Repairing the Irish insurance market

Without doubt, insurance costs have risen in recent years and for many business and personal customers this has been a very difficult pill. Many factors make up the cost of insurance, and it is sometimes hard for people to decide what is going in a war of words where there has been more talk than real change in the four years since I became CEO of FBD Insurance plc.

I have repeatedly pointed to the high cost of injury claims as being the main driver of premium increases and I am in good company. Former High Court President Nicholas Kearns, chairman of the Government’s Personal Injuries Commission, recently compared Irish compensation culture deniers to climate change deniers. He reported that pay-outs for whiplash and other soft tissue injuries in Ireland are four times those of the UK. These huge pay-outs also incentivise fraud and claims exaggeration which further adds to cost as we try to keep pace with the fraudsters.

At an Oireachtas Committee last week, FBD stated that about 20% of claims are suspected fraudulent or exaggerated. These range from staged crashes to someone who is genuinely in an accident, but grossly exaggerates the pain or the impact on their lives in the hope of a bumper pay-out. Of the two, exaggeration is much the bigger problem. Despite the recent political bluster, FBD has never claimed that fraud is the only issue.

Much was made by Deputy Pearse Doherty of the fact that the insurance industry reports only a small number of cases to the Gardaí, but exaggeration of claims is not an offence unless the claimant gives false or misleading evidence during the court hearing and the Judge finds this to be the case. Even then there have been very few cases where a judge has dismissed the claim outright, sometimes only disallowing the bit of the claim deemed to be without merit. Notably in some cases, the ruling has made awards despite the judge openly questioning the credibility of the claimant.

Gross exaggeration is fraud. However in the way our legal process operates, regrettably it is not a criminal offence. Encouraged by some solicitors, many people, who consider themselves otherwise honest, seem to believe that exaggeration is fair game.

Let me also tackle the false idea that we are making outsize profits at the expense of our customers. Some commentators sensationally note that industry profits jumped by 1,300% between 2016 and 2017 (the latest date industry figures available). This is true and while it makes a good populist headline it is a bit meaningless when the industry made a tiny net profit including investment income in 2016 of €16m across 17 insurers which went up to €227m in 2017. Between 2013 and 2017 the industry lost €757 million insuring motorists and €349 million insuring Irish businesses. Some insurance companies collapsed including Quinn, Setanta and Enterprise Insurance.