Speech by Michael D’Arcy, Minister of State, Responsibility for Financial Services and Insurance at the Brokers Ireland Conference
I would like to thank you for the invitation to open the conference here in Croke Park today. I note that it is the first conference under the new brand Brokers Ireland and I would like to wish you every success in this new phase of your organisation.
As a result of my work as Chair of the Cost of Insurance Working Group, which I will talk about shortly, I am very aware of the significance of your role in the insurance arena particularly the specialist advice you provide in the employer/public liability insurance area. I am also conscious that there is a broad life insurance/investment dimension to your work as well to which the transposition of the Insurance Distribution Directive is particularly relevant. I will briefly touch upon the transposition process.
The theme of today’s conference is ‘A Vision for the Future’. This is an interesting theme particularly in the context of the times we live in today. Insurance, in particular, is an area that is potentially the subject of huge changes, not only in terms of the types of risk that need cover, but also with regard to how it is sold, the use of data analytics, and the role of insurers and brokers in the future.
I understand that you will be looking at an interesting range of issues today, including: Irish, UK and European market developments; cyber security; digital strategy and business mentoring on future challenges facing brokers. You will excuse me, I hope, if my ambition does not stretch as far as speaking on all of these issues!! However I think that by providing a Government view on the ongoing work of the Cost of Insurance Working Group, the transposition of the Insurance Distribution Directive, Brexit, and also updating you on the Irish economy, I will help contribute to framing some of your discussions today.
Cost of Insurance Working Group
It is important that Ireland has an insurance sector that is not only financially stable but that contributes to economic activity. The insurance sector makes a vital contribution to the Irish economy, through employment, attracting global capital and serving the needs of consumers and businesses. Given the economic significance of the insurance sector, it is vitally important that the sector operates in an efficient manner as possible.
One of the issues of greatest concern to consumers and businesses is the cost that they pay for the cover they receive. It is against this background that the Cost of Insurance Working Group was established by the Minister for Finance to examine the factors contributing to the increasing cost of insurance. Its objective is to identify immediate, medium term and longer term measures which can address increasing costs, while bearing in mind the need to maintain a stable and sustainable insurance sector. The initial focus of the Working Group was on the rising cost of motor insurance premiums and as you will know the Working Group published its Report on this matter in January. This report contained 33 recommendations and a detailed action plan on the implementation of those recommendations. Quarterly progress reports have been published, the most recent of which was in October.
Also in January, the Cost of Insurance Working Group commenced its examination of the cost of business insurance, in particular employer liability and public liability. In this regard, it has engaged in an extensive consultation process with a range of stakeholders including Brokers Ireland, Insurance Ireland, the Hotels Federation of Ireland, IBEC, ISME, the Vintners’ Federation of Ireland, the Licensed Vintners’ Association, the Retail Grocery, Dairy and Allied Trades Association, Chambers Ireland, the Law Society of Ireland, the Bar Council of Ireland, the Health and Safety Authority and a number of insurers who have a large market share in the coverage of this type of risk. In addition, submissions received from interested parties were considered as part of the process.
I would like to thank you for the invitation to open the conference here in Croke Park today. I note that it is the first conference under the new brand Brokers Ireland and I would like to wish you every success in this new phase of your organisation.
As a result of my work as Chair of the Cost of Insurance Working Group, which I will talk about shortly, I am very aware of the significance of your role in the insurance arena particularly the specialist advice you provide in the employer/public liability insurance area. I am also conscious that there is a broad life insurance/investment dimension to your work as well to which the transposition of the Insurance Distribution Directive is particularly relevant. I will briefly touch upon the transposition process.
The theme of today’s conference is ‘A Vision for the Future’. This is an interesting theme particularly in the context of the times we live in today. Insurance, in particular, is an area that is potentially the subject of huge changes, not only in terms of the types of risk that need cover, but also with regard to how it is sold, the use of data analytics, and the role of insurers and brokers in the future.
I understand that you will be looking at an interesting range of issues today, including: Irish, UK and European market developments; cyber security; digital strategy and business mentoring on future challenges facing brokers. You will excuse me, I hope, if my ambition does not stretch as far as speaking on all of these issues!! However I think that by providing a Government view on the ongoing work of the Cost of Insurance Working Group, the transposition of the Insurance Distribution Directive, Brexit, and also updating you on the Irish economy, I will help contribute to framing some of your discussions today.
Cost of Insurance Working Group
It is important that Ireland has an insurance sector that is not only financially stable but that contributes to economic activity. The insurance sector makes a vital contribution to the Irish economy, through employment, attracting global capital and serving the needs of consumers and businesses. Given the economic significance of the insurance sector, it is vitally important that the sector operates in an efficient manner as possible.
One of the issues of greatest concern to consumers and businesses is the cost that they pay for the cover they receive. It is against this background that the Cost of Insurance Working Group was established by the Minister for Finance to examine the factors contributing to the increasing cost of insurance. Its objective is to identify immediate, medium term and longer term measures which can address increasing costs, while bearing in mind the need to maintain a stable and sustainable insurance sector. The initial focus of the Working Group was on the rising cost of motor insurance premiums and as you will know the Working Group published its Report on this matter in January. This report contained 33 recommendations and a detailed action plan on the implementation of those recommendations. Quarterly progress reports have been published, the most recent of which was in October.
Also in January, the Cost of Insurance Working Group commenced its examination of the cost of business insurance, in particular employer liability and public liability. In this regard, it has engaged in an extensive consultation process with a range of stakeholders including Brokers Ireland, Insurance Ireland, the Hotels Federation of Ireland, IBEC, ISME, the Vintners’ Federation of Ireland, the Licensed Vintners’ Association, the Retail Grocery, Dairy and Allied Trades Association, Chambers Ireland, the Law Society of Ireland, the Bar Council of Ireland, the Health and Safety Authority and a number of insurers who have a large market share in the coverage of this type of risk. In addition, submissions received from interested parties were considered as part of the process.
The issues that have been raised by stakeholders related to the Employer Liability and Public Liability insurance market, include:
• the significant increase in the cost of Employer Liability and Public Liability insurance to businesses,
• the increasing trend towards using larger excesses or self-insuring to manage the cost of insurance,
• the lack of availability of Employer Liability and Public Liability insurance for certain sectors
In addition, the Working Group heard about many issues related to the legal environment within which Employer Liability and Public Liability claims are handled, including:
• a frustration with inconsistency of awards and the Book of Quantum,
• the huge costs in challenging claims through the court process,
• perceived prevalence of fraudulent and exaggerated claims,
• the need to strengthen or increase the use of existing legal provisions relating to false evidence and fraudulent actions in the 2004 Civil Liability and Courts Act (Sections 25 and 26 in particular). It is clear that these provisions are not working as effectively as they should be at the moment, and
• the need for the role of PIAB to be developed further.
Two sub-groups were formed to look in more detail at, respectively, market-related issues and legal-related matters. It had been initially envisaged that the second phase recommendations would take the form of an addendum to the Report on the Cost of Motor Insurance and would be published by the end of September. However, it became clear quite quickly, that there are some very complex legal and constitutional issues which would need to be considered, and because of this, it was decided that extra time should be devoted to properly examining the relevant issues in order to ensure that effective and achievable recommendations are formulated.
Therefore, the Working Group decided that a full ‘stand-alone’ report will instead be prepared. The aim is to finalise that Report by the end of the year and present to the Minister of Finance, with a view to bringing it to Government in the New Year.
I would expect that this report will follow a similar format to the Motor Report and include an action plan with associated actions and deadlines for implementation.