If you think motor insurance is under siege in the UK, you should tryoperating in Ireland. A public outcry over regular four-figure premium rates caused the government to launch an investigation into alleged profiteering. The resulting Motor Insurance Advisory Board report criticised insurers and lawyers. Insurance Times gathered brokers, underwriters and loss adjusters to examine the implications
Eamon Hurley, Royal & SunAlliance insurance operations manager
The issue is that insurance companies have to explain their case with much greater clarity and conviction. We have to be clear that the problems are beyond the simple problems of the insurers. They are insurance industry problems and I think there's confusion out there.
The MIAB report itself is a consumer report, it's written with a consumer bias for the benefit of consumers and it makes no claim to be anything else in its introduction. And some of the headlines associated with its presentation were quite vitriolic towards insurers.
Of the 67 recommendations, only ten, however, were directly given to insurers to implement. The rest requires the intervention of other parties, such as the legal profession. So, whereas insurers were being lambasted, recommendations didn't reflect that.
I received something in the post from a lobby group that is interested in controlling the costs of insurance in Ireland. They're really trying to get some energy into a campaign to reduce costs. Among the terminology they use are words like, "schools", "hospitals", "tourism", "construction industry", "being held to ransom by insurance hikes", and "once again the focus is on the insurers". Yet over the page they say: "We strongly believe that five key actions taken by the new administration would significantly reduce claims and increase insurance costs." And the five key things they mention are nothing to do with insurers, so again there's a confusion in the mind set between the insurers and the role of the market as a whole.
One of the biggest points to consider is legal costs. Irish cases are 25 times more likely to have counsel appointed, so it's 75% of cases relative to 3% in the UK. Think of the cost of that. Legal costs are four times the UK level and legal proceedings are issued in five times more cases in Ireland than in the UK. So you know whatever the compensation which we can talk about, or rather which we should leave to one side, there's a huge cost relative to, say, the UK.
Andrew Petherbridge, Coyle Hamilton director
Government departments need to take a very, very hard look at this report, now that they have five years before the next general election, and focus particularly on what they have to do, because all the insurance companies are doing is actually dealing with the symptoms.
How about a bit of product innovation, such as including risk management? You could offer a discounted premium subject to a person achieving a full licence and doing a driver's course that is much more advanced than they're put through to get their licence. The discount would stand in year two provided the driver achieves those two things in year one.
I don't think insurers are making big profits. Look at Churchill's new Irish call centre. Why doesn't it want to write business here? I think the reason Churchill won't come in here is because it knows that it's hard to make money.
Malcolm Hughes, Miller Farrell chief executive
If I was confident that each of the recommendations was going to be tackled with the same vigour, I'd be more encouraged by it, but I'm not sure that is going to be the case.
One of the biggest problems to sort out is the frequency of accidents, the standard of driving and the level of enforcement. The insurance industry on its own won't solve this problem. I think the insurance industry should try to lead that.
One area we could look to that hasn't been raised is technology. Have we really got benefits from technology in terms of delivery of administration? We still operate in a sort of silo mentality even within the industry itself, where everyone is doing their own thing, but not necessarily sharing. And that goes for all sorts of brokers through to insurers, through to service providers like ourselves. And I think that's where the big opportunity is.
My fear is the soft touches will be the ones that people will concentrate on and the real political difficulties that deal with legislation and constitution will be left alone.
Paul Kavanagh, McCarthy Insurance group manager and past-president Irish Brokers' Association (IBA)
There's very little that any of the insurance companies or anyone involved in the insurance industry can do. We've been talking about it for too long, at this stage we need action. For example, the government's penalty point system has been stalled. I honestly believed, and I've been involved in a debate with the minister, that he doesn't even know how he's going to implement it. Is there going to be a new licence? They don't know.
We, as brokers, are seeing huge amounts of people lapsing their insurances without looking for their no claims bonuses. This means that someone in the market is taking them on without a no claims bonus, either as a different person or a different record, or alternatively they're driving without insurance at all. That's a huge problem. And couple that with the fact that there are 400,000 people on provisional licences and another 100,000 people who are what I would call the black economy of the provisional licences. They have no licences at all. They may have had licences that have lapsed and they know the consequences of getting new licence are too severe. They have to sit tests. So over half a million drivers are basically untrained.
We'd like to see more capacity in the market by way of extra competition. Competition has dropped, there is no doubt about that. Lloyd's syndicates have definitely indicated that they are not coming into this market at present. They are not going to invest their capital here for the sake of 4%.
Siobhan Wynne, Insurance Institute of Ireland head of education and training
We all know that the industry doesn't have a very good image or reputation. A lot of consumer fears and perceptions come out of lack of transparency. Applying that to motor, it's simply that people should know what their insurance premium goes to, what are the loadings, what are the weightings. If the person taking the call can't explain, then consumers lose confidence.
Adrienne O'Sullivan, DAS business manager
One of our difficulties is that our public relations is very, very poor and everyone assumes we're making huge profits. The report highlighted that motor insurance is too high. As insurers we agree that motor insurance is too expensive, but it's not because we're making vast profits. If we're all making the profits suggested in the report, everyone would be writing motor insurance. And at this stage people are getting out of motor insurance, they don't want to get into it.
One of the biggest issues that has come out of the report is road safety. Our roads here are appalling if you compare them to any other European country. Not only is our safety poor but, as Malcolm said about enforcement, the rules of the road are simply not enforced in this country. A man from the National Roads Authority told me there is a blank refusal for the Commissioner to put Gardai on the roads because there's such a big issue on crime at the moment.
There's no doubt legal costs are too high. We have let the legal system run away with costs on this money train for many, many years. We as insurers were to blame for this, because we allowed it to happen under our noses.
We desperately need more co-operation between plaintiffs and defendants. If that happens we will reduce costs. For example, agreeing the same medical examination or agreeing the same doctor. They are so simple, yet we can't do it here. We have five medical reports in a case here where there might only be one in the UK, and yet adequate reasonable compensation is reached and the costs are so much less in the UK.
There's a huge opportunity to bring more legal costs in-house. Some companies do have excellent in-house claims handling, and I'm sure they find their costs are greatly reduced.
Paul Sheehy, St Paul head of claims
Dorothea Dowling and her board [MIAB] have run with this issue and insurers ran scared, unfortunately. From a claims point of view, I would be critical of myself and my colleagues in claims, in that we didn't drive these changes ourselves. It's unfortunate that we were on the back foot and a pity that we didn't lobby the government ourselves.
One of the main things I will be looking for from a claims point of view, and one we need to press for is the personal injuries board. I would look to take these cases outside of the legal arena, because I think the government is going to have huge problems trying to get the legal profession to do anything other than reduce their costs. They're running at 42% of our claims bill. For every £10,000 [of a claim] you're paying out £4,200 on legal costs.
Why does it need a solicitor on both sides, a barrister on both sides - and possibly two barristers on one side? And then it has to go before a judge. It's not a very good way of getting the victim money, and I would much prefer we take it out of the legal process.