Mr. Paul Redmond:

I represent the car rental industry in Ireland. I thank the committee for the opportunity to present the industry’s particular issues relating to motor insurance and to provide members with a tourism perspective on the subject.

Licensed franchisees of all the leading international companies operate in Ireland. There is also one subsidiary of an international car rental company. A very significant proportion of the car rental business is conducted at the three main airports - Dublin, Cork and Shannon. The industry is an important part of the tourism infrastructure and is critical to get tourists around the regions. There is no point in marketing the Wild Atlantic Way unless one has a transport infrastructure to support it.

I will give members an idea of the size of the industry. More than 626,000 rental agreements were concluded in 2015 at the major airports, and already in the first six months of this year, which has been another very good year for the industry, 323,000 rental agreements have been concluded. Much of the recent national debate has been about the rising costs of motor insurance premiums. The car rental industry has long lost the ability to procure insurance cover simply by the payment of an annual premium and therefore to a large extent operates on a self-insured basis. That means the settlement of personal injury claims is in large part a direct operating expense for the companies.

International car rental companies have identified Ireland as having the highest risk liability costs for car rental operations. One car rental company operating in Ireland, which is a direct subsidiary and not a franchised operation, has access to comparative data in other countries. The company has seen its third party liability costs in Ireland treble in the past four years. Those costs are now three times higher than its operation in France and twice as high as in Germany, Spain and the UK. The company has had to increase its liability reserves by more than 200% to the point that its liability costs are now the biggest of any of its European operations. After people and cars, risk liability is now the company’s third biggest expense.

Car rental companies incur significant legal costs in trying to defend claims. Unfortunately, most of those involved in motor accidents in rented vehicles are visitors to this country and will have gone home by the time claims are processed. That makes processing claims and sourcing witness statements very time-consuming and costly and, to be honest, often very ineffective. If one is on holidays in Ireland and is involved in an accident, when one goes home, does one really want to get involved later on, perhaps nine months or a year later?

The car rental industry is also particularly vulnerable to fraudulent and criminal activity as unsuspecting tourists are often preyed upon. Criminals know the difficulty of securing evidence and the issues that arise relating to the presence of tourists in any ensuing court case. We carried out a recent survey of our member companies which revealed that more than 20% of all claims are suspected to be fraudulent. Many of the claims involve pure criminality, such as deliberately staged accidents where two cars crash into each other on an arranged basis, often with little damage done to either car, but usually resulting in multiple injury claims.

Such is the potential reward in Ireland for personal injuries car rental companies are suspicious that they are being targeted by criminals from other countries coming here to stage car crashes. The Minister referred on the previous occasion to perverse incentives; that is certainly one of them.

Even in cases where minor injuries are reported, these staged accidents will usually have multiple claims resulting in very high settlement costs, particularly when associated legal costs are factored in. A £5,000 award for a whiplash injury in another country can in Ireland start with a recommendation of €15,000 from the Injuries Board, be rejected and, following procrastination, finally yield a settlement or a court award of, say, €23,000. When legal fees on both sides are added, that punitive escalation can mean total costs can be close to €50,000 for each claimant, and there are usually four or five claimants involved. This type of incident, therefore, can cost significantly more than €100,000, which is a direct operating expense on a car rental company. One does not have to be a genius to work out that we cannot withstand too many of these in any year.

Industry representatives have met the Garda fraud squad and presented it with many examples. We requested that a national Garda operation focused on claims arising from accidents in the car rental industry be initiated. While we did receive helpful advice, the fact remains that there are very few prosecutions for making a fraudulent claim and, therefore, there is no real deterrent in this matter.

The chairman of the Council of the Bar of Ireland, refuting an insurance industry claim, admitted recently that while it may be that the level of damages awarded in respect of particular injuries in Ireland is greater than that in another jurisdiction, it was not so in respect of all claims. Unfortunately, these particular injuries - soft tissue, whiplash etc. - are the very claims that predominate against the car rental industry, and from presentations already made to this committee, it would appear that 80% of claims are falling into that category.

While the various parties to the national debate argue over the extent of the increase in court awards, legal costs, effectiveness of the Injuries Board etc., the bottom line is that the car rental industry can testify to a significant impact from the rising cost of risk liabilities. We understand that a review of the book of quantum is under way. As the book of quantum is not a recommendation for compensation levels but merely a reflection of prevailing levels, our industry does not have much confidence that this review will alleviate our problems unless it is prepared to benchmark personal injury awards to a European norm for these whiplash and soft tissue damage claims. We accept that anyone with a legitimate claim deserves an appropriate level of compensation. However, why should that level of compensation be twice or three times what people in France, Germany or the United Kingdom receive? A system that benchmarks personal injuries awards with other countries would help prevent fraudulent and spurious claims, reduce legal and other costs and help to maintain our tourism competitiveness.

Competitiveness will be key to continued growth in our tourism sector as, ultimately, tourists either pay for these exorbitant personal injury awards against car rental companies or, if the market does not allow the costs to be passed on, car rental companies do not survive.

In summary, the car rental industry needs a reduction in the level of personal injury awards for whiplash and similar injuries. We need a reform of the Injuries Board procedures that prevent certain categories of cases being referred to the courts. A reform of the Injuries Board procedures would seem to be the action that might provide the quickest win in this matter and, as suggested by the Chairman to the Minister on the previous occasion, we would welcome immediate action and urge all Oireachtas Members not to allow the legal profession to frustrate the necessary reforms in this very dysfunctional marketplace.

We need a reduction in legal costs and, in particular, in multiple legal fees in respect of single incidents. An accident can lead to four or five personal injury claims resulting in four or five separate levels of legal fees and, in most cases, all from the one firm of solicitors.

We need improved deterrents to reduce the level of fraudulent claims and to assist Garda authorities and the Director of Public Prosecutions, DPP, to secure prosecutions. Unfortunately, there is a wide gap between a car rental company believing a claim to be fraudulent and a successful court prosecution. It is, apparently, difficult to prove intent to defraud. Overall, we need a reduced cost environment for risk liabilities that helps and makes a contribution to sustaining a competitive tourism sector. I thank members for listening.