Mr. John O'Donoghue:

We are dealing predominantly with contracts of insurance - contracts between the insurer and the insured. That sets out the basis of claim settlement in the contract. Insurers have decided to adopt practices that suit them but not the consumer. These are outside the scope of the policy. Mr. Downey spoke about retaining 30% of the agreed claim payment, which is not in the policy. Traditionally, these policies were policies of indemnity, which meant that those who were insured would receive a payment of money and go off to do whatever they had to do with it. The insurers would like to have full power over how the property is reinstated. They have suggested the use of their own builders in some cases. Many of the policies entitle them to do that. In the retention cases, they are saying to the policy holders that they will not pay them all of the money. Instead, a balancing payment will be made to the policy holders after they have funded the difference between what they are initially paid and what they end up being paid. If a policy holder wants to draw down a balancing payment, he or she will have to submit a VAT invoice from a contractor who is registered for VAT purposes. VAT is an inherent part of the settlement.

I will explain what many policy holders are now doing. Mr. Downey used the figure of €10,000 as an example. If a person in such a case has a policy excess of €1,000, his or her net initial settlement would be €6,000. He or she would be expected to find the difference between €6,000 and €10,000. He or she would then have to prove to the insurer that he or she has spent €10,000 before the balancing payment of €3,000 could be made. At the moment, the only thing that is sought is the submission of VAT invoices. In addition, a reinspection is carried out to ensure all the work has been done. The question is whether a demand, to the effect that these works be carried out by a contractor who is C2-registered and VAT-registered, should also be included in the policy. Nothing like that is included in policies at present.