehicles which are insured.

That is in an automatic number plate recognition, ANPR, system. Our insurers provide the ANPR database of all insured vehicles, with the purpose of passing that data on to An Garda Síochána so that it can check whether a car is insured. That is the first data we share.

The second level of data share relates to InsuranceLink. InsuranceLink is a database which monitors claims, with the sole purpose of trying to identify profiles in fraudulent claims. That data is shared, again with insurers, with the sole purpose of combating fraud.

The third database we have is the IIDS, which is the information insurance data services. That relates to the area of penalty points where our database is connected to the national fleet database, which is held in Shannon. In terms of what we do, our members, through that database, can access it to verify people's disclosure about penalty points. That information is shared.

The next data about which there has been much talk is in respect of aggregate market data, that is, how well the industry performs in terms of profits, loss, claims and so on. In respect of that area, we report to the Central Bank under our legislative and regulatory obligations. We also produce our own fact file. The Central Bank also produces the private motor statistics, which we feed into. That was borne out of a statistical analysis the Motor Insurance Advisory Board did. The Central Bank of Ireland has continued with that. We collect that as well from the industry and pass it on. I hope that gives the members some oversight of the type of data we collect, the reason we collect it, who we collect it from and who we share it with.

What does Mr. Thompson say in response to the claim that has been made here that this information is not being shared widely or that it should be shared publicly?

Mr. Michael Horan

I am happy to build on what Mr. Thompson has said and answer that question. Regarding accessibility of data, we supply data to the Central Bank of Ireland. Insurance companies supply many individual returns to the Central Bank of Ireland. They supply their net underwriting revenue accounts for their total business. They supply net underwriting revenue accounts for accident insurance, motor insurance, marine, aviation and transit, fire and other damage to property, liability - these are all individual returns - credit and suretyship and other classes. All of these individual company returns are supplied to the Central Bank of Ireland, which then produces an annual report, insurance statistics, which is available on its website. Members can see all the individual company returns, and the market returns for each year. That is one service we provide, and it is there for anybody to see. That is also available through a software programme, which is available from a service provider, where people can interrogate the individual forms, look at claims development patterns and so on. One can see how claims and the cost develop over time.

What information does Mr. Thompson have that is being withheld, as was stated here by a number of witnesses, that might influence another company's view of the market or that would inform a company that wanted to come into the market?

Mr. Michael Horan

I would say that we also supply to the Central Bank of Ireland detailed individual policy and claims information on private motor insurance - 20 fields of information on individual policies, individual claims, the cost and so on. That was a recommendation of the former Motor Insurance Advisory Board, and the document is published on the Central Bank of Ireland website every year. That is a huge amount of data that is available within the Irish market and also to international insurance companies.

Is there data that Insurance Ireland does not publish?

Mr. Michael Horan

We publish our fact file.

No. Is there data that Insurance Ireland does not publish?

Mr. Kevin Thompson

In answer to the Chairman's question, we publish everything we are asked to publish.

That is not answering the question. Does Insurance Ireland publish everything that would be required to inform those who have to be informed of the conditions in the marketplace in Ireland?

Mr. Kevin Thompson

We believe we do. I refer to the private motor insurance statistics published by the Central Bank in October 2015 covering the insured years from 2003 to 2013. To give the Chairman an example of that, it breaks down the settlement rate in terms of how quickly claims are settled over different years. It also breaks down the costs per claim based on age profile, so there may be an age profile between 17 and 20 years, 20 and 25 years and between male and female drivers. The private motor insurer statistic also shows in its appendix, not on a name basis but with an indicator A to Z, the profile of each company. For example, it shows that Company A seems to have more young drivers than Company B, and that Company B has more older drivers than Company C. It is all broken down and is there for people to see.

What would Mr. Thompson say to all the witnesses who came before us here and said that he does not share his data? What would he say to the witness who appeared this morning to say that, as an associate member, he was paying a significant amount of money for data and was not sure whether he had access to all of the data? Mr. Thompson listened to the hearings. Will he address those specific questions because those are the questions raised with us about the data and data sharing, the cost of membership and associate membership of Mr. Thompson's organisation, and what that entails?

Mr. Kevin Thompson

I will address the associate member's question first and then comment on the wider data question. An associate membership fee for Insurance Ireland is €10,000 per annum but I qualify that by saying that we are a voluntary, non-profit organisation. That is the way we work. We know the associate member who was here this morning. When someone becomes an associate member, they have access to all our data. There is no blockage whatsoever.

In terms of the fee they are charged on top of that, we have databases so if they want to get a connection they pay an InsuranceLink set-up fee, which ranges between €2,000 and €4,000. It is a one-off fee. It does not go to us; it goes to our IT provider for connecting that service to them. They then pay an InsuranceLink usage fee. As I said earlier, InsuranceLink monitors claims so every time someone accesses the system, it is on a pay-as-you-go basis. They get charged every time they access it. The charge will depend on one's usage. A very large player who has a large market share and who accesses the system frequently will pay a lot more proportionately than a very small player in the marketplace. We believe that is the right way to proceed.

A figure was quoted this morning of €100,000. That is not the figure. There was some confusion in that regard. That figure relates to our IIDS system. Regarding penalty points, what we have within our IIDS system currently is that our direct providers, that is, insurance companies, have access to it. We are building an enhanced module to it which will allow brokers to have access to it. That overall IT enhancement and development will cost approximately €100,000. That is the figure we have been given by our IT provider. That is in terms of associate member costs and the comment regarding €100,000 made this morning.

Regarding our databases such as ANPR, and particularly InsuranceLink, where we are trying to combat fraud, the system is only as good as the number of people in it. If someone who is trying to combat fraud has only 50% of the market, they are only capturing 50% of potential fraudulent claims. They want as many providers as possible to be in that system. The more providers they have, the more robust the system in covering the entire market and catching potential fraudsters. It is in our interest, therefore, to have as many people as possible in that system.

I hope that clears up the point about the associate membership question.

On overall data and people having access to it-----

There have been complaints that Insurance Ireland does not share the data.

Mr. Kevin Thompson

We do share our data. We share our data publicly. Anyone who is a member of our organisation has access to our data.

That is not publicly, access is confined to the membership. It is a club.

Mr. Kevin Thompson

No, it is not a club. If one is signed up to our InsuranceLink database, one has access to it.

If one is an associate member, one pays €10,000. Who pays €100,000?

Mr. Kevin Thompson

The €100,000 is related to the module that is being built to extend the functionality around InsuranceLink.

Where is the misunderstanding about the €100,000 then? Mr. Thompson said this morning there was a misunderstanding.

Mr. Kevin Thompson

In terms of the fee they pay to access InsuranceLink. They currently access InsuranceLlink. The sum of €100,000 relates to IIDS, which is a different system.

So to access all of the system, it is €110,000.

Mr. Kevin Thompson

It is €100,000 spread across all members. It might come in at about €800 per member.

So it is not €100,000.

How much is full membership?

Mr. Kevin Thompson

Full membership ranges from a standard fee and the amount depends on one’s market share.

How much is a standard fee?

Mr. Kevin Thompson

It is €10,000.

I do not wish to get overly bogged down in the inner workings and revenue streams of Insurance Ireland but it is relevant to much of what we have been discussing. This is our fifth day of hearings and the witnesses have probably sat through almost as much of it as we have. The industry is not regarded kindly by many of the people who were in here. We are here trying to represent the public. We have all seen insurance premium increases of 35% to 40% in a year, 70% over two years, and individuals have experienced vastly greater increases. As a corollary, some people must be lower than the average but there are huge increases across the board affecting everybody.

The witnesses are the voice of the insurance sector and their role is to represent and support the development of the sector in the interests of both their members and customers. That is fair enough. How many staff are in the organisation? It has been said it is a not-for-profit organisation and is not a return-to-shareholder type scenario.

Mr. Kevin Thompson

We have 17 full-time staff.

A total of 17 staff. What are the revenues from the various activities? I presume it is public information. Is it millions or billions?

Mr. Kevin Thompson

Our revenue is split between two amounts - standard operating costs of €2 million and then we have what is called projects costs, which is an additional €2 million. When I say project costs, that is where the members themselves decide they have a specific project they want us to do or a specific system.

So Insurance Ireland spends €4 million from its members between membership fees and charges for the various databases and then the money is spent running the organisation.

Mr. Kevin Thompson

The majority of the general administration budget amount of €2 million goes on staff overheads. The other €2 million is at the discretion of members and they decide. Some years they might decide to spend €2 million and some years they might decide they do not want to spend €2 million on any specific project.

Are all the motor insurance databases in the country that exist or that co-ordinate data run through Insurance Ireland? I refer to the information on penalty points. Please forgive me but I would have thought there was some Garda database of penalty points where the penalty points are recorded by the Garda and presumably by the GoSafe cameras and it goes into a State database to which the witnesses get access. Alternatively, are they just sharing the information people give them about penalty points? Do they not have any access to the Garda system?

Mr. Michael Horan

I can take that question. I will explain briefly about the databases we have because there has been a lot of commentary about data and people talk about data without defining what it is. The InsuranceLink database-----

Through the Chair, I ask Senator Horkan to forgive me for cutting across him. Who talks about data without knowing what it is?

Mr. Michael Horan

Just commentators in general.

Mr. Horan should be specific because if he is laying that at the door of members, I would say bí cúramach because it is an integral part of what we are talking about here today, about parsing out the issue of data.

I have no problem at all with Deputy Sherlock’s intervention. Almost every commentator talked about the lack of clear data, the lack of explanation and the lack of visibility of what is going on in the motor insurance sector. We can see the personal injuries information in the Injuries Board and we can see what is going through the courts system. That is only 30% of the overall amount of claims, so 70% of cases are settled and most people who appeared before the committee said they did not believe they had any great visibility on that. Are the witnesses saying that if one becomes a member of Insurance Ireland, one gets access to that information or is it available to the public through the Central Bank figures?

Many of us, including me, asked what questions other witnesses wanted us to put to Insurance Ireland. They wanted to know the number of claims, the average cost of the claims and therefore the total amount of claims that are being settled because if the Injuries Board claims are not increasing in value year-on-year or are relatively stable and likewise in the courts – certainly not 70% increases – the explanation then must be, other than the Solvency II Directive or the reduction in investment income, that the rest of it is being picked up by a massive increase in the cost of the claims that are being settled. We do not appear to have any visibility on those figures. Is that visibility already there for us or is it only there if we sign up to the databases and join the organisation, or does it exist at all?

Mr. Kevin Thompson

It is there.

Mr. Kevin Thompson

I draw the committee’s attention to the private motor insurance statistics published in 2015. To give the history, that statistical exercise was born out of the Motor Insurance Advisory Board’s second report in 2004. The Central Bank has carried that format forward and we have fed into that. I commented earlier on the type of data in there. It gives claims costs, so if one looks at the claims costs from 2006 to 2013 – that is in the report and it is up on the CBI website and one can access it.

Is that the Central Bank insurance statistics 2014?

Mr. Kevin Thompson

It is the private motor insurance statistics published in 2015.

Was it published at the end of September 2015?

Mr. Kevin Thompson

It was published in October.

Is it a 36 page document?

Mr. Kevin Thompson

We can circulate it.

If it is that freely available, are those who are paying €10,000 per head a bit naive?

Mr. Kevin Thompson

It is different. What we are talking about is market statistics. In response to the original question, if people want to know what is happening in the claims environment, they can see the market statistics both in our fact file and in the private motor insurance statistics published in 2015.

Can they work out from those statistics whether the motor insurance industry is profitable or loss making? I know we saw the figures that said insurance companies generally are losing €20 to €30 per €100 of premium paid. That statistic was quoted to us earlier in the hearings but I have not had an opportunity to study the statistics. It appears to me that many of the people who appeared before the committee were not aware of these statistics or they certainly gave us the impression that they were very lacking in data about what is going on within the motor insurance industry. The witnesses are almost the last star witnesses of the sessions we have had up to now and are pretty much refuting what everyone else has said. If that is the case, so be it, but those people are investigating the industry and they do not seem to know all the information exists or else the witnesses are telling us something exists and what they want is not what exists.

Mr. Kevin Thompson

I think there are two issues. The first is that we are not saying that more data should not be provided.

I did not say that.

Mr. Kevin Thompson

What we are saying is that there is data on claims. My colleague, Mr. Horan, will say more in that regard. To give a high level piece of it, if one looks at the private motor insurance statistics published in 2015, they will show that between 2006 and 2013 there has been a 23% increase in claims costs for comprehensive policies and a 38% increase in claims costs per policy for third party.

Neither of those figures is anywhere close to 70%.

Mr. Kevin Thompson

I am just giving an example and we can come back to that point. Mr. Horan will speak about where the profitability comes from.

Mr. Michael Horan

We recognise that people want more data and we are working on that because we recognise that more work needs to be done at our end in providing more transparency.

What are the barriers to delivering that because we had Conor Faughnan in last week telling us that the ANPR recognition system that was installed in all the Garda vehicles is virtually useless because one in four hits they were getting for a car that was neither taxed nor insured was producing data that was not correct.

For example, the Garda got a flag of a vehicle that was not insured and then it turned out that it was insured. There are obviously difficulties there. We are all sitting here with phones in our pockets that are more powerful than computers that were guiding aircraft 20 years ago. What is the problem here?

Mr. Michael Horan

There have been problems with the ANPR system. The ANPR, automatic number plate recognition, system is an exercise to help the gardaí enforce road traffic legislation on uninsured driving. The idea is that by feeding data into the system for gardaí, they would be able to tell whether a vehicle was insured or not with their hand-held devices. That is how it works. There have been some data problems with it.

Is the data it is getting inaccurate?

Mr. Michael Horan

The reason it is difficult to be 100% accurate with it is that people are changing motor policies the whole time. They move from one company to another and so on. There is an issue around fleet vehicles, that is vehicles that are on motor fleets.

Is it not a real-time database that is constantly updated or is there a backlog of a month or a week's processing?

Mr. Michael Horan

It is updated on a daily basis.

Some 25% of their hits were inaccurate. One in four of us is not switching on a daily basis.

Mr. Michael Horan

That was some time ago but we have done a lot of work since then on the technology to try to improve that. The InsuranceLink database is an anti-fraud claims database that insurance companies feed into. It was established back in 1987 to provide an anti-fraud claims database. When an insurance company registers a claim, it puts it onto the InsuranceLink system. If it gets a match on the system it might mean that the insurance company would take a closer look at the claim. It does not mean that anybody is fraudulent. It just means that-----

They have had more than one claim.

Mr. Michael Horan

It could be as innocent as that. It is a tool to help the insurance industry fight fraud. It has been there for over 30 years.

I remind the Senator of time.

I am sorry. Whose database is the penalty points database?

Mr. Michael Horan

It falls in under the integrated insurance data service. There are two modules to it; penalty points is one of them. What we have is a centralised hub. The data is actually with the national vehicle and driver file in the Department of Transport, Tourism and Sport. Through this hub, insurance companies can check at renewal whether somebody has penalty points. Non-disclosure is a problem in the motor insurance market. Not everybody declares they have penalty points when they have them. It means that insurance companies can see whether somebody has penalty points or not. That is the purpose of that.

I am conscious of time. If somebody says they do not have penalty points when, in fact, they do, are they then penalised on their premium for telling lies?

Mr. Michael Horan

If one is telling lies in any respect in relation to motor insurance, one could run into problems at the claims time.

I accept that but I am talking about when the insurance company is raising the premium. One is putting in one's application and being quoted a figure and perhaps one is refused because one has denied that one's penalty points exist. How does that work? For those people who have told the truth and will suffer the consequences if they have penalty points, there should be some deterrent for people who deny their penalty points exist as opposed to being told "By the way, you forgot a few points." Mr. Horan can come back to me on that.

We have seen a 60% to 70% increase over two years and a 38% increase in the past 12 months. How much of that is attributable to Solvency II, how much to there being less investment income and how much to increased claims? We do not know.

Mr. Michael Horan

On the penalty points issue, if somebody has penalty points they have not declared, at the very least the insurance company would rate on the basis of the penalty points that are showing on the national vehicle and driver file database.

They do that anyway. Is there any penalty for having told a lie?

Mr. Michael Horan

It would be open to an insurance company to not quote at renewal on the basis that one has said something that is flagrantly incorrect. On the question of how the premium increases break down, it is very hard to disentangle all the different factors.

Without the data.

Mr. Michael Horan

It is something on which we could come back to the Senator. For us, the main factor is the volatility in the claims environment, higher court awards and uncertainty. That has driven claims costs up. Premiums are primarily dictated by the cost of claims.

Mr. Horan is saying there is volatility in the claims environment. We know the court award figures did not increase by 38% in a year and the Injuries Board figures did not increase 38% in a year, yet insurance premiums have gone up 38% in a year. Mr. Horan needs to reconcile that with us. I will let other members of the committee develop that point.

I thank the witnesses for coming into us today. There has been a focus on data. I am looking at this from the point of view of whether the market is competitive. Whether it is perfectly competitive or not remains to be seen. There is still a fundamental question about whether there is perfect knowledge around the market. We all recognise there has to be a surplus on every premium derived by a company. That is a given but we are finding it difficult to reconcile the extent to which premia have increased. It is a steep, unaffordable rise. If insurance companies are pricing risk and liability and if by any reasonable, objective analysis the individual motorist's personal circumstances have not changed, the car has passed its NCT test and nothing has changed from the motorist's point of view yet they are incurring a cost of 30%, 40% or 50% they are asking themselves, "What is going on here?". Most people will accept the argument around the resetting of the market to adhere to rules and provisioning. The witnesses' opening statement outlined that the price of premiums had reduced significantly over quite a number of years. What most people cannot reconcile is the extent of the increases. I have listened carefully to what Mr. Horan is saying about the data. He speaks about the private motor insurance statistics report in 2015, the IIDS, the ANPR and so on. In the Personal Injuries Assessment Board's submission to us it states there is:

...no public information available relating to overall numbers and costs of claims for personal injuries and the only figures that were made public did not contain any information on the costs of directly settled cases. Without access to that information, a full picture of the impact [of personal injury claims] on insurance premiums is difficult to establish.

If we take Insurance Ireland's submission before us today and its willingness to seek a solution to this issue and layer on the fact that it is saying there is adequate data available to make an assessment of the market, why is it that the PIAB, which is a statutory body, is telling the Houses of the Oireachtas there is not perfect knowledge? How do the witnesses reconcile these statements?

Mr. Michael Horan

We have explained there is a lot of data. We accept that people require more data. We have said we are scoping out an exercise and we are working on this at present. This is our position.

What does scoping out an exercise mean? If Insurance Ireland provides statistics to the Central Bank then yes, there are statistics, but the issue is how they are mined for quantitative analysis of the data so that decisions can be made. Will the scoping exercise, whatever that is, result in transparency around the cost of a premium? There is no breakdown of the cost of an average motorist's premium. People accept the insurance companies must make a surplus on the premium and accept, to a certain extent, a rejigging or resetting of provisioning, but they do not accept the stark increase. The witnesses still have not explained this, not even in their opening submission. There is nothing in the opening submission, with all due respect, or in the subsequent replies which answers for the ordinary motorist the question as to why premiums have increased.

The witnesses have not spoken to us about behaviours in the insurance industry regarding the settling of claims - whether the insurance companies interrogate fully every claim that comes before them, or whether they settle them just to get them off the desk and out the door. We do not know who the members of Insurance Ireland are. The witnesses state that it is representative of 95% of the domestic market but, presumably, all of the big insurance houses are members of Insurance Ireland also. We know it is a not-for-profit organisation. We are all intelligent people here, presumably, so we know Insurance Ireland gets its riding instructions from those paying subscriptions. The question is whether Insurance Ireland is here to speak for all of its members, including the big insurance houses. We now hear there will be an investigation by the Competition and Consumer Protection Commission, but we are none the wiser more than half an hour into these proceedings. I am still ignorant as to why there has been such a stark increase. The witnesses state that the data is available, but clearly it is not.

Mr. Kevin Thompson

Regarding the data, we are doing a scoping exercise. Witnesses have appeared before the committee. We have engaged with the Society of Actuaries in Ireland and other stakeholders. We are trying to get to the UK standard and the level of data produced there. It will take time to get there and we are very clear about this. For the data to have any meaning it will have to be in track for a good number of years, but we have started the journey and are engaging with stakeholders on it. One difficulty we are cautious about regarding the UK data is that it projects future claims and premiums, and we must look at this from a proprietary point of view and a competition point of view. This is where we want to get with the data.

I apologise for cutting across Mr. Thompson, but now we are drilling down into the nub of this. He states that the data is proprietary but, at the same time, he states that Insurance Ireland is yielding up sufficient data to statutory organisations and the Central Bank. Effectively, he is giving the impression, with regard to its intervention, that there is perfect knowledge in the sector because he stated it has the IIDS and InsuranceLink, notwithstanding the ANPR issues, and the private motor statistics with the Central Bank. Insurance Ireland is creating an impression that it is yielding the data unto Caesar, so to speak, but it is not telling us, in very real and simple terms, why the increase is happening. We accept a certain degree of provisioning and resetting in the market, and we accept that the insurance companies need to make a degree of profit, but not to this extent. We do not have visibility as premium holders of the level of profit that will be made and the stark increases that have been made. This is the real issue for motorists. To be fair about it, the risk profile for the vast bulk of motorists by any actuarial standard has not actually increased. We do not have perfect knowledge on what insurance companies settle out of court on the steps with solicitors. The witnesses will not give us this information.

Mr. Michael Horan

The general point made by the Deputy is fair. We have said we are committed to working on data. It is an exercise that takes time to go through, with the best will in the world, to try to define the requirements to consult with people, and that is what we are committed to doing. Regarding the question on why premium increases are as high as they are, this is primarily dictated by the cost of claims in general and by an individual's claim experience. Motor insurance and premiums are based on a number of rating factors such as age, driving experience and claims experience. The overall claims costs underneath the surface dictate what way premiums will go, and this is the fundamental issue. Some of the issues we are speaking about are internal to insurance companies, some are about insurers' pricing and some are external to insurance companies - for example, the level of awards and legal costs. A holistic view needs to be taken on how to address all of these issues. We need to focus on the large size of awards in the country, particularly for whiplash. We need more consistency in the awards. We need lower legal costs in litigation cases.

Senator Gerry Horkan took the Chair.

The reality contradicts this. If I am to be very frank and blunt, insurance is a hard-nosed business and is highly competitive. The companies have shareholders and a bottom line. The witnesses cannot come into the Oireachtas and state that there are eight aspirations or solutions to this and that the sixth is to reduce legal costs, when we know, anecdotally and factually, that insurance companies settle out of court without investigating to a large extent whether a claim in the first instance was fraudulent, or where there is a history of repetitive cases involving people who are up and down the steps before it goes into the courtroom. There is a culture of settling before going to court, where the case could be interrogated properly, and the industry is not taking on the fraudsters. The companies have realised it is much easier to just settle and get cases off the books and off the table.

The second solution suggested is tackling whiplash. The witnesses have stated that eight out of ten motor insurance claims in Ireland are for whiplash and awards here are three times those in the UK. They stated that premiums are a function of the costs of claims, so high awards mean higher premiums. However, they did not tell us the percentage of these whiplash claims which are settled without going through an Injuries Board process or are settled outside the doors of the court. Until we can drill down into this information it appears that the insurance industry will ride the storm, apply the further 20% increase in the premiums already signalled to the market, and go through the investigation with the Competition and Consumer Protection Commission and pay lip service to what we are trying to achieve, which is lower costs for motorists. It is plus ça change, plus c'est la même chose.

There is no evidence here that the industry is really making an honest effort, beyond aspirational language, to reduce premiums.

Mr. Kevin Thompson

In response to the charge that we are settling too easily and are not fighting enough, I would refer the Deputy to the private motor insurance statistics on settlement rates. Between 2009 and 2013, the first-year settlement rates, that is, the speed at which we settle a claim, reduced by 13% for comprehensive policies and by 17% for third party insurance. Settlement rates have been slowing down, and that is reflected in the statistics from the Central Bank. That indicates to me that the sector investigates every claim.

Let us be clear, though. Our job is to pay claims. Our job is to settle claims. We cannot treat every claimant as a potential fraudster. When people have a genuine claim and are entitled to financial compensation, they expect insurers to settle those claims quickly and diligently. We are also mandated by the consumer protection code to do that and to do it fairly. There is a balance to be struck between paying claims quickly in respect of genuine claimants and giving them a fair level of compensation while also having proper systems in place to make sure that where there is a suspicion of a fraudulent claim, we follow it through. I urge the Deputy to look at the latest statistics from the Central Bank which show that our settlement rates in the first year have been reducing. That says to me that we are taking more of an active role as an industry in investigating claims, but it is a fine balance. We cannot treat every claimant as a criminal.

There is an inverse principle at work here. Mr. Thompson has said that the industry is settling more and tackling fraudulent claims, but it is increasing premiums at the same time. It does not figure.

I wish to go back to the Personal Injuries Assessment Board, PIAB, statement which argues that there is no public information available on the overall number and cost of claims. The PIAB has access to the same report that Insurance Ireland furnished to the Central Bank. One would also assume that because it interfaces with the insurance industry all the time, it has access to InsuranceLink or can get a sense from Insurance Ireland of the integrated information data service, IIDS, for example, yet there is a contradiction between its position and that of Insurance Ireland on the availability of information.

Mr. Kevin Thompson

That is why we have a scoping exercise. We have said that we will try to provide more information. That is why we have engaged with the Injuries Board and taken its comments on board. We have also engaged with the Society of Actuaries in Ireland and taken its comments on board. We also send raw data to the Central Bank. We collect data and send it on. I assure Deputy Sherlock that we have been engaging and recognise that there is a deficit, but it takes time. I want to manage expectations here. It is not about us putting it on the long finger; far from it. We want to be transparent, we know that the public demands it and we have no problem with that. We are working to bring this forward.

Before I call Deputy Michael McGrath I wish to point out that when Deputy McGuinness was chairing the meeting, he asked what data were not being shared. The witnesses said that everything was being shared but then said that everything that had been asked for was being shared. They also said that there was a need for more work and a scoping exercise. There is an inherent contradiction between what the witnesses said at one point and what they said later on.

Mr. Kevin Thompson

This is evolving and always will be. I am sure when we have scoped this and come back to it in five years' time there will be new requirements. That is just the nature of the business we are in. It is constantly changing and there will always be new requirements and new regulations. We accept that.

I know but the Chairman, Deputy McGuinness, asked Insurance Ireland earlier what was not being shared. Mr. Thompson said that Insurance Ireland had been sharing everything it had been asked for, but it then emerged that it has not been able to deliver everything it has been asked for, so there is an inherent contradiction in that.

I welcome the witnesses from Insurance Ireland. I will start with the issue of claims payouts. The latest official data from the Central Bank that we have relate to 2014 and show the total amount paid out in respect of motor liability claims. Does Mr. Thompson have the figure for 2015? Does he have the aggregate figure for 2015 for the overall motor liability claims paid? I trust Insurance Ireland has submitted its returns already to the Central Bank and the statistics will probably be published in the next few weeks.

Mr. Kevin Thompson

We are actually collating the data. The data we have here today show that for motor insurance alone, the total is €1.2 billion.

It is €1.2 billion. This is the kernel of the matter really because, put simply, Insurance Ireland has said that there are more motor insurance claims and those claims are costing more. The data show an increase because the 2014 figure was €1.0145 billion or thereabouts and last year it was €1.2 billion.

Mr. Kevin Thompson

It was €1.258 billion.

That means it has increased by more 20% on the 2014 levels.

Mr. Kevin Thompson

Yes.

Let us look at the data that we have. In 2011, the figure was close to €1.6 billion, in 2012 it was €1.070 billion, in 2013 it was €990 million, in 2014 it was €1.014 billion and the figure for 2015 is €1.258 billion.

Mr. Kevin Thompson

It is €1.258 billion, yes.

Can someone work out the percentage there? What percentage increase is that? By my calculations it is 24%.

Mr. Kevin Thompson

Yes.

That is a significant increase. Those are hard data. That is the amount that has been paid out by insurance companies in respect of all motor claims, including direct settlements, court awards, Injuries Board awards and any other payouts. Is it correct to say that the figure captures the lot?

Mr. Kevin Thompson

It captures the claims, yes.

Fair enough. It is up 24% over 2014 levels but it is still significantly below the 2011 levels. That said, that seems to be an outlier in the data contained in the insurance statistical review. Premiums have increased by 70% in three years but the payouts three years ago were just under €1 billion and were just over €1 billion in 2012 and 2014. While there has been a 24% increase, that is not 70%. How did we arrive at a point where premiums are up by 70% in three years if the industry is saying that the main factor driving that is claims payouts? That is not borne out by the evidence.

Mr. Michael Horan

The Deputy is talking about the premium growth in one year but we are talking about-----

No, I am talking about premium growth over three years, which is about 70%. Premiums grew by over 38% last year alone.

Mr. Michael Horan

There are a number of factors contributing to premium increases. As we said in our opening remarks, there was a certain amount of underpricing in the market as well as lower investment returns and higher claims costs. We believe the claims costs are the major factor. The Central Bank's recent thematic review shows that claims frequency was up by 8% and the average cost was also up by 8%. Another factor is the adverse development of existing claims. This is where insurers have claims already on their books and have to increase the reserves on them.

A number of things happened in 2014 that caused the change. We had three changes in 2014 that had a retrospective effect on claims that were already open and had already been made but not settled. The main change was the increase in the financial limits of the courts. The Circuit Court limit increased from €38,000 to €60,000. There were two other changes as well. Legislation introduced what was known as the recoverable benefits and assistance scheme. Previously, insurers could deduct social welfare benefits from personal injury claims but the legislation required them to make repayments to the Department of Social Protection. The third change related to what is known as the discount rate at the end of 2014. This affected catastrophic injury claims. Given low investment returns, it was determined that we needed higher lump sum payments. All these had a retrospective effect and required insurance companies to effectively go back and increase their reserves. This fed in to the cost of claims and that has been a factor. The three things together - underpricing, lower investment returns and the higher cost of claims, driven by what I have described-----

I hear all of that, but let us be straight with people. The insurance industry has been pointing the finger for premium increases squarely at the issue of increased claims costs. The level of premium increases far outstrips the actual increase in the amount of claims paid out by the industry. Insurance Ireland has repeatedly said that premiums are a function of risk and the amount of claims being paid. We have to be straight with people. I accept that there are many other factors. Does Insurance Ireland have monthly data for 2016?

Mr. Michael Horan

No.