Ciarán Lynch (Cork South Central, Labour)
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The joint committee will discuss the difficulties in obtaining home insurance for properties in areas that have experienced extreme weather events. I welcome from the Irish Insurance Federation Mr. Michael Kemp, chief executive, and Mr. Michael Horan, non-life insurance manager. I thank the witnesses for their attendance and for the federation's prompt response to our invitation earlier this year.

I draw the attention of the witnesses to the formalities as they operate under Standing Orders of the House. I draw their attention to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. However, if you are directed by the committee to cease giving evidence in relation to a particular matter and you continue to so do, you are entitled thereafter only to a qualified privilege in respect of your evidence. You are directed that only evidence connected with the subject matter of these proceedings is to be given and you are asked to respect the parliamentary practice to the effect that, where possible, you should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. I also wish to advise you that the opening statements you have submitted to the committee will be published on the committee's website after this meeting.

Before commencing the presentation, I wish to say a few words. Flooding is now a regular feature of Irish weather conditions and it costs a lot of money to repair the damage it causes. The floods of earlier this year cost €54 million in damage and sizeable costs were also incurred during the several major floods that have occurred since 2000. They cycle of floods will show that regardless of whether it is for households or for businesses, the immediate shock of having one's property or business flooded comes with its own difficulties. This is followed by the clear-up and the other processes, the final stage of which concerns the question of whether one can get insurance again into the future and the associated difficulties and concerns. This is one of the main points of focus of the joint committee's deliberations this afternoon. In so doing, I note we cannot facilitate a situation to develop in which large numbers of households nationwide are deemed to be uninsurable or outside the protection of the normal insurance schemes that are available. I am familiar with the argument that insurance companies insure against risks but not against certainties and I do not think we will reiterate that argument this afternoon.

It does seem insurance companies are geotyping parts of the country in a blanket approach. Accordingly, a house deemed to be in a flood-risk or subsidence-risk area will not get cover. For example, it is impossible to get flood insurance for a dwelling within 100 m of a river even if it is an apartment 100 ft. off the ground.

In the past everyone could get full comprehensive car insurance. It is now being reported anecdotally that most policies are being stripped back to third party and fire and theft in some areas of the country because of the zoning approach applied by the insurance companies. If this is the case, this is a major change in direction of insurance policy strategy. The recent European report which examined flood risks remarked favourably on the model of practice used by the industry until now, which was to cover a broad range of insurance for non-specifics.

Another issue I wish the federation to address this afternoon is that, because regions are geozoned as being at particular risk of either flooding or other events, even if remediation works are carried out to reduce that risk, it is impossible to have this zoning removed. Parts of the country deemed flood risks 15 years ago have had major relief works carried out to prevent further problems. However, they are still zoned as being a flood risk. Then there are floods caused by engineering problems rather than a natural disaster, which happened this year.

I note the federation stated in its written submission that no more than 2% of policies exclude flood cover. However, 2% represents a sizeable number of people who must live with this uncertainty. There is a question of fairness about this, as well as the broader systemic consequences such as difficulties in selling on the properties. Except in the case of a cash purchase, an engineer operating for a mortgage bank will not allow the sale of such a property to proceed. We could actually have whole hosts of properties that are unsellable because of an insurance classification that may not stand up to scrutiny.

The Government has spent large amounts of money rectifying the circumstances that allowed flooding to occur in the first place. Why can the insurance companies not provide cover for houses in the areas where these remedial works have been carried out and flood prevention measures have been implemented? Why are such measures not considered when determining house insurance premiums?

I invite the federation to make its opening statement.

Mr. Michael Kemp:

I thank the Chairman. Mr. Horan will make our opening statement as he is our specialist in this area. I have noted the Chairman's points and will address them later.

Kevin Humphreys (Dublin South East, Labour)
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Is the opening statement the one provided to the committee before the meeting?

Mr. Michael Kemp:

Yes.

Kevin Humphreys (Dublin South East, Labour)
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I am sure most of the committee members have read it. It might be more efficient if the statement-----

Ciarán Lynch (Cork South Central, Labour)
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I would rather have it read into the record. Will Mr. Horan make his opening statement?

Mr. Michael Horan:

On behalf of the members of the IIF I welcome the opportunity to address the joint committee on the problem of flooding with particular reference to household insurance.

The floods in June 2012 led to 1,260 claims costing €54 million. There were 627 household claims costing €15 million, 487 commercial property claims costing €38 million and 146 motor claims costing €1 million. There have been seven other significant flood events since 2000. The cumulative cost of these eight flood events was €697 million. At the time, the November 2009 floods represented the single largest insured loss ever in terms of overall cost, at €244 million. However, the new record did not last long as it was closely followed by the December 2009-January 2010 freeze, which cost €297 million. A further freeze in December 2010 cost €224 million.

Whatever side one is on in the climate change debate, there is no disputing the fact that in the past decade insurers have seen more frequent and costlier weather-related losses, not just in Ireland but globally. To have the largest weather-related losses in such close succession has put significant pressure on the property insurance market. However, insurers have repeatedly displayed their resilience and as a result injected over €1.2 billion back into the economy following these weather events.

In general, we believe insurers have coped extremely well with these weather events, with rapid responses to claims notified by policyholders, quick inspection of damage and approval of remedial work. Insurers’ responses have included 24-hour telephone helplines, subsidising alternative accommodation and the provision of emergency funds. When a property is badly damaged by flooding, it is necessary to dry, clean, repair and restore it. This may take some months due to the time it takes for properties to dry out after being flooded. It is insurers’ experience that in the boom years homeowners invested heavily in upgrading the fit-out of their homes, installing high-quality kitchens, wooden floors and electronic equipment, which has resulted in a large increase in the cost of flood claims.

A feature of recent flood events was that local businesses and residents were given little or no warning. That is a serious shortcoming in flood-prone areas, which needs to be addressed urgently through the development of better early warning systems when there is an imminent risk of flood. The recent floods also highlighted the fact that too many agencies are involved in flood risk management. They comprise the Office of Public Works, OPW, 34 local authorities supervising watercourses and drains, Waterways Ireland, the ESB - which owns 13 of 15 large dams - various Departments, amenity groups, recreational clubs and environmental and wildlife interests. The number of agencies involved can lead to confusion and inaction in managing flood risk.

Flood insurance receives considerable media attention but availability of flood cover is not a problem for the majority of householders. The insurance market offers flood cover as a standard feature of household policies and the IIF estimates no more than 2% of policies have flood cover excluded. The flood cover penetration rate is very high by international standards. Penetration rates in many markets abroad are as low as 25%. When assessing risks, insurance companies analyse the history of the property and any flood prevention measures implemented by the OPW or local authority in an area. Some people will pay a higher premium because the flood risk is higher, while others have a higher flood excess on the policy. Exclusion of cover is generally a last resort and usually only arises where a property has suffered previous flood damage and it is overwhelmingly likely that future flood loss will occur. Insurance offers protection against a risk but not a certainty. It is not tenable to ask policyholders in general to absorb the cost of inevitable losses.

There are 12 insurers with offices in Ireland offering household insurance, with others without an Irish office also offering insurance under Single Market rules. There is no shortage of suppliers and the market is very competitive. As things stand, policyholders in low-risk areas already subsidise high-risk areas. In the absence of this approach, flood insurance would become unaffordable in some parts of the country where flood insurance is still available but flood risk is above average.

Insurance companies operate in a global market and spread their risks around the world using numerous specialist reinsurance companies. It is therefore vital that the insurance industry acts with prudence on flooding risks to ensure that affordable reinsurance cover is maintained.

The OPW is the lead agency for the Government's flood risk management programme. The IIF welcomes the recent engagement of Deputy Brian Hayes with the insurance industry in his capacity as Minister of State with special responsibility for the OPW. Insurers are major stakeholders in mitigating the economic effects of flooding. However, minimising the financial impact of the cost of floods to property owners is critical to the sustainable provision of insurance.

The IIF has had constructive discussions with the OPW over the past year. We appreciate the constraints within which the OPW is operating. However, even within these constraints, we believe there is much that can be achieved. Our efforts are aimed at improving the management of flood risk in Ireland, with particular reference to the construction of flood defences. It is also important that the OPW communicates reliable information on flood defences to insurers in a format that is easily accessible so that underwriters can satisfy themselves that flood defences comply with acceptable and measurable standards when assessing risks. In practical terms, insurers need to have confidence in the OPW's review of standards and commitment to the maintenance of flood defences once completed, as well as the items listed in my presentation. The OPW has begun to develop some sample data, which it has forwarded to us. We are now considering it with our members.

At a more general level, the IIF advocates the various items listed under point 13 of my presentation document, the more significant of which include the following: more investment in structural and non-structural measures so that the OPW can fulfil its brief as the lead agency for flood risk management; the establishment by the OPW of a national flood liaison and advice group comprising all stakeholders, including the insurance industry, to advise on planning strategies, flood risk management, etc.; more transparency on capital projects - that is, a clear, publicly available flood relief capital works programme specifying priorities, budgets, targets and timelines; and swifter completion of structural defences.

The Government's response to flood risk management in recent times dates back to 2002 with the establishment of the flood policy review group. In 2001, the OPW was given the responsibility of being the lead agency for flood risk management. The review group identified a work programme involving approximately 24 projects with an estimated cost of €444 million, to be delivered over ten to 15 years. In the seven years after the OPW was given responsibility for flood risk management - that is, up to 2011 - it was allocated a capital budget of €257 million, but has spent only €188 million.

The OPW's project implementation process has six stages, which are listed in the document provided. It can take more than ten years for a project to go through this process. In 2008, the OPW commissioned Goodbody Economic Consultants to undertake a value-for-money and policy review. The consultants' report stated that the OPW’s implementation programme had not met its targets for a number of reasons, including manpower deficiencies, the diversion of OPW resources to deliver unforeseen projects and the relatively lengthy design and planning process for projects. Given the current state of the public finances and the embargo on recruitment, we are concerned that these shortcomings may not be addressed and may even get worse in the future.

In 2008, the then Department of the Environment, Heritage and Local Government published draft planning guidelines and invited submissions from interested parties. We made a submission in November 2008 in which we highlighted that the guidelines were largely a copy of the UK guidelines which had failed to discourage development in flood-prone areas. We suggested that the Scottish planning guidelines offered a more sustainable model and called for the establishment of a flood liaison and advice group with representation from all interested stakeholders, including insurers. The deficiencies we identified in the guidelines are listed in my presentation document.

The insurance industry wishes to preserve the widespread availability and affordability of flood insurance as far as possible. High penetration levels generally are necessary if the current model is to survive, with low-risk areas subsidising higher-risk areas. The continued availability of flood reinsurance is vital as it allows insurers to provide cover for catastrophic risks by spreading costs over time. Government investment in structural defences is needed to preserve flood insurance in high-risk areas. Government action is also needed on non-structural measures such as addressing deficiencies in the planning guidelines. We appreciate the increased engagement on the part of the Minister of State and the OPW but current levels of investment in and implementation of flood defences also need to improve. I would be happy to elaborate on any aspect of this presentation on which members have questions.

Ciarán Lynch (Cork South Central, Labour)
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If members focus on questions rather than making 20-minute contributions, I can call them over and over again.

Barry Cowen (Laois-Offaly, Fianna Fail)
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I thank the gentlemen for coming before the committee and making this presentation. Considering the year we have had and as we face into the winter again, it is worthwhile and opportune.

Mr. Horan mentioned during his presentation that the industry had invested in the region of €1.2 billion back into the economy. Can he identify exactly where that might have been? Has any of it gone into the area of flood relief, or does he feel that such investment is solely the remit of the Government and local authorities?

He mentioned that 2% of the population is uninsured. How does that figure compare to other years? Has the IIF measured progress in this regard? Have the improvement works carried out by successive Governments at various locations throughout the country, such as in Clonmel, Newcastle West and Athlone, been reflected in the IIF's records and figures? Has the IIF seen a downward trend in the number of units that remain without insurance?

The bigger question is my first one. The IIF claims the sector has invested in the economy. Where has that investment taken place, and has any of it been directed towards the provision of flood relief at flood-prone locations where major investment is required? If the sector has not invested directly in flood relief, does the IIF feel an onus of responsibility in this area? Can Mr. Horan see a role, from an investment and an expertise perspective, in moving forward in that area?

Mr. Michael Horan:

The €1.2 billion that we injected back into the Irish economy following these weather events is the payouts following claims. That is what I referred to when I spoke of the €1.2 billion.

We wish to preserve insurance availability and affordability in Ireland as far as it is possible to do so. The way the equation works is that the Government, through the lead agency, the OPW, manages flood risk, puts in the structural defences where necessary and carries out non-structural measures such as clearing watercourses and drains where necessary, and that enables the insurance industry to provide cover against the risk of flooding.

Overall, compared to other countries, the penetration rate for flood cover in Ireland is high, at 98%. If one looks at other countries, the penetration rate can be as low as 25%. Overall, the market works efficiently, certainly compared to other countries. Ten years ago, when there was flooding in various parts of Dublin - for example, in 2000 and 2002 - remedial measures were taken in some of those areas. Some areas of Dublin where there were problems relating to flood insurance availability ten years ago no longer have those problems.

Barry Cowen (Laois-Offaly, Fianna Fail)
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The investment that Mr. Horan mentioned referred to the claims, which are required by virtue of the commitment made by the parties concerned. My question relates to whether Mr. Horan sees a role for the insurance federation in future preventative measures. Is that role based on the expertise within the sector or is it a monetary contribution? Can the IIF lock horns with the relevant Department with a view to having a key role in preventative measures in the future?

Mr. Michael Kemp:

In the past, one of the difficulties has been that we operated somewhat in isolation and that the OPW and local authorities did their own thing. Sometimes there was a failure to consult in advance or to ensure that the measures taken were adequate from the point of view of risk assessment, which is the role of underwriters. One of the positive developments over the past couple of years is that there has been much more engagement on a bilateral basis with the OPW. We acknowledge that the flow of information is much improved and we are much more involved in the process. We would like to get to a stage, as we mentioned in the presentation, at which there is a standing liaison group, with others, not only us, involved.

The expertise that is available within the industry could be utilised in planning and executing flood defence works and in identifying problem areas. Over the past several years we have supplied information to the OPW to ascertain whether it can match its priority areas with locations where insurers have made significant pay outs on claims. That is how we see our role in these matters, apart from the indemnification of policy holders who have cover in the first place.

Brian Stanley (Laois-Offaly, Sinn Fein)
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This committee has tried to deal with the question of the number of bodies responsible for these matters. The OPW does not have the final say over what happens in many water courses because other bodies, such as the National Parks and Wildlife Service, are responsible for them. This creates significant problems. Has the federation highlighted the issue to the Minister? Deputies have raised the issue because it is problematic that the National Parks and Wildlife Service can exercise a veto on whether a sluice gate should remain open.

In regard to works carried out by local authorities, in one case the local authority was required to carry out surveys costing up to €10,000 in order to progress a project worth €4,000. Even in these competitive times, €4,000 covers a small amount of work. It would amount to a JCB being on a site for several hours. This is an example of how ridiculous matters have become.

I come from an environmental background but the National Parks and Wildlife Service is taking its responsibilities to an extreme, which results in properties being flooded or left under threat of flood because works cannot be carried out in certain areas. I know of one area in which the staff of the local authority concerned are keen to proceed with the work and deal with the consequences afterwards. They are prepared to take the rap from the National Parks and Wildlife Service, which seems to have the same powers as the Taliban used to possess.

Is the federation aware of these restrictions? They are impeding progress and had they been in place when the old Board of Works existed, half the country would still be under flood water. A balance must be found between protecting humans and their property and securing habitats for birds and wildlife. In some cases the prohibition on works has itself done environmental damage, such as wiping out the corncrake on the banks of the Shannon.

Which body does the federation regard as the most suitable for exercising overall responsibility in conjunction with local authorities? I agree that the buck has to stop somewhere.

Mr. Michael Horan:

The OPW is the lead agency and it was given that role in 2004. As the Deputy rightly noted, wildlife interests and various other interest groups are also involved in flood risk management. This can lead to confusion and inaction. We advocate that the OPW, as lead agency, should adopt a co-ordinated action plan with priorities for all agencies. The OPW should be dictating to the other parties involved in the process. At present, everybody appears to have an equal say in what happens and, therefore, it takes a long time for decisions to be made on flood remediation measures. During that delay, residents have to live with the stress of possible flooding and insurers have to deal with a high risk of flood events in undefended areas.

In regard to which body is most suitable, the flood policy review group sat for two years from 2002 to analyse the issue and it decided that the OPW should be the lead agency. We are happy with the OPW acting as lead agency provided it is given the tools to do the job. It currently has manpower deficiencies and in most years it underspends its budget. It also has to deal with the various other agencies involved in flood risk management.

Brian Stanley (Laois-Offaly, Sinn Fein)
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In regard to curtailing the National Parks and Wildlife Service, can the witnesses suggest any examples or experience from other European countries which would prevent us from walking into a situation in which we are paralysed? Local authorities and the OPW are paralysed and cannot act because of ridiculous restrictions placed on them by bodies such as the National Parks and Wildlife Service. Does the federation have any information on how this relationship operates in other countries?

Mr. Michael Kemp:

We do not have detailed information on how the relationship is managed in other countries but systems work very differently in countries on the Continent where there is limited penetration of private insurance and collective or state backed funds are used to insure against flood risk.

It certainly is one reason the process takes so long in Ireland and, although there are projects which have been vetted and approved for the OPW to implement with a reasonable amount of resources, it takes a considerable length of time to get through the stages. In many cases it requires between six and ten years to get from design stage to execution. We would like to see that speeded up. One way of achieving this objective is to bring together all interests in a body subject to a certain degree of control in respect of the time it takes to discuss the issues arising and reach a conclusion.

Catherine Murphy (Kildare North, Independent)
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The figures provided include the bad winters of recent years, when there were blanket spreads of claims rather than claims from specific geographic areas. Many of these claims were initiated by burst pipes, which occurred across the country, rather than specific flood events which tend to occur over 30 year intervals. It is unusual to experience two very bad winters consecutively. We probably experienced two winters in one year because there was snow in January and December of the same year.

We all use our own areas as examples. I am based in Kildare North, where several flood events have occurred. Some of these events were so traumatic that I can recall the dates on which they occurred. The experience of co-operation between the OPW and the local authority has been quite positive in terms of responding and developing flood defences much more rapidly than the witnesses suggest. A significant amount of public money has been spent on good flood defence systems that have held up against subsequent 50 year or 100 year flood events. However, those who suffered damage in earlier flood events are unable to get insurance or else have to pay increased premiums on their policies.

There was no certification available for people to expunge that record in areas where it had been properly tested and where there was public investment. I believe that certification process is deficient. Has the insurance industry engaged with the OPW on the return on investment from that point of view?

The Minister for the Environment, Community and Local Government has advised that there are 1.8 million households in the country and the 2011 census indicated there are 1.995 million.

Ciarán Lynch (Cork South Central, Labour)
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These are residential households.

Catherine Murphy (Kildare North, Independent)
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Yes, residential households. Mr. Horan indicated that 2% of people are not getting flood insurance. Some people may not even be looking for insurance because they will not pay for insurance that will not cover flood where that has been the biggest exposure for them. It may well be that they are so heavily loaded that they do not seek that. Does the 2% reflect the real situation?

Mr. Michael Horan:

The Deputy suggested that we do not differentiate between the numbers. All the numbers in the list - the eight incidents - are all flood events since 2000. We mention the two freezes in the following paragraph simply because they were such extraordinarily large weather events that a property insurer could not ignore them. As the Deputy has said, these are the major flood losses over that period. Localised flooding happens everywhere on an ongoing basis, but we are just isolating the extreme flood events - very large weather losses.

I believe the 98% figure is a reasonably accurate reflection of the situation on the ground. The Irish Insurance Federation operates an insurance information service, which deals with queries and complaints from members of the public. We do not deal with many complaints on availability of flood insurance cover, which would be in the low single figures each month. We always say that it is not possible to generalise from one or two examples. Overall we believe the flood insurance market operates efficiently. We welcome the engagement we are having with the Minister of State, Deputy Brian Hayes, and the OPW. Part of the purpose of that engagement is to allow the flow of information from the OPW on the work it is carrying out on flood defence works - big and small - to be communicated to the industry so that insurers can take those flood defence works into account when they are assessing risk.

Catherine Murphy (Kildare North, Independent)
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As the Chairman said, there are cases where there might have been a flood in a small area in a valley following something that happened on a hillside and the entire area is put on some sort of floodplain, which is nonsensical. I could bring Mr. Horan to places where that is happening today. Huge investment has been made in flood defences. There does not seem to be any kind of certification system to deal with areas that have had the flood defences built. They do not seem to get any kind of benefit when seeking insurance subsequently. I recently spoke to a person living in a housing estate on a hillside whose insurance policy specifically excluded flood. There is no water anywhere near that house other than in the tank in the attic. That seems very unfair. Also, once work is done, there is no certification to recognise that those areas are not at the same level of risk as they would have been prior to the work taking place.

Mr. Michael Kemp:

I think there are probably two aspects to that. In an extreme case such as that, a person should not get a decision as bad as that. To some extent that is the purpose of our information service. That is the kind of issue a person can have reviewed and reassessed. On a more general basis, we need to get more accurate flood maps to establish not just the area relative to a watercourse or something like that but where the risk is taking into account the local topographical features. That is where we are now getting better information from the OPW, which will enable us to be more accurate in the future in dealing with those sorts of cases.

Ciarán Lynch (Cork South Central, Labour)
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This needs to be summarised and nailed down. The witnesses are saying 98% of people are getting flood insurance. The EU report indicated that Ireland is one of the safest countries for the insurance business and that we present a far lower risk than any other country in Europe. Therefore, the insurance industry here should be performing at a high level. However, if the model it pursues is to continue, it will not be 98% in the future, and at the centre of this is geocoding. The insurance industry is not taking into account the specifics as Deputy Catherine Murphy has pointed out, but is considering the generalities of a location. I am aware of a house in Cathedral Road in Cork - not in my constituency - which is at a height of approximately 500 ft. and cannot get flood insurance. If Cathedral Road floods, nobody will be living in Ireland. If I live in an area that has been geo-coded, why is there no mechanism for me to get my property out of that geocoding? The insurance industry is not taking a specific examination of the property but is applying a general rule. That is a summary of Deputy Catherine Murphy's contribution and the witnesses need to respond to it.

Mr. Michael Horan:

Individual insurers are competing with each other. Insurance companies-----

Ciarán Lynch (Cork South Central, Labour)
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The witnesses represent the federation that should be setting the guidelines. What do they say to those companies?

Mr. Michael Horan:

We do not set guidelines for individual insurers. It is a competitive market.

Ciarán Lynch (Cork South Central, Labour)
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Why join the federation if it is not applying some code of conduct? Is Mr. Horan saying that the Irish Insurance Federation does not give guidelines or a code of practice to its members with regard to what should be good practice for their customers?

Mr. Michael Horan:

We do not get involved in individual underwriting matters.

Ciarán Lynch (Cork South Central, Labour)
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Does the federation give guidelines to its members or do its members have a code of good practice drafted by the federation? Is there a code of practice in the insurance industry?

Mr. Michael Horan:

There is a consumer protection code that applies to all financial services.

Ciarán Lynch (Cork South Central, Labour)
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The consumer protection code is prepared by the National Consumer Agency. Does the Irish Insurance Federation have a code of good practice for its members?

Mr. Michael Kemp:

We have codes of practice in some areas, but we do not have anything in relation-----

Ciarán Lynch (Cork South Central, Labour)
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I am asking about a code of good practice. It is possible to have codes of practice indicating how to minimise costs, pay out on premiums and so forth. Does the Irish Insurance Federation have a code of good practice for its members?

Mr. Michael Kemp:

We have codes of practice, one relating to duty of disclosure and use of warranties, and another relating to dealing with customer complaints, and we use-----

Ciarán Lynch (Cork South Central, Labour)
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They go to the regulator.

Mr. Michael Kemp:

No, it is in addition to what the regulator has.

Ciarán Lynch (Cork South Central, Labour)
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It goes to the regulator.

Mr. Michael Kemp:

No, it is an industry code in addition to what is laid down by the regulator. In the past we had other codes on various matters which have been superseded by regulation. This is not an area relating to directing companies on how they assess risk or what criteria they bring to bear on it and in which we have a function. That is not what we are here to do.

Ciarán Lynch (Cork South Central, Labour)
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I can chase Mr. Kemp around the room all afternoon and we will be here until we get an answer to this. If I live in an area that has been geo-coded as being at risk of flooding or subsidence and I can prove through engineering that those risks do not present on my specific property, either business or domestic, how can I get out of that geocoding?

Mr. Michael Kemp:

The Chairman is making an assumption that-----

Ciarán Lynch (Cork South Central, Labour)
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No, I am not making any assumption; this is a fact. Half of Cork city has been geo-coded as being a flood risk as has half of Dublin and other areas. The geocoding is at the centre of this problem. I want Mr. Kemp to explain to the committee how I get out of geocoding. While the insurance industry minimising its risks is a legitimate business practice, if it is cherry-picking that is an entirely different business altogether. How do I get out of geocoding?

Mr. Michael Kemp:

The Chairman is making the assumption-----

Ciarán Lynch (Cork South Central, Labour)
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I am not making an assumption.

Mr. Michael Kemp:

The Chairman is making the assumption that the industry as a whole is taking a decision on a particular matter. Individual insurance companies compete with each other.

Ciarán Lynch (Cork South Central, Labour)
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I will read it to you.

Mr. Michael Horan:

It is not uncommon-----

Ciarán Lynch (Cork South Central, Labour)
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I will read it to you.

Mr. Michael Horan:

No, excuse me-----

Ciarán Lynch (Cork South Central, Labour)
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Excuse me, I will read it to you. I want to deal with geocoding and then I will open up the discussion. If I go onto the website of any insurance company I will see eligibility conditions laid out. These conditions all indicate that every company uses geocoding. So that we can move on and broaden the discussion and allow other members to speak, I ask the witnesses to tell me how a person living in an area that is geocoded can approach a company to change this.

Mr. Michael Horan:

It is not uncommon for one insurance company to examine its individual claims costs and decide to offer cover while another insurance company decides not to because their risk portfolios are different as are their claims costs. One will not necessarily receive the same answer from every insurance company.

Ciarán Lynch (Cork South Central, Labour)
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Perhaps as an outcome of today's deliberations, the Irish Insurance Federation should make recommendations to its members on how its customers can deal with geocoding.

Mr. Michael Kemp:

If the Chairman is making this request of us we can certainly speak to our members about it. The Chairman is using the word "geocoding" as shorthand for something we do not recognise.

Ciarán Lynch (Cork South Central, Labour)
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You do. The European report, in which the Irish Insurance Federation took part and which was published last week, examines Europe in geocoding terms, whether for earthquakes, floods or subsidence. The Irish Insurance Federation is a part of this report and geocoding is a methodology used in it. I will put the question to the witnesses. Does the Irish Insurance Federation need to examine geocoding by its members to allow households not at risk of flooding but which have been geocoded as such to get out of the tyranny of geocoding as it applies to them?

Mr. Michael Kemp:

We are not on the same wavelength with regard to this.

Ciarán Lynch (Cork South Central, Labour)
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We certainly are not.

Mr. Michael Kemp:

We have asked our members this question and they tell us they treat each case on its own merits and will consider claims history as well as any predictive information they have with regard to the risk of flooding in an area. As Mr. Horan stated, various underwriting decisions are taken on the same risk by various companies. We are not dealing with a monolithic industry attitude.

Ciarán Lynch (Cork South Central, Labour)
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I will conclude on this point because the witnesses have not answered it. Whatever its members are telling the Irish Insurance Federation I can tell the witnesses their customers are telling us they are stuck with geocoding and cannot get out of it. I strongly urge the witnesses to take on board this issue. Businesses will close down because of geocoding and houses cannot be sold because of it. We already have a mortgage crisis and the insurance industry is contributing to it because people cannot sell their homes to escape from a mortgage debt as the house cannot be bought because of geocoding. I suggest geocoding must be seriously examined by the Irish Insurance Federation and solutions must be provided. It is causing huge problems as the insurance industry increasingly moves away from blanket insurance to cherry picking where all conditions do not apply.

Kevin Humphreys (Dublin South East, Labour)
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According to paragraph 8 of the presentation, exclusion of cover is generally a last resort. Do the witnesses stand over this?

Mr. Michael Horan:

Yes, exclusion of cover is a last resort. Insurers are in the business of providing flood cover to as many people as possible.

Kevin Humphreys (Dublin South East, Labour)
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The witnesses acknowledged the flooding that occurred in 2002 and the work carried out afterwards by the OPW. Is this work recognised in insurance cover?

Mr. Michael Horan:

In Dublin where problems occurred ten years ago flood defence works were carried out and far fewer problems occur now.

Kevin Humphreys (Dublin South East, Labour)
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According to a letter issued by the engineer in charge of the flood defence unit project team, flood protection work in the area of the Dodder estuary from Ringsend bridge to Newbridge in Sandymount is completed and is designated to prevent tidal and river flooding to a 200 year event and the best estimates of tidal rise due to global warming to the end of the century. Is this sufficient to allow people obtain flood insurance for their property? It is an official letter issued by a professional team working for the OPW. Is it adequate to allow household insurance for flood cover?

Mr. Michael Horan:

As I stated in my presentation-----

Kevin Humphreys (Dublin South East, Labour)
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Mr. Horan mentioned in particular the 2002 event and the work carried out afterwards. This is why I am asking the question. The flood defence unit protection division issued this letter to the area protected to the level of a 200 year event and best estimates on global warming. This letter was freely available to members of the Irish Insurance Federation from the more than 1,000 people with insurance policies in the areas. Is this a good enough guarantee to allow flood insurance in the area?

Mr. Michael Horan:

Paragraph 12 of the presentation document states it is important the OPW communicates reliable information on flood defences to insurers. We listed the kind of information we wanted.

Kevin Humphreys (Dublin South East, Labour)
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This information has been communicated and meetings have been held with insurance companies and engineers in charge. Is Mr. Horan stating the information given was inadequate?

Mr. Michael Horan:

We are involved in the process of engagement with the OPW and we are asking that the information listed in paragraph 12 is provided to insurance companies so they can take it into account-----

Kevin Humphreys (Dublin South East, Labour)
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It has been provided.

Mr. Michael Horan:

-----when they make decisions. This partly answers the point being made by the Chairman.

Kevin Humphreys (Dublin South East, Labour)
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It has been communicated with regard to Part 8 planning permission and so on. It has been freely accessible to the members of the Irish Insurance Federation.

Mr. Michael Horan:

In Dublin fewer problems of the type experienced ten years ago exist now.

Kevin Humphreys (Dublin South East, Labour)
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Should this not be reflected in insurance policies?

Mr. Michael Horan:

It is reflected in insurance policies.

Kevin Humphreys (Dublin South East, Labour)
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Over the summer I conducted a survey of 1,000 households in the Ringsend, Irishtown and Sandymount areas which were affected by the event. A significant number cannot obtain any insurance cover and the cost for the majority has doubled. One lady responded that she had been insured for flood cover with Axa Insurance for 20 years and had never experienced flooding but her premium more than doubled. She is afraid to move because she cannot obtain flood cover elsewhere. Another respondent who had never experienced flooding was refused quotes from all companies, and she names the companies in question, despite a flood wall now being in place. A woman who had been insured by Hibernian Insurance, which is now Aviva, for almost 40 years was flooded in 2002 and made a claim. Her policy lapsed earlier this year because she was in hospital and did not renew it. Aviva has refused to renew the cover. Residents received letters from Zurich Insurance advising them it was no longer in a position to provide flood cover. These are just a few examples from a wide-ranging survey.

The OPW spent €8.5 million over four years. To my knowledge, this issue was also raised by the Minister of State, Deputy Brian Hayes, when he met the Irish Insurance Federation. Given the presence of the flood defences the likelihood of these areas being flooded is minor but people still cannot obtain flood insurance. As the Chairman pointed out, some people cannot sell their houses because they cannot get flood cover. I put it to the witnesses that the presentation they made is very different to what is actually happening. They mentioned the substantial work carried out by the OPW in 2002 at a cost of €8.5 million, but the people in the area I surveyed tell the story of what is happening. I can give the witnesses a list of the insurance companies people have contacted which have refused to provide household insurance or doubled the cost of it. Will the witnesses tell me why this is happening?

Mr. Michael Horan:

Without knowing the individual circumstances of the people involved it is difficult to answer the question. Our point is that if the flow of information from the OPW on flood defences it undertakes throughout the country is improved to the maximum it will mean insurers have more information to factor into their underwriting processes.

Kevin Humphreys (Dublin South East, Labour)
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Is Mr. Horan stating that the OPW has not provided the members of the Irish Insurance Federation, IIF, with this information and that the assurances issued since 2009 and re-issued in a letter in July 2012 are not sufficient? Is the professionalism of the OPW and Dublin City Council being questioned?

Mr. Michael Kemp:

In some schemes, there was a difference of opinion concerning the adequacy of the work conducted. The case to which Mr. Horan referred was on the north side.

Mr. Michael Horan:

The Tolka.

Mr. Michael Kemp:

Where there has not been adequate liaising in the design of a scheme, differences of opinion arise concerning the adequacy of the defences. There is scope for different expert views. We pointed out the need of a number of stakeholders, including insurance providers, to be involved in the design of a scheme. While well intentioned, some of the work carried out does not address problems adequately. This may be the problem in the cases in question.

Kevin Humphreys (Dublin South East, Labour)
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Is Mr. Kemp stating that what has been certified by the city council and the OPW in accordance with international standards as a once in every 200 years event is inadequate?

Mr. Michael Kemp:

It is a possibility.

Kevin Humphreys (Dublin South East, Labour)
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What is more likely is that insurance providers decided to ignore the work and charge high premia. I will move on, as I will not get a proper answer. The hardship being caused to people is significant. Not only have they been flooded, but the damage done by being unable to get insurance or sell their homes is immeasurable. The IIF needs to revert to us with strong and legitimate answers. The flood measures were designed by the best international experts, yet insurance providers claim that the standards are inadequate.

Ciarán Lynch (Cork South Central, Labour)
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I must call Deputy Corcoran Kennedy.

Kevin Humphreys (Dublin South East, Labour)
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That is fair.

Ciarán Lynch (Cork South Central, Labour)
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I will call Deputy Humphreys again.

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I thank the witnesses for their presentation and attendance. Anecdotal evidence suggests delays in processing and delivering on claims. What is the ideal timeframe for processing a claim and what is the reality? We have heard about months of delays.

The insurance industry is global and many international and national companies are examining their corporate social responsibility policies. Do the IIF's members have a role in this regard? Investing in the remedial efforts of the OPW to which the witnesses referred would be good for the insurance industry. We must acknowledge the impact of climate change. The industry and the victims of flooding would reap the rewards of such an investment.

The witnesses mentioned that they had a liaison with the OPW that they might not have had previously. A catchment flood risk assessment and management, CFRAM, study is being done. As an interested party, should the industry make a submission? Much of the information contained in the document supplied to us today reflects what the committee found following our recent investigations.

Regarding the flood policy review group's proposals in respect of 24 plus projects, the witnesses mentioned that completion would take ten years under the OPW. Are there examples of such lengthy projects?

Mr. Michael Horan:

I will address the question on the length of time taken to deal with a flood claim. When a property is badly damaged by flooding, it can take time for all of the repairs to be done. It cannot be repaired immediately. Rather, it must dry out and be professionally cleaned. Only then can it be repaired and restored. This process can take some months, given the time it takes for some properties to dry. In extreme cases, as much as a year may be necessary. Unfortunately, this is a fact of life where serious flood damage is concerned. There is no point in trying to carry out rushed repairs on a property before it is fully dry. The repair would not work and would need to be done again.

We have suggested the establishment of a flood liaison group comprising stakeholders, including the insurance industry, to advise on flood risk management, planning strategies, etc. We see a role for ourselves in that regard. The IIF has a role as a conduit of information to insurance companies, for example, to update them on the remedial measures, large and small, that have been taken throughout the country. The OPW has carried out large projects in a number of major towns and cities and local authorities have taken smaller remedial measures in respect of flooding blackspots. If that information can be communicated to us, we can pass it on to the insurance companies, which can take it into account when making their underwriting decisions.

In terms of liaising with the OPW, we have made submissions on a number of CFRAM exercises. The briefing material that we have supplied is an abbreviated version of some of the points we made during those exercises.

Deputy Corcoran Kennedy mentioned the flood policy review group and those of its projects that took ten years or longer. We identified a number of cases as having taken longer than ten years. For example, the St. John's river project in Waterford was at stage 4 in December 2003 and stage 5 in late 2009. The Templemore project was at stage 2 in December 2003 and stage 4 in 2009. The Fermoy project was at stage 1 in December 2003 and stage 5 in 2009. It is a six-stage process. In some cases, it took a project five or six years to move from one intermittent stage to another.

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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What of my question on corporate social responsibility?

Mr. Michael Horan:

Our primary offer in that regard is the expertise we would provide through the flood liaison and advisory group. With other stakeholders, we would like to advise on flood risk management and planning matters.

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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Is that the extent of the investment? In some instances, corporate social responsibility goes further than that offer. Will the industry consider offering more than just advice?

Mr. Michael Kemp:

In other contexts we have considered whether there is scope to do that on a collective basis at industry level. However, it tends to be a niche that individual companies like to carve out for themselves, for example, through sponsorships. It can be considered, but the decision to make a financial contribution to remedial measures is one for individual companies. It tends not to be the type of initiative that can be managed at industry level through the association.

Aodhán Ó Ríordáin (Dublin North Central, Labour)
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I would like to add my view on what I believe is outrageous behaviour of the part of the insurance companies dealing with the residents in my constituency, whom I have been trying to support. I find Mr. Kemp's comments in regard to the Tolka works puzzling. In the most recent floods in 2008, 2009 and on 24 October last, the Tolka region was almost unaffected. There must be a communication breakdown somewhere. I would like to put on record the trauma being experienced by these people in terms of their dealings with the insurance companies. As pointed out by the Chairman, Deputies Murphy and Humphreys and others, these people are living in homes that are effectively worthless because, as everyone knows, without house insurance one cannot sell a house. While some families are obtaining a level of flood cover, new purchasers of houses in the area will not get cover. Leaving aside the trauma of living in an area of perceived threat of flooding, which threat has in many cases subsided because of remedial works, having this situation hanging over their heads is a life sentence. Despite that works are planned, have been signed off on or completed, the attitude of the insurance companies has not budged, which is outrageous.

I agree with the Chairman that the response in terms of the role of the federation in moving the insurance industry towards a situation whereby it can take individual cases outside the geocoding is disappointing. A shift in culture and attitude is required. It is difficult for any of us to offer support to residents in this situation when the attitude of the federation representatives is simply to throw their hands in the air and say they wished things were different but there is nothing much they can do. We are all aware of the savage nature of market forces and what has happened to our economy. The families concerned have been left once again to the mercy of the savage nature of market forces and are suffering as a consequence.

Mr. Michael Horan:

We appreciate the stress involved of living in a flood hazard area. Insurance companies are in the business of providing insurance to as many people as possible. Obviously, if it is totally uneconomic to provide flood insurance, it will not be provided. However, that happens in respect of only a small minority of areas in the country. We aim to keep those areas and the percentage of people involved to a minimum. We believe we can do this if, through a process of engagement with the OPW, the flow of information about flood defences is improved to allow insurers to take it into account, thus preserving the model we have in this country. That is what we are aiming to achieve. We are trying to partner with Government to find a sustainable solution to the issue of availability of insurance cover.

Ciarán Lynch (Cork South Central, Labour)
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It is impossible to get household insurance if one has been declared bankrupt, as per the eligibility criteria for Allianz, which I believe is shared by most other insurance companies. The Government hopes to have its insolvency legislation enacted in the next couple of months. This positive development, which will allow people escape from burdening debt, may also result in their not being able to insure their homes into the future because they will have been declared bankrupt. Can the witnesses explain why it is not possible to get home insurance if one is declared bankrupt? Why, if I was declared bankrupt today but can still meet the €500 premium in respect of domestic home insurance for the next 12 months, can I not get insurance?

Mr. Michael Horan:

That is a new practice.

Ciarán Lynch (Cork South Central, Labour)
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It is not new. I checked this with some brokers this morning. This has been a standard practice within the insurance industry for a number of years. A declaration of bankruptcy is placed in the same category as conviction or charge in respect of arson or any criminal offence, other than a motoring offence. Bankruptcy is not a crime. It may be the result of bad business practice, for which a person is not imprisoned unless he or she has embezzled funds and so on. Can the witnesses provide any explanation in regard to the reason bankruptcy is considered a valid reason for the non-granting of house insurance?

Mr. Michael Kemp:

I cannot answer that question because I was not aware it was a problem. I am happy to look into the matter for the committee.

Ciarán Lynch (Cork South Central, Labour)
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Perhaps Mr. Kemp would revert back to the committee with an explanation in that regard.

Mr. Michael Kemp:

Yes.

Ciarán Lynch (Cork South Central, Labour)
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Perhaps also Mr. Kemp would ask the federation's members to review that practice, in particular given the economic circumstances of the country and in light of enactment of the insolvency legislation in the coming months.

I would like now to revert to the substantive issue of geocoding. Yesterday a businessman in Douglas was informed that owing to recent flooding in the area, he would not be able to get insurance cover into the future. Hundreds of millions of euros of taxpayers' money has been spent over the years by successive Governments on putting flood protections in place, which has resulted in a lowering of risk to the benefit of the insurance industry. The insurance industry has not contributed one cent to lowering that risk. The question that arises is how much the industry saves as a result of every euro of taxpayers' money spent in this regard.

Paragraph 13 of the federation's submission lists nine specific recommendations, all of which are worthy. However, what action will be taken by the Irish Insurance Federation? The witnesses have advocated for swifter completion of structure defences, a more co-ordinated action plan from the OPW and so on. If all the nine recommendations were implemented tomorrow, what could we expect in return from the federation? In my opinion, there is a need for re-examination by it of the practice in regard to geocoding. Households and businesses need to be able to remove themselves from it. Also, business owners such as the one in Douglas who was informed he could not get flood insurance into the future need to be told what actions they need to take for them to get insurance. What type of remedial action, if taken, would facilitate them getting insurance into the future?

Non-provision of insurance cover could result in the closure of businesses. Profit margins are so tight businesses cannot take the hit in a flood in terms of the destruction of €20,000 worth of stock, never mind the cost of refurbishing the premises. Business owners need to be told by Insurance Industry Federation members what they need to do to facilitate their getting insurance cover. I would welcome some recommendations from the federation in this regard. There are options. The business owner referred to is locked out from obtaining insurance.

Can we put in place an interim measure where insurance would be provided, although with an excess, so the first €5,000 or €10,000 in damage may not be covered? Deputy Corcoran Kennedy mentioned climate change and this is another example of how the industry should be more innovative and modernise its thinking. It must formulate solutions that are no longer based on a blanket insurance approach but rather target certain areas. In particular, the industry must respond on a business level to the type of State intervention suggested in paragraph 13.

Mr. Michael Kemp:

That is essentially what all the measures we are suggesting are addressed to. They are meant to try to alleviate the issue. It is very difficult to be specific about individual cases as every situation is different; there is different topography and risk from place to place. In some cases, measures can be taken at the level of individual premises that would help to protect against flooding but in other cases, there is a question of physical defences, water courses and greater protection upstream. We must also be aware that in some cases a problem is prevented by taking action in one area but it may create a difficulty somewhere else. That must be taken into account.

The idea and thrust of our argument is that if we can take effective measures, which will include participation in design from the insurance industry, and have an agreed standard of the built defences, there will greater availability of cover in areas that were previously a problem. The claims cost associated with flooding, subject to frequency and climate change issues, will go down, all other things being equal, and therefore the insurance cost will go down.

As we noted in the presentation, excesses in premiums are implemented before getting to the ultimate stage of having to withdraw cover because of the prognosis for a recurrence of damage. All those tools are used on a daily basis to try to address problems as they arise.

Ciarán Lynch (Cork South Central, Labour)
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This is related to geocoding, which is subject to constant assessment and is not specific. I can get car insurance in the morning and property insurance may be for property worth four, five, six or ten times the value of a car. I would be asked more questions about my car. Car insurance is mandatory but house insurance is not. Nevertheless, in applying for car insurance I would be asked how many miles are on the clock, how many miles I drive per year, the value of the car, the effect of depreciation, what the car is used for, where it is located at night, etc. As car insurance is so specific and there was Government intervention a couple of years ago because young people were being fleeced, that part of the insurance industry responded.

I do not believe the Government has to make an intervention in the first instance with the insurance industry and I would much prefer the industry to respond to its problems. Regretfully, the witnesses have not told us there will be a code of practice for members, although perhaps that is a response that should be given from the outset.

Not providing specific insurance to companies goes back to what was mentioned by Deputies Ó Ríordáin and Humphreys earlier. The Office of Public Works, OPW, has implemented a host of remedial measures and people still find they cannot get flood insurance, so what is happening? Is the relevant Department not informing the insurance industry or do customers not have the methodology to explain that their property is no longer at risk? What is going on?

Mr. Michael Horan:

The Chairman mentioned the motor insurance industry. Over the past ten years much work was done by the Government on road safety, with improved enforcement-----

Ciarán Lynch (Cork South Central, Labour)
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Hundreds of millions of euro were spent on flood protection.

Mr. Michael Horan:

As a result of improved road safety, there are fewer fatalities and the injuries board has taken legal costs from the system, etc. The cost of motor insurance has fallen because of that. A similar model applies here, where the industry wishes to preserve the widespread availability and affordability of flood insurance. There is increased engagement on the part of the Minister of State at the Department of Finance, Deputy Brian Hayes, and the OPW, but current levels of investment and implementation of flood defences must improve. There should be better communication of flood defences being implemented, both big and small around the country.

Ciarán Lynch (Cork South Central, Labour)
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I will comment on that and I do not even need a response. One of the issues which prompted me to invite the witnesses before the committee was a person ringing my office two or three weeks ago. The person was looking to change insurance company, which is becoming more difficult with property insurance, as if one is without insurance, it is almost impossible to get back into it with some cases. People are trying to hang on to policies. Nevertheless, the person in question was shopping around. A series of questions was asked, including whether a claim was made in the past seven years. The person indicated that a claim had been made and significant underpinning was done on the property to deal with subsidence. This work should mean the property was invulnerable to subsidence but the insurance company in question did not offer a quotation because of the history of subsidence on the site, although remedial work had been completed.

This process does not make sense. The property has had remedial work done. It may have been a "no-brainer" for the insurance company at a business level because there was no risk involved, with the remedial work already done. As a result of "geozoning" - being in a particular region - somebody seeking insurance is blown out of the water in trying to get a fair deal from an insurance company.

Catherine Murphy (Kildare North, Independent)
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We are all focused on one issue. I have made a point regarding a certification process. We heard a letter read out detailing a reputable certification process as it related to a case on the Dodder. There does not seem to be any process between the OPW and the industry. It is well and good for the industry representatives to ask to be told about the projects around the country, including cases of remedial works where there has been flooding. What is totally absent is any kind of certification process, with a person being able to hand a certificate to an insurance company to prove that a problem has been sorted out. The certification process should be agreed between the industry, the OPW, local authorities, etc., but it is totally absent. We are getting more information on the issue, and several of us have provided examples. We do not intend those individual cases for comment by the witnesses but rather to show how we have practical experience of dealing with people who are saying the opposite of what we are being told today.

I have a concern about the catchment flood risk and assessment management study, CFRAMS, which is mapping all the flood areas around the country. When something is captured in the study, remedial works can take place on the piece of land, which can then be returned to the system. It appears that the risk is the insurance company will be given another raft of locations from the study that will be excluded. This information will be public and will only make the matter worse unless we can come to grips with the issue.

There was an argument that these processes can take ten years, with the implication that the OPW is inefficient, etc. There have been many flood events in north Kildare, with several areas having had remedial work. A cost-benefit analysis would be done which is pivotal to what gets funding, as there is limited funding for the OPW. The worst cases are remediated first and where there is insufficient funding, not everything will get through the system. It is not just about time but rather quantifying the problem.

The witnesses have indicated that people contact the insurance industry but only a small number complain about not being able to get flood insurance. How does the industry capture the number of people who cannot get flood insurance?

How does one capture the numbers who do not bother getting insurance because they cannot afford it given that it is twice or three times the price it would have been? How does one capture the number of people who are simply priced out of the market? Does one measure this by the complaints received? Do people know to whom they should complain? Do they know this is something the federation is measuring?

In the town in which I live, Leixlip, there was flood early in the last decade. A major job was carried out that cost millions of euro. The Office of Public Works, OPW, was involved in it. Most of those areas have not been flooded since then. In Leixlip there are two hills with all the housing estates and the valley. The valley was flooded and the people who cannot get flood insurance are in the housing estates. How stupid is that? There is no river near them. It is because there is a blanket inclusion in this zone so they cannot get insurance. This is the point that all of us are trying to press home. We need a certification process that is acceptable to all. When public money is spent alleviating the problem, it must be reflected by bringing people back in so they are fairly treated in terms of the insurance cover they would rightly expect to be able to get for an affordable price.

Kevin Humphreys (Dublin South East, Labour)
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I do not see in the two paragraphs referred to anything that is difficult to comply with. We should write to the OPW. The opening statement states: "It is also important that the OPW communicates reliable information on flood defences to insurers in a format that is easily accessible...". We should ask the OPW if it is providing reliable information given the fact that the witness raised it. I have found the OPW to be very professional and to operate at a very high standard, so we should write to the OPW and pose that question.

I have not received a satisfactory answer. We know the work that was done and the information was communicated to the insurance companies. The works were to the highest standards and were verified by senior engineers, but it made no difference to people's access to insurance. Other things were mentioned in the statement. It says: "It is insurers’ experience that in the boom years homeowners invested heavily in upgrading the fit-out of their homes – installing high quality kitchens, wooden floors and electronic equipment resulting in a very large increase in the cost of flood claims." However, that also increased the cost of taking out insurance. I wonder why that is included. It is obvious that if one insures one's house for a higher figure, the insurer will charge the person more money. That is part of the insurer's risk. The insurers are saying that they will charge the person more but they do not wish to pay it out. That is what hits me from that comment. Homeowners invest in a fit-out of their homes but they pay a higher premium for that fit-out. I am at a loss to understand why the witnesses included that.

The operation profits for household insurance are still at approximately 125%. Is it sustainable in that area? Are we facing insurance companies opting out of high risk elements? We have seen this in areas in Europe. The European directive and other European countries have insisted that insurance companies carry the risk on high-----

Ciarán Lynch (Cork South Central, Labour)
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Excuse me, I must put your proposal of writing to the OPW to the committee. Is that agreed? Agreed.

Kevin Humphreys (Dublin South East, Labour)
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Thank you.

Do the witnesses believe the 125% is sustainable or what would it need to go up to at that level?

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I wish to refer back to the corporate social responsibility. I am disappointed that the witnesses reserved their potential action to a committee they are proposing be established. I believe it is something the federation should be examining. Do the witnesses think, following this meeting, that they will consider this or do they see a role for themselves in this at all?

Mr. Michael Kemp:

In terms of the provision of information, we might be slightly at cross purposes. What we are talking about is not just provision of information after the event. Much of what we said in our submission related to getting involved in the design process and agreeing standards. There is something in what the Deputy said with regard to certification but it depends on there being agreement on what the standards are in advance, both for design and construction of the flood defences.

Kevin Humphreys (Dublin South East, Labour)
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Is there a design for national agreement on a one in 200 year event?

Mr. Michael Kemp:

There are various standards used for different things in different countries but there is no standard agreement.

Kevin Humphreys (Dublin South East, Labour)
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The presentation refers to a one in 100 year event and a one in 200 year event. The specifications are there. I do not understand the witness's point.

Mr. Michael Kemp:

We put in the presentation what we believed was a reasonable level of protection. That is the standard. It is a question of assessing in a particular case whether the works actually meet that standard.

Kevin Humphreys (Dublin South East, Labour)
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The standards to do with the height and the tidal surges are covered in specifications and are broken down into a one in 100 year and a one in 200 year event. The OPW is operating, certainly within the Dublin region, on a one in 200 year event. Its recent applications to An Bord Pleanála based all its work on a one in 200 year event, backed up by international criteria. Are the witnesses saying that the international criteria put in the applications for planning permission by the OPW are flawed?

Mr. Michael Kemp:

Not necessarily. I am saying that it is a standard everybody is aspiring to, but it is a question of fact in any individual case whether the design that is proposed or the carrying out of that design actually meets that standard.

Kevin Humphreys (Dublin South East, Labour)
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Is the federation looking for a veto?

Mr. Michael Kemp:

What we have been suggesting is that there should be some wider consultation at an earlier stage in the planning of the design so it is agreed that what is proposed will meet the standard. That makes it easier after the event to be able to review the situation regarding the availability of cover.

There was a suggestion that we were criticising the OPW for being inefficient in terms of the time taken to carry out some works. That is not what we meant. We were saying that the process the OPW is caught in, as much as anybody else, is such that it tends to slow things down to an unacceptable degree. There should be an examination of that to try to streamline the process. The OPW, like everybody else, is constrained by the process in getting projects to fruition.

With regard to problem cases, our estimate of 98% plus penetration is based on an estimate of the level of cover provided to households throughout the country. It is not based on a sampling of the complaints we get. The point we made is that the complaints seemed to be relatively low in comparison to the amount of publicity the problem has had. However, we are quite happy to look into complaints and we are usually very effective at getting results where there is a manifest injustice in the way a particular case has been treated. There will be occasions when we will stand over the fact that we believe there is a logic to what is done in underwriting decisions in general, but there are cases where mistakes are made and in many cases we get underwriters to change their opinion and to reinstate cover or to change the terms clashing with the cover in those cases. In addition, at area level, where works have been carried out, there have been changes in the attitudes of underwriters to insuring risks in those areas.

The point about the higher standard of fit-out was not intended to be a criticism. It was just an explanation. It is one of the reasons that we have seen the cost of weather events increasing. There is a higher sum at risk. Certainly, it is charged for in premiums-----

Kevin Humphreys (Dublin South East, Labour)
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It would have been fairer to say there was a higher premium because there was a higher level of fit-out. The insurance companies have been taking more money in.

Mr. Michael Kemp:

We stated a number of insured costs associated with particular weather events, and one of the reasons for that is that there are higher values at risk.

Kevin Humphreys (Dublin South East, Labour)
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The other side of the balance sheet is that the insurance companies take the money in.

Mr. Michael Kemp:

Sure, I have no problem with that.

Ciarán Lynch (Cork South Central, Labour)
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Can we bring the meeting to a conclusion?

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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Can I refer back to the corporate social responsibility? I might not be making myself clear. The insurance companies must pay out as a result of flooding. Do the witnesses not see a role for the industry in, to put it baldly, stumping up some cash to help out in this regard because they will benefit in the end?

That is the kind of responsibility I was thinking of. Why is it assumed the State will always do this? The insurance industry is a profitable global industry. There must be some mechanism for the industry to help us out. Earlier, the Chairman referred to the fact that Ireland is one of the safest countries to insure in and surely it must be possible to do what I suggest.

Mr. Michael Kemp:

In terms of improving risk and therefore bringing down costs, it is reflected in a competitive market and the reduction in prices. When Deputy Corcoran Kennedy says the industry will benefit, ultimately the consumer will benefit because the consumer will get cover at a lower price if the cost of claims reduces, as has happened in respect of motor insurance in the past ten years. The point made in respect of corporate social responsibility is that it is an area where it could be considered but it is a matter for individual companies rather than an area in which we have a role. We can examine it and talk to our members about it but it will come down to individual companies deciding whether they want to get involved.

Marcella Corcoran Kennedy (Laois-Offaly, Fine Gael)
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I suggest the Irish Insurance Federation should show leadership in this matter. It would be beneficial to everyone if it did.

Kevin Humphreys (Dublin South East, Labour)
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The presentation referred to warnings. There is a comprehensive tidal surge warning system that operates from Cork to Dublin. What is the opinion of the witnesses on the early warning system?

Caít Keane (Fine Gael)
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I apologise for being late because I was attending another meeting.

Ciarán Lynch (Cork South Central, Labour)
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I ask Senator Keane to put a question.

Caít Keane (Fine Gael)
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I will confine my contribution to one question because of my late attendance. Regarding the comments of Deputy Corcoran Kennedy on corporate social responsibility, the situation appears to be all of the gain and none of the pain. On the GPS mapping system, the scene should be changing for the insurance companies. Where houses are a certain number of feet above river or sea level, the likelihood of flooding is lower. Some insurance companies group factors and do not isolate whether the issue is flooding, fire or something else. One pays a premium and certain items are covered. I would like to see a written statement from the insurance body on this point.

Mr. Michael Horan:

On the tidal surge warning system between Cork and Dublin, the point we are making in the presentation is that a feature of recent floods was the absence of adequate warning. The November 2009 floods were an example of that, even though it was not tidal flooding. In the case of the June 2012 floods-----

Kevin Humphreys (Dublin South East, Labour)
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It is very hard to deal with monster rain.

Mr. Michael Horan:

Even a short warning period of a number of hours can be effective in terms of reducing the overall cost of the episode to everyone.

Kevin Humphreys (Dublin South East, Labour)
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Mr. Horan is not familiar with the low-pressure tidal warning system in place.

Mr. Michael Horan:

I am aware it exists and that a flood warning system is being developed.

Kevin Humphreys (Dublin South East, Labour)
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From the comment Mr. Horan made, it seems he does not fully understand the details.

Mr. Michael Horan:

A wider warning system is being developed and work has been going on for the past number of years. We welcome the work.

Ciarán Lynch (Cork South Central, Labour)
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I thank the Irish Insurance Federation for the speed of its response to the request to appear before the committee. As with most industries, the insurance industry is in a competitive and challenging environment. However, there are seven points of consideration the federation should take into account at the conclusion of today's meeting. The first is the need for a code of good professional practice with regard to problems that arise with geocoding. There must be a certification process to allow businesses and households to challenge difficulties that arise from geocoding or from remedial works being carried out. The third point is that there must be a re-examination of the eligibility criteria for household insurance. One concern is why bankruptcy precludes people from getting household insurance, particularly in light of insolvency legislation coming down the tracks. There be may be another series of insolvency measures.

Fourth, the industry has responsibility to respond in detail to situations where flooding insurance is refused, particularly in cases where a customer has an existing policy. If the business or household has had flood or subsidence insurance up to now and can no longer get cover, the insurance company has a responsibility to explain why cover is not being offered. In outlining the details, an explanation can be given to the household or business of the remedies necessary for the household or business to be covered in future. As part of an interim measure, where a business may be unable to get flood insurance while it is carrying out remedial measures, the introduction of excess payments may be a solution to assist businesses and households. The parties may agree that the first €10,000 of damage is not covered. The industry must meet the challenge in respect of climate change and the adverse weather conditions seen in recent years. According to European reports, the Irish household insurance industry is in one of the lowest risk regions in western Europe. This is also a country with the highest percentage of homeownership, meaning people are more likely to insure property than those in countries with a larger rental base. The insurance industry is in a fortunate position. As Deputy Corcoran Kennedy suggested, the Irish Insurance Federation needs to show leadership in this area and apply innovative measures and approaches.

On a positive note, at a future engagement I hope that when we talk about good practice, there will be a more immediate response. The Irish Insurance Federation should be seen as the body setting standards of good practice in the industry with regards to the areas mentioned. I invite Mr. Horan and Mr. Kemp to make any concluding comments before drawing the meeting to a close.

Mr. Michael Kemp:

I thank the Chairman for raising the points. We can discuss a number of them with our members and we will be happy to engage with the committee further after that dialogue.

Ciarán Lynch (Cork South Central, Labour)
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Perhaps Mr. Horan can do so by written response in the first instance.

Mr. Michael Horan:

I am happy to take the points raised by the Chairman and discuss them with our members.

Ciarán Lynch (Cork South Central, Labour)
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That concludes our consideration of the topic. I thank Mr. Kemp and Mr. Horan for their assistance in our deliberations.