Mr. John O'Dwyer:

With regard to cost containment and length of stay, Milliman identified close to €25 million, which we are actively working on, representing 2% of our overall claims costs. However, the Milliman report also said that some of the cost savings the VHI has implemented have not been seen anywhere else in the world. Sometimes we can be selective in our reporting of the issue. The VHI is obsessed with driving down costs. As I said to the Chairman, we are not perfect but in the last couple of years we have driven down costs by €200 million. Consultants' costs, for example, are back to 2004 levels. Maybe they should be lower but to drive them down to 2004 rates is good progress. We often talk about the average consultant cost but a couple of years ago, the average consultant was getting approximately €83,000 from VHI. Today, that is down to just over €60,000. These are clear examples for the Deputies of the VHI driving down its costs. We have a clear programme over the next few years to drive down costs by a further €100 million or more. However, like some of our competitors here, we are scared by the implications of this potential cost in the public hospitals of €250 million. This is, as Mr Dónal Clancy has said, a game-changer and will really hurt our business going forward.

I wish to address a few other issues. Reference was made to our staff and our administration costs. VHI administration costs are 6.3% and would stand up anywhere in the world. We are in the top decile. If I could put it in sporting terms, we are in the Champion's League regarding administration costs. Am I saying there is no room for improvement? No, I am not because there certainly is but the issue is not the administration costs but the claims costs in terms of keeping health insurance affordable. This is where we need to focus.

Regarding the question of salaries, in our core health insurance business our staff numbers have come down slightly. We have tried to look after our customers as they expect and have introduced a new home care facility in recent years. Where a customer has been in hospital, we can treat him or her at home with our own doctors and nurses. We have recruited specialist medical personnel, who are not cheap, to make sure we can take people out of hospital and treat them in the comfort of their own homes. We tick two boxes here. We delight the customer and we also reduce our costs. We also have SwiftCare clinics in a number of centres in Dublin and Cork. We have also been innovative in recent years in setting up screening centres in Dublin and Cork. The chronic illnesses of heart disease, cardiovascular disease and type 2 diabetes are a real problem in our society and we have screened up to 13,000 customers, free of charge, for these conditions. We are looking to be preventative in this regard by making sure people take the appropriate action to minimise potential future costs. This is where the VHI makes its investments and this is what our customers want. These are the sorts of initiatives that will keep our customers well and out of hospital.

On the question of young people, we believe there must be a system of lifetime community rating. We cannot continue with a situation where a 30 year old and a 55 year old joining at the same time are treated in the same way. We have inter-generational solidarity. The rules of the game have been set, not by the VHI, but by society, and it has been decided that community rating is the way forward. We do not have risk rating as is the case in motor and home insurance. I have worked in countries where risk rating operates and when people get sick they are risk rated again and their premiums become so exorbitant that they cannot afford health insurance any longer. We have decided in Ireland to apply different rules and that is why we have a risk-sharing system. I do not mind, from a competitive point of view, if the legislators decide to create a risk-rated market - so be it - but as a taxpayer I believe the Government has made the correct decision because we need to protect all of the people in our society. The way to do this is to have a community rating and risk-sharing mechanism. I am not saying that either is perfect and I mentioned a number of problem areas in my presentation. Deputy Naughten mentioned the issue of health status and I fully concur with his comments. However, I am extremely pleased that the concept is introduced because it is standard in other countries where a risk-sharing mechanism is in place. We have discussed this with all of the insurers and there is consensus that this has to change. However, let us take the positive out of this. For the first time, health status is legislated for and we believe there is much room for improvement in this particular area.

Deputy Kelleher asked about solvency and the VHI currently meets the minimum solvency requirement. To get authorised, we will need more capital and we are looking at every possible avenue for securing that, in particular from reinsurance. We are exploring all options.