Dr. Mark Cassidy:

Deputy Durkan raised a very important issue of the challenges in relation to public liability. This is something into which we now have enhanced insight following the collection of the new database we have, the national claims information database, NCID. This provides us, for the first time, with very detailed information regarding premiums - the costs of insurance for public and employer liability - and in relation to trends in the costs of settling claims, how claims are settled, comparing the different channels through which claims can be settled and, ultimately, the profitability of firms operating in this sector.

I will provide the committee with a little of the flavour of what challenges the sector is facing. First, it has been the case that premiums for public and employer liability have been increasing over recent years. In fact, premiums are up across that sector by 24% since 2015. It is not the case that this has corresponded with a period of profit making for this part of the sector. Indeed, since 2015, the provision of employer and public liability has been a loss-making activity. Following a number of successive years of losses, the sector returned a modest profit in 2019, the most recent year for which we have data.

The trends we are seeing in the cost of settling, including the process of litigation, are contributing to the higher premiums. We know that the cost of settling claims is the key determinant of the level of premiums. Over the entire period, the average cost of claims has increased. For public liability, the cost has increased by 16% since 2015, while for employer liability, it has increased by 30%. There is no doubt that is a very important factor behind the increase in premium costs in that sector.

In addition, a key element in the cost of claims relates to legal costs. In relation to legal costs for this type of public and employer liability, the proportion of cases going through litigation has increased from around half in 2015 to around two thirds in 2019. Many more cases are going through the more expensive legal route. The combination of the trends of more cases going through litigation and the high contribution of legal costs to claims, and therefore the increase in the cost of claims, is the main factor driving premiums for the sector and has made it extremely challenging.

What we do not have are data on businesses that are not able to get insurance. Naturally, our data only relate to insurance that is provided. A key alternative issue is the challenges in some sectors where it is difficult to get insurance for various reasons, particularly due to the high risk associated with them, and the potential costs of premiums.