THE FRIDAY INTERVIEW: Mike Kemp maintains the insurance industry is not reaping excessive profits and points to the high number of accidents, high legal fees and high compensation levels as the key costdeterminants in the sector.

Mike Kemp is under no illusion about what most people think about the insurance industry.

"It's a difficult industry to get people to love because insurance is pretty much a grudge purchase for most people," says the chief executive of the Irish Insurance Federation.

"It is regarded as a necessary evil by most people, so we're coming from that background. All we can hope to do is make sure we get a fair hearing and people understand where we're coming from and what the real underlying causes of high costs are."

Despite claims by the recently published Motor Insurance Advisory Board (MIAB) report that the industry is reaping excessive profits, Mr Kemp says he is generally satisfied with the MIAB's findings and that the industry got the fair hearing it wanted.

"I'm happy with the overall thrust of the recommendations. I don't think it's a matter whether there were two, eight, 20 or 50 addressed to us. The ones that are addressed to us are not the essential ones that are going to make a difference in price and they could never have been," he says.

"The real issue is that the core things that are coming out of the report are not things we can do anything about," he adds, saying it justifies the IIF's line that it was not the root cause of the problem.

The issues which the MIAB found were driving up the cost of motor insurance - the high number of accidents, the high levels of compensation and high legal costs - are for others to address, he says. The insurance industry is united in its approach in dealing with the problems of high motor insurance premiums, according to Mr Kemp.

"We're certainly going to implement the ones that are addressed to us," says Mr Kemp.

"There are no dissenters about implementing the recommendations that are addressed to us, but we do want to draw attention to things that need to be done by other people because they are the core recommendations that are going to have an impact if they are implemented.

"If all of the recommendations are implemented, it will have a beneficial impact on costs and it will bring down premiums. But it's a big if, because other people need to take action. It's not something we can do on our own."

Mr Kemp says there has been a lack of political will over the years to tackle the underlying causes of high motor insurance.

"There hasn't been adequate political will to tackle the road safety problem; nobody wants to get into any debate about the levels of compensation because it's a bit of hornet's nest as far as most politicians are concerned, treading on the toes of the judiciary, and the legal costs are something which is a bit more easy to tackle on a practical level, but there are very important vested interests."

Some politicians have sought to make political mileage out of the topic without actually seeking to address it, he says.

"You can get a good soundbite out of it - "isn't it terrible the price of motor insurance for young people" - but they tend to be a bit quieter about what they're going to do about it and in the past certainly most politicians have fought very shy of nailing their colours to the mast on any of the important proposals."

While the high levels of compensation may remain unchanged, Mr Kemp says the setting up of the Personal Injury Assessment Board could result in huge savings in time and money involved in the current legal process.

Much had been made of the IIF's initial reluctance to co-operate with the MIAB and provide it with the data it required.

But Mr Kemp rejects the idea that the industry was uncooperative and that this has damaged its image. He says the amount of raw data requested by the MIAB was unprecedented.

"All I can say is there wasn't any bad faith on the part of the industry and we were prepared to provide the data that was required. The logistical problems of collecting and parcelling the data in a different way is what really held it up.

"There was an issue about confidentiality of the data when you're down to that level of detail, how it should be presented in terms of each company's own information, because there is a commercial competitive issue there.

"That was sorted out relatively quickly. It was taken a bit out of proportion. There wasn't as big an argument as there appears to have been," he says.

One area where Mr Kemp is in dispute with the MIAB is on the area of profitability of insurance companies in the Republic.

He describes the claim that insurers here were 10 times more profitable than their UK counterparts from 1983 to 1999 - £343 million punts (€432 million) compared to £30 million sterling (€48 million) - as a "red herring".

"We're a bit concerned about the concentration and coverage on the profits comparison. It is misleading. The arithmetic is correct but the conclusion reached, the '10 times the UK profits must be excessive profits', is not right.

"The UK took a complete hit in the last three or four years of the 1990s, so their profits were virtually nil, so our profits are 10 times virtually nil. The point is the return was not enough to keep the companies in the market."

In the past, insurance companies were able to run significant underwriting losses because investment returns were so high, says Mr Kemp.

"Investment income has fallen off in the last few years, so it has certainly focused company's minds more on what's happening in the underwriting end and it is one of the reasons they have had to increase their prices," he says.

Nevertheless, the MIAB found that female drivers aged 19 to 20 were paying excessive premiums. Mr Kemp puts such instances down to the inexact nature of underwriting.

"You will always get imbalances between different segments of the market. Some will be profitable this year and others will be profitable next year irrespective of whether they are high- or low-risk and the reason for that is that underwriting is not a science; you don't know what your costs are going to be next year.

"Young females for a particular type of cover of three years from 1997 to 1999 had been paying too much - not deliberately - and other groups had paid too little."

On reports that the Competition Authority may be contemplating a series of dawn raids on insurance companies to determine if there has been price-fixing, Mr Kemp says the industry has nothing to hide.

"There is no price-fixing. The companies have nothing to hide."

Motor insurance is not the only type of cover coming under scrutiny these days. Surveys from various business organisations regularly indicate that the cost of public liability insurance is high on many companies' agendas.

"Liability costs are high for the same reasons - third-party personal injury claims are expensive compared to other countries, the costs are expensive and we have too many of them in the first place," counters Mr Kemp.

In an attempt to cut down on fraudulent and exaggerated claims, which, he says, are adding €53 million to the costs of public liability claims, Mr Kemp has called on the new Government to legislate for a specific offence of insurance fraud.

But he says he is reluctant to get into an argument over whether there is a compensation culture or a negligence culture in Ireland.

"The truth is there is a bit of both. Workplaces are not as safe as they should be, the roads are not as safe as they should be, but I think the fact that we have a fairly lenient regime, even if you're discovered exaggerating or falsifying an injury, and the high damages for personal injury when you succeed in an injury, means there are some very overwhelming incentives there for people whose morals may not be what they should be."

The past year has been a testing time for the industry as a whole and for Mr Kemp.

"There is constant comment and a lot of criticism and a lot of negative comment out there," he says.

"I've got to try to turn it around. That's what I'm here for."