Mr. Aidan Connaughton:

I am sorry again to interrupt the flow of the questioning. I thank the committee for the invitation to discuss issues related to insurance in Ireland. I would like to begin by acknowledging the role the committee has played, during both the current and the previous Dáil terms, in supporting the ongoing reform agenda that began five years ago with the establishment of the cost of insurance working group. These collective efforts are delivering results. One clear example of this has been the implementation of the personal injuries guidelines, approved by the Judicial Council in March and which came into effect in April. When I appeared before the committee in May, I said we were hopeful that as the guidelines were implemented, award levels would begin to fall, leading to a reduction in overall claims costs. The evidence available to date indicates that the new guidelines are having a noticeable impact. Figures published by PIAB in October show the value of the average award made by PIAB has fallen by 40% year on year. The Central Statistics Office, CSO, motor index shows that average motor premiums have also fallen and are now almost 20% lower than in 2018.

For the benefit of members in understanding the cover AIG provides and how we support businesses and consumers, I would like to provide a brief overview of our business in Ireland. AIG has been in operation here for more than 44 years. American International Group Inc., AIG, is a leading global insurance organisation and is listed on the New York Stock Exchange. Our Irish business, which is run from our Dublin office, employs 160 people in general insurance and we have more than half a million customers. AIG has been the insurance partner for large and small companies, not-for-profit organisations, and individual consumers in Ireland since 1977. We support the insurance needs of Irish-based companies expanding in the EU and around the world as well as the insurance needs of US and other multinational businesses in Ireland. Our business mix in Ireland is weighted towards larger, corporate customers and our principal products are financial lines, such as directors and officers insurance, liability and commercial property insurance, with motor, travel and accident and health plans in the consumer space.

I know that business interruption insurance is a particular focus for the committee in today’s session. AIG policies that include business interruption cover are typically property and commercial policies where the business interruption results from physical damage to property. This is the basis on which our property and commercial policies are priced and these would include cover, for example, from fire, explosion, machinery breakdown and natural catastrophe. We have had a small number of business interruption claims related to Covid-19. AIG’s priority for all our business customers is to support their efforts to return to pre-pandemic levels of activity by dealing with claims fairly and paying promptly where policies provide cover.

Following another year of considerable challenges and uncertainty in the face of the evolving pandemic, AIG remains focused on protecting the health and safety of our colleagues as well as continuing to serve clients, policyholders, business partners and other stakeholders. AIG has introduced a range of measures to support its customers throughout Covid-19. We have also applied discounts for policy renewals where this is appropriate, reflecting, for example, lower driving volumes while many people are working from home in accordance with the public health guidelines.

On the cost of insurance, the new personal injuries guidelines, as I have mentioned, are an important step towards achieving meaningful change in reducing Ireland’s high cost of claims. Enhancing and reforming the role of PIAB, as set out in the Government’s action plan for insurance reform, is also welcome. We support PIAB, we recognise its positive impact to date and we believe it should have more power.

Although average awards made by PIAB have fallen significantly since April, it is worth noting that there has been an increase in the rejection rate. This means more cases will be going to court and greater uncertainty will exist around the ultimate cost of claims. It is our view that where an injury is not catastrophic and if the PIAB award is not accepted within three months there should be a binding arbitration either to agree that the award was fair or make a different award. This would reduce the burden on the courts and eliminate unnecessary delays and legal fees, which inflate costs.

This year has been a difficult one for many customers and businesses. We do not underestimate the challenges that lie ahead as we look to fully reopen our economy and society. Against this backdrop, however, 2021 has also been a year of progress and reform which is delivering benefits to policyholders. We look forward to working with the committee, the Government and all our stakeholders to continue this progress.