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Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach díospóireacht -
Wednesday, 19 May 2021

Developments in the Insurance Industry: Discussion

I remind members to please turn off their phones and, when they address the meeting, to please do so without their face covering, as it helps with the recording of the meeting. Apologies have been received from Deputy Steven Matthews. We are joined today by Mr. Anthony Brennan, CEO of Zurich Insurance, Ms Siobhan Corbett, chief claims officer of Zurich Insurance, Mr. Tomás O'Midheach, CEO of FPD insurance, Mr. Jackie McMahon, chief claims officer of FBD Insurance, Ms Kate Tobin, chief underwriting officer at FBD Insurance, Declan O'Rourke, CEO of Aviva Ireland and Mr. Brian O' Neill, head of communications and brand sponsorship at Aviva Ireland. The purpose of today's meeting is to discuss the developments in the insurance industry and to continue our work in this area. The format will be that we will have some opening statements and then members will proceed to ask their questions.

I remind members and those present of the longstanding practice the effect that members should not comment on, criticise or make charges against a person outside the Houses, or an official, either by name or in such a way as to make him, her or it identifiable. I remind members of their privilege in relation to their attendance here. They have full privilege if attending from Leinster House or the Convention Centre. Those attending remotely will not have the same privilege. I now invite Mr. Brennan, Zurich Ireland, to make his opening remarks, followed by FPD and then by Mr. O'Rourke.

Mr. Anthony Brennan

Good afternoon Chairman and members of the committee. Thank you for the invitation to meet with the committee today to discuss issues relevant to general insurance in Ireland. Zurich welcomes the opportunity to be part of this important discussion and to contribute to the work of this committee. Since our last meeting with the committee in October 2019, we have grown our overall market share to 10% and our business now employs 400 people across our Dublin and Wexford offices. We remain a proudly Irish business, with 100% local management team focused on the Irish market, writing around €350 million in premiums in Ireland. We have maintained our AA- financial strength rating, which means Zurich customers can continue to rely on us to consistently deliver on our promise when it matters.

Like all businesses, the impact of Covid-19 was unexpected and unprecedented. Our immediate priority, when the first lockdown was announced in March 2020, was to support the national effort, protect our employees' well-being and maintain full service to our customers by moving the vast majority of our employees to remote working. We maintained a robust consumer protection risk framework to manage customer conduct risk and drive positive behaviours. This framework brings to life our ingrained practice of listening to customers and treating them fairly in line with the Consumer Protection Code and is evidenced by our low level of customer complaints, less than 1%, based on active policies and received claims in 2020.

Claims reputation is particularly important to Zurich. We strive to provide an efficient and fair claims experience for our customers and our reputation for paying valid claims is a key factor behind our market success over many years. In line with our existing claims philosophy, Zurich is committed to treating all our customers honestly, fairly and professionally. We ensured that this approach was applied to all Covid-19-related claims from the beginning. Our approach to all claims is to investigate the individual facts of each claim, clearly explain policy coverage to the customer and communicate the rationale for our determination on liability to the customer in writing. Where there is cover, any claims offer is fair and represents our best estimate of the customer's reasonable entitlement.

We offer internal appeals and complaints processes to all customers. We also advise them of how to bring any complaints to the Financial Services and Pensions Ombudsman of Ireland and, to date, we have been notified of one complaint to the ombudsman in relation to a Covid-19 claim. Our approach is fully aligned to the expectations set out in the "Dear CEO" letter, issued by the Central Bank of Ireland, CBI, on 27 March 2020, in relation to business interruption claims and the CBI’s business interruption insurance supervisory framework. Zurich is committed to continue to meet the CBI’s expectations as set out in the letter and framework, through our dedicated and professional handling of all Covid-19 claims.

I will turn to the new guidelines on judicial awards and the impact on policy premiums. Let me first say that Zurich welcomes this change as a meaningful step to deliver lower insurance premiums to Irish customers. I want to take this opportunity to again confirm that we will pass on the benefits of resulting reduced claim costs to our customers. I am sure the committee will appreciate that there are certain important legal limitations, particularly under competition law, that limit my sharing of any competitively sensitive information or speculating in relation to either future premium levels or Zurich’s future pricing strategy. Each individual insurer will need to independently assess their own view of the impact of the changes and act accordingly. We have completed our initial analysis of the expected impact of the new guidelines on our future claims costs. Claims costs make up a significant part of premium, so it is logical any reductions in such costs should positively impact premiums and in the coming weeks we are implementing changes to customer premiums to reflect the impact of this reform action on claims costs.

The new guidelines should lead to material reductions in general award levels. I also hope they will lead to an increased percentage of claimants accepting Personal Injuries Assessment Board, PIAB, awards. PIAB provides a fair, cost-effective and consistent mechanism to provide compensation to claimants, which benefits all key stakeholders and society at large. In recent years, Zurich has continued to accept over 90% of the awards made by PIAB. We have seen a consistent fall in claimant acceptance from approximately 65% in 2013 down to around 50% today.

The most recent national claims information database, NCID, report on private motor insurance clearly demonstrated that most claimants do not receive a significantly higher award subsequent to rejecting a PIAB award. It usually takes a further two years to settle the claim, with a marginally higher amount paid to the claimant but with the resulting legal costs adding more than 50% to the average claim cost. Any action that can be taken to increase PIAB claimant acceptance rates will reduce the future costs of claims in Ireland. I welcome the ongoing work to reform and refine the work of the PIAB, which could lead to further reductions in insurance costs and, inevitably, customer premiums in a competitive market. Zurich is committed to continuing to review and adjust its premiums in light of future reform and market developments to ensure we continue to offer fair and competitive prices to our customers. I look forward to answering questions from the committee.

Thank you, Mr. Brennan. I now invite Mr. O'Midheach of FBD Insurance to make his opening statement.

Mr. Tomás O'Midheach

I thank the Chairman. In my brief opening statement, I will introduce FBD and touch on topics of interest to the committee. I was appointed chief executive officer in January 2021. I am joined today by my colleagues, Ms Kate Tobin, chief underwriting officer, and Mr. Jackie McMahon, chief claims officer. FBD was established in the 1960s by farmers for farmers and has built on those roots in agriculture to become a dedicated general insurer serving the needs of our agricultural, small business and consumer customers throughout Ireland. More than 900 people are employed by FBD across 24 counties. We are Ireland's only remaining indigenous general insurer and our business is entirely focused on the Irish market. We hold approximately 10% of the liability, motor and property insurance market in Ireland, as measured by share of gross written premium and we have approximately 500,000 policyholders.

We fully understand and appreciate the impact the Covid-19 pandemic has had, and continues to have, on our customers. During 2020, FBD provided approximately €12 million in rebates to our commercial and motor customers. We continue to provide rebates to impacted commercial customers, at a total cost of €4 million thus far in 2021. With regard to business interruption, it was evident from the outset of the Covid-19 pandemic that differing points of view existed concerning the application of business interruption insurance under FBD's public house insurance policy. In order to determine liability and provide clarity and quantum, we supported the intervention of the courts. We worked in a collaborative manner to ensure the process was carried out as efficiently as possible, with FBD covering the reasonable costs of all parties involved in the case. As the committee is aware, judgment in the case was handed down by the Commercial Court on 5 February. That judgment has provided the necessary clarity in regard to policy cover. FBD fully accepts liability and we have moved quickly to engage with affected customers. Interim payments of more than €11 million have been made as we await the final resolution from the courts. There is a further court hearing scheduled in July to determine how the final elements of claim settlements are to be backdated.

Many publicans in Ireland have been loyal and valued customers of FBD for many years. We are thankful for their ongoing custom during this challenging period for them. We are proud that our retention rate among those customers remains high. We are very supportive of the Government's insurance reform agenda to reduce premiums for consumers, borrowers and businesses. The average premium for FBD's private car customers has reduced by approximately 20% since 2017. We continue to monitor our claims experience and claims costs closely, and we are committed to reducing premiums. This year, we particularly welcome the adoption and implementation of new Judicial Council guidelines for personal injuries awards, which is a very positive step. While we have yet to see the new guidelines reflected in awards by the PIAB or in the courts, we have been proactive in reflecting their assumed future impact on the premiums currently being quoted to our customers.

I must mention the ongoing competition law investigation by the Competition and Consumer Protection Commission, CCPC, into the private motor insurance sector. FBD takes compliance with the competition rules very seriously and is, of course, working in good faith with the CCPC on its investigation. We will endeavour to assist the committee as far as possible but, as members will appreciate, we are constrained in terms of what we can say around sensitive competitive dynamics such as pricing, including potential price changes, and our confidential commercial strategy. I look forward to any questions or queries members might have.

Thank you, Mr. O'Midheach. I now invite Mr. Declan O'Rourke of Aviva Insurance Ireland to make an opening statement.

Mr. Declan O'Rourke

I thank the committee for inviting me to discuss issues relating to business continuity insurance and the recent changes to judicial awards and their impact on policy premiums. These are issues of significant importance to all stakeholders in the Irish insurance industry and we welcome the opportunity to contribute to the debate. As the CEO of Aviva's general insurance business, Aviva Insurance Ireland, I cannot respond to questions on mortgage protection, which is a life policy underwritten by a separate Aviva business here in Ireland. However, I have made available to the committee a short statement from Aviva Life & Pensions Ireland on the impact of Covid-19 on underwriting criteria for life policies, which also clarifies queries on the impact of vaccinations on mortgage protection claims.

Aviva has been operating in the Irish market for more than 240 years. Our businesses in Ireland are fully owned subsidiaries of the international insurance group Aviva plc, which is listed on the London Stock Exchange and is a member of the FTSE 100 Index. In Ireland, Aviva currently employs 1,500 people across our offices in Dublin, Galway and Cork. Aviva Insurance Ireland, of which I am CEO, and Aviva Life & Pensions Ireland are significant general insurance and life players in the Irish market. We are sustainable and socially responsible insurers that seek to deliver value for all stakeholders, including our customers, over the long term. We contribute significantly to national sports and community organisations through our sponsorship of the Aviva Stadium and our support of charitable and community causes. We remain committed to operating in a competitive Irish insurance market that is stable and sustainable for our customers. We have led the market in supporting insurance reform and we continue to support the creation of a more sustainable and less volatile market, which will assist with both the cost and availability of insurance for all our customers.

We are aware that the issue of business interruption claims is a significant concern to businesses, advocacy groups and policymakers. As has become apparent through recent legal cases in the UK and Ireland, this is a complex issue and it is widely accepted that no insurance market in the world provides widespread business interruption coverage for a pandemic such as Covid-19. Aviva Insurance Ireland has approximately 15,000 customers who have cover for business interruption. The vast majority of those policies do not provide cover for business interruption arising from the Covid-19 pandemic. The wording used by Aviva in the policies is generally unambiguously clear. However, we have approximately 50 policies taken out by small businesses where the wording is not as clear. So far, we have received only a few claims on those policies and we have paid them. Despite not receiving claims from the remaining customers, we have been very proactive in writing to those policyholders to draw their attention to the cover they have in place and inform them that they may have a valid claim. We have a small cohort of large corporate policies where a claim may arise in the future. We are working closely with the brokers on those cases.

Where we have received business interruption claims due to Covid-19, we have provided each customer with a full explanation of our decision in cases where policies did not provide cover. Only a small number of customers were unhappy with our determination and subsequently made complaints. Most of those complaints were resolved by our complaints handling processes. However, a handful of customers took cases to the Financial Services and Pensions Ombudsman. All of those cases have been ruled in our favour. In summary, the vast majority of Aviva Insurance Ireland's policies do not provide cover arising from the Covid-19 pandemic. Where they do, or where the policy wording is not clear, covered claims are being paid and all notifications are being dealt with promptly.

Aviva is fully supportive of the Government's action plan for insurance reform and welcomes the implementation of the new personal injury guidelines. We acknowledge the work done by successive Ministers of State, Eoghan Murphy, Michael D'Arcy and Deputy Fleming, the relentless work of officials at the Department of Finance and the work of Mr. Justice Nicholas Kearns. We also acknowledge that despite opposition from many of its own members and the Law Society of Ireland, the Judicial Council voted to adopt the new guidelines. The changes will have a positive impact on the cost and availability of insurance for businesses, voluntary organisations and motorists.

While acknowledging the work done, there is still a long way to go before minor awards are on a par with those in many European countries. For example, one of the largest reductions is for fully recovered minor whiplash, awards for which will move from €16,000 to €6,000. However, this will still be four times higher than what applies in the UK, where minor whiplash payouts are moving from £4,000 to £1,500. Many countries do not provide any compensation for minor whiplash. We believe there is still more to do in both reducing awards and strengthening the scope and remit of the PIAB.

Regarding the impact on premiums of the new guidelines, Aviva has anticipated the changes and reduced premiums in advance of the implementation of the guidelines.

In an open insurance market like we have in Ireland, there is a clear correlation between premiums and claims costs. Insurance markets will not allow excessive profits and combined ratios generally gravitate to approximately 95% over the cycle. As claims costs reduce, insurance companies enter new segments of the market where there is an opportunity to make a reasonable return. In the Irish market, we are already seeing better availability of insurance in underserved areas. At Aviva, we see the changes to awards as a positive and an opportunity to grow our customer base, enter new market segments, launch new products and provide great value to our customers.

I thank the witnesses and appreciate their time. There are many areas and colleagues will cover other issues so I will keep my questions quite specific. My question is for Mr. O'Midheach from FBD on something he referred to quite extensively in his opening remarks that I want to tease out, namely business continuity insurance. I have three questions. First, why is FBD still arguing over the costs of the test cases brought? I believe the Central Bank has written to the company on this. Does he intend to respond? Second, Mr. O'Midheach said that €11 million in total has been paid out. Does he not accept that a 5% interim payment is not fair to the businesses considering that most have been closed for 16 months. Third, FBD is reducing the awards by the amount of Government support received by publicans. Will it return these moneys back to the State?

Mr. Tomás O'Midheach

With regard to arguing over ongoing costs, the quantum hearing of the court is on specific items that need to be clarified with regard to costs, principally around opening, what the liability is for partial opening, depending on the various rules that were asserted around 50 people outside, etc. I presume those were the costs to which the Deputy referred as distinct to the legal costs.

I am also referring to the Central Bank indicating that FBD should pay the full costs of the test cases. Can Mr. O'Midheach provide clarity on that?

Mr. Tomás O'Midheach

We have always undertaken to pay the reasonable cost of all legal costs. We are engaged with the solicitors for the plaintiffs to determine those legal costs. We will pay the reasonable costs as we have been requested to do and as we have always said we will.

Does Mr. O'Midheach not appreciate these businesses have been closed and they are struggling immensely? The costs saved by FBD by the test cases, rather than multiple cases, means it is in the company's interest as well as the businesses involved to have the issue of costs resolved as soon as possible.

Mr. Tomás O'Midheach

I agree and as soon as we are supplied with the details to calculate the reasonable costs, we absolutely will. We are awaiting the details.

On the second question regarding the interim payments of €11 million, the 5% payment was an immediate payment to publicans on receipt of any form of representation. It was an immediate payment prior to a second interim payment, which would be on receipt of some details. The second payment would cover any costs that are not subject to the quantum hearing that are detailed in the submission. We will pay the second interim payments. Those have been engaged on so the Deputy's reference to the first interim payment is essentially an immediate payment without any reference to detail.

Could Mr. O'Midheach break down the difference between the interim and immediate payment? How does it make up the €11 million?

Mr. Tomás O'Midheach

I will ask my colleague, Ms McMahon, to give some of the details on the separation of the payments.

Mr. Jackie McMahon

As Mr. O'Midheach said, the interim payment was offered without receiving any information whatsoever. There are many different factors for pubs, whether they were wet or dry, the periods it was open, what its trade is like, and how it splits between off-licence sales and on-premises sales. We asked for an amount of information against which we can evaluate quantum based on what we know now and based on the judgements of the High Court and while awaiting the judgement from the quantum hearing that is working through some of the outstanding issues, we are making a second preliminary assessment. We are basically turning that around in approximately three days from receipt of the information. We have established quite a user-friendly portal to assist publicans in submitting the information to us. Once we receive the information we make an evaluation, send the offer to the publicans and we will revisit that when the quantum hearing is finalised. Should that be delayed, we can make a subsequent payment once we get further information.

To be clear on my question, of the €11 million that has been paid out, what is the breakdown? Is it all interim payments? Mr. McMahon referred to the user-friendly portal and the three-day turnaround? What is the split between interim and secondary payments in the €11 million?

Mr. Jackie McMahon

We paid out €11 million in interim payments. We have paid out and had the offers accepted at the order of €4 million to publicans who have submitted information. We have offers out with other publicans to the order of €2 million.

Mr. Tomás O'Midheach

To return to the Deputy's third question on the reductions for wage subsidies, it is a principle of insurance that the insured party is made whole with no benefits. Included in the business interruption contract is a reduction for any sum saved during the indemnity period in respect of charges and expenses that are saved by the business. Our belief is that would include the Government subsidies and the principle of making an insured party whole and not double paying. It is subject to the quantum hearing that will be held in July but for the moment, our calculations have reduced the gross sum insured by those sums received from the Government.

I thank Mr. O'Midheach.

I thank the three gentlemen for their presentations. My focus will also be on business interruption. Most businesses are only now, more than a year later, beginning to make their claims. Without the State acting on their behalf using the taxpayers' money, many of these businesses would not have survived until today. It has been taxpayers' money that has kept them afloat and put them in a position to make a claim.

I am not too sure whether a similar approach has been taken by all three companies. It probably affects FBD and Zurich more than it does Aviva. The methodology used is the liability to the insurance companies is the loss of gross profit less any net savings of expenditure. Is that fair?

Mr. Tomás O'Midheach

Yes, in general.

As Deputy Richmond mentioned, the taxpayer has funded the survival of these companies through grants, employment wage subsidy scheme, EWSS, and the Covid restrictions support scheme, CRSS. Do the representatives think it is right and fair that the State, on behalf of the taxpayer, should subsidise a claim that their companies are liable for?

Mr. Tomás O'Midheach

First, it needs to be determined in the quantum hearing as to whether we will make that payment and whether the resolution is between the publicans and the Government or ourselves and the Government. The Minister of State at the Department of Finance, Deputy Fleming, has made it very clear that in the event that we do not pay the subsidy to the publicans, he will engage in a mechanism by which he will seek to recover that money from the insurance companies.

What does Mr. Brennan think?

Mr. Anthony Brennan

We are aware of the statements made by the Minister of State. It is welcome. It is a sensible approach that we would record any such State support that we deduct from any claims we have. We will engage with the Minister of State to discuss potentially repaying those.

I do not agree with the principle. The danger is that if someone has an insurance policy, he or she does not, effectively, qualify for State support. I do not agree with that as a principle and we need to engage with the Minister on that. He has made a sensible suggestion, namely, that in all claims we make, we should record any State support we deduct in order that it will be clear what the amounts are. We will engage with him on the issue.

Is Zurich looking at a difference between the EWSS, the CRSS and the capital grants received through the restart grant? How is the company approaching that?

Mr. Anthony Brennan

In practice, for the majority of our claims, limits apply to business interruption, so we will not deduct any State supports from them. For some larger claims with larger organisations, they may well come in. To date, we have not gone through an individual calculation of any large organisation to determine exactly what will or will not be deducted. As the representatives from FBD noted, a court case that will help to rule on some of those points is due.

It is clear that there could still be a liability on behalf of the insurance companies to these State supports, and they are waiting for the courts to rule on that or for the Minister of State to make a claim against them. Is that correct?

Mr. Anthony Brennan

Yes, I think that is a fair summary.

I welcome our guests to the committee. My first question relates to when premiums are going to reduce. In 2019, Mr. Brennan appeared before this committee, along with colleagues from throughout the industry. They asked us to reduce the cost of claims and to produce legislation, which has since happened. The judges have done their work and reduced the cost of claims for minor injuries, which are now fully recoverable up to 60%. Mr. Brennan stated at that meeting that if insurers had not reduced their prices by somewhere in the region of 10% to 15%, the committee should ask a lot of questions. For liability, he stated it should be higher, and probably close to 20%. That was based on a 50% reduction in claim awards but, as Mr. Brennan will be aware, the legislation and the decision made by the Judicial Council have raised the limit to 60%.

What I and everybody else want to know is when Mr. Brennan and his company are going to pass on these reductions to policyholders.

Mr. Anthony Brennan

Unfortunately, I am constrained in regard to anything to do with price signalling. As I said in my opening statement, we have made a decision on the amount we are going to pass through to customers in the coming weeks. We are actively working to implement that on a number of platforms. I cannot say more than that because anything else could be seen as signalling when and to what extent we are going to reduce our premiums.

I recognise that it is really important that the industry responds to this reform. It has taken us years to get here, and I have to ask the Deputy to allow us a few weeks to implement this and get it across to our customers. We will not be found wanting. I appeared before the committee in October 2019 and made some clear statements, which I stand over.

The guidelines were adopted by the Judicial Council not weeks ago but months ago. They took effect on 24 April but Mr. Brennan is well aware of them. People are being charged by his company for renewal of motor or business insurance and are not getting the reduction, despite Zurich knowing damn well that if there is a claim in that policy over the next 12 months, the cost of paying out on that claim is now substantially reduced. Nevertheless, the company is pocketing the benefit, despite the commitments the industry gave to us. Mr. Brennan should not try to pretend this is something out of the blue. Why has Zurich not reduced costs over the past three weeks since these guidelines took effect, and why is it continuing to charge motorists and businesses extortionate premiums despite the level of awards having reduced in these cases by up to 60%?

Mr. Anthony Brennan

The awards were brought into force on 24 April, which is only a few weeks ago. We are working to implement those changes for all our customers. That is what we will do for Zurich customers.

Does Mr. Brennan agree with a statement made by one of his colleagues at the committee previously? He stated that his company prices insurance for the following 12 months and that it sets premiums on the basis of what it expects to happen in terms of the number of claims over that period. Is that the way that insurance is priced?

Mr. Anthony Brennan

It is, and our best estimates of many factors feed in to that premium over the following 12 months. It is about looking forward to the following 12 months. I accept that we anticipate, hopefully, a reduced cost of claims, which I welcome. It is a big reform and we will not be found wanting. We are going to implement - I have to be careful about what I say - changes to our premiums that reflect these rewards.

Euro for euro, will the savings made by Mr. Brennan's company be passed on to the consumer?

Mr. Anthony Brennan

Yes, in total. It is difficult to say exactly. What does "euro for euro" mean? As we have said clearly, we will pass on the benefit of the reduction in claim costs to our customers.

Without signalling the level to which prices will fall, will Mr. Brennan outline to the committee the average cost of, for example, third-level injury costs, which in 2019 amounted to €295 per policy? Where does he expect that figure to be for the next 12 months?

Mr. Anthony Brennan

I have to be very careful. I return to what I said in October 2019. The percentages I talked about then are still appropriate. I have looked at the most recent national claims information database for 2019 and the same principles apply. I have to be careful about using numbers during this meeting and I apologise for that. I do not want to mislead the Deputy. Certainly, the information on motor insurance suggests that the percentages I quoted in October 2019 are reasonable.

On liability insurance, we are not necessarily seeing the same level of savings coming through because the types of injuries that feed in to those sorts of employers and public liability are of a moderate to severe nature, and there is not the same level of reductions as in the new guidelines. They are not 50% across the board. For some injuries, particularly moderate to severe ones, the reductions are lower.

That is very much changing the tune after the fact, given that-----

Mr. Anthony Brennan

No. I said clearly-----

On the previous occasion, it was all about the number of minor soft tissue injuries and how that needed to be dealt with. It was dealt with, which went beyond the expectations of Mr. Brennan as CEO-----

Mr. Anthony Brennan

Deputy-----

It was not 50% but 60%, and the guidelines have been in place for the past month. I have carried out a survey in which I asked people to tell me whether their premiums had decreased, increased or stayed the same. We received more than 1,000 responses from people who have had renewals in the past three weeks since the guidelines came into effect. Is Mr. Brennan surprised that 61% of them have had an increase in their renewal quotation for motor insurance? Only 20% of them have seen a reduction, while a further 20% report that their premiums are broadly the same as in the previous year.

Mr. Anthony Brennan

I am very surprised because I checked our figures before this meeting. On motor insurance, for example, we have seen a 4% reduction in quarter 1 this year on quarter 1 last year, on average, across our policies. I stress that, like FBD, we have 500,000 customers, so perhaps some of their premiums have changed for other factors. The vast majority of Zurich customers, however, will have seen reductions in their motor insurance premiums over the past 12 months, not related to the cost-of-injury reforms.

I ask the representatives from Aviva the same questions. When is Aviva likely to pass on the significant reductions? It is pocketing large sums as a result of premiums it has been writing over the past three weeks, knowing damn well that the awards that will be paid out, if they are to be paid out on these contracts, will be significantly reduced. When are motorists and businesses likely to see premium reductions?

Mr. Declan O'Rourke

In the past six months, there was quite a bit of anticipation of this and the market has reduced by approximately 8% in that time, which is the largest decrease in motor premiums I have seen in such a short time. Quite a bit of this is already factored in. We need to be careful on the 60% number, although I accept that in the case of minor injuries, there has been a reduction of 60% in general damages on fully recovered whiplash cases. As for the moderate and larger cases, however, the latter will probably not change at all, while the moderate ones are dropping by approximately 20% or 30%.

Over the entirety it will not be anything like 60%.

Is Mr. O'Rourke trying to spin me the yarn that most of this is already priced in? Is this really what the insurance industry is trying to say now, that it expected this so it started to reduce premiums last year and this has to be counted into the equation? Is this the tale Mr. O'Rourke is trying to tell?

Mr. Declan O'Rourke

No, it is not. What I am saying is that in any market there is anticipation in advance. There is not a single day where everything changes. There are many factors and pricing is ongoing. I can obviously speak about the significant price decreases in the past and we have seen significant decreases in the past two years. Our average premium is back to where it was in 2010. There has been an awful lot of progress already. I cannot speak about the future, obviously, but we have seen big moves by the industry at this stage.

I do not want to go over old ground but I always like to look at the facts. The national claims database held by the Central Bank provides us with a rich amount of facts. The facts are that over the past decade the cost of claims has reduced by 9%, the number of claims has reduced by 45% and premiums have increased by 35%. One of the most significant things that has happened in the insurance industry in recent years took effect on 24 April. This is that the cost of claims was reduced by a significant amount. It was the insurance industry that was begging, screaming, crying, lobbying and looking for this. It has been delivered. Over the past three weeks, the industry has not significantly reduced the cost of premium renewal.

I will give an example from one of the surveys. The premium last year of an individual who has an insurance policy with Aviva was €400. This person has had no claims, has the exact same cover and has not replaced the car. We are comparing like with like. The renewal quotation this year, which was received within the past three weeks, was €730. The person phoned up and tried to get a better deal. The person moved company and got insured with FBD for €375. This was an 83% increase at a time when the Government, the Dáil and the Judiciary have slashed the cost of claims. What people want to know is when they are likely to see significant reductions in their premiums. Will Aviva pass on euro for euro the savings the industry will make as a result of paying out reduced claims?

Mr. Declan O'Rourke

I cannot speak on a specific case but I can tell the Deputy that our average premium over the past few years has been dropping significantly.

What has happened in the past three weeks?

Mr. Declan O'Rourke

Insurance is not a three-week game, it is an long term game. The Deputy needs to look at it over a period of time rather than a three-week period. We are committed to passing on the savings. In our view, we have passed on many of them already.

The savings came into effect three weeks ago. When are the companies likely to pass them on? They are not doing so yet.

Mr. Declan O'Rourke

The Deputy needs to look at it from the point of view that the savings are not as clear as that. It is easy to say there is a 60% reduction in the minor whiplash cases but there are still a lot of factors in this. We need to see the behaviour of solicitors, claimants and judges to see where this goes. For example, quite a lot of judges voted against this so it will be interesting to see where this will land. The solicitors will try to work with this as much as they can to continue to have high fees. Claimants are already looking at multiple injuries, and there is some activity to push cases higher with multiple injuries that may previously have just involved one injury. It is complicated. It will take time to figure out exactly what the discounts are. We have passed on almost all of the savings we believe are there now.

My next question is for FBD. When are we likely to see the savings passed on to its customers? Why have they not been passed on up until now? Will the company commit to passing on euro for euro savings as a result of the reduction in awards to its customers?

Mr. Tomás O'Midheach

We made a decision to apply these immediately. We did a calculation of what the amount ought to be and we have applied that amount. It has been applied in the case of motor insurance. Our calculation of that amount has been applied to the rating and it is now live on the market.

The company has already applied it. I will give another example from the survey of an FBD customer, again comparing like with like. The same car has not had a previous claim and last year's premium was €550 and this year's premium is €635. In another case, last year's premium was €1,300 and this year's renewal quote is €1,450. How are premiums increasing if the savings have been passed on?

Mr. Tomás O'Midheach

As are my colleagues, I am surprised given that the general trend is in the opposite direction. Obviously, we cannot reference particular cases. To some extent, it has to do with the timings. Was it in recent days or recent weeks? I am surprised, as were my colleagues, because in general I would have thought with the reductions in recent times that it would be unusual for any one individual, without some other cause, to have an increase.

My next question is for Mr. Brennan and Mr. O'Rourke. Their companies, Zurich and Aviva, are in the top seven insurance companies in Ireland. They are also in the top seven in the UK. Will the witnesses explain to the committee what are the responsibilities and requirements on their companies since the British Government reduced the cost of whiplash awards? What do they mean? How do the companies have to show the Financial Conduct Authority, FCA, that they are passing on these savings to consumers?

Mr. Anthony Brennan

I will start. In the UK we have a very small share of the motor market. It is certainly well less than our motor share here. The difference is that in the UK the change was in the form of one-for-one guidelines and they can be mapped easily enough. What we have here is a move from the book of quantum, which is a set of guidelines, and there is not a one-for-one match. It is going to be very difficult at an individual claim level to say exactly what would have been paid on the claim in the past. The Deputy mentioned the national claims information database, which contains rich information and tells us the total cost of claims. This is where we will see the real effect of this coming through. In the same report, we will see the effect on premiums and the two can be matched.

What has happened in the UK is a one-for-one match, whereby we can see the award under the new guidelines and what it would have been under the old guidelines. We do not have this here. They are quite different and there are ranges. Trying to match them one for one would be quite subjective. If anything, we could play a game by stating the award would have been higher under the old awards but here is what it is. The best way to monitor this would be through the national claims information database. The Deputy has brought a Bill to the Dáil and I suggest we engage through Insurance Ireland to see whether we could add some extra fields to the national claims information database. It could be another way of monitoring the exact impact of these new awards.

Let me be clear. In Britain, Mr. Brennan's company, along with all of the other six largest companies in Ireland, has to satisfy the FCA as to what the cost of claims would have been before the awards were slashed, what the cost of claims are after the awards were slashed, what the premiums would have been if the awards had not been slashed and what they are now. This is the way the British Government ensured in legislation that the insurance industry passes on pound-for-pound savings. Mr. Brennan's argument is that Britain applied it to only one issue, which is whiplash. If it can be done for whiplash it can be done for all other injuries. Is it not the case that the industry does not want this oversight because without it there is no way to ensure the insurance industry has passed on pound for pound and euro for euro the reduction in awards to its consumers?

This is the only way we will be able to satisfy it. All of the companies, with the exception of FBD have to do this in Britain, yet they are resisting this oversight here.

Mr. Anthony Brennan

I do not think it has yet been figured out exactly how it is going to be done in the UK. As I said, the national claims information database has become the go-to on data and, rather than creating another process, I would prefer that we try to see can we work with the existing process. We will provide all of our data to the Central Bank in a very carefully regulated and transparent way to see could we use that to provide the same level of reporting the Deputy and the Oireachtas would like to see.

Mr. Brennan says that is not worked out in Britain but it is. It is part of the 2018 legislation, which has taken effect. Let me make it clear. Does that include that the companies would provide the expected cost of claims prior to the reduction in awards, the cost of claims now, subsequent to the awards being reduced, the premiums if the awards were not reduced and the premiums now, as a result of the awards being reduced? Is Mr. Brennan saying his company would be open to the national claims database having that information and reporting on it?

Mr. Anthony Brennan

I find it difficult to see how exactly we could come up with that information.

It is doing it in Britain. It is a legal obligation on the company that it has not resisted in Britain.

Mr. Anthony Brennan

I will be honest. I am not aware of the exact details of the case and I have not seen it worked out in practice in the UK. We would be happy to work on it. All I am suggesting is perhaps we would work together and engage with Insurance Ireland to find the best way to measure this.

I have been very clear. We will pass on the benefits, euro for euro, and that is what we intend to do. I believe the national claims information database already provides the information to cover that at a high level. I am not sure moving it down to each individual claim is the way to do this and it will create an awful lot of work. It is quite subjective because, as I said, there is not a one-for-one match between the old book of quantum and the new guidelines. All I am suggesting is we could try to work together to find a way to minimise cost. We do not want to create cost for everybody because that cost will ultimately feed into customer premiums, and I am sure the Deputy would agree with that. It is about trying to find a way to work with the existing process to get the overview that is required and that the Oireachtas would like to see.

Mr. O’Rourke's company also has the same obligations. These are the regulations and they are quite detailed. If his company is not aware of what they are in Britain, I can send them on to him. It is all worked out.

Mr. Anthony Brennan

Let me be clear about this. I am responsible for Irish business. I have no role whatsoever in our UK business. I do not understand why the Deputy would expect me to have read through the UK regulations in great detail.

I am not expecting that. However, when Mr. Brennan said they are not worked out, my point is that the regulations are here, they are worked out and they are quite detailed. What I am asking is whether the companies would be satisfied to provide the same information to the Central Bank here? I have no faith that the insurance companies are going to pass this on, euro for euro. That is my position, and I hope I am wrong. What I am not going to do is allow for legislation to be passed, for the Judiciary to do its part and for the insurance companies to pocket much of the benefit from it. I want to hear from Mr. O’Rourke whether his company would be open to having the same level of oversight and requirement that has been legislated for in Britain in regard to providing the information I have just outlined.

Mr. Declan O'Rourke

Again, I am not familiar with the detail from the UK. I do know individual prices are changed all the time by customer level and at all different levels, so that would be a very difficult thing to do. There are other ways we can do it. We can look at the margin of the insurance companies and the particular lines. If we look at the motor insurance business in Ireland, it has never been a particularly profitable business anyway and I do not see it becoming particularly profitable in the next year. Most companies are looking to make a margin of five points on it. I think it can be monitored quite easily over the next period through the national claims information database and through returns from the insurance companies as to the margin they are making on that business.

How are Aviva and Zurich preparing for the FCA pricing remedy on dual pricing to be announced at the end of May? How they are going to respond in regard to pricing? What is their response to the FCA predicting that premiums will reduce, so insurers will not lose market share? What are their views in regard to the legislation that has passed the Dáil and will come before this committee in October to bring the same effect to dual pricing here?

Mr. Declan O'Rourke

That is a complicated issue and I know, again anecdotally, that the UK is struggling with it. The objective of it is good and, certainly, protecting vulnerable customers is very important. Aviva has led the way on this, even as far back as 2019 when we put a cap on the difference between new business and renewal business, which for a direct channel in Ireland is 25%. That is an important one. Nobody wants to see a situation where people are being charged large premiums, especially vulnerable people, as it is not right. We have acted on that. We have led the market and both regulators have seen that.

That is an important piece but there are other unintended consequences of this. There is no doubt the people who shop around now get a good deal and they will not get as good a deal afterwards if dual pricing is banned because, at the moment, incentives for new customers to try to encourage customers on board are probably being compensated for by older customers. That is the way a lot of markets work, including this market.

There is a lot to it. I know the FCA is grappling with what is going to happen with back books, where there is no new business and where less than 15% of the business is new business. I know it is grappling with margin versus price and with discounts on new business. It is having its own tangled web with this. We need to be careful we do not end up in a situation where, like the health industry, the products are 99% the same but the prices are different and we end up with an awful lot of products. We would fear that certain players might be able to get involved in sharp practice because there would be quite an opportunity within a very strong regulated market like that.

We all want to protect vulnerable customers. We monitor our pricing for vulnerable customers versus our overall book to make sure there are no significant differences. I agree we need to protect vulnerable customers but we need to be careful with the market as well because some unintended consequences could happen.

Mr. Anthony Brennan

I would make the same point on unintended consequences. We monitor what goes on in the UK but much more important to us is the fact the CBI – the Central Bank - is currently engaged in a very detailed review of the practice here in Ireland, and we expect it to report in the coming months. I am sure what is happening in the UK will feed into its consideration and deliberations, and we will respond to that. As I said, we are fully engaged with the CBI. One of the challenges is that the FCA in the UK has said it thinks it will reduce premiums but, ultimately, if companies have a target profitability level, it will redistribute premiums. If that is the right thing to do, then that is the right thing to do. I think we will learn from the FCA and what measures it comes up with, and there are certain things we could look at across the industry here as well.

My final question is to FBD. It was very interesting to hear Mr. O'Midheach talk about FBD welcoming the legal challenge and so on. While it might have welcomed it, it fought it tooth and nail, and that is the reality. The Central Bank made it very clear that the Government's announcement for pubs to close was to be deemed not a voluntary closure but an enforced closure. What did FBD do? It challenged that in the courts.

Mr. Tomás O'Midheach

We did not challenge the closure in the courts. We challenged our liability and whether or not it was-----

Did FBD challenge the point that it was a voluntary closure?

Mr. Tomás O'Midheach

No, we challenged whether or not it was covered as business interruption cover under the policy.

FBD said it was a voluntary closure. It said it was not a forced closure by the State. Let me get on to the substantial point. The test cases have happened and FBD has lost the cases. It argued in court and it lost the cases and we have to find out the quantum. I engaged with the Central Bank because there was huge anxiety in regard to test cases in terms of the costs and what would happen. The Central Bank had issued a very clear statement in terms of reasonable cost being covered. Now, FBD is arguing in regard to that. I note Mr. O'Midheach’s language in regard to reasonable cost. Is it not the reality that what he believes is reasonable and what the actual legal costs are in some of these cases could be a difference of €1 million?

Mr. Tomás O'Midheach

In the absence of specifics, I have no idea what the difference could be. We have not seen the specifics of what people are believing to be the costs pre the legal cases being heard, and if it is in the nature of €1 million, whether that is spread over the four cases or one individual case.

When we see the detail, we will see what is generally perceived to be reasonable or unreasonable prior to entry into court.

What does Mr. O'Midheach suggest would be unreasonable? Has he seen any of this at all? Why does the Central Bank need to engage with FBD for a second time on the matter if he thinks there is no issue and that everything will be okay when we see the costs?

I remind the Deputy of his time.

Mr. Tomás O'Midheach

We have not received details yet, but we are now engaged on details or are about to receive it. We have not actually seen it yet.

I will leave it at that.

I thank Mr. Brennan, Mr. O'Midheach and Mr. O'Rourke, and their colleagues from Aviva, Zurich and FBD for attending this hearing. I note what Mr. O'Midheach said about passing on the savings arising from the enactment of the judicial guidelines, although there seems to be some evidence to the contrary. The delays by Aviva and Zurich are simply unacceptable. As has previously been said, this did not come out of the blue. They knew this was coming and their foot-dragging is simply unacceptable. When they get around to passing on the savings, will that happen automatically or will customers need to ask for them? What will they do for those customers who have taken out premiums since 24 April? Will there be a rebate for them given that the Judicial Council guidelines took effect on 24 April?

Mr. Anthony Brennan

I will answer on behalf of Zurich first. I do not see this as foot-dragging. We have taken a long time to get to this point. I have been in this industry for approximately five years and we have been talking about reform for that time. We have been involved in many reports along the way. I am delighted to see this day has come. There are practical reasons the implementation of changes takes some time. These will feed through automatically to our premium rates.

Many factors feed into insurance rates. When we look forward, we need to estimate several factors, including, for example, the acceptance rate of PIAB and the chances of whether these cases will be accepted in court.

I am comfortable that we are offering a fair price. We will adjust that price in the coming weeks to allow for some changed assumptions on what the future injury costs will be. We need to implement this across multiple platforms. I am sure the Senator has been involved in areas of government where people wanted to implement something quickly but it needs to be fed safely through the various systems and processes to ensure that those results can be got out to customers. Right now, we are engaged in implementing it. We analysed the results in April. We made a decision on the level of change we would put through and we are implementing that as we speak.

Mr. Declan O'Rourke

I cannot speak about the future, but I can outline what we have done. The decrease in the past six months has been the largest decrease I have seen in my career in the industry. This has been anticipated by the market. It is happening. It will continue to happen as we find out the behaviours of the solicitors, the judges and the claimants, and we can be more certain about exactly what the amount is. That is what happens in any insurance market.

The enactment of the Judicial Council guidelines was on the promise of a reduction in premiums. It is simply not acceptable to extend that further and for the insurance companies to say that they now need to see the outcome of decisions in the courts.

I wish to ask about excluding the value of State supports in the business interruption insurance payouts. I have heard the comments made about the wait-and-see approach being adopted. Industry representatives are awaiting engagement with the Minister. I find that extraordinary, given that these statements have been made knowing full well that in personal injury cases, insurance companies are required to provide a statement of recoverable benefit on the benefits that the injured party would have had to claim arising from personal injury, particularly with regard to loss of earnings and social welfare payments. Arising from that statement of recoverable benefit, the Department of Social Protection is reimbursed by the insurance company in respect of those payments that needed to be made because of the personal injury.

While FBD, Zurich and Aviva know that they must abide by one set of rules for public liability and employer liability in personal injury cases, are the witnesses now saying that they will abide by a different set of rules that they make up for themselves on the payout of business interruption claims?

Mr. Tomás O'Midheach

The Senator referred to personal awards. There is a set of rules by which we gather the money and pay that. No such set-up rules exist. There is no mechanism currently. That does not exist. We are quite happy to calculate the amount because it would be clearly determined as a result of the quantum whether we withhold it or not. If we withheld it, we could clearly calculate it. Then, we can engage on any mechanism, set of rules or principles after that. I am not saying that we will not, but there is no set of rules. In the example the Senator gave, there is a clear set of rules, and established precedent.

Mr. Anthony Brennan

I agree with that point made by FBD. However, there is also the point that the current set of rules is very much set up on the basis that somebody is responsible for the accident that led to somebody else claiming or getting benefits from the Department of Social Protection. However, in this case we are talking about very different circumstances; nobody is responsible for Covid-19. It is a very different sort of set-up. We need to understand that the current rules do not automatically apply. We need to engage with the Minister to understand the grounds on which he believes we should refund these.

I go back to my earlier point. It is a dangerous principle and we need to be very careful. People are entitled to something different irrespective of whether they have an insurance policy. That is an important principle for me and for the industry. The current one is very much based on if someone is in an accident and it is deemed to be somebody else's fault and they are deemed to be responsible for it and if we are covering that person, we pick up those costs. That is the legislation that is there. It is a very different set of responsibilities for Covid-19 because no individual we are insuring is at fault or responsible for Covid-19.

Mr. Declan O'Rourke

We have not deducted any State supports to date so it is not really an issue for us.

Does Aviva intend to continue doing that in the future?

Mr. Declan O'Rourke

Yes. We will be following whatever Government guidelines come out.

I understand what Mr. Brennan is saying about who is at fault here. Of course, the very nature of business interruption cover is that it sets out the various types of interruptions. It does not necessarily attribute blame from what I understand of the cover. His argument is very much that insurance companies should be entitled to be subsidised by the State because it was not their fault and it was somebody else's fault. The practice of insurance companies pocketing the payments made by the State has gone on for years in personal injury cases. Millions of euro were made by insurance companies until legislation was passed in 2013 and enacted in August 2014, which led to having the statement of recoverable benefit and the need to reimburse the Department of Social Protection.

I am not convinced by Mr. Brennan's argument that his insurance company deserves a subsidy because it is not the company's fault or the client's fault, but somebody else's fault. It is an act of God so to speak.

Mr. Anthony Brennan

The Senator asked a question related to the current legislation.

I tried to explain why the current legislation does not apply in this circumstance. I am not saying that insurance companies are not entitled to State subsidies or anything like that. I was simply pointing out that the current legislation is very much based on a very specific point of law around personal injuries arising from accidents. I was not trying to say that the insurance company is entitled to this. I was simply pointing out that this is why it does not automatically apply. The current legislation does not automatically make this happen.

Can I take it that-----

Mr. Anthony Brennan

I am not trying to make a bigger point of what insurance companies should be entitled to or not.

Can I take it that the clear message from Mr. O’Midheach and Mr. Brennan today on behalf of FBD Insurance and Zurich Insurance is that the Government will have to legislate and they will not take it upon themselves to reimburse the State? They will have to force the Government's hand and have it legislate for the companies to ensure that those deductions are not made from the business interruption cover in the payouts to their customers.

Mr. Anthony Brennan

No, what I said today is that we will engage with the Government. I think it is important that we sit down with the Minister to understand his position and we can explain our position and arrive at an agreement. I do not expect us to go to legislation. I hope we could sit down with the Minister and come to an agreement. I do not think it is clear-cut. I am not saying today that want to force through legislation. The insurance industry should work with the Government and the Oireachtas wherever possible.

Have meetings taken place with the Minister of State, Deputy Fleming, on this issue?

Mr. Anthony Brennan

Not that I am aware of.

Mr. Tomás O'Midheach

Not on this specific topic.

Okay. Obviously, we will urge the Minister of State to engage in those meetings.

My final question relates to the types of insurance products that are available in this country. Aviva Insurance Ireland's submission outlined the better availability of cover in underserved areas and the anticipation that this will play out arising from the Judicial Council guidelines and the changes that are taking place within insurance. FBD Insurance and Zurich Insurance have also noted their commitment to the Irish market.

I want to ask the witnesses about insurance cover in the area of leisure and activity businesses. Do they consider there is a gap in the market now with regard to adventure centres, adventure projects, voluntary projects or groups and leisure centres? Is there is a gap in the market with regard to coverage for those sectors? Are the three companies before the committee seeking to provide coverage to these sectors in the near to medium-term?

Mr. Declan O'Rourke

Whenever there is a big change like this, all companies will look at opportunities and see what kinds of areas may be more attractive than they might have been last year or whatever. We have done that. We have underwritten quite a number of voluntary organisations in the past number of months and we have also added some leisure business. It is a small amount; we are just being careful. It is an area in which pretty much all the insurers in Ireland have been badly burned in the past. We need to gradually look at that, therefore, but we are certainly doing more than we would have done a year ago in a number of those areas.

We urge Mr. O'Rourke to do more because, at the moment, there is no coverage in some of those sectors. They have to go to England and further afield.

Mr. Declan O'Rourke

An important part of that is to also look at areas such as PIAB. The Senator spoke about children. Children will still have to go to court for assessment. That might be something that would help with childcare in adventure centres, children's play centres and those kinds of areas. Things could be done there as well. A review of PIAB is going on now, which is also a really important piece of the jigsaw.

Mr. Anthony Brennan

To be frank, we have grown our market share in the past year and a half by approximately 10% but that has not been in areas such as those described by the Senator. We feel that to make a move into those sorts of areas, we need to see more progress on the duty of care. One of the big challenges for both voluntary organisations and the leisure sector is the level of duty of care here in Ireland. As things stand right now, we do not have any immediate plans to expand into those particular areas. As the Senator said, they have been serviced over the years, mainly with more specialised companies from outside Ireland, mainly the UK. I believe that will continue to be the case for the immediate future.

I thank Mr Brennan. Would Mr O'Midheach like to come in?

Mr. Tomás O'Midheach

I will ask my colleague, Ms Tobin, chief underwriting officer, to reply to the Senator about how we consider new lines of business.

Ms Kate Tobin

I thank Mr. O'Midheach. Given our situation as an Irish stand-alone insurer, FBD Insurance is very cautious about entering into new sectors, particularly where we do not have expertise. As the situation changes over time with the claims experience in some of those areas, we would seek to expand. It would usually be into areas that are adjacent to the business we underwrite at the moment, however.

We provide insurance for some voluntary organisations. We ensure men's sheds, usually related to the locations of our local offices, and we also insure the Tidy Towns. One of the major game changers around this will be the review of the Occupier's Liability Act 1995 and whether anything can be done on duty of care to balance the interests between small business owners, their patrons and their employees.

I thank Ms Tobin. That is it from me, Chairman.

I thank Senator Sherlock. I call Deputy Mairéad Farrell.

Gabhaim buíochas leis na finnéithe as teacht os comhair an choiste seo. Bhí plé an-suimiúil againn go dtí seo agus tá an chéad cheist atá agam i gcomhair FBD Insurance.

My first question is for FBD Insurance. Does Mr. O'Midheach accept that the benefit of taxpayers' money, paid to small businesses and their employees by Government subsidies, ought to go to the small businesses for which they were intended rather than to large insurers such as FBD Insurance?

Mr. Tomás O'Midheach

The benefit went to the small businesses. They have, therefore, been in receipt of those payments. We have deducted those payments from the gross sum to make the insured party whole. By the same token, I do not believe it is anybody's intention that they ought to benefit by those in addition to being made whole for the gross sum.

Does Mr O'Midheach accept the fact that these businesses have suffered greatly over the past year and the reason for these Government subsidies is specifically to assist businesses, which, through no fault of their own, have been unable to operate in their usual manner? That is the reasoning behind providing these Government subsidies. I am of the view that it is wholly and grossly unfair to do this to these businesses, which are already suffering.

Mr. Tomás O'Midheach

To give an example, if we gave the full profit of 2019 to a publican who then got the Government benefit, that person would gain from the pandemic, whereas if we deduct it, the insured party is made whole. There is, therefore, no benefit from insurance.

The debate then about making the Government whole is a distinct issue, which we have covered in previous discussions about mechanisms and rules. The insured party would be made whole, however.

I believe the public outrage about this is quite understandable. I have another question in this regard. How many claims has FBD Insurance receive from publicans to date beyond those it has not deemed to be covered by business interruption, and how many has it settled?

Mr. Tomás O'Midheach

I ask my colleague, Mr. McMahon, to take the committee members through that detail.

Mr. Jackie McMahon

I thank the Deputy for her question. We have at this stage communicated with all the public house claimants. We had quite a process to ensure we could communicate with all of them. Regarding claims where we have received information from publicans, the figure concerned is 220, or about one fifth of what we have overall. We have received information from those people. Slightly fewer than 85 have accepted, and then we have a similar number where the offer is currently with the people concerned. The remaining claims are then at the stage of being assessed.

In that regard, what percentage of the overall amount insured has FBD paid out, on average, if those figures are available?

Mr. Jackie McMahon

I do not have those figures. I will try to get them before the end of the meeting.

That would be great. If Mr. McMahon does not get a chance to get those figures before the end of the meeting, he could furnish them to the committee afterwards. It will be important for the committee to see them. Turning to the Consumer Insurance Contracts Act 2019, how is the insurance industry preparing to implement that legislation in full? What impact is it anticipated that will have for those affected? It is a pity in many ways that the Government dragged its heels in this regard. I refer in particular to the ambiguity in respect of the potential for this initiative to have been of benefit to those impacted by the pandemic.

Mr. Anthony Brennan

We have been working away on the Consumer Insurance Contracts Act for the past two years. Much detailed work has been undertaken in that regard in the past six or seven months. We are ready to implement the Act on 1 September. The main impact for customers is that they will be able to see their claims and premiums information for the previous five years. The advent of this legislation is going to change the nature of insurance.

One of the unexpected consequences may be more pieces of paper in a renewal package - perhaps another four or five documents on average. Customers will see more questions being asked, because the insurer's responsibility to ask specific questions has been increased, and that will happen. Insurers will, therefore, ask more questions as part of the renewal process and in respect of new business concerning policies. However, I reiterate that we are ready and we will be going live on 1 September in respect of the final stages of the Act.

Mr. Tomás O'Midheach

We are in a similar position. We welcome the clarity and transparency that the Act will provide for consumers in respect of contracts. We are also working hard to implement the provisions of the legislation, and have been for the past 18 months, so we should be ready by September as well.

Mr. Declan O'Rourke

It is a similar story from Aviva. We have a big team working on it and we expect to be ready for September.

Moving on to fraud, it is the issue we heard many insurance companies over the years suggest as the big reason for having such high costs. Insurance companies, of course, have a legal obligation to report fraud so it can be investigated. It is not incumbent on them to carry out the investigation, but they do have that legal obligation to report such instances. From the figures I see here, in 2019 there were 63 reports of fraud, while in 2020 there were only 48 such reports. Given all the bluster and everything we heard in media reports over the years regarding how significant an impact fraud was having, do the witnesses agree that the number of reports is quite small? Can they explain why that would be the case?

Is that question for Mr. Brennan?

Given the number of people who hold insurance, that is a small number of reports of fraud.

Mr. Anthony Brennan

I ask my colleague, Ms Corbett, our head of claims, to respond.

Ms Siobhán Corbett

I can only speak for Zurich, rather than the industry as a whole, but during 2020, we validated all claims, as is our obligation. The process identified 345 claims that warranted further investigation by our specialist team dealing with potential fraud. Of those 345 claims, there were 68 cases where we suspected some element of fraud. I underline the fact that it was only a suspicion of potential fraud. On further investigation of those claims, there were 13 claims where we felt there was sufficient evidence of fraud to be of material assistance to An Garda Síochána, and those cases were referred on. Again, I cannot speak for the industry as a whole, but 13 claims out of 68 would, from my understanding, be above our market share, but that is all I say in respect of Zurich.

I thank Ms Corbett.

Mr. Declan O'Rourke

In Aviva, we had 247 fraud cases that we reported. Of those, 117 were premium fraud, involving practices such as ghost brokers, forged no claims discount, NCD, certificates, etc., and 130 were claims frauds for things like staged accidents. That accounted for the total of 247 cases.

Those 247 cases were reported by Aviva.

Mr. Declan O'Rourke

Yes, that is correct.

I call Deputy Durkan.

I have a couple of short questions. I welcome the opportunity to have this exchange of views. I used to be my party's spokesman in this area once upon a time a long time ago. I must not have had too much of an effect, because we are still dealing with the same problems. Does Insurance Ireland regulate the level of risk that may be undertaken by the various insurance companies? I refer to the cover given, for instance, for business interruption or whatever it might be. What is the story in that regard? Could someone enlighten me?

Mr. Declan O'Rourke

Having been a spokesman for a long time, the Deputy will probably recall the former Minister and Deputy, Mr. Des O'Malley, fighting for this type of change back in the 1990s. He was appealing to judges to bring injury awards down to European levels. We have finally got there, or we are on the way. We still have a bit to go, but there has been progress in those years. To answer the Deputy's question, Insurance Ireland does not do that. It is an open market and Insurance Ireland has nothing to do with the cover provided by individual insurers.

Insurance Ireland does not preset standards or advise the insurance companies as to what they might do. I was wondering about that point, because if the activities of one or more of the insurance companies were of an overly risky nature, that might have an impact on the entire industry.

Mr. Declan O'Rourke

No, Insurance Ireland has no involvement in that regard whatsoever.

Has the insurance industry become involved during the past ten to 12 years in providing cover against loss in the financial services sector? I posed a question to the Minister some years ago because I was given information to the effect that several lenders had taken insurance cover against some risks. In fact, it was alleged at the time that those lenders were going to get paid by two different bodies. One of those groups was the public, and the other was the insurance companies. What is the story behind that?

Mr. Declan O'Rourke

I guess financial institutions buy many different types of cover. Typical examples include directors' and officers' insurance, which would cover the boards of those companies, professional negligence insurance, which would cover financial institutions for cases of negligence, mis-selling, etc., and crime cover for possible instances of theft, in addition to normal insurance policies. There are quite a few possibilities. It would depend on what the action was, but typically in financial institutions we see many negligence actions. We also see quite a bit of crime.

How many claims were paid out where negligence was suggested or where the insurance taken out was to cover various risks? A reply to a parliamentary question stated that some are covered in the high-risk category, but the Minister was not sure how many or what percentage were covered. That set off alarm bells because insurers would not have to cover too many. All they needed was to cover two or three big risks, or maybe one really big risk, to result in a serious chasm in the entire insurance sector. To what extent were payouts undertaken in respect of high-risk financial transactions or speculative transactions? Are insurance companies still covering those?

Mr. Declan O'Rourke

Again, without the details I am not able to comment on that. Typically-----

Mr. O'Rourke should not be shy. This involves the entire insurance industry. He should be flamboyant on this, come right out and say it as it is. He can tell all to me; I will not tell anybody.

Mr. Declan O'Rourke

Typically those types of insurance programmes buy large limits, but each insurer would have a small piece and then that would end up in large programmes. Most of those insurers would be offshore. One would not understand fully and one would not even see it in the Irish insurance numbers. The answer the Deputy got about not knowing the answer was probably the correct one.

It may well be the judicious one at the time but I am not so sure it was the correct one. My immediate suspicions were aroused as to what extent cover might be offered to people who are trading in a fashion not in accordance with the rules, and who may have been compensated and drew down the cover. I certainly would like to feel that Insurance Ireland was looking at these kinds of situations. For example, would there be an assessment by the insurance company as to the potential for reckless trading? What would be done in that situation? Would the insurance company say "Okay, you are looking for cover for €10 million or €20 million, this is what the premium will be and we will cover you"?

Mr. Declan O'Rourke

Yes, but one cannot cover an illegal act. If it is an actual illegal act, it cannot be covered.

No, I am not talking about an illegal act at this stage; I am talking about what could later be determined as reckless trading. This means, as the fellow said, sailing close to the shore.

Mr. Declan O'Rourke

If a company is involved in reckless trading, for example when it is bankrupt, and there was an allegation against the directors, there are insurance policies one could buy for that, until it was proven in fact that they did an illegal act. One cannot, however, cover an illegal act.

I am aware that an illegal act would change the whole scene. In the event that the action was not determined to be an illegal act but it was a high-risk act - otherwise they would not be looking for cover in the particular situation - can Mr. O'Rourke give us any indication as to how those issues are greeted nowadays? Does the insurer come out to the front door to meet the person seeking the cover, or does the insurer hide in the office and pretend that the person does not exist, hoping that he or she will go away? Does the insurer just pay out when the time comes?

Mr. Declan O'Rourke

Again, it depends on the case. The Deputy's first question related to Insurance Ireland. They would have nothing to do with that and most of the people involved in that type of insurance would not be members.

Mr. Declan O'Rourke

It would be the brokers. The brokers would represent the insurance. The brokers would go out to the market. Their job is to ensure they get the best cover available on the market.

It is up to the insurance company to accept the proposal.

Mr. Declan O'Rourke

Correct.

How can an individual insurance company assess that kind of risk? Is it taken as granted? Do the companies ordinarily proceed with the cover or do they refer to anybody to examine it? Do insurers say to themselves, "I do not think this is a very good risk and we should not have it"? I pursued this issue ten years ago. I came to the conclusion that there could have been a serious amount of cover offered for various high-risk financial transactions, which were unsafe or highly speculative. I believe since that claims might have been paid. In response to an earlier question Mr. O'Rourke said they would have been small amounts and it would be very small in the context of the Irish industry, and so on and so forth. Like bookies with a bet they do not want to handle, they could have lay off the risk to a European insurer. I am not trying to trivialise it. I became familiar with all of these routes at the time, and I have one more. Will Mr. O'Rourke clarify the degree to which the insurance companies evaluate the liability they take on in some of these circumstances, and especially with medium- to high-risk financial transactions?

If the Deputy has another question, can he please put it now?

Okay, we are running out of time. I will give the other question now too. The problem with putting two or three questions in together, it is the easiest one that gets the reply. However, I will hold the other one for the moment because this will only take a short time. The other one will take even less time.

Deputy, we are running out of time and I am anxious to ask a few questions myself. If he will ask the question-----

I will not delay. The Chairman knows I am very good at taking-----

Can Mr. O'Rourke answer the question please so we can get through it quickly?

Mr. Declan O'Rourke

Again, these tend to be specialist insurers. Stockbrokers, banks and funds, for example, will be insured around the world and they have global insurers with expertise in the area. They will know, for instance, whether an investment fund is high risk, are moms and pops investing, is it specialist investors who can take care of themselves, if investors need to be protected, what are the chances of a claim, and what types of things do they invest in. Those specialist underwriters will figure out a rate.

I will ask my last question. It is a question I asked insurance companies some years ago. Many small business people and private citizens have a number of vehicles for which they require insurance cover. Some families may have up to 20 vehicles depending on the size of the family. I inquired as to whether fleet insurance was available. Immediately, the insurance companies threw up their hands and said, "Not at all, not under any circumstances, and how could you even consider a thing like that?" I am not so sure I was given the right reply, but maybe Mr. O'Rourke could elucidate further on it.

Mr. Declan O'Rourke

Me again?

If you would, Mr. O'Rourke, or whoever wishes to take it.

Mr. Declan O'Rourke

As a constituent of the Deputy, it is only fair. A number of insurers offer multiple car discounts. We offer a loyalty discount. If the customer covers both their house and car we give discounts on both and free travel. If they are classic cars there are schemes that take care of that and the premium is much lower because the cars are driven very little. There is an array of options. The local broker will probably be able to answer the question better than the insurers. We would know bits and pieces of each one and what we offer ourselves but the brokers tend to know all of the products out there.

I thank Mr. O'Rourke. I thank the Chairman. I will be a good boy now.

I thank the Deputy. I have a number of questions and I suggest that the witnesses could take the question relevant to their company.

Regarding brokers and how they operate, what is the average profit margin they add to a quote given to them by an insurer?

Mr. Anthony Brennan

I will answer that. Most brokers would not add a profit margin to a quote. They get the quote from us and then they add certain fees they charge their customers for doing certain things. It is an actual fee and they would disclose it to the customer. They would not normally add a profit margin to the premiums we send to them.

From where do they get their profits?

Mr. Anthony Brennan

There is a mixture. There is a level of commission we would pay to brokers, which they pass on to the customer.

The quote customers gets through a broker is the quote directly from the insurance company and the broker is paid a commission on that. Is that correct?

Mr. Anthony Brennan

That is correct.

I could put my next question to any of the three CEOs but I will put it to Mr. O'Rourke. The information he has given the committee is that we can see insurance premiums coming down. He said there is evidence of that. The evidence I see in my office is that insurance premiums are going up. I am not saying the majority are going up but the ones I see are. I have an example to hand where the individual is insuring a car and nothing has changed except that he and the car are a year older. His insurance last year was €470 and this year it is €608.17. Given that there was very little driving going on over the past year because of the Covid-19 pandemic, other than in local areas, and given that there is a 50% no-claims record on this particular premium, why has it increased? I know Mr. O'Rourke will say he cannot comment on individual cases but all the other cases are the same. Nothing has happened to justify any kind of an increase in those cases. If anything has happened, it is that the Minister of State, Deputy Fleming, has said that insurance premiums will come down. That is not what we are experiencing in our offices. In spite of everything the witnesses said this afternoon, I hold to the position that insurance premiums have gone up for a considerable number of people.

Mr. Declan O'Rourke

That probably is the case but, if we look at it overall, as we discussed, and looking at the CSO numbers-----

What does Mr. O'Rourke mean by "that is the case"?

Mr. Declan O'Rourke

It is the case that some premiums go up and some go down but in terms of the average premium over the market, the CSO numbers and the NCID numbers - both independent views of where the insurance sector is at - show there have been dramatic decreases. In six quarters, the NCID showed that premiums dropped by 9%. The CSO figures up to the end of 2019 and from 2020 onwards are showing a further 7% drop. That is a 16% decrease overall. There will always be some-----

Regardless of that figure, a significant number of people have had the opposite experience to what Mr. O'Rourke has been explaining to the committee. I have referred to one such case. The individual in question is a loyal Aviva customer but he is expected to pay €138.17 more than he paid last year. I would say this is the same for everyone. This person has been reading the newspapers and watching media coverage showing the indicators that insurance premiums are going down. Like Mr. O'Rourke said, the overall percentages are going down. Why then would customers like the man to whom I referred be facing an increase in premium?

Mr. Declan O'Rourke

The most common reason for a customer to have something like that would be that he or she might be moving back to a more standard rate. From time to time, we offer online discounts and introductory offers to customers if we are looking for volume or new online customers. There are a number of reasons and different factors-----

I am sorry for cutting across Mr. O'Rourke but I want to stick to the facts here. This man, a customer of Aviva for years and with a no-claims bonus in place, has been told his premium is going up by €138. Mr. O'Rourke can cite statistics and analysis and the whole lot but there are too many people like this man coming into my office and telling me they cannot get insurance or, as in his case, that their premium has gone up. Nothing Mr. O'Rourke has said today explains the increase in this individual's premium, which is similar to what is happening in other cases.

Mr. Declan O'Rourke

I am happy to look at that particular case. I cannot speak about an individual case without seeing it but what I can say to the Chairman is----

Will Mr. O'Rourke answer my question?

Mr. Declan O'Rourke

If we look at our customer satisfaction levels, they are in the high 80s. The figure for the people who are happy with our service is 90%. There are a lot of companies in any industry that would be really happy with those satisfaction levels.

I could be dabbling in the margins here but, out of the numerous complaints brought to my attention, I have chosen one that is a standout type of complaint, and it is not the only one. I just do not understand this argument we have had here for years abut insurance premiums. Regarding the decision of the Judicial Council, Mr. O'Rourke said that quite a number of the judges voted against the proposals and his concern now is that they might ignore the proposals and continue in their old ways. That is what I am taking from what he said. He also referred to solicitors and how they might be into activities that would retain their high levels of fees. That is a throwback to when we first started this discussion. The solicitors blame the insurance companies, the insurance companies blame the solicitors, everyone blames the judges and the customer gets screwed. It seems we are back in that territory again.

Mr. Declan O'Rourke

I do not believe we are back in that territory.

Then Mr. O'Rourke should stop making statements like that.

Mr. Declan O'Rourke

These are risks and issues we need to watch. The PIAB is an independent State body set up to assess injuries. For all of us, it is the best place for injuries to be assessed. However, out of 30,000 cases that go into the PIAB, only 6,000 get assessed there. I am not saying these things will happen but it is really important that we keep an eye on them. That figure of 6,000 needs to increase and it is in everyone's interest that it does. Right now, there is no incentive if a case comes out of the PIAB and the legal costs go from €800 to €16,000. There is no barrier to stop that happening. We just need to be careful with the structures that are in place and that behaviours do not change to cause obstructions.

Deputy Doherty said he had conducted a survey and analysis of the cases brought to his attention. I have done likewise and I set that against all of the things that are improving in insurance, what is happening in the courts and so on. Nothing the three CEOs have said gives any comfort to me or, indeed, to those customers to whom I will write back after this meeting. I will encourage them to write directly to the three insurers represented today and see what comes out of it. I suggest to Deputy Doherty that he do the same. I am fed up listening to the same old story all of the time. It is like Groundhog Day and we do not move on in any substantial way.

I want to ask about chartered engineers and fire safety consultants. I understand they seek insurance cover from the insurance companies represented here today.

Is that correct? Is that category of person or company be insured by the companies? That is a question for everyone. Maybe Mr. Brennan could give Mr.O' Rourke a chance. Does Mr. O'Rourke want to answer?

Mr. Declan O'Rourke

No.

Do the companies have customers of that type?

Mr. Anthony Brennan

We have a small number. It is a very specialised area. Covering the area has become particularly difficult after the tragic events in the Grenfell Tower in the UK. There have been a number of inquiries since then. It is becoming more challenging and specialised in that particular area. That clearly is an area of difficulty right now for insurance cover.

Which company offers that kind of cover?

Mr. Anthony Brennan

I am aware of one. It would be unfair of me to name a company here in front of other competitors.

Does Mr. Brennan's company offer that kind of cover?

Mr. Anthony Brennan

Not today, no.

What about Mr. O'Rourke's company?

Mr. Declan O'Rourke

Is this in respect of engineering companies?

Chartered engineers and fire safety consultants.

Mr. Declan O'Rourke

We certainly do chartered engineers. The Chairman is talking about professional negligence. We entered that market earlier this year but we take small excess lines. We are not a primary player in it.

What about FBD?

Mr. Tomás O'Midheach

I will ask Ms Tobin, the chief underwriting officer, to speak to that.

Ms Kate Tobin

That is not an area FBD currently insures.

Some of the companies cover it. The complaint I have received is that most design team members are required to carry a minimum cover of €6.5 million. I presume that is public liability cover for the various developments they are involved in. They currently can only get €1 million to €2 million coverage and as they exceed €2 million, there is a 400% or 500% increase. They are being asked to sign off on housing estates and developments that have been completed. Without them having the cover, many councils and voluntary housing agencies will simply not get the sign-off that is required by law. It is interesting that when they are dealing with insurance companies regarding fire cover, there is a clause in one of the policies, which states: "We will not make any payment for any claim, or part of a claim or loss, arising directly or indirectly due to the combustibility or potential combustibility of fire protection performance of any type of panelling, cladding, facade or other material used in the surface, roof or interior of any building including, but not limited, to any associated core filter signage and insulation". Is that a clause that any of the companies are familiar with?

Mr. Anthony Brennan

That is not a Zurich clause, I am sure, but it sounds very much in line with what is happening in international reinsurance. This has become a very specialised area. Any company that has been involved in the area will need to provide cover outside Ireland to protect themselves. The Chairman spoke of the large sums insured that are involved. It sounds very like international global reinsurance type-wording. Again, what happened with the Grenfell Tower is the reinsurers are saying they do not want to provide cover for these after all that has happened. They have seen the risk and they do not want to provide cover, particularly to cladding. As I said, I am not an expert in the area but that does sound like international reinsurer type-wording to me.

Is it a clause Mr. Brennan's company would use?

Mr. Anthony Brennan

No, I do not recognise the clause but if we were doing business like that, which we are not, and we were reinsuring it internationally, which would have to be done, the reinsurer would be very insistent of using their wording rather than ours in those sorts of circumstances because ultimately they take the risk. How reinsurance tends to work is that companies will take the risk up to a certain amount and will reinsure anything above that with these large global reinsurers. They would be quite insistent, I imagine, in an area like that that their wording would be passed on.

Is it correct, therefore, that the three companies before the committee do very limited cover of this type?

Mr. Anthony Brennan

Correct.

I would like to ask about cast insurance. We received a letter regarding the problems being experienced by those employing a cast for a film production. Are any of the witnesses familiar with the problems in that area of is it a sector with which they are familiar?

Mr. Anthony Brennan

Zurich Ireland is not involved in that area.

Mr. Declan O'Rourke

Nor is Aviva Ireland.

Mr. Tomás O'Midheach

No, not typically.

Is that, again, one of those types of insurance where someone has to go through a broker for cover outside the country?

Mr. Anthony Brennan

A very specialist broker would look after areas like that, yes.

Are they Irish-based or based abroad and accessed through a broker in Ireland?

Mr. Anthony Brennan

There is a wide range of brokers in Ireland who specialise in a number of areas. I do not know the area at all but I am sure there are Irish brokers who are involved in the area. Off the top of my head I happen to be aware of an Irish-based broker who is involved in cover for concert cancellations and who places all that business internationally. There is a lot of expertise among Irish brokers and a number pick specialist areas such as that to focus on.

It is none of the companies here.

Mr. Anthony Brennan

No, they would not place that sort of cover locally; it is very specialised.

Each company was asked earlier for statistics regarding different payouts and claims. Is that information available on their websites? I refer to information on the background to claims, general stuff.

Mr. Declan O'Rourke

Is this regarding Covid?

No, any insurance for the different areas that the companies insure in.

Mr. Declan O'Rourke

Absolutely.

It is all there.

Mr. Declan O'Rourke

Yes.

Okay. I have no further questions. Deputy Durkan is indicating.

I said I would be a good boy and I apologise in advanced. I asked whether insurance companies covered any financial investment risks and so on. I forgot to ask whether they invest in funds that may require rescuing at a later stage.

Mr. Anthony Brennan

No, most insurance companies in the market would be very heavily invested in very secure assets. It is something that the Central Bank would look at when it examines us. It looks to see exactly where our money is invested. We tend to have very secure investments across the industry.

What do the companies do with their cash flow? They have a good cash flow and moneys to invest on any given day or week, sometimes very considerable amounts. Is it put into a bank account with a return of 1% or 2% or is it invested in a fund?

Mr. Anthony Brennan

We tend to have our own investment teams that would look to invest the money for the long-term. In many cases it could be five, six or even ten years before a claim is settled. We would have teams who would look to invest that money in a wide range of different assets. One tries to get diversity. One would try to avoid putting money on deposit at the moment because of negative interest rates but there are times when it is necessary to have access to it if, for example, there are a couple of large claims coming up. One needs to know the cash is available in the company's bank account. Generally one tries to invest in something that hopefully has a positive yield with a longer term.

I thank Zurich, FBD and Aviva for attending the meeting.

Can I ask one final question?

We are out of time.

Sorry about that. I am obliged to bring the meeting at an end at 2.30 p.m.

Sitting suspended at 2.30 p.m. and resumed in private session at 3.15 p.m.
The joint committee adjourned at 4 p.m. until 12.30 p.m. on Wednesday 26 May 2021.
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