Insurance fraud and rising premiums: ‘People think they can get away with making outrageous claims’

Picture the scene: four people sit around a pub table tucking into a meal. One of them begins to choke on a shard of glass. Her companion leaps up, slapping her back, scanning the room for help.

All the while, a small CCTV camera at Judge Roy Beans in Newbridge, Co Kildare records the show. Its footage proves revealing: moments before her apparent distress, the woman is seen reaching into her top, removing the glass and carefully placing it in her mouth.

“People think they can get away with making outrageous insurance claims, a belief supported and encouraged by some within the legal sector and facilitated by insurers settling dubious claims,” said Pádraig Cribbeen, chief executive of the Vintners’ Federation of Ireland (VFI), which later posted the footage on social media to demonstrate what many of its members must deal with.

Although the example was used to highlight the threat of so-called “compo culture”, many businesses in Ireland say they continue to experience unduly expensive premium costs for a variety of reasons, despite comprehensive reforms in the sector. As well as hospitality, the outdoor adventure and other niche or “pinch-point” sectors complain of excessive fees.

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At the heart of debate around public liability insurance lies the insurer who claims cover is historically loss-making and the customer who claims Government-driven reforms have not been passed down, and greater competition is vital.

While eagerly anticipated Central Bank data later this month should provide insights into how the liability sector has performed since insurance reforms have bedded in, many customers remain frustrated.

“The adventure activity sector in Ireland continues to suffer an existential crisis due to the cost of obtaining affordable public liability insurance and, sadly, more and more operators are closing,” said Brendan Kenny, chief executive of Ireland’s Association for Adventure Tourism (IAAT) which represents various outdoor pursuits companies.

Although the organisation, formed in 2017, created a safety management system for its members, it says they continue to pay premiums up to six times the rate of those across Europe.

“One of our German colleagues said recently that what we pay for insurance would cover the insurance costs of the entire sector, high ropes specifically, in Germany,” said Bill Cremin, managing director of Zipit, a company offering treetop climbing activities in counties Dublin, Roscommon and Cork, with annual insurance costs of a quarter of a million euro.

Sector research conducted by the IAAT, which has over 230 members, shows two-thirds (65 per cent) of operators have seen their premiums increase since 2019, despite much-trumpeted market reforms. The average premium increase was 45 per cent.

[  Adventure centre owner removes ‘anything that causes injury’  ]

Given that one in five (19 per cent) operators have been unable to secure cover for all of their products, the majority of IAAT members say improving market competition is now the priority.

In the equine world, the Association of Irish Riding Establishments (AIRE) has found similar concerns among its members. One said: “We have to be grateful to receive a quote at all, never mind price or conditions.”

Although not considered to be at the same existential level, hospitality businesses have also complained about insurance costs and poor comparisons with other countries.

At its annual conference last year, the Irish Hotels Federation’s then president Elaina Fitzgerald Kane appealed to the Government to address the “excessive and escalating cost” of insurance, citing an average increase of 20 per cent in premiums for the year, in the immediate aftermath of Covid-19 and its effects on the sector.

“We are the laughing stock of Europe in terms of the cost of insurance for business. When you look at Germany, Denmark [they] don’t have the same compensation culture,” said Adrian Cummins, chief executive of the Restaurants Association of Ireland (RAI).

“A lot of work is being done but it’s not being done fast enough.”

[ Insurers urged to immediately lower premiums after Oireachtas passes new law restricting occupiers liability to visitors ]

Compared to the adventure activity sector, which puts insurance at as much as 12 per cent of turnover, the restaurant industry estimates its insurance cost as about 5 per cent. Cummins concedes that while it is a problem, insurance is not among the most pressing issues, which include inflation, VAT and energy costs.

At Scholars Townhouse Hotel in Drogheda, Co Louth, owner Mark McGowan estimates he has had about 12 personal injury claims over 18 years.

“We have to take out a loan for our insurance this year. It’s the first year we’ve had to do it,” he says.

“[It] has gone right up to €44,000. We’re a 16-bedroom hotel; I’ve a 40-seater lounge and I have about a 60-seater restaurant. So with the turnover we’re doing, it doesn’t make [sense].

“There’s nothing left for the business owner any more. All we’re doing is we’re working for the Government, we’re working for insurance, we’re working for our staff, we’re working for everybody else.”

Fáilte Ireland, which promotes the domestic tourism market, has felt the need to weigh in. A spokeswoman said the problems in securing cover was having a “significant impact on businesses” in the sector.

“Not only does this have implications in terms of the negative economic impacts, it also has the potential to seriously undermine Ireland’s overall tourism offering,” she said. “Our analysis shows that the insurance difficulties facing tourism SMEs in Ireland is unique to us.”

Ireland’s domestic insurance industry is worth €4.6 billion. While it largely functions without issues, the Government published a sweeping plan for reform of the industry at the end of 2020.

With ambitions to lower costs, tackle fraud and increase market competition, its 66 actions have been the subject of three implementation reports.

Big changes were brought to the judiciary, where compensation awards have been considered excessively high in the past. In April 2021 the Book of Quantum – which guided payouts – was replaced by new personal injury guidelines.

By the following June Sean Fleming, Minister of State at the Department of Finance, set out evidence the move had already delivered. Average public liability and other awards made by the Personal Injuries Assessment Board (PIAB), the body that deals with all initial claims, during the first eight months since the guidelines were drawn up, had dropped by over 40 per cent.

By then, the average PIAB award was slightly below €14,000 compared to almost €24,000 in 2020. Almost three-quarters of awards (72 per cent) were for under €15,000, compared to just 30 per cent in 2020.

Another significant piece of legislation overhauling Ireland’s duty of care laws is expected to further ease the strain on costs. The Courts and Civil Law (Miscellaneous Provisions) Bill 2022, signed into law earlier this month, amends the Occupiers’ Liability Act by rebalancing the duty of care to visitors and recreational users. In plain terms, it will address the dreaded “slips, trips and falls” and shift more weight toward personal responsibility.

[ Woman withdraws claim of up to €60,000 after CCTV shows her slamming brakes ‘for no obvious reason’ ]

Nevertheless, the Department of Finance has conceded some activity-related sectors, including hospitality, are facing difficulties.

“The international liability insurance market has shown signs of hardening in recent years, with consequent effects on availability and premium prices,” a spokeswoman said. “As a small, open economy with multilayered connections to the global economy, Ireland has been particularly impacted by this.”

The department notes that data from the National Claims Information Database (NCID) has shown the liability market to be loss-making for years. Added to that, “niche sectors” have traditionally been reliant on UK underwriters but this has been upended by Brexit-related bureaucracy and costs.

These are positions echoed by the industry itself, which pushes back against any notion of arbitrarily high premium costs. Even in a reform era, both say there is no silver bullet.

“There are difficulties in some of these niche, pinpoint sectors but I suppose the context from an Insurance Ireland perspective is the liability market has been challenging for insurers over the past decade or more,” a spokesman for the umbrella organisation said, adding that some had left the market.

“We are seeing a reduction in claims [through PIAB] but that will take time to feed through to premiums. We are probably at an inflection point where some of these changes are bedding in and we [have to] see when the benefits will come to realisation for some of these sectors.”

Over the last 10 to 12 years, he said, such niche businesses found themselves “economically unviable” in the eyes of an insurer, due to costs, including legal fees for settling claims.

Insurance Ireland is more cynical about claims of excessive policy costs in the hospitality sector, which it sees as a “deflection tactic” from the high-cost business environment, particularly hotels.

The spokesman said the reason Ireland is considered more expensive than other European countries is “multifaceted”. Insurance Ireland and the Department of Finance point to last year’s NCID report from the Central Bank which showed that in 2020, 92 per cent of employer and public liability, as well as commercial property policies, cost less than €5,000.

“But the same report pointed out that all sectors had seen increases” in premium costs, noted Brian Hanley, the recently appointed chief executive of the Alliance for Insurance Reform. While optimistic, Hanley appears eager to contextualise progress.

“Local reform [in Ireland] should have had a much bigger impact on local liability insurance costs,” he says, emphasising the customer experience that, whatever about intent, not everyone has reaped the reward.

“There is a huge degree of frustration that it hasn’t. There has been a whole-of-society effort to do something about insurance premiums.

“[It] hasn’t been passed on to members. You see some modest reduction perhaps in motor but certainly from talking to members there is nothing in EL [employers’ liability] or PL [public liability] to date.”

Hanley accepts Brexit arguments but he is quick to counter others. It comes down to competition, he says, a market shortfall currently being addressed by a specialised unit working out of the Department of Finance.

Whatever the ultimate solutions, Hanley believes those corners of Irish life that struggle to find insurance should not be pigeonholed, sent into a corner on account of their niche status.

“To call them pinch-point sectors in some ways is to diminish their value,” he says.

“There is at least some [activity] cancelled every week. You read in the papers that they can’t go on, they can’t continue, it’s not possible for it to happen. They might be relatively small in scale but they’re part of our culture, part of our tourism offering, part of our identity.”