John O'Mahony (Mayo, Fine Gael)
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The purpose of this meeting is to engage with representatives of Insurance Ireland and the Consumers Association of Ireland on the issue of petrol stretching. Members will recall that on 3 December, we met officials from the Office of the Revenue Commissioners regarding this matter in order to establish how the scourge of fuel fraud, particularly petrol stretching or fuel contamination, might be satisfactorily addressed.

On behalf of the committee, I welcome Mr. Kevin Thompson, CEO, and Mr. Michael Horan from Insurance Ireland and, from the Consumers Association of Ireland, Mr. Dermott Jewell and Mr. Raymond O'Rourke. I wish to 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 the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they 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 them that any submission or opening statement they make to the committee will be published on our website after the meeting.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

I invite Mr. Thompson to make his opening remarks.

Mr. Kevin Thompson:

I thank the committee for this opportunity to contribute on the discussion on petrol stretching. I will make a brief presentation, the first part of which outlines Insurance Ireland's background so as to set out the context of who we are and what we do. The second part comprises a brief statement on insurance and the issue of petrol stretching.

Insurance Ireland is the leading voice of insurance in Ireland, representing 95% of domestic insurance companies and 85% of international life assurance companies. Insurance Ireland members pay out on behalf of our customers €5.4 billion claims each year to Irish consumers and contribute more than €1.6 billion in taxes to the Exchequer annually. We also employ more than 27,000 people. Motor claims exceeded €1 billion in 2013 with approximately 235,000 motor claims.

There are 16 motor insurers in the market. Damage to cars arising from petrol stretching is generally covered by comprehensive motor insurance policies, but it is not covered under third party, fire or theft policies. Insurance Ireland members have settled approximately 600 motor claims resulting from petrol stretching, with an additional 250 claims being validated in the pipeline. Our members have seen a decrease in notifications of damages claims due to petrol stretching in the past two months. Policyholders who have suffered damage should check the full extent of their policies and contact their insurers directly or, where appropriate, via their intermediaries.

This is a concise statement of how we view the position of insurance in terms of petrol stretching. I am more than happy to take questions from the committee on the issue. I am joined by Mr. Horan, our general insurance claims manager.

John O'Mahony (Mayo, Fine Gael)
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I thank Mr. Thompson. With the committee's permission, we will take a statement from the Consumers Association of Ireland before passing over to members.

Mr. Dermott Jewell:

I thank the committee for its invitation. We are pleased to be present and appreciate the opportunity to contribute on what is a significant, serious and detrimental issue for many consumers and citizens. I am joined by our chairperson, Mr. O'Rourke. While we have not received a large number of complaints, we have received a significant number of inquiries from consumers frustrated over whom they should approach to find recompense for or resolution to problems that they subsequently found owed to petrol stretching. The difficulty is that while there is a good degree of anecdotal evidence relating to numbers and areas, predominantly along the Border and in Mayo and Galway, we are receiving inquiries from other pockets around the country, which is confusing. We have been relying too much on anecdotal evidence. I understand doing this to some degree, but Revenue, Customs and Excise and the Garda are also involved. As of December 2014, the Garda still had 308 official complaints open in respect of this issue. In view of this, it is possible to see how ascertaining greater detail will probably happen in time.

The average cost to a consumer is in the region of €3,500 to €4,000, but more in some cases of which we have heard, and a small number of cases are outside the insurance coverage that has been suggested at this meeting. This amounts to a consumer loss of more than €1.5 million, which is significant.

In terms of consumer protection, consumers generally find themselves supported by the Sale of Goods and Supply of Services Act 1980. Unfortunately, the Act is not being applied in this instance because the consumers cannot find a degree of appreciation of the proof they are able to provide regarding where and from whom they purchased the product because the seller often refuses to discuss the issue with them. As consumers, this immediately puts them on the back foot. Their consumer rights are denied, so they must predominantly take civil actions to find recompense via the National Standards Authority of Ireland, the Garda or the Revenue Commissioners. That is a problem.

While a number of claims have been supported by the insurance industry, an increasing number of providers seem to be exiting that level of cover. It is important to note that when consumers purchase second-hand vehicles, they are sold a warranty form of insurance. Such warranties now put fuel contamination outside their range of cover. This is a significant move.

Motorists contribute significantly to the Exchequer, including the job creation measures for which its funds are used. For example, they pay VAT on servicing.

Somewhat frustratingly, they contribute a significant amount of tax in the level and amount of fuel they purchase. Despite all of that, and all of the protections we provide positively for consumers, many of them have nothing to rely on in this situation. That is why we need to hear significantly from the Garda Síochána and Revenue about what is being achieved. More importantly, we need to learn lessons from the fall-out from this episode. We have made a number of suggestions to that end. Perhaps a test case or a number of test cases might be put through the small claims procedure. The problem there is the €2,000 limit. It might be worth a test. In addition, we think the burden of proof could be reversed to require the providers of the fuel to prove their fuel is not contaminated on day one. Initiatives could be put in place to measure that on a regular basis, perhaps monthly. On the basis of the detriment to many consumers, the industry could be asked to consider putting in place a fund. This could be done directly from the distribution sector of the industry with no burden on the consumer. This fund could be set up to try to mitigate in some way these costs and losses to consumers.

John O'Mahony (Mayo, Fine Gael)
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I thank both witnesses. We have had a number of hearings and meetings on this issue. All public representatives have spoken to consumers who are affected by it on many occasions. I spoke to a number of them this morning. They are left out at the moment. That is the problem. Mr. Jewell has suggested that a fund could be established to compensate consumers. Would that be done by the Government, the insurance federation or the industry? Could Mr. Jewell outline what he has in mind in a little more detail? He also suggested that a consumer could bring a case to the small claims procedure. Who would the consumer be claiming against?

I understand there are two types of insurance. Every motorist is insured. Mr. Thompson made it clear this kind of damage is not covered by third party insurance but is covered by comprehensive insurance. Does the claimant in one of these cases always lose his or her no-claims bonus? Perhaps it depends on the particular policy. Is there an excess payment? Does it depend on the small print of the policy? I understand that fuel stations have public liability insurance. I understand from what I have heard anecdotally that payments have been made on the basis of some of the service stations' public liability insurance. Could Mr. Thompson clarify whether that has happened? Is there some possibility of redress there? It was alleged at an early stage that insurers had removed coverage for fuel contamination from certain policies, including the policies of some people with comprehensive insurance. Is that a fact? If it happened, were the premiums reduced to reflect the decrease in cover? I apologise for hitting Mr. Thompson with so many questions. I am trying to be precise. I know members have many questions as well.

Mr. Kevin Thompson:

I can look to answer them in order. I reiterate that petrol stretching would not be covered under third party, fire or theft policies. The effect of a claim for fuel stretching on a person's no-claims discount would ultimately depend on the type of policy he or she has. Some people pay a tiny amount in addition to their comprehensive policy premiums to enjoy the benefit of having their no-claims discounts protected. In such cases, they do not lose their no-claims discounts. In other cases, depending on the terms and conditions of the policy, when a claim is made the policy holder has to take a step back in terms of the no-claims discount that is allowed against his or her premium.

I was asked whether insurers have removed coverage or taken steps to exclude this from policies. We have seen no evidence of that. The only thing I would say in general terms is that we have 16 carriers operating within the market. They generally compete on price, product offering and customer service. The market dynamics ultimately dictate what they do and do not offer. If a certain provider decides to exclude this type of coverage, that might place the provider at a competitive disadvantage by comparison with other providers. Market forces will dictate what happens. We have no hard facts on the public liability aspect of this issue. Like the Chairman, we understand anecdotally that a limited number of claims have been paid under public liability from petrol stations.

Mr. Dermott Jewell:

The fund I have proposed would be very similar to the fund that provides for the activity of the Financial Services Ombudsman, for example. The costs of the fund would be met by the provider. That means it would be paid for by one or more of the distributors, the garage owners and the station owners. They would contribute to a fund on an annual basis on the basis of their turnover. This money would probably be collected by Revenue. This kind of approach has been proven to work and operate in a number of areas.

The position of the consumer with regard to the small claims procedure is always that he or she has a contract with the person to whom he or she paid the money. Any time a consumer takes a claim in the small claims procedure, it is taken against the individual to whom he or she paid the money. In this case, it would be the owner of the petrol station where he or she purchased the fuel, as long as he or she has proof of this. That is why I said that a number of test cases could comfortably facilitate some learning in how this might work. A consumer who takes such a case might have to take a reduced hit. As I said, we have not heard anecdotally about anyone whose loss was as low as €2,000.

Timmy Dooley (Clare, Fianna Fail)
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I welcome both presentations. We often get very long and windy presentations. That is not to cast aspersions on anyone who has been before us today. Both speakers have been succinct and helpful. Mr. Thompson has set out what the insurance industry has done in regard to this matter. He has indicated that approximately 600 claims have been paid. That is very good news if it is the case. It is not borne out by the anecdotal information I am getting. A number of people have indicated to me that they are having real difficulties with their insurance providers. I do not know whether that is another matter, nor do I know if there are issues around the validity of the case, etc. It is very difficult to talk in isolation. I am merely putting it on the record that the anecdotal information available to me suggests that quite a few people are having ongoing difficulties with their insurance companies. I accept that there are different exclusions on policies and all of that. I would like Insurance Ireland to follow up this meeting of the committee by seeking information from its members so that we can ascertain how many cases are currently pending where there is some dispute, or where the insurance companies have refused the claim. That would give us a better understanding of the overall extent of the problem that exists.

There is a concern that when an issue like this arises for an insurance company, we quickly start to see exclusions on policies that make it impossible to insure against it. I do not think that would be the best way to go in this case. It is a difficult situation for consumers, particularly those who purchase or have purchased relatively new cars. As Mr. Thompson knows, the impact of a change of engine on the value of a new car is between €5,000 and €10,000, depending on the vehicle concerned. It is completely outside the control of the person concerned. That is the insurance side. Perhaps Mr. Thompson can come back to us with details of the full extent of the problem and let us know if there are any developments coming down the track in regard to the exclusion of these matters from insurance policies.

Mr. Jewell also made a very straightforward presentation. I like his recommendations. I will propose to the committee that rather than merely giving people an opportunity to come and say what they think, it should make some recommendations on foot of the work it has done on this issue that might ultimately find their way into legislation.

A compensation fund exists in other areas. It is administered by the industry but with the backing of legislation. Mr. Thompson will be familiar with it regarding the insurance company and how that works, or perhaps how it does not work from a consumer point of view. I believe the industry will have to do much more, and that will be part of any recommendations I will put forward. Mr. Jewell touched on that when he spoke about monitoring and putting a much greater onus on the person who is selling the product to stand over it. It becomes very difficult from a traceability point of view to prove that it was at the last station one got the fuel that caused the damage. Notwithstanding that, there is a tolerable level of contaminant allowed generally in fuel because water leaks into underground tanks and so on but the State will have to become much more prescriptive about the quality of the fuel sold and the industry, in terms of the distribution, will have to stand over the product to a much greater extent.

This should not be an impossibility, particularly regarding the consolidation that has taken place in forecourt ownership across the State. There are now two or three big operators while the small independents are very much a thing of the past. There are some but the bigger conglomerates are pricing them out of the market and they are operating only in small areas. With that consolidation there is space for a much greater legislative approach and ensuring that the industry stands over the validity of its product and therefore eliminates, to the greatest extent possible, the risk of contamination occurring. When it does occur I would have thought that will help the insurance industry to ensure it does not have to go down the road of exclusions on policies. I thank the witnesses.

Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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I thank the witnesses for their presentation. In terms of insurance, if they want paperwork to verify that people who have comprehensive insurance have been sneakily done out of this money because of the small print, I will give it to them in a few minutes. I have dealt with people with comprehensive insurance who thought they were covered for everything but who today are left with bills they cannot afford to pay.

We need to examine the entire insurance industry. Some insurance companies are pricing lower but when one reads the small print they are not offering the same cover. That is wrong because there are people, especially in the west, who have lost two cars and cannot afford to repair them. The way the insurance industry has handled that is disgusting.

We are trying to find a needle in a haystack. We talk about solving this problem. Revenue cannot solve it. Cars travel from filling station to filling station. We talk about taking people to court but one has to be able to prove where one got every drop of petrol. It is almost a non-runner. We should face up to these facts.

I have written letters to the Department of Finance, the insurance companies and everyone I could think of but they all say it is not their problem and that I should try someone else. Someone has to face up to this reality and if the insurance companies are to be honourable, especially with the people who have comprehensive insurance, they should stand up and be counted on this issue. They should forget about the clause in the small print that has caught out these people. I urge the witnesses to do that.

Paschal Mooney (Fianna Fail)
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I will be brief asking this question because unfortunately I have to leave. I thank the witnesses. To follow up on what Deputy Fitzmaurice said, I have had the same experience. I was surprised to hear that 600 claims were settled because that is not the reality in terms of the few people who have contacted me. The most recent case is a neighbour who has no idea where he got the petrol because as Deputy Fitzmaurice said, he moves around but he knows the problem has to do with petrol stretching. The insurance company sent the adjustor to see him but the adjuster ruled it out and said it was not covered.

Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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Yes.

Paschal Mooney (Fianna Fail)
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He is now stuck with a bill for €2,500 to €3,000.

John O'Mahony (Mayo, Fine Gael)
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Even though he has comprehensive insurance.

Paschal Mooney (Fianna Fail)
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Even though he has comprehensive insurance. He is not covered. I do not know where the witnesses are getting their figures from or the criteria-----

Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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I can give the witnesses the details in five minutes if they want them.

Paschal Mooney (Fianna Fail)
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The insurance industry here has a great deal to answer for, and it is not good enough to come in here and roll out those statistics when we know the reality on the ground is totally different.

John O'Mahony (Mayo, Fine Gael)
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Mr. Thompson might respond to the contributions of the three members.

Mr. Kevin Thompson:

Following on from the theme set by the Deputies, to respond to Deputy Dooley on the claims processing, our sector is a regulated sector so we would follow the consumer protection code in terms of the rules laid down by the Central Bank of Ireland on our duties and administrating claims. Chapter 7 of that code is explicit and I would argue strongly that our members follow that to the letter in the interests of the consumer.

Part of that consumer protection code highlights that a regulated entity must endeavour to verify and validate a claim received from a claimant prior to making a decision on its outcome. There is a duty on insurers, therefore, to make sure we pay valid claims, and that we verify that claims are valid. We sympathise with the consumers who have been affected by this petrol stretching issue but we have an obligation to make sure that we validate claims in a correct manner.

Regarding the specific examples the members got from their constituents, I can only stand by the figures we have been given, and those figures are correct. We have surveyed our members. We have paid 600 claims. I come back to my earlier comment in respect of the way our members compete and how the market is different. Different policies will have different levels of cover-----

Paschal Mooney (Fianna Fail)
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And there are different companies adopting different policies.

Mr. Kevin Thompson:

-----based on the terms and conditions of their policies. As I said, people often look for their insurance product in terms of price. They should look beyond price. They should look at price, the service that is provided by the insurer and what they are actually getting for that price. That is how the market works.

Where people have comprehensive cover, we have surveyed our members and we know that 600 have been paid and 250 are in the pipeline. We will come back to the members and give them the figures in respect of the numbers that have been declined but in terms of declinatures, our members will have received claims in regard to that but ultimately they are third party policies. We cannot do that. That would be flagged as a decline, so there would be elements behind that. We will come back on that.

Timmy Dooley (Clare, Fianna Fail)
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To answer my question Mr. Thompson might tabulate for us the number of claims paid out that were in a comprehensive plan, the number in a comprehensive plan that were not paid out, and the number who had third party cover that were denied compensation for that reason. What we really want to know are the reasons those with comprehensive cover were declined.

John O'Mahony (Mayo, Fine Gael)
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I agree with Deputy Dooley. Effectively, it is an analysis of the 600 claims. If we have evidence that some comprehensive insurance claims have not been paid it is important that the witnesses would provide us with that detail so that we can get further information. They can do that through the clerk to allow us circulate it to members.

Michelle Mulherin (Mayo, Fine Gael)
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I welcome the witnesses. On the insurance side, I have attended public meetings and we have had representatives of the Revenue Commissioners here on this issue. Many people have fallen between two stools and they have described the cost of repairing one or even two vehicles but we should be clear about the messages we send to people, and that includes the representatives present from the insurance industry. As politicians we often say that the insurance company should be doing this but some of the conversations I have heard at public meetings are misleading people because they give the impression that the company will cover a policy even where there is an exclusion clause, the cover is third party only or there is some other reason people are not covered. Yet, it must be clearly specified as an item of cover within the policy for the company to provide cover. That is the reality.

In some instances the insurance company is doing what it is legally entitled to do. My issue is where insurance companies have been dragging their heels for months and not making a call on whether they will indemnify under a policy where it has been established that petrol stretching took place. I am aware of such cases and I believe it is wrong. We have to accept that the insurance company is within its legal rights to make a call on a policy but when we go beyond that we are talking about a fund to which they may contribute, such as the uninsured motorists' fund.

Every time we have a conservation, no more than the conservation we have had with the Revenue Commissioners telling us that they are testing fuel, and so on, it gives people hope that something will come out of the investigations. We know there are huge problems in respect of petrol stretching. It is also an issue for the Consumers Association of Ireland.

It would seem that Customs and Excise has paper trails, but it does not have forensic evidence. The damage happens after the fact. The issue is a matter of quality control. We need to be clear about the fund that is mooted. Will it be a one off sum of money to deal with petrol stretching for a defined period?. Is it envisaged that it will be generated from a levy on insurance policies? I would like to think that consumers should be able to buy petrol at a forecourt, without discovering months later that their engine has been destroyed. There is no evidence that the petrol has been tampered with because of the time-lag in the discovery of the damage to the engine. Clearly the problem is that there is no evidence.

There needs to be quality control. The problem does not begin at the filling stations as I suggest the money is made by the distributors. It is in the distributors' interest that there is consumer confidence in the product. Consumers face a crisis in confidence in where they can buy fuel. That is a very strange scenario in our consumer driven society - that people cannot be assured of the quality of a product.

How much engagement have people had with the organisation? How many people have not been compensated? The issue of public liability was raised. Clearly motorists are going to their insurers and asking them to pay out on their individual insurance policy. The problem is with the product sold by the retailer but it could be caused further up the supply chain. It is important that we establish how many people have been compensated under the filling station's public liability insurance. An impression was given previously that things would be put right under their insurance. We know that there is a requirement to provide evidence to claim under any insurance policy. Clearly, there is a lack of evidence.

People have been left high and dry. There are false dawns about what we can do, when notwithstanding all the investigations that have gone on, it would be very difficult for anybody to pursue this in a court of law, owing to lack of evidence and problems with the chain of evidence.

We must be very clear about what can be done and how this problem will be dealt with in the future. At a previous meeting with the Revenue Commissioners I suggested we should have an independent body, funded by the distributors, responsible for quality control, in order that in the future people can be assured of the quality of the fuel. The representative of the Consumers Association of Ireland suggested that consideration be given to the establishment of a fund to be created from levies paid directly by the industry and from which compensation can be managed and paid. Is he suggesting a once-off fund or the creation of a fund going forward? I presume he is not suggesting a fund going forward because this is an issue that we clearly have to hit on the head.

John O'Mahony (Mayo, Fine Gael)
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In addition, Deputy Dooley has requested that an analysis of the claims be addressed.

In respect of the public liability insurance, could we have information on whether the insurers have made payments to motorists under the public liability insurance of the forecourt? That information would be helpful.

Mr. Dermott Jewell:

I will make a number of brief comments. I suggest the creation of a once-off fund, as is needed currently to deal with this problem. In response to one of the Deputy's questions on how many cases are involved, I will not lie as I do not know the answer. The problem is that there is no significant evidence or detail of exactly how many people are at a loss but I know, as I mentioned earlier, that from the small number of approximately 300 people who are officially listed with the Garda Síochána, the damage runs in the region of €1.25 million to €1.5 million. Those people need to access some fund.

One of the problems is that there are always terms and conditions. The burden of proof needs to be reversed in this situation. The burden of proof must be placed on the petrol distribution companies and the garages so that they must prove that they did not sell contaminated petrol. Most importantly, if we are to look at an insurance product, as a consumer I would never have thought I needed to ask an insurance company whether I would be covered in the event of fuel contamination. It would never have entered my mind that it might happen. That is the problem.

John O'Mahony (Mayo, Fine Gael)
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I thank the witnesses for appearing before the joint committee. May I ask them to follow up with the information that is required?

Michelle Mulherin (Mayo, Fine Gael)
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Chairman, I would appreciate if the representatives from Insurance Ireland could respond briefly to the points I raised.

Mr. Kevin Thompson:

We will endeavour to do our best to collate the data and send it to the committee secretariat.

Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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Would Mr. Thompson be able to take up the matter with the insurance providers if we were to forward cases where the complainants had comprehensive insurance for years?

Mr. Kevin Thompson:

We have insurance information service lines, so people can contact that service the purpose of which is to give consumers advice on products.

John O'Mahony (Mayo, Fine Gael)
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When the secretariat gets the information it will be circulated to the members present today.