Insurance, uncovered: Firms warn of 'existential threat'

Maria Bailey’s personal injuries action against the Dean Hotel swung the spotlight onto the difficulties that hospitality venues face with compensation cases.

Since then, the government has experienced relentless pressure over soaring insurance costs, alleged profiteering by insurance companies and the large payouts approved by the courts.

Michael D’Arcy, Minister of State at the Department of Finance, has threatened to levy new fines on insurers whose accounts show they are making tens of millions in profit in Ireland. The only tangible policy change, though, has been the passing of the Judicial Council Bill in the Dáil last week.

Under the legislation, guidelines will be developed by a new committee that will advise a judicial council, which has yet to be established.

It is unclear whether this will result in a reduction in insurance premiums, but many are sceptical given the profits enjoyed by insurers.

Meanwhile, business owners are exasperated by ever-increasing costs.

In response to The Sunday Business Post’s survey of more than 200 pubs, restaurants, hotels and cafés, owners and managers complained that they were being pushed out of business by the manner in which insurance companies handle claims.

One hotel owner said his business’s premium had increased from €20,000 in 2015 to €47,000 this year.

“We are in business 25 years, had one claim in the first 20 years and four in the last five years,” he said.

These included, he said, a claim settled in 2017 for €30,000 for a man who suffered hot water burns from a shower he broke off the wall in his room in 2014. Another claim settled in the same year resulted in an €11,000 payment to an employee who had been with the firm for three weeks and who slipped and sprained her wrist, he said. The owner said the claim was settled “without her ever seeing a doctor” or attending the Personal Injuries Assessment Board (PIAB). Another restaurant owner said that the business had never had a claim in 30 years, yet its premium had increased by 30 per cent in the past four years.

The owner of a pub detailed how, even after the business supplied video evidence of a claimant dancing and walking without a limp, their insurance company settled her claim for €20,000.

A restaurant and pub owner who was charged €50,000 for insurance last year said the business had been paying €15,000 every year since 2015.

The owner of a small rural pub said that because it had two minor claims outstanding for a number of years, nobody but its current insurer would insure the business. Since the first claim was made, the pub’s premium had risen from €3,500 to €20,000.

The survey found that 73 per cent of businesses had been hit with an increased premium at their last renewal, and the average increase was €3,871.

For small and medium-sized enterprises, or those with fewer than 50 employees, the average increase last year was €3,345.

While 73 per cent of businesses faced higher premiums, only 11 per cent had been subjected to a claim against them since their last renewal.

Asked about the insurance issues they felt were putting pressure on their businesses, the respondents highlighted insurers’ handling of claims.

They said that even when supplied with strong evidence, such as CCTV footage, or evidence that a personal injuries claim had been exaggerated or was fraudulent, the insurance company paid out without challenging the claimant.

Others said that when a claim was made against them, their next premium was increased, but they had never heard what had happened with the claim.

An issue that several business owners believed deserved much more scrutiny was the costs imposed by insurers requiring businesses to maintain certain standards or have extra work carried out. One restaurant owner said they had to ensure their toilets were clean at all times or they would not be covered, while another said they had to pay up to €9,000 a year for two industrial cleanings of their kitchen canopies by an outside firm.

The survey gave further insight into how all manner of enterprises are feeling the pressure from increasing insurance costs. Businesses are not the only organisations affected, however.

Dozens of special schools have been forced to band together to get cover that would allow them to keep their doors open for the new school year.

Several special schools face crippling insurance costs, with some reporting increases of up to 700 per cent over the past two years.

The soaring cost of cover has forced 15 special schools to contact the Department of Education, alerting officials to the difficulties they face.

In response, the department has advanced school capitation payments – worth a combined €36,860 – to two schools as an emergency measure to allow them to pay their premium.

Joe McHugh, the education minister, said it was “not sustainable” for his department to “advance capitation payments as a way of meeting vastly increased insurance premiums”.

In a Dáil response, McHugh said: “I know that this is a cause of concern to schools as well and it is my hope that a speedy and cost-effective resolution can be secured for impacted special schools.”

The Sunday Business Post understands that a number of special schools have agreed to establish a group insurance scheme to find cover at an appropriate price for the next school year.

Several arms of government including the Department of Education, the Department of Public Expenditure and Reform and the State Claims Agency are working with the National Association of Boards of Management in Special Education (NABMSE) to develop the initiative.

Schools in favour of establishing the scheme have been asked to authorise NABMSE to act on their behalf and a tender for a brokerage service has been issued. It is thought a scheme could be put in place by the end of the month.

Breda Corr, general secretary of NABMSE, said she expected as many as 50 schools could participate in the scheme.

“[High] insurance costs really hit smaller schools where every penny counts,” she said.

This newspaper last month reported on the extent of the insurance crisis faced by community and voluntary organisations.

Ivan Cooper, chief executive of The Wheel, an umbrella organisation for these groups, said publicly funded community assets were lying unused because premiums have risen by as much as 500 per cent in three years.

The “big fear” among the organisation’s members was that they would be forced to close because of the “existential threat” posed by rising insurance costs, he added.

Insurers appearing before the Oireachtas finance committee last week committed to lowering premiums if personal injury awards were reduced in the courts.

At last week’s committee meeting, representatives of Axa Ireland, FBD Ireland and Allianz Ireland said any reduction in court awards that might result from the Judicial Council would deliver lower premiums. They declined to give specific commitments.

The insurers highlighted the ongoing investigation by the Competition and Consumer Protection Commission (CCPC) into alleged price signalling, a practice in which firms’ announcements of pricing changes are construed as an invitation to competitors to follow suit. They said they had to be careful not to be prescriptive in terms of potential changes in the cost of cover.

In addition to the level of court awards, insurers also point to the level of fraudulent claims that push up premiums.

The true extent of fraud in the industry was disputed at the committee, with Pearse Doherty, Sinn Féin’s finance spokesman, accusing insurers of exaggerating the problem.

Robert Smyth, Aviva Ireland’s Head of Fraud, told The Sunday Business Post it was evident “that many claimants exaggerate their injuries with the objective of increasing their compensation payments” after minor collisions.

“This is also fraud and needs to be tackled. The problem is aggravated further because the awards in court are inconsistent and this encourages fraudsters to roll the dice and hope for a big payout,” he said.

Smyth said Ireland’s high compensation awards have also encouraged suspected fraudsters from outside this jurisdiction to travel to Ireland to stage motor accidents.

Aviva is investigating one British-based individual who has been in at least three road traffic incidents while visiting Ireland over a 13-month period in 2016 and 2017. These resulted in numerous claimants and potential compensation payments of between €500,000 and €1 million, Smyth said.

“Irrespective of the potential for high- compensation payments, as well as the associated legal costs, settling personal injury claims submitted by fraudsters is not tolerated in Aviva. We will investigate thoroughly and allow the courts to decide on the outcome,” he said.

In total, Aviva is dealing with about 50 suspected cases of insurance fraud concerning people who have travelled from Britain.

In one instance, the insurer interviewed a British-based individual who had been involved in an incident and lodged a suspected fraudulent claim while in Ireland. That incident was reported to the Gardaí although Smyth said not all 50 of the British-related cases had been.

“We went over to England to interview him and a completely different person turns up to meet us and gives a version of an event that appears to be related to another accident to the extent that we believe they were having other accidents with other insurance companies that we weren’t aware of and were just mixing up the accidents,” he said.