Oireachtas Joint and Select Committees
Thursday, 1 December 2016
Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach
Costs of Business Insurance: Discussion
9:30 am
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We will now resume in public session. We are looking at the cost of business insurance. I welcome Mr. Padraig Cribben, chief executive officer with the Vintners Federation of Ireland and Mr. Donall O'Keeffe, chief executive officer with the Licensed Vintners Association. Deputies must attend the Dáil for a vote and 12.45 p.m. and the Senators must go to their business at 1.30 p.m. I ask the witnesses to ensure their mobile phones are turned off. I wish to advise the witnesses 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 a witness is directed by the committee to cease giving evidence in regard to a particular matter and continues to do so, the witness is entitled thereafter only to a qualified privilege in respect of their evidence. Witnesses 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 invite Mr. Cribben to make his opening statement.
Mr. Padraig Cribben:
I thank the Chairman and the members for the invitation to make the presentation today. The Vintners Federation of Ireland represent publicans in the 25 counties outside of Dublin. We currently have a membership of 4,000. The vast majority of these 4,000 outlets are family owned, family run, small businesses. Pubs must renew their licence each year and the fee payable is based on six different licence bands. Revenue issue figures showing the number of pubs in each band and they are as follows. A total of 53% of pubs with a turnover of under €190,500 per annum are in that licence band. Some 24% of pubs are in the licence band of €190,500 to €380,999. This is 77% of all pubs in the State have a turnover from alcohol of less than €4,000 per week. In the remaining four licence bands of €381,000 to €635,000 there are 10% of pubs, the €635,000 to €952,499 turnover band has 6%, the €952,500 to €1.27 million turnover band has 3% and there is a modest 4% of pubs that turn over more than €1.27 million. These figures show a vast accumulation of very small businesses where the control of every element of cost becomes critical.
Over the past decade alcohol sales in pubs has fallen by a third for a myriad of reasons that are not necessary to be recounted here. This reduction in sales has resulted in the above set of statistics. Notwithstanding these figures, pubs are still a major source of employment right across the country with in excess of 50,000 people currently in gainful employment in the sector. Over the past 12 to 18 months we have been increasingly exercised by calls from members in relation to significant increases in insurance. With that in mind we conducted a wide-spread survey of members in September of this year and the findings are quite instructive. A total of 88.3% of our members have seen an increase in insurance in the past two years with 38.5% of members seeing an increase of between 10% and 20% in the last 12 months. Increases of between 20% and 40% were seen by 39.5% of our members in the last 12 months and 12% have seen increases in excess of 40%. More frighteningly, 37% of members have indicated that they have experienced significant problems in insuring their business.
Like all businesses publicans have many costs to contend with and we asked our members to rank the costs that currently cause them most concern. The top three in order of concern were: business insurance, commercial rates and TV subscriptions. The third concern may surprise people who do not understand what happens in pubs but TV subscriptions can cost up to €1,000 per month. Clearly, business insurance is a cause of major concern within the trade and we have quite a bit of anecdotal evidence of some members experiencing extreme difficulty in getting adequate cover and some of these in situations where there would appear to be no enhanced risk from previous years. Over the past number of years we have seen a number of insurance companies declining to even look at or quote for business in the sector.
We can speculate forever as to the reasons for the current high cost of insurance and until there is more transparency within the sector it will remain mere speculation. We do know, however, that in Ireland the cost of settling claims is significantly higher than in most other European countries. We know that legal costs play a very big part in the total cost of a claim and we know that the collapse of various insurance companies has led to various increases in premium.
So what needs to be done? While the Vintners Federation of Ireland does not believe that it has the silver bullet solution, we believe addressing the following measures would go a long way towards bringing a level of sense back into the cost of insurance for businesses. Enhanced powers could be given to the Personal Injuries Assessment Board, PIAB, to determine liability on all public liability claims with very limited exceptions. In particular, all detail upon which a claim is based must be produced at the PIAB stage. An appeal from the PIAB stage should be such that it is only on a point of law. There should be no legal fees for either side at PIAB. There should be a review of the Book of Quantum with a view to bringing it into line with European norms. We know there are a significant number of fraudulent claims and there should be enhanced penalties for people found guilty of bringing fraudulent claims. Any alleged incident or accident must be reported to the company where it is alleged to have happened within 30 days of its occurrence. If the current position is allowed to prevail more businesses will close simply because they cannot access insurance or cannot afford it. There is still a window of opportunity to bring meaningful reforms that will allow businesses to survive and to continue to give employment but that window of opportunity is fast closing. Action is urgently required. I thank the Chairman for the opportunity and we are prepared to take any questions members may have.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I thank Mr. Cribben. I now invite Mr. Donall O'Keeffe to make his opening statement.
Mr. Donall O'Keeffe:
I would like to begin by thanking the Chairman and members for the invitation to speak to the committee on the important topic of the cost of business insurance. The Licensed Vintners Association, LVA, is the representative organisation for the publicans of Dublin. We have some 600 members which is over 80% of the pubs in our capital city. Collectively our members sell 30% of the alcohol in the Irish on-trade and employ 12,000 staff.
In simple terms there are three elements involved in business insurance; property cover, employer’s liability and public liability. The LVA’s concerns are entirely focused on the issue of public liability covering the premiums and the cost of claims, as we understand that such claims account for 89% of all liability claims in the licensed trade. To provide the committee with some flavour on the nature of public liability claims in our sector our analysis shows that some 71% of these claims are related to slips, trips and falls.
The LVA surveyed its members in September on their experience of the cost of insurance renewal over the past three years, 2014 to date. The figures are stark. Average premiums paid in 2014 were more than €16,670 per annum, rising to €20,463 per annum in 2015 and rising again to almost €25,000 per annum in 2016. This is an average annual increase of 21% and 22% in the previous two years. These figures disguise the huge range in premiums paid by pubs across Dublin with many of our suburban members paying €20,000 to €25,000 annually, which is a very high figure and increasing and increasing by 20% annually. That late bar scene, however, faces enormous insurance bills, with many of these businesses facing annual premiums in the €50,000 to €100,000 range. One of our members reported an insurance premium of €145,000, up from €80,000 two years previously. It is clear that insurance premiums are a very significant cost for the Dublin licensed trade and that premiums are escalating at an unsustainable pace. It is hampering the competitiveness of our industry and is threatening the viability of some pubs. We have had the shocking case with one of our members where a customer was awarded €90,000 for a dislocated thumb as a result of a fall on stairs. The impact of this claim was that the insurance premium doubled to €150,000 per annum, which is not sustainable or viable. The nightclub part of his business had to be closed with the loss of 15 full-time jobs.
The Dublin licensed trade has a particular concern with claimants having up to two years to lodge a claim. This is completely excessive as it makes it difficult for the business to prepare a defence as staff and/or customer witness statements cannot be obtained at that stage and CCTV footage would no longer be available.
On the availability of statistics, we understand around 20% of claims are settled by the PIAB and that a further 5% to 10% actually end up in court. This means that 70% to 75% of claims are settled directly between insurers and claimants. There is absolutely no information available on the majority of public liability claim settlements. This is simply unacceptable in a modern economy and a real deterrent for new entrants to the insurance market. The Government needs to conduct an independent economic analysis of the cost drivers of escalating public liability insurance premiums to bring greater transparency to the opaque insurance market and allow both regulators and the public to understand the factors and the extent to which they contribute to higher premiums. It is not possible to regulate for a better functioning insurance market without understanding and quantifying the cost drivers. For example, we note from the PIAB that the trends in the past three years, from 2013 to 2015, show a 6% increase in the number of public liability insurance claims to 8,906, with the average award being very stable at approximately €25,000. These figures do not support the view that higher claim costs are causing the hikes in premiums. Others point to legal costs as being a factor, but there is no such statistical evidence available. Absolute clarity on the cost drivers is, therefore, needed. The Government needs to legislate for the mandatory provision of statistical information on public liability insurance claims, to include the number of injury claims; the nature of these claims; the settlements paid; the legal, medical and other fees identified; and the duration from claim lodgment to settlement. There should be a publicly available national claims register to provide for transparency on awards, costs and claimant details to minimise the risk of repeated claims by individuals.
The Government should review the functioning of the PIAB to ensure that at least 75% of public liability insurance claims are settled by it without legal representation and oblige all claimants to notify the business concerned with full details of their claims with 30 days of an incident occurring. It should also review the book of quantum which include all settled claims data, not just PIAB awards, and benchmark awards intentionally to ensure competitiveness from a business perspective. It should also ensure the Judiciary consistently applies the book of quantum guidelines.
We welcome the committee's focus on this important issue and are available to answer questions members may have.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The delegates' recommendations for oversight of the insurance industry run along the same lines as those made in our report on the motor insurance industry, bar one, the recommendation relating to the PIAB and legal costs. Generally, the recommendations are the same, which is welcome. Have the Vintners' Association of Ireland and the Licensed Vintners Association made submissions to the Minister of State, Deputy Eoghan Murphy, on what is happening in their trade? They are involved in the retail trade, but the problems in the motor industry are similar.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The delegates do not make reference to this here, but is it their experience that claims are often settled without them about knowing it?
Mr. Padraig Cribben:
Absolutely, that is one of the big bugbears of members and nothing new. Before I became involved in this business, I managed other businesses for 30-odd years and had the same problem for 30 years. One had to extract information from insurers and very often found when one went looking for information on a claim that it had been settled. It is an age-old problem and a major source of concern for our members which do not have an input. Even in cases in which they have what they believe is absolute evidence such as CCTV evidence contradicting some of the claims made, they find that they are settled.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Have the associations engaged directly with the insurance companies on this issue?
Mr. Donall O'Keeffe:
In the past couple of months we met Insurance Ireland, the three largest insurance companies and some of the largest brokers in Dublin. The insurance companies' perspective is that claims are always considered on case by case basis. They are very concerned that the outcome of a court case is uncertain. Average wards can be extraordinarily high. They take the view, rightly or wrongly, that it is better to settle and have a defined outcome with which they can rather than take the risk of going to court. Our concerns are the same as those expressed by Mr. Cribben and the Brokers Federation of Ireland.
Let me make a couple of other points. There are significant costs involved in preparing a defence, including the time of the owner and management, in seeking legal advice, preparing the file, talking to staff and taking witness statements, all of which can be for naught. Usually, when a publican goes to that much trouble, it is because he or she genuinely believes he or she has a defendable case, only to discover, typically within the week of the court hearing after the case has rumbled on for two years, that it has been settled without discussion with him or her and his or her views being taken into account. It is extremely frustrating.
Rose Conway Walsh (Sinn Fein)
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I thank the delegates for coming. As I used to run a pub in London, I know a little about bars. It is hugely important that the delegates are here and that we hear from them because while we have focused on motor insurance, I have always said there are the same fundamental conditions in other areas of the non-life insurance market. There have been increases in the cost of insurance for business and health cover. It is inevitable that we will consider the pressures business is under and the model being operated. The work we have done on the motor insurance sector should have a positive impact. Claims being settled without reference to the business paying the premium has to stop. Do the delegates think the insurance industry which provides cover for business has the characteristics of a cartel?
Mr. Donall O'Keeffe:
Certainly from a Dublin perspective, only one company is operating in the insurance market for the licensed trade. A lot of business is placed via brokers in London, particularly for those involved in the late night scene, but it is not an industry that is characterised by the high number of players actively involved and competing in it.
Mr. Padraig Cribben:
Twelve months ago we felt so strongly that there was so little competition in the Irish market that we engaged with a firm of brokers here to specifically look at almost bespoke policies for the licensed trade using underwriters in London. We have probably since been able through that medium to help in excess of 10% of our members to find alternative insurance providers. I am not so sure that there is a cartel, but what I am sure about is that there is very little appetite within many of the insurance companies operating in Ireland to provide insurance cover for those involved in the trade.
Rose Conway Walsh (Sinn Fein)
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Today we are focusing on businesses as claimants. Will the two associations tell us about their experiences as claimants? Has there been any change in the attitude of insurers when ones make a claim, for example, for damage caused by fire or flooding? Are there ongoing concerns that insurers are reluctant to pay out and seeking not to pay based on technicalities?
Mr. Donall O'Keeffe:
Thankfully, there has been a low level of exposure to catastrophic claims in Dublin. A small number of very large premises have burnt down. In those scenarios, cases were handled pretty well. In 2011, there was a big issue with flood damage. The experience of our members in that scenario depended very much on which companies they were insured with. Some companies are very thorough, professional and fair while others have sought to exploit what we consider to be loopholes and various clauses in contracts to minimise what they pay out.
While property insurance can be potentially catastrophic for a business, this is not where our concerns lie. Our concerns are centred on public liability. Public liability claims are overwhelmingly the main types of claims our members face from day to day. The property side and, in fairness, the employer liability side are generally very contained, but the public liability side is where all the pressure is.
Mr. Padraig Cribben:
We do not see major problems in that area. One of the things we have noticed is that a number of insurance companies write into their small print that if one does not notify them as soon as one is aware of any potential incident, they will not cover the claim. Who reads the small print in an insurance policy document? This was a bigger problem with some of the people who were in the business than those who are currently in the business. This matter has to be managed quite carefully. I know of a case from some time ago in which there was an incident that did not seem to be anything more than an incident. It was not reported but it turned into something very big. The pub was not covered. The insurance company refused cover for what turned out to be a six-figure sum. Obviously, this meant it was curtains for the business.
Flood insurance apart, the property insurance side is not necessarily a big problem. Mr. Jerry O'Dea has some anecdotal evidence to give.
Mr. Jerry O'Dea:
I am Jerry O'Dea and I am here in my capacity as secretary of the Vintners Federation of Ireland. It is not an executive position. I am also a publican in Limerick. To answer the question directly, there is not a major problem with claims being processed or contested, as Mr. O'Keeffe and Mr. Cribben have alluded to; our main issue seems to be public liability. There will always be problems with claims from property but that is not the big issue. I can give many anecdotal stories but they may not be relevant for today. In my case, for example, our business has been in the family for three generations. Up to two years or 16 months ago, we had been with the same major insurance company for 30 to 35 years. When it came to renewing the insurance policy, despite our not having made a claim in the previous 15 years, the company declined to quote for the business. Essentially, everybody was put into the one basket. As Mr. O'Keeffe mentioned, the company was just not interested in taking on any business in the area. This goes back to the public liability problem that exists.
Rose Conway Walsh (Sinn Fein)
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The Licensed Vintners Association makes a good point that, despite what we might hear, there is actually very little evidence that higher claims costs or increases in legal fees are leading to higher premiums. I am not saying these are not factors but there has been a dramatic increase in premiums. The increase cannot be attributed to them, at least not in the whole. Has the delegation met Insurance Ireland or the Central Bank to question them about their business model or the effect on the decreased dividends from their investments?
Mr. Padraig Cribben:
We have not met Insurance Ireland but I suspect that if we were to do so along the lines referred to by the Senator, we would be as wise after the meeting as before it. This is where there is a need for some watchdog with teeth to get behind what is actually driving the costs. That is the only way we can proceed. Unless we know what is driving the costs, we cannot actually decide how to address them. Again, I suspect meetings of the kind proposed with organisations such as ourselves are pretty futile.
Rose Conway Walsh (Sinn Fein)
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That is exactly what we are coming across in the motor insurance sector. Has Mr. O'Keeffe read the motor insurance report that we produced?
Rose Conway Walsh (Sinn Fein)
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He will then have identified some relevant comments within it that may be helpful.
Mr. Donall O'Keeffe:
We met Insurance Ireland. It was the first meeting we had when we started to explore the insurance issue in late August or early September. The insurance industry is inclined to point to the legal expenses and the level of the awards as the core problems while the legal people point to the insurance industry, the lack of competition and escalating premiums as the core problems. Everybody is alluding to false and exaggerated claims as issues. Specifically in the context of the insurance industry, there is no doubt that solvency, low interest rates and low market returns are affecting its finances but this element is not core to the business of insurance, as in managing premiums and dealing with claims.
Our first request to this committee and the Government is that there be an economic analysis to quantify exactly which factors are driving the premium rises. Is it awards? This does not seem to be the case. Is it the number of awards, as in an escalating claims culture? We do not believe so. Is it the legal costs? We have no clarity on it. Is it exaggerated, false or bumped-up claims? Nobody seems to have information on that or, at least, there is none that we can lay our hands on. The lack of clarity or opaqueness that is applying in the market is a fundamental problem. Certainly, no insurance company from outside the country will look into a market in which one cannot figure out the dynamics and invest heavily. There is a very big demand regarding solvency capital requirements. The companies will not take a risk in this regard when they cannot understand the dynamics. An economic study, independent of the industry, is required to quantify the drivers of costs is the single most urgent step that needs to be taken.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I have to attend a vote in the Dáil. Excuse me.
Rose Conway Walsh (Sinn Fein)
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I fully agree with the focus on the need to empower the Injuries Board. That is a key demand in the report on motor insurance but it obviously has implications for the delegation. There is a fine line to thread here. For example, when we look at the book of quantum and the delegates' recommendations, we note the desire to bring the book into line with European norms. The book has been updated but it cannot be brought into line with that of any other country as it is simply a record of the claims. Likewise, making a related suggestion on the right of appeal or to legal representation within the Injuries Board raises many questions for me. In general terms, it would be legally dubious. There may be points to be clarified in this regard.
Mr. Padraig Cribben:
We have a similar situation with the old Employment Appeals Tribunal. We are not suggesting that one cannot have legal representation at the Injuries Board but that, if one has, it is one's decision and also one's cost. If one goes into the Employment Appeals Tribunal, one does not get costs there. We are certainly not suggesting one cannot have a lawyer, barrister or senior counsel, if one so wishes, but that one must pay the cost, including out of one's award, if one gets one.
Rose Conway Walsh (Sinn Fein)
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I accept the clarification.
Mr. Donall O'Keeffe:
The exact same applies to ourselves.
There was another issue, and it has not been alluded to in much detail. All information pertinent to the claim should be lodged with the Injuries Board at the time of making the claim. If the matter subsequently goes to court, where the award is not accepted or either side contests it, no further or new information can be introduced at that stage. In fairness to the Injuries Board, it is very difficult to adjudicate on an award if there are no medical reports and no loss-of-income statements. How does one go about calculating the value of the award in that scenario? There is a lot of opaqueness associated with what is happening in this regard. That is facilitating the involvement of legal advisers. If one were suspicious, one would worry about why that is happening. Surely the information should be lodged at the start of the making of the claim. It must be made available for the court in any event if the case ends up in court.
Rose Conway Walsh (Sinn Fein)
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I am extremely concerned about the future of pubs, particularly rural pubs, and the part they play in the community in addressing isolation and social exclusion.
Burdens are being put on rural pubs, which have almost been forgotten about, in terms of trying to meet all the overheads. Mr. Cribben cited rates, the cost of which for pubs that do not have a high turnover is deplorable because they are based on the square footage of the premises. I cannot see how pubs in rural Ireland will survive. If we were to do a survey of publicans across rural Ireland, we would find that most of them want to get out of the game. These pubs play a huge role, not just in serving drinks to people. It is the social inclusion aspect that concerns me. That is why the members of this committee should give a commitment to do everything we can to address the rising and unexplained costs across the board, not only in terms of insurance but also other costs such as television licensing and so on. This committee will continue to work with the witnesses and the recommendations in the reports from both organisations are robust and should be implemented immediately.
Gerry Horkan (Fianna Fail)
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I am conscious that Senator Conway-Walsh, Senator O'Donnell and myself must attend the debate on the Finance Bill at 1.30 p.m. but we will try to continue this discussion for as long as possible, despite the fact that we have been here all morning. It is a very important topic and we want to give it as much of a hearing as possible but I ask contributors to ask questions rather than make statements. I call Senator Paddy Burke.
Paddy Burke (Fine Gael)
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I welcome the members of the deputations. Four areas were mentioned, namely, the cost of the awards, the number of awards, the legal costs and the false claims. Who do the witnesses believe should correlate that information to determine which of those factors is the reason for the increasing costs or if it a combination of all of them? I know a publican whose insurance cost annually was in the region of €27,000 but in the past 12 months, that figure has increased to €67,000. That is an enormous increase. It is a pub in a commercial town that offers food. It does not have a very late bar but it has had a number of claims. An increase to €67,000 is enormous and that is probably put down to the claims.
Have the witnesses examined the new book of quantum published recently to see how it fares in terms of awards made arising from claims in the trade business? Publicans will not be able to justify those costs, which are probably a bigger charge than the rent of the property, rates or both combined. With regard to motor insurance, particularly in terms of the haulage business, the Government decided to reduce road tax for hauliers but following that the insurance companies increased their costs. The insurance companies tune in to these issues and I would be interested to know how we can help with regard to going through those, whether it is the awards, the costs, the legal expenses or whatever, and how all that information can be brought together to put pressure on the insurance companies.
Mr. Donall O'Keeffe:
There are two obvious options. The Regulator is the Central Bank. The Regulator should have the wherewithal to carry out that study and publish the findings but, ultimately, it is a function and responsibility of the Department of Finance. The Minister could mandate that such a study be carried out.
The key point is that an independent evaluation would bring clarity in terms of the elements driving up the cost of premiums because a series of bodies and sectors are pointing at each other. The insurance companies are blaming the legal eagles and the legal eagles are blaming the insurance companies. Medical costs, false claims and the high level of awards are coming into play but nobody can say how much of the costs is attributable to each element and without that, we are all in the dark. I would assume the Central Bank is the obvious body to do this but also the Department of Finance.
Mr. Padraig Cribben:
If there is that lack of clarity, there is probably scope for all the above to be creaming, so to speak, because nobody knows who is creaming. As Mr. O'Keeffe said, the only people who can do it is a regulatory authority, probably the Central Bank but in the absence of the Regulator doing it, there is a political imperative on the Department of Finance to take action.
The kind of case the Senator cited, which I may not be unfamiliar with in terms of the detail, will close businesses. While that is a relatively extreme case, it is not unique.
To go back to the point made by Senator Conway-Walsh about the tight margins, 52% or 53% of all pubs in the country have a turnover of less than €190,000. Taking a midway point of approximately €140,000 or €150,000, every increase of €1,000 or €2,000 in cost is a nail in the coffin. In terms of somebody whose insurance premium increases from €6,000 to €8,000, when other things are taken into account that extra €2,000 is a cause for extreme concern, particularly when businesses have such a low turnover. That is a turnover level and when that is brought back to gross profit and one starts looking at the cost base and other costs that have been increasing, a 25% increase on an €8,000 insurance bill will bring that up to €10,000. That €2,000 just may be the €2,000 that is not available.
Paddy Burke (Fine Gael)
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Mr. Cribben is putting the blame fairly and squarely on the Department of Finance and particularly on the Central Bank, which is now allowing competition in terms of quoting for the trade or placing itself in an area of the country to allow much more competition.
Gerry Horkan (Fianna Fail)
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I am not sure that is a fair conclusion.
Paddy Burke (Fine Gael)
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We asked similar questions of the Central Bank representatives when they were before this committee-----
Gerry Horkan (Fianna Fail)
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I remind members that the Governor of the Central Bank will be before the committee on Tuesday, 20 December-----
Paddy Burke (Fine Gael)
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We might be able to put-----
Gerry Horkan (Fianna Fail)
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-----and we might raise with him the concerns expressed at this meeting along with other concerns.
Paddy Burke (Fine Gael)
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-----some questions to him.
Mr. Padraig Cribben:
From our perspective, it is not a question of apportioning blame. It is a question of asking where the answers can be found. The answers must be found with the Regulator and, if not, there is a political imperative on the Department of Finance. It is essential that we get answers because unless we get answers and clarity, we do not know the problem we are tackling and if we do not know the problem we are tackling, we will not get a solution.
Gerry Horkan (Fianna Fail)
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That is a fair point and it is the very point we made throughout six or seven days of hearings on the insurance industry, and it is reflected in the report on motor insurance. We just do not know. Mr. O'Keeffe's submission alluded to the 20% that goes to the Personal Injuries Assessment Board, PIAB, the 10% that goes to the courts and the 70% of which we have zero visibility. Would Mr. Gleeson like to come in on that point?
Mr. John Gleeson:
I am vice chairman of the Licensed Vintners Association, LVA. We own a family-run pub in suburban Dublin and we have found there is lack of competition when we seek a quote every year. We have had no public liability claims in the past ten years but our insurance is increasing by at least 20% year on year. We deal through a broker. The broker goes to the market. One big player has at least 80% of the Dublin pub market, so there is a lack of competition. One can go through the United Kingdom where sometimes one might be dealing with an agency that deals with lower A rated companies. The basic problem is a lack of competition.
The only way to drive competition is to provide more clarity in the market. If there is competition, one can see exactly how claims are settled, the volume of claims and what is happening in the market. The Government needs to legislate for the mandatory provision of statistical information regarding public liability. The more information that is gathered, the more chance of outside companies coming in to compete in Dublin and the rest of the country. That is where we are coming from.
Gerry Horkan (Fianna Fail)
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The committee was informed that in a typical year, 8% of motor insurance premia paid out and 92% of people were contributing and not getting anything back. What is the claims rate? Some pubs might have two or three claims while others might have none for years. We do not have an idea of the percentage of claims relating to pubs.
Kieran O'Donnell (Fine Gael)
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How many pubs are threatened by the increase in insurance premia?
Kieran O'Donnell (Fine Gael)
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Have any pubs been unable to secure insurance?
Mr. Padraig Cribben:
I have no direct evidence but I have no doubt that there have. The last thing somebody will tell you is, "I could not get insurance so I am operating without it". That is not something we would advise any vintner to do. I am aware of one or two publicans who had extreme difficulty and it was very much a last minute job for them to get cover.
Kieran O'Donnell (Fine Gael)
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That means more than one in three pubs is having extreme difficulty accessing insurance.
Kieran O'Donnell (Fine Gael)
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I refer to the two publicans who are operating in a dual capacity. I know Mr. O'Dea from Limerick. What are their priorities to ensure their businesses continue to function and they continue to employ people?
Mr. Jerry O'Dea:
Mr. O'Keeffe and Mr. Cribben both alluded to the issue of public liability and the lack of information. An insurer who may want to come into the market does not know what he is dealing with. I outlined my own story earlier. There was absolutely no reason other than the company wanting to reduce its exposure. It is like every publican is the same basket. Senator Burke mentioned that somebody who had three claims over the past number of years was suddenly faced with a 300% increase in his insurance premium. That might be extreme but, fundamentally, the lack of information as to what is driving the cost is preventing other insurers getting interested in the market.
Mr. John Gleeson:
There is also a provision whereby somebody can claim up to two years after the incident. Most pubs, including ours, have 30 days CCTV footage at a maximum and then it is gone. If someone comes in and says, "I fell in your place four months ago", we have no evidence and the claim can still proceed, even though we have no CCTV footage. A 30-day rule should be easy enough to implement.
Kieran O'Donnell (Fine Gael)
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The committee's top priority is a national database complied by the CSO and I hope that will feed into making significant strides.
Gerry Horkan (Fianna Fail)
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Addressing the two-year provision seems to be most obvious and easy quick fix. Nobody would get away with coming in 23 months and 30 days after an incident to make a claim in any other business or industry. A week, a fortnight or 30 days would be adequate.
The committee did not appreciate the lack of competition. There are technically 24 operators in the motor insurance market but, in reality, there are six. We are being told that in Dublin - I presume it is the same in the rest of the country - that there is a predominant single insurer. The awards, legal costs, the number of fraudulent claims are also issues. An award of €90,000 for a dislocated thumb is an issue but I am not sure it reflects the injury involved. Insurance companies highlight the lack of predictability in claims. Different courts award different amounts for the same or similar injuries.
I thank both delegations for their written submissions in advance of the meeting. We need the anecdotal instances of pubs without a claim for ten or 15 years being declined by their existing insurer or who are facing massive increases with no transparency and no indication as to why. The PIAB and court figures have not changed. In theory, it is down to the insurance companies making money out of the pubs to cover other losses or many claims being settled for higher amounts than they previously either in terms of the volume of claims or the awards. Do the two vintners have other stories or evidence that they would like to share with the committee? The committee should write a letter to the Minister of State at the Department of Finance, Deputy Eoghan Murphy, outlining our concerns about business insurance with particular reference to the vintners, both rural and urban, together with copies of the two submissions and a transcript of the meeting. Is that agreed? Agreed.
Is there anything further the delegations would like to add for the committee and the Minister of State?
Gerry Horkan (Fianna Fail)
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To make the insurance market more attractive.
Mr. Jerry O'Dea:
Many of the stories are anecdotal but there is no smoke without fire. I know of one case where a claim was lodged after 15 months. The vintner had CCTV footage, having filed away disks. The person apparently was not even on the premises at the time of the event. A year and a half later, one is trying to find evidence, eyewitnesses and staff. Our business is transient when it comes to staff. For example, people work part time in pubs while attending college and so on. The two-year provision is a problem for vintners. Somebody can come along two years after the event and say, "I fell". If I do not have CCTV footage or any other evidence, the claim will be settled by the insurance company and I will not know why, how or for how much.
Gerry Horkan (Fianna Fail)
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Mr. Cribben referred to turnover figures for alcohol. Is that solely alcohol sales per pub or are food, off licence drinks, crisps, etc., included?
Gerry Horkan (Fianna Fail)
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And not soft drinks?
Mr. Padraig Cribben:
Soft drinks are included. I would like to make just one other point which sometimes gets lost in all of this. Because of the pressure that guys are under - not just pubs, but all small businesses - if somebody comes into the market with insurance they do not look to see if these guys are triple-A, double-A or A-rated. In the last six weeks we have seen an insurer who came into the market and has been here for some time, which was regulated in Lichtenstein. It has gone belly-up, as they say. There were one or two brokers around the country using this particular underwriter. Whatever premium they have paid they have no cover for that period. There is a downside, therefore, in that unless we tightly regulate who is insuring them in the country, people under pressure will go to, let us call it, the lowest common denominator that will give them insurance. It may turn out, however, to be a false hope.
Gerry Horkan (Fianna Fail)
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I thank the witnesses for appearing before the committee. I wish to echo what was said earlier. The pub trade, both urban and rural, is a vital part of all our communities. I value the work that all the witnesses are doing in Dublin and elsewhere across the country. It is a meeting place which provides an opportunity for people to gather together, thus combatting both rural and urban isolation, which is a big issue for many people. People can meet in the pub to celebrate or commiserate. It provides a service without which many communities would be worse off. I wish therefore to thank the witnesses for their contribution to Irish life and society. I thank them for their submissions and contributions today. We will formulate a letter to the Minister of State, Deputy Eoghan Murphy, with the transcript of today's meeting and a copy of both submissions.
I also wish to thank members of the committee and on that note we will now adjourn until 6 December 2016 at 2 p.m.