Tuesday, 17 December 2019
I will not take any names yet. I want Deputies to listen carefully. Before we begin Leaders' Questions, I remind Members of the time limits for this item set out in Standing Order 29. As the Members are well aware, the Standing Order allows three minutes for the initial question and response and one minute for each supplementary question and response. As I stated on the previous occasion, the clocks are strategically located.
There was quite a bit of criticism at the meeting of the Business Committee on Thursday last, which I chaired. I have a responsibility to enforce these limits. I ask those who are posing the questions to please respect the time limits because those representing the various groups of all shades in the Business Committee were quite critical. I ask Members to bear that in mind.
Before we come to the Order of Business, I remind other speakers that I will try to ensure that we deal with it as set out in Standing Orders so that we do not have Second Stage speeches or questions about constituency matters. I call on Deputy Micheál Martin. I am quite sure he will lead by example. Members should remember that in the past it was two minutes and a minute and it was extended then to provide additional time.
The Central Bank's report on private motor insurance reveals a shocking story of continuous rip-off of the people of Ireland, in particular young people, by the insurance industry. It is also a damning indictment of the Government's weakness, paralysis and failure to protect people from a greedy and exploitative industry and the Government's inability to change the story over the past eight years. At times, the Government seemed to side with the industry and accept its explanations. This is the first comprehensive study of premiums and cost claims in Ireland and it undermines the narrative of the companies and their claims about spiralling pay-outs and increased claims being the major factor underpinning growing premium increases. It found that between 2009 and 2018, the average cost of claims per policy fell by 2.5%, while average premiums jumped by 42%. It is even more alarming that in the past five years, from 2013 to 2018, average premiums went up by 62%. Meanwhile, the industry generated an average operating profit of 9%, twice the level of profitability seen in the United Kingdom. We know personal injuries claims, the Personal Injuries Assessment Board, PIAB, and legal costs are also factors. Last week, the Taoiseach told me in the Dáil that motor insurance had come down by 20% or 30%.
This report says they went up in the past five years by 62%. The Taoiseach, the Minister for Finance and the Minister for Justice and Equality have had a hands-off policy on this for years. Was the Government's response due to ignorance or gross incompetence? Did the Government know what was going on in recent years and the degree to which people, in particular young people, were being ripped off while the Government failed to protect them from this industry and to take the measures and the decisive intervention that would have made a difference? The Taoiseach's comments to me last week reveal a level of disconnect with the reality on the ground that is quite shocking. Does the Taoiseach accept that the Government has failed to protect people from a greedy industry that has spun a false narrative to maximise profits? Why has the Government not intervened to strengthen and restore the Personal Injuries Assessment Board to centre stage in moderating the cost of claims? The Government did not protect that institution against vested legal interests which sought to undermine it. Was the Government aware of the scale of the rip-off? Why have change and reform to deal with this been so slow in recent years?
I thank Deputy Martin for raising this very important issue. What I said was that the cost of motor insurance had gone down by about 25% since it peaked in 2016, which it has. That is what the figures show. It went up and has gone down by approximately 25% since 2016.
It is a published number. I believe it comes from the CSO, but I will provide the Deputy with the source by the end of the day. I am sure he will be good enough to retract his earlier remarks when he sees the data I produce. As I said earlier, the cost of motor insurance has gone down by approximately 26% since it peaked in 2016.
It went up before that. Now we need to make sure we drive it down further because the cost of motor insurance is still too high in Ireland for young drivers and all other drivers. Our objective is to make sure we bring down the cost of insurance over the next couple of months and years.
The report published yesterday is the report of the national claims information database. I commend the Central Bank for its work on publishing the report. It is worth noting that this report was produced only as a consequence of Government action on insurance. I compliment the Minister of State, Deputy D'Arcy, in particular, in that regard. The national claims information database was set up on foot of a recommendation of the Government's cost of insurance working group because we did not have enough data and transparency on insurance. That is why we asked for the report to be produced. It would not have been produced had there not been Government action. It carries out an in-depth analysis of annual trends of non-life insurance claims. This is seen as crucial in developing an understanding of how claims costs impact on premiums and, in particular, an understanding of the relationship between the price paid by the customer for motor insurance and the cost to insurance undertakings. This is the first report and it covers the ten-year period between 2009 and 2018. It highlights the importance of the cost of claims to the level of insurance premiums. However, it also highlights the highly cyclical nature of the insurance market and, in particular, the growth in insurance premiums relative to the cost of claims and the growth in profitability of the motor insurance underwriting sector since 2015. The report provides information on how claims are settled, the time it takes, and the legal costs associated with the various settlement channels. This information had not been previously available. Therefore, the conclusions from this part of the report are just as important as the premium claims element.
I believe the report shows that both the insurance and legal centres have a role to play and questions to answer with regard to the difficulties we have faced in recent years when it comes to the cost of car insurance. It appears that insurers underpriced in the early part of this decade and then increased premiums beyond levels that were needed to cover losses incurred, and consequently are now making significant profits. At the same time, the legal costs associated with the litigation settlement channel seem disproportionate when one considers that the report indicates the award levels for those settlements under €100,000 are not much higher than equivalent settlements of the PIAB. In addition, the length of time to settle the claims is nearly two years longer than in the PIAB, which in itself drives up the cost of insurance. The Central Bank will finalise its report on the feasibility of expanding the database to cover employer liability and public liability as the next step.
I wish the Taoiseach the very best of luck in saying to the thousands of young people who have been ripped off over recent years that at least we compiled a report to tell them something they knew all along. That is essentially what the Taoiseach is saying. His source is essentially the CSO, which is asking the industry to present the figures. Is it not? This is a definitive study. It is not what the Government has been doing, namely, coming in here last week stating complacently that it is all sorted and that costs are going down by 20% to 30%. The cost went up 62% in five years. What in the name of God was the Taoiseach doing? What were his Ministers doing?
It is not just the motor industry that is affected. All week, it has been about crèches and childcare facilities, some of which will be closing this week because of inaction. The Minister of State claimed to be shocked over premiums increasing. Businesses have been ringing alarm bells because of the excessive rip-off in insurance that has been occurring with no rational explanation. Of course there are fraudulent claims and issues arising over the high cost of litigation in the courts but, again, the Taoiseach did nothing about it. He failed to protect the PIAB from the vested interests that sought to undermine it. The PIAB was an effective intervention brought in by Ms Mary Harney well over a decade and a half ago. It dramatically upset vested interests and brought costs down but the current Government has stood by. It has taken a hands-off approach. The situation is now that, right across the board, from crèches to childcare, we are in crisis in terms of the capacity of businesses and people to survive.
We all acknowledge in this House that the cost of insurance, be it motor insurance, public liability insurance or employer liability insurance for business people, is too high. Our objective is to bring down the cost of insurance. How do we do it? We do so through the reforms that have taken place and more that will take place in the future. One, for example, is the establishment of the national claims information database. The reason the Deputy is raising this question today is that we now have information we did not have in the past. We have that information only because of action taken by the Government on foot of the work led by the Minister of State, Deputy D'Arcy.
We reformed the PIAB, which the Deputy mentioned, by means of the Personal Injuries Assessment Board (Amendment) Act 2019 in order to encourage greater compliance with the board's process. In contrast with the Deputy's claim that we have somehow weakened the board, the opposite is the case. We have strengthened it by means of the 2019 legislation. There is also stronger Garda action, through the Garda National Economic Crime Bureau, to crack down on fraudulent and exaggerated claims. Even today we are taking action on insurance costs because the Judicial Council has come into existence. The commencement order has been signed and the Judicial Council has been formally established. There is now a committee of judges that will look at the book of quantum, at the level of claims and at the awards being made by the courts in order to see if they are appropriate.
There has been a moment of enlightenment and clarity on the part of those in Fine Gael and Fianna Fáil, who have finally realised the nature of the spin they have been swallowing from the insurance industry for the past couple of years. The reality is that all this information was available to the Taoiseach and Deputy Micheál Martin, and their Deputies, if they wanted to look at it. We did not have to wait for a comprehensive report from the Central Bank to tell us of the spin and blatant lies from the insurance industry that were pedalled by the Taoiseach and Deputy Micheál Martin on the floor of this House.
Last week, another insurance provider, Ironshore Europe, one of the biggest insurers in the childcare sector, withdrew from the market. The Taoiseach may be aware of Ironshore, although I believe that none of his Ministers has reached out to that company or to any childcare providers. Nothing has been done about the fact that some childcare operators are likely to close their doors and will not be able to reopen in January 2020. Ironshore was the insurer of the four crèches that were completely exposed on an RTÉ programme in the summer. Those crèches are the subject of a number of litigation cases. There has been an injunction in the courts seeking to prevent Ironshore from withdrawing insurance cover for them. Those crèches will no longer be allowed to operate or be trusted to supervise and care for children.
We are now left with only one insurance provider in the sector. That company is asking childcare providers for approximately triple the amount they paid for insurance in the past. Some of these providers are not-for-profit organisations. I spoke to representatives from one provider and discovered that its premium will increase from €1,800 to almost €5,000 in January. The provider in question simply does not have the money and does not know what it is going to do when it closes its doors on Friday. Where will it find the money? Will it be able to reopen in January? What will happen to the 80 children to whom care is provided by the organisation to which I refer and which is a centre of excellence for those with additional needs?
The Government has done nothing in respect of this issue. I tabled a parliamentary question last week regarding what engagement there has been with the childcare sector and what meetings the Minister for Finance, Deputy Donohoe, has had with the Minister for Children and Youth Affairs, Deputy Zappone, on this issue. There has been absolutely no action whatsoever. The Central Bank issued its report yesterday and it has provided clarity for both parties here. That report completely rebuts the spin of the industry and is a damning indictment of the Government, which has refused to hold the industry to account and which has done worse by pedalling the spin put out by the industry. As I did in the case of the Minister for Finance last month, I ask the Taoiseach to stop making the claim that insurance premiums have dropped by 27%. Do they not understand what is involved here? I have made the point on the record of the Dáil on numerous occasions that the Central Statistics Office, CSO, asks about one particular policy. The data are there across all claims and they show that, from 2016 to 2017, insurance premiums went up by 15% and by a further 2% in 2018. The figure is going up by 17% rather than down by 27% as the Government has claimed.
The leader of Fianna Fáil addressed this House on 1 October and claimed that the compensation culture is rife. Last week, he blamed the culture of claiming at any cost for the rising cost of insurance. The facts indicate clearly that the cost of claims has actually decreased by 2.5% since 2009. I will conclude by stating that the number of people claiming has dropped by 40% and the number making personal injury claims by 20%. Will the Government please stop swallowing the guff from the industry and join me and others-----
Let us get this clear, Taoiseach. I am not using up the Taoiseach's time. I heard the Deputy accuse the industry of lying. If we can establish that he accused the Taoiseach of lying, then I will deal with that.
No. I thank the Leas-Cheann Comhairle for being helpful. I accused the industry of spinning and lying. I accused the Taoiseach of swallowing its spin and regurgitating it here on the floor of the Dáil. I am asking him to retract the comments and the claim that insurance premiums have dropped by 27%-----
I have never been soft on the insurance industry or on the legal industry when it comes to the issue of insurance; not in the slightest. Our efforts have always been to bring down the cost of insurance, including motor insurance for drivers, as well as employer liability and public liability for businesses. That is our objective and why we brought around these reforms which led to this report we are discussing here today.
On the issue of childcare facilities and crèches, I acknowledge there are many parents worried that their childcare costs will go up in the new year and that their crèche may close. We are aware of this. The Department of Children and Youth Affairs is engaging with the sector and with the Minister for Public Expenditure and Reform to see what we can do about it to ensure we do not see crèches closing in the new year. We are particularly conscious of those difficulties with regard to the price or availability of insurance, particularly liability insurance. It is acknowledged that the recent announcement of the withdrawal from the market by one of the insurers providing insurance to childcare providers is a worrying development. This only happened in the past two weeks.
Early learning centres and school-age care services must re-register with Tusla before 31 December. To do so, they must provide proof of an existing insurance policy. They do not need to show proof of future insurance policies. They need to prove they have an existing insurance policy in order to register on 31 December.
We understand the concerns of providers as they do need to have insurance cover to provide services.
Childcare services are mostly private businesses and are expected to cover their costs from the income they receive. Insurance costs have not been raised as a significant issue with the Department of Children and Youth Affairs until the recent withdrawal of one of the underwriters on 6 December. The Department of Children and Youth Affairs and Pobal offer a case management system for services suffering sustainability difficulties, mainly in the community childcare sector. Services should contact their local childcare committee to access available supports such as advice or business planning. For community providers, financial supports can also be made available after an assessment. This process is managed by the childcare committees and Pobal.
The Government cannot compel insurance companies to stay in the Irish market. Consequently, we need to ensure the insurance market is attractive for such insurers in order to generate greater competition and thus improve overall current capacity and the pricing position. Critical to achieving this is bringing award levels for so-called “soft tissue” injuries down in this country and more in line with other jurisdictions. The report of the NCID, national claims information database, corroborates this with the cost of injury claims increasing by 54% since 2005.
The Taoiseach stands accused again of completely spinning on behalf of the industry. Will he, if he has read the report, accept table No. 14? Does he accept that motor insurance premiums have increased every year since 2016? Will he accept that the number of people who are making claims has reduced by 40% and personal injury claims reduced by 20%, facts which dispute the compo culture argument?
Again, he misdiagnosed the issue concerning the childcare sector. If the Government was actually monitoring this properly, it would know that the Hyde and Seek scandal has led to a serious issue with insurance. There was a High Court injunction which prevented the insurance company from withdrawing its insurance policy to the four crèches. There are 53 cases being taken against this insurance company because of what happened within that sector. These are issues which were not revealed by Tusla or any regulation but by good investigative journalism. It was not because of the high levels of award. It was because this area was completely unregulated and because of all the factors were exposed by the “RTÉ Investigates” programme.
I am begging the Taoiseach on behalf of not only the childcare sector, soft play areas or motorists, but many other sectors which will be affected by this in the new year. There needs to be Cabinet decisions on this.
It needs a Cabinet sub-committee, not a talking shop, but an action point-----
The Deputy is very vocal on this issue. He is very good and well-informed on the issue, which is why I am so disappointed that his solution is a Cabinet sub-committee. A Cabinet sub-committee - I know all about them - will not bring down the cost of insurance for any driver or business person in Ireland.
Ireland has more workers on low pay than any other country in the OECD except for the United States. Some 23% of full-time workers earn less than two thirds of the median income. When the national minimum wage was introduced here in 2000 it was set at this mark to bring full-time workers out of low pay. Since then, that has never been met and today the minimum wage is only around half of the median income. It should be pegged at two thirds of the median income to bring about a minimum wage that has been recognised by all.
The Irish Congress of Trade Unions has just published a report showing that CEO pay in the top companies has increased by between 9% and 99% in one year. Twenty-two of the top 26 chief executive officers take home over €1 million in pay, with the highest pay reaching €8.2 million in a single year. In one company the CEO takes 212 times what the average worker earns. In recent years, Ireland has had the highest gap between the highest paid and the lowest paid of all OECD countries, which is a shocking record to have. This is not just about CEOs, but it is about high-paid workers in some industries and, unfortunately, a whole swathe of low-paid workers in others. The main thing that reduces this inequality is the relatively high level of cash transfers that we have in this country. However, even those cash transfers in tax and social welfare were not raised by the Government in the most recent budget.
Low pay means that many people in full-time work can no longer afford housing or other cost of living increases. Our cities need workers in retail, security, cleaning and hospitality. However, the bulk of workers in those sectors do not come within a mile of living and meeting the rent in our inner city areas. This is deeply unfair and socially unsustainable.
The Taoiseach is on record as stating that the cap on bankers' pay should stay in place and the Government has pledged to raise the minimum wage to €10.10 from January. Does he agree with me that we need to do much more to address this unique gap between the highest and lowest paid in the country, which makes us the worst in the OECD and outliers when compared with countries that are apparently much more progressive than we are?
I do not have those figures in front of me now, but I remember reading them in the past. I accept we have a high gap between high pay and low pay. The reason we have that is that we have a very large number of very high-paid people, particularly in the multinational sector. We have high pay in Ireland. It is not that we have low pay relative to other countries. It is that we have many people in very high-paid jobs, particularly in the multinational sector, which brings up the average.
I believe our national minimum wage is the sixth or seventh highest in the world, even adjusted for purchasing power capacity. If the pay of our public servants, teachers and civil servants is compared with other western countries, it is higher than the average. The same applies in the private sector. It is not that Ireland has low pay relative to other countries when one compares job with job.
It is the very large number of highly paid people, and especially those working in the multinational system, who distort the figures and bring up the average. Interestingly, as we are talking of statistics, Deputy Howlin will acknowledge the statistics produced by the CSO two weeks ago in the survey on income and living conditions. These figures looked at income equality and the income gap and came up with quite a different result. The survey showed that whether one uses the Gini coefficient or the other measure, income inequality is at its second lowest since records began in 2004. They are, perhaps, conflicting statistics in that the CSO says that Ireland has never been more equal, or that at least since 2004 Ireland's income inequality is at its second lowest level.
There are different ways of dealing with the gap Deputy Howlin has referred to. The Deputy has rightly pointed out that one of the ways Ireland distributes wealth is through our tax system and our social welfare system. This has an enormous redistributive effect, more so than other countries, with our relatively high taxes on those who are well paid and relatively low taxes on those who are poorly paid compared with other countries. Our tax and welfare system is the main way we deal with that gap, which after transfers makes us a very equal country relative to others.
It is true that because we have progressive taxation and a decent social welfare system, it masks the fundamental inequality, which is the gap between those who earn the highest and the vast bulk of people who are on very low incomes. It is a fact that far too many of our citizens are barely earning enough to exist. They do not earn enough to pay rent in our inner cities or in our main towns. They struggle to pay for childcare, and some people are opting out of work because the cost of childcare is greater than their take-home income. Many of them face incredible pressure even in providing transport to work. The Government must recognise this reality before we set about resolving it.
While the State can influence income by a progressive tax and social welfare system, the fundamental issue of having a decent wage rate across all sectors of work, some of which were instanced by the Taoiseach in his reply, must be set as a national objective. Would the Taoiseach agree that we need a focus on what is an acceptable living wage rather than a minimum wage, and that since the minimum wage was instituted in 2000, Ireland has fallen well behind the target of bringing the lowest paid worker up to an equivalence with middle-income earners?
It is certainly narrowed. That gap is narrowed by our tax and welfare system. Before social transfers, tax and social welfare, there is a big gap between the best paid and the lowest paid in Ireland. After tax and welfare, it actually goes the other way and we are one of the more equal countries when it comes to-----
-----the gap between the lowest and best paid. As I said earlier, the reason we have that gap in Ireland is not because Irish workers are worse paid than people doing the same job in England, America, France or Germany.
Relatively, Ireland's pay levels are higher, and our minimum wage is the sixth highest in the world, even when one takes into account purchasing power capacity. The gap exists because there is a large number of people on very high pay, especially in the multinational sector, which distorts the figures and drives the number upwards. One could take the view that we should set a pay cap or a maximum pay level, and I am aware that some socialists argue for that. While one could do that, I am not sure that bringing people down achieves very much.
The other way is through the minimum wage mechanism and the existing legislation that established the Low Pay Commission, which was brought in by Deputy Howlin's party when it shared Government with us, and which does it properly. It takes into account the views of employees through their unions, it takes into account the views of employers who must find the money to pay it in the first place, along with the views of academics. The commission then comes up with a figure.
We are now one decade on since the financial crash and one of the key questions at the time was where were the auditors and where were their warnings. It strikes me that the same question can be applied now in the context of the FAI and the scandal around its debts.
Deloitte was its external auditor for 23 years. One of the points of having an external auditor is to have independent eyes on the accounts. Can this really be the case after 23 years of doing the same job for the same organisation? The Financial Reporting Council in the UK states year on year familiarity with clients can lead to accountants taking the same approach even when business conditions change, thereby underlining the need for rotation if good governance is to be prioritised. Financial information which was published recently during the unfolding of the FAI saga showed some startling adjustments to the FAI accounts for previous years. For example, in 2016 an originally reported profit was adjusted from €2.344 million to €66,000. In 2017, a profit in the accounts of €2.8 million was adjusted to the point that it ended up being a loss of €2.9 million. This is in addition to the fact that a Revenue audit in 2019 revealed an underpayment of taxes and, together with interest and penalties, led to an additional liability of €2.3 million. It begs the question as to whether the FAI would have managed to secure the tax clearance certificate it needed to access Government grants.
The Taoiseach was a Minister with responsibility for sports. He knows that Government grants are paid on foot of a tax clearance certificate in addition to audited accounts. Should we now look at a system whereby organisations are required to show evidence of audit rotation with inbuilt time limits for each audit period before a rotation is required? Good governance requires such a system. The UK has introduced a system of grading its audit firms. This is also used to ensure rotation. It plans to publish the grades and past performance of the large audit companies. It has also introduced more powerful audit oversight. The introduction of the grading system was on foot of the collapse of large firms such as Carillion, BHS and Thomas Cook, proving the UK has taken lessons from the financial scandals. We must do the same.
Does the Taoiseach accept there is an issue with the same external audit firm having an audit contract with the same organisation for 23 years or anything near it? The EU statutory audit regulations of 2016 are supposed to introduce this and I do not understand why it has not happened. Will the Taoiseach support making such a rotation system a prerequisite for Government grant funding in addition to tax clearance certificates?
I thank the Deputy. I do not want to cast aspersions on any particular audit firm, nor on the many thousands of very good people who work in that particular firm, but I do think the Deputy has asked a good question and makes a very good point. It is a principle of good corporate governance that organisations should not be audited by the same people forever and ever and ever again. It is certainly something that Sport Ireland and other public bodies should examine as to whether it is made a condition of Government grant aid that auditors are rotated after a period of time.
The same applies to board members. We often see a situation in a lot of organisations that we fund, whether charities, sporting bodies or local taskforces, that the same people are on the board for ten, 20 or 25 years and this is not good corporate governance either. There should be a rotation of board members too. They are definitely areas where the Government could be more active in requiring turnover of auditors and turnover of board members as a condition of funding in future.
With regard to the independent audit being done, it was provided to Sport Ireland and the Minister and has been passed on to An Garda Síochána. The Office of the Director for Corporate Enforcement has also been notified. The purpose of the audit was to get a clearer picture of the financial and governance issues in the FAI and to chart a course for the association to deal with the serious failings in order to restore confidence in public funding to football in Ireland. The board of Sport Ireland considered the report on 27 November and welcomed that the audit found that State funding given to the FAI was expended for the purposes it was given.
That is an important point. We should reassure taxpayers and the public that the taxpayers' money that was given to the FAI was used for the purpose intended, including participation, anti-racism, women in sport and all the other things that Government funds. The independent audit confirms that public money was not misappropriated.
The Sport Ireland board approved the establishment of a liaison group between Sport Ireland and the FAI to prepare and agree a detailed implementation plan for all of the recommendations of the KOSI report. The board will continue to monitor the progress of reform in the FAI and Sport Ireland will continue to support the association to take the necessary steps to restore public confidence. The Minister, Deputy Ross, and the Minister of State, Deputy Griffin, believe the most urgent priority now for the FAI should be the appointment of four independent directors, new faces sitting around the top table of Irish football. Therefore, it is important that the board, under the leadership of the independent chairperson, moves quickly to fill the CEO vacancy and to satisfy the concerns of all stakeholders that the new CEO should be independent of any current or previous involvement with the FAI.
I agree on the need to appoint those independent board members and chairperson. As new appointees, they will need to be given a chance. They are in a very difficult situation. The introduction of a rotation of audit should not be exclusive to sport. It is good practice. It will not be unique to sports that there are failings by virtue of the fact that there is too much familiarity. A European Union statutory audit regulation was introduced in 2016, which provides for mandatory rotation over a long timeframe. Why does that not apply in this case? It would have forced a change of auditors and thus there would have been a fresh review at an earlier stage.
I honestly do not know why it does not apply in this case but I will check that out and provide the Deputy with a more detailed reply. It may well be - I am only guessing - that the directive applies to bodies that are largely publicly funded whereas this is a body that receives only a small proportion of its funding from the Government. That is just my guess because that is often the way European directives work. They apply to largely or majority funded bodies, not ones that only receive a portion of their funding from the State. As I said, I will check it out. I will ask the Minister for Public Expenditure and Reform to examine the wider issue that if public money is provided through a third party to voluntary bodies, charities or NGOs, surely it is appropriate that they are properly audited and rotate their auditors. A bit like the FAI, it would be appropriate that they should rotate their leadership, chairman and board members and not have the same people in charge for ten, 20 or 30 years, which is just bad corporate governance practice, as, I think, we will all agree.