LAHIFFE & ASSOCIATESPublic Affairs & Political Communications

OIREACHTAS REPORT FOR IRISH BROKERS ASSOCIATION September 13, 14 & 15, 2016 Oireachtas Finance Committee

RISING COST OF MOTOR INSURANCE

(edited)

Session 1 - Tuesday

Chairman (Deputy John McGuinness): I welcome representatives of the Irish Road Haulage Association; the Irish Taxi Drivers Federation; the Car Rental Council and the Freight Transport Association Ireland

Ms Verona Murphy:  I am president of the Irish Road Haulage Association, Ireland's largest Government-recognised licensed road transport representative body. We see the rising cost of motor, fleet, employer and public liability insurance, and it should be noted that over the past year, insurance premiums have increased across the board by between 50% and 100%, and in many cases, even more. The following is a cost comparison with trucks in other Member States: in Ireland, a truck on a motor policy costs an average of €5,000 per truck; in the UK it is €3,000; in Belgium €2,500; France €2,500; Portugal €2,400; Bulgaria €2,500; Germany €2,500; Poland €2,000 and Romania €2,000.

We see several reasons for this increase. There is a uniform approach by all brokers and underwriters, both of which blame the judicial awards in Irish courts and the Book of Quantum. The insured will pick up the tab for the Setanta debacle regardless of what the courts determine to be the case because neither the Government nor the insurance companies will absorb the cost. Insurance companies are using high reserves to reduce claims bonuses and raise premiums. There is no competition in the market and those who are competitors are not competing, the insurance industry is very lax in fighting claims, and there is a tendency to increase premiums as the preferred option. If there is no competition, it is easier to hike the premium than fight the claim. The culture in Ireland is to claim as it is very easy to spend another person’s money.

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We ask the Government to make provision for road haulage operators to source their own insurance in a neighbouring Member State. Can the Government change the operating field of the courts? For example, can they make a claimant accept compensation and encourage him or her not to go to court? On the issue of the claims culture in Ireland, can the Government fund a proper advertising campaign or even enact legislation that will result in imprisonment or fines for fraudulent claims and see that area policed? The collective road haulage industry must be permitted to access the ESM to ensure its fleet. There should be no difference in insuring trucks on continental territory, no matter where they are based, as long as they hold an EU registration plate.

Regarding the Government cap on reserves and the length of time reserves are being placed on incidents, insurers are using them to reduce claims bonuses and raise premiums. The Government must encourage new entrants into the insurance sector. There is no competition in the market. The insurance industry is very lax. Where there are enough competitors in what we see as a small market, they are not operating in a competitive fashion. We must discourage the practice of blocking the market and allowing only one broker to quote for one insurance company.

We ask the Government to support our IRHA-led initiative of the driver apprenticeship programme. All insurance providers should be encouraged to support haulage operators, and the apprentices participating in this programme, as it will ultimately mean proper training and should reduce insurance risk.

I put a scenario to insurance brokers at an open forum recently by asking if a haulage operator was based in Ireland, but was termed to be a continental haulier that is primarily carrying imports and exports to and from Ireland, thereby spending 90% of its time abroad and giving it a 10% chance of an accident in Ireland, on what basis could it blame the Irish Judiciary, the Book of Quantum or even the PIAB? They were also asked what they believe is the basis for the increase on haulage operators that have no claims experience on the island of Ireland. Neither of these questions were answered and they remain unanswered to date.

It is the opinion of the IRHA that the legislation that stops an Irish-registered vehicle from being insured by an out-of-State broker no longer fits the criteria of the ESM. In essence, if an operator's licence can be obtained by an Irish citizen anywhere in the EU, it should follow that an Irish operator can obtain his or her insurance in any country in the EU.  

Mr. Joe Herron: Taxi insurance has increased, on average, by 60% across the board. For those on the bottom level of premium, which was approximately €1,000, insurance rose to €1,600. That is excessive, but the worst case is when somebody has an accident, because there is then no limit on the increase that can be put upon them. As a result of high insurance premiums a lot of drivers who were driving on their own licence have been forced to surrender that licence and drive for other people. They were previously able to get block insurance, but that is no longer the case. Last year, the cost for co-drivers, as they are known, went from €1,040 to a minimum of €3,000. In many cases, drivers just cannot afford this. There are three main insurance companies for taxi drivers and another company acted through a broker in Rathfarnham. The broker has now said it is no longer quoting for taxi insurance and has told its customers they will have to go elsewhere. In many cases, the drivers who did go elsewhere could not get a quote.

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My third point concerns the new wheelchair-accessible licences that are being granted. Some drivers just cannot get a quote unless they have three years' taxi driving experience. How they can get this without insurance is beyond me, but this is what the companies want. One gentleman had driven a van for 23 years accident free but when he decided to go into taxi work, he got his grant for a wheelchair-accessible vehicle, but the lowest quote he could get for insurance was €9,500. This does not make sense. The problem, as we see it, is that there are only three insurance companies which quote. Foreign insurance companies that could set up here will not do so because it appears the insurance companies will not divulge the full facts about what their costs and claims are. Have taxi drivers suddenly become very dangerous animals on the road, necessitating the rise in insurance premiums?

One of our members has driven for 11 years on the same licence and for the same man. He has not had one accident but his insurance went from €1,040 last year to €3,000 this year.  It is just unbelievable. There appears to be no encouragement from the State to attract other insurance companies that would be willing to quote for taxi insurance. We would like to see the market much more open.

Mr. Paul Redmond: I represent the car rental industry in Ireland. More than 626,000 rental agreements were concluded in 2015 at the major airports, and already in the first six months of this year, which has been another very good year for the industry, 323,000 rental agreements have been concluded. The car rental industry has long lost the ability to procure insurance cover simply by the payment of an annual premium and therefore to a large extent, operates on a self-insured basis. That means the settlement of personal injury claims is in large part a direct operating expense for the companies.

International car rental companies have identified Ireland as having the highest risk liability costs for car rental operations. One car rental company operating in Ireland, which is a direct subsidiary and not a franchised operation, has access to comparative data in other countries. The company has seen its third party liability costs in Ireland treble in the past four years. Those costs are now three times higher than its operation in France and twice as high as in Germany, Spain and the UK. The company has had to increase its liability reserves by more than 200% to the point that its liability costs are now the biggest of any of its European operations. After people and cars, risk liability is now the company’s third biggest expense.

Car rental companies incur significant legal costs in trying to defend claims. Unfortunately, most of those involved in motor accidents in rented vehicles are visitors to this country and will have gone home by the time claims are processed. That makes processing claims and sourcing witness statements very time-consuming and costly and, to be honest, often very ineffective. If one is on holidays in Ireland and is involved in an accident, when one goes home, does one really want to get involved later on, perhaps nine months or a year later?

The car rental industry is also particularly vulnerable to fraudulent and criminal activity as unsuspecting tourists are often preyed upon. Criminals know the difficulty of securing evidence and the issues that arise relating to the presence of tourists in any ensuing court case. We carried out a recent survey of our member companies which revealed that more than 20% of all claims are suspected to be fraudulent. Many of the claims involve pure criminality, such as deliberately staged accidents where two cars crash into each other on an arranged basis, often with little damage done to either car, but usually resulting in multiple injury claims.  Such is the potential reward in Ireland for personal injuries, car rental companies are suspicious that they are being targeted by criminals from other countries

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coming here to stage car crashes. Even in cases where minor injuries are reported, these staged accidents will usually have multiple claims resulting in very high settlement costs, particularly when associated legal costs are factored in. A £5,000 award for a whiplash injury in another country can, in Ireland, start with a recommendation of €15,000 from the Injuries Board, be rejected and, following procrastination, finally yield a settlement or a court award of, say, €23,000. When legal fees on both sides are added, that punitive escalation can mean total costs can be close to €50,000 for each claimant, and there are usually four or five claimants involved. This type of incident, therefore, can cost significantly more than €100,000, which is a direct operating expense on a car rental company. One does not have to be a genius to work out that we cannot withstand too many of these in any year.

Industry representatives have met the Garda Fraud Squad and presented it with many examples. We requested that a national Garda operation focused on claims arising from accidents in the car rental industry be initiated. While we did receive helpful advice, the fact remains that there are very few prosecutions for making a fraudulent claim and, therefore, there is no real deterrent in this matter.

The chairman of the Council of the Bar of Ireland, refuting an insurance industry claim, admitted recently that while it may be that the level of damages awarded in respect of particular injuries in Ireland is greater than that in another jurisdiction, it was not so in respect of all claims. Unfortunately, these particular injuries - soft tissue, whiplash etc. - are the very claims that predominate against the car rental industry, and it would appear that 80% of claims are falling into that category.

While the various parties to the national debate argue over the extent of the increase in court awards, legal costs, effectiveness of the Injuries Board etc., the bottom line is that the car rental industry can testify to a significant impact from the rising cost of risk liabilities. We understand that a review of the Book of Quantum is under way, but our industry does not have much confidence that this will alleviate our problems unless it is prepared to benchmark personal injury awards to a European norm for these whiplash and soft tissue damage claims. We accept that anyone with a legitimate claim deserves an appropriate level of compensation. However, why should that level of compensation be twice or three times what people in France, Germany or the UK receive?

In summary, the car rental industry needs a reduction in the level of personal injury awards for whiplash and similar injuries. We need a reform of the Injuries Board procedures that prevent certain categories of cases being referred to the courts. We would welcome immediate action not to allow the legal profession to frustrate the necessary reforms. We need a reduction in legal costs and, in particular, in multiple legal fees in respect of single incidents. An accident can lead to four or five personal injury claims resulting in four or five separate levels of legal fees and, in most cases, all from the one firm of solicitors.  We need improved deterrents to reduce the level of fraudulent claims and to assist Gardaí and the DPP to secure prosecutions. It is, apparently, difficult to prove intent to defraud. Overall, we need a reduced cost environment for risk liabilities.

Mr. Neil McDonnell: The Freight Transport Association Ireland represents people who deal in large books of commercial vehicle motor insurance, public liability insurance, carrier insurance and property insurance. All have risen so substantially in the past two years. We believe that it is time to stop the national compensation culture that drives this excessive insurance cost and that it is absolutely necessary to address the ridiculous compensation

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payouts on the basis that they are victimless; they are not. We we see no reason for whiplash injuries in Ireland to result in the payment of multiples of the damages payable in the UK or the Continent. We see no reason for serial claimants and fraudsters to be able to enjoy the freedom to falsify or exaggerate claims without the threat of prosecution for a codified offence of perjury, which we lack. There is no reason that insurers should not pay for rehabilitation of plaintiffs rather than paying them general damages and genuine claimants have nothing whatsoever to fear from this. Moreover, there is no reason why we should continue to accept a system that functions effectively as a social welfare system for unscrupulous lawyers and litigants.

Our roadmap to lower insurance costs, which we provided to the Committee, lists 52 recommendations on how we think it would be possible to so do. More than half of these 52 recommendations are in members' gift, as legislators, to deliver. We ask the Committee not simply to take these legislative measures, but to exercise leadership in calling out the compensation culture for what it is and stamping it out.

Senator Kieran O'Donnell: If a road haulier is operating in Europe and a particular truck is spending most of its time in mainland Europe, can it be insured through an insurance company outside Ireland?

Ms Verona Murphy: The answer is "No". If that insurance company is registered here, one can insure an Irish plate. If the company has a brokerage here, essentially, as well as in the UK, then one can insure an Irish plate in the UK, but if the company is not registered here, one cannot. I am one of those hauliers. I am a continental haulier. I spend 90% of my time outside the country and I have not got an answer as to how my risk is being assessed. I should be able to insure my truck anywhere in Europe. Seemingly, we want to take the insurance as a single European market. There is a report from the Department of Transport in 2012 that was never published. They complained at that time that increases were in the region of 30%. Over the past three years, they have climbed to as much as 300%. It is not sustainable. I have a member whose premium went from €43,000 with 20 trucks on his motor policy to €164,000 with a claims experience of €25,000 spread across 20 vehicles. That was one year. That is his claims experience. What is happening here is that he is with one company and it was assessing five years. That is acceptable. We understand that is how they do it. However, we have competitors in this market. We have at least five underwriters, if not six or seven. They are not competing. His quote comes in at €164,000 from his current insurer and any other quote is upwards. That is not competition.

Senator Kieran O'Donnell: Does Ms Murphy believe they are operating a cartel?

Ms Verona Murphy: If that is what it is called; it is not competition anyway. It is our belief that there is not competition in any sphere of the administration of claims. Claims are not being settled. A so-called "simple" whiplash claim, which, I accept, can be frustrated, should never enter the court. The Book of uantum will only give a recommendation. If it is recommended to be €15,000 and it goes above 10% to 20%, it should not be in the courts. It should be settled. There is no aggressive management of claims as there was when we had other competitors in the market. There is nothing competitive about the underwriters in this market and unless one brings in approximately another ten, that will not change.

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I am allowed to access my insurance in Europe. I have an EU haulage licence. It is granted by the EU. It is delivered to me by the Department of Transport. I should not have to compete with an Irish haulier who is based in Bulgaria.

Senator Kieran O'Donnell:     If members of the IRHA were allowed to get insurance from an insurance group based in mainland Europe, would it bring down costs by providers in Ireland?

Ms Verona Murphy: We see this as predominantly just an Irish problem. We do not have a large market. We are probably one of the smaller markets in Europe. We have enough underwriters in this market to support the size of the sector. It is based on competition and how it is administered, but there is none.

Senator Kieran O'Donnell: A taxi driver went to three companies, but only one quoted and let us say the quote was for €4,000, which is prohibitive, can the Irish Taxi Drivers' Federation go to the Motor Insurers' Bureau and say it is prohibitive and the federation wants the bureau to get it another quote?

Mr. Joe Herron: No, it will say: They can do nothing further. The problem really is that only three insurance companies are quoting. If one goes back two to three years, and certainly no more than that, they were offering special deals. If one moved from company A to company B, they would do it for less. Company B would do it for someone else for less than what I was paying, even though I had stayed loyal to them. It did not make sense to me, but they did that.

Senator Kieran O'Donnell: To call it straight, does Mr. Herron believe that the insurance companies have come together in Ireland in a quiet room and have said that they are going to operate as a unit here and that they are effectively changing the way they operate in Ireland, collectively as a group, to get a result for themselves?

Mr. Joe Herron: It is too far beyond belief to think that they came to the same conclusion at the same time and suddenly all increased by roughly the same margin. I just do not find that believable.

Senator Kieran O'Donnell: Mr. Paul Redmond said that an insurance operator that provides motor insurance said a car rental company has seen its third-party liability costs in Ireland trebling in the past four years. How has that situation arisen in the past three years? Why are we suddenly seeing that since 2014 in Mr. Redmond's own business, as well as with ordinary motorists, road hauliers and taxi drivers? Is there a reason that has happened in the past three years? Can one just put it down to claims?

Mr. Paul Redmond: Yes, I think the situation is getting worse. It is progressively going from bad to worse. It is the level of claims, the awards and the settlement levels being reached. It is a dire situation which is getting worse. Previous speakers spoke about taking these small whiplash claims and dealing with them in some way, probably through the Injuries Board, and letting them be forced to settle at that level. If one can contain it at that level, one will stop the legal profession literally hoovering money out of the system. It is not just about awards, but everything that goes around it.

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I served on MIAB years ago with Dorothea Dowling. We have been through all this before. This is nothing new. We have had these problems for years. We have had a dysfunctional system and, lo and behold, the legislators of the time came up with the PIAB legislation and we all believed that would solve the problem.  Within months, however, we had a Supreme Court ruling that the legal profession had to be involved and that people were entitled to legal representation. As such, that one great reform has not been effective in achieving the objectives set out under the MIAB recommendations. If we could go back to that level and get that put right, we would go a long way towards solving that problem. We still have a problem with where we are on the Book of Quantum. For some reason, we have managed to get ourselves into the stratosphere in terms of some of these awards. It is not going to be that easy to fix. How does one go back? That may be a longer term project than reform of the procedures in the Board to curtail whiplash and soft injuries claims. If we could ring-fence them and injuries involving tourists, it would be useful.

Senator Kieran O'Donnell: What is the single item that would bring down the cost of insurance?

Mr. Neil McDonnell: If it was a single item, it would be to introduce rehabilitation rather than this concept of general damages. The reason is that there is no objective reasoning. If one breaks one's little toe on someone's premises, the Book of Quantum says one is entitled to between €11,300 and €16,100. A big toe is substantially more because you require it for mobility. 70% of the claims are settled outside the Injuries Board system, while 20% are concluded by the Injuries Board and 10% in court. The reason is that even at that level, a solicitor will come to one and say "You have broken your little toe and I will trump €16,100". If the solicitor gets anything in excess of €16,100, he or she will recover costs. Unlike the UK, we do not see any of the claims data behind this. The Injuries Board functions in a no-costs environment. If one breaks one's little toe and the Board assesses the award at €15,000, one gets €15,000 in cash and there are no costs. However, if one goes to one's solicitors and takes that on, 95 times out of a hundred, the claim will be settled out of court and there will be a cost element appended. Assessing how much the claimant actually gets of that is not possible at the moment. It is not visible. We have said there should be a fixed moral hazard built into the system which defines how much in excess the award would have to be. As there are no costs in the Injuries Board award, there should be a hurdle one is required to beat. It is uncontrolled and invisible. We do not know what is going on.

Ms Verona Murphy: We are not in line with that train of thought as a short-term solution. One will have Constitutional challenges to the type of model that is being aired there. It has been tried in England, but is not yet in legislation. The proposal has been flagged that one would have payment for treatment as opposed to an award of costs. Our model is a solution that can happen in the morning.  Instead of me, as a haulier, having to operate out of the jurisdiction and reflag my whole business, why can I not simply obtain my insurance? That is not bringing the competitor to Ireland. It is allowing me to access the competition and then I can determine whether it is competitive or not. We should be allowed to access the Single Market as commercial entities.

Senator Kieran O’Donnell asked if this is a cartel. If it walks like a duck and quacks like a duck, then it is a duck. Brian Hayes, MEP, has called for the EU Competition Authority to investigate this. I cannot see why this cannot be allowed. A month ago, it was announced a cartel was deemed to exist in the truck manufacturing sector and the manufacturers have been fined €2.3 billion. We complained about it for seven years. It was 11 years before anything

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was carried out. I do not know why we would wait in the case of insurance. If we are even thinking it is a cartel, it should be investigated. I suggest that would cure the situation almost immediately.

Mr. Joe Herron: One problem costing insurance companies huge money is the fact that if one has a minor accident, with little or no damage to the vehicle, but somebody claims he or she hurt his or her knee, ankle or toe and claims €10,000, the insurance company will pay without question because it is cheaper than getting the lawyers involved. For that reason, the insurance companies do not bother fighting claims which they know are spurious rather than fraudulent. That is a significant problem for them.

Deputy Sean Sherlock: Does the IRHA have an assessment as to where the political fault lines are in opening up the insurance market for hauliers? I would like to get an idea as to how Irish hauliers are interfacing with European hauliers in opening up the market. For instance, Aviva is an international insurance house. If it can operate in the Irish market and other Member States, I cannot see why there cannot be a greater degree of flexibility across boundaries, particularly as we have a Single Market and free movement of goods and services. The Minister has set up the cost of insurance working group. Has he invited the IRHA to discuss these issues?

Ms Verona Murphy: We have tried every which way to define what the blockage is.  We know that insurance is governed by the CBI. It is within the remit of the Department of Finance, which we know has had a report since 2012 that was never published. All we know is that under the EU regulation and the conundrum that causes in Irish legislation, we are precluded from accessing insurance on an Irish registration plate anywhere outside this country, which means that the insurer, underwriter and brokerage must be regulated here.

Deputy Sean Sherlock: The Injuries Board is basically telling us that the average payout on claims between 2009 and 2015 was approximately €22,000 or €23,000. We have to find a solution somewhere. Notwithstanding the Supreme Court decision where there is the right to legal representation, and one takes that for what it is, it seems that if it has dealt with 100,000 awards since 2005 and the average payout is approximately €22,000 or €23,000, it appears that there is a multiple of that, which is not quantifiable at this point in time, where claims are paid out on the steps of the court. This is where the data and lack of transparency come in. This is where we will be engaging with the Law Society of Ireland in interrogating that dynamic as well as engaging with Insurance Ireland.

The issue of cartel-like behaviour does come into play. If Insurance Ireland has a finite membership composed of the bigger houses, and if Zenith Insurance, which is exiting the market, is saying that it does not have access to data, it is clear that there is a blocking mechanism there by certain elements of the insurance sector to ensure there is incomplete access to information by either the Irish Brokers Association or some of the insurance players in the market. If we can tackle that element, we can introduce data sharing among insurance providers.  If data sharing was introduced, it would sort out the taxi drivers that Mr. Herron is representing. To have a situation where there are only three insurance companies providing insurance for the Taxi Drivers' Federation seems to me to be a ludicrous scenario given the importance of taxis to how we operate.

I want to get a sense of the witnesses' perspective on or perceptions of how Insurance Ireland and its members operate, and whether they perceive there to be a blocking mechanism in

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relation to data. To return to the PIAB, if we could have transparency around the data from claims settled out of court, it would sort many of the people who are renting cars in this country. It would sort many of the problems for the providers in that sector.

Mr. Redmond touched on the issue of soft tissue injuries. He stated he had no confidence in the review unless it benchmarks against EU norms. If we had a situation here, for instance, whereby small claims for minor injuries such as whiplash were dealt with by things like vouchers for access to medical services, it could then be monitored on an ongoing basis. Is that something that the witnesses' members would accept?

Mr. Neil McDonnell: That is why we suggested rehabilitation in the first place. If one looks at the French system for that, not alone do they have rehabilitation as part of their mechanism, but they also only permit diagnosis of whiplash from a confined field of specialists. It is not a free for all. I heard shock and horror from the legal profession last night that anyone would entertain the French system. In France, one cannot go to one's GP and get a diagnosis of whiplash for insurance purposes. One would go to a specialist. I do not want to disagree with the IRHA, but most of the underwriters in Ireland at the moment are non-Irish; they are substantial houses. I will not mention any of the company names, but one of our operators quoted her experience of going through the motor book. The only company that gave her a quote is the one insuring the company. It gave her a 35% increase on the previous year. All the rest, which are household names, either quoted an unrealistic quote, showed no interest in winning the business, declined, exited the market or declined to quote haulage.

We are definitely dissatisfied with what is happening in the market as far as underwriters are concerned. Our Services Manager is an insurance professional and when we have spoken directly to underwriters, the message we are getting from some of the recently exited companies is that they recently entered the market and got burnt. They stated they got burnt because of lack of information on the 70% of what was going on. There is only visibility on the 30%.

Deputy Sean Sherlock: Essentially, there is a point to be made on the issue of access or opening up the market to insurance on a pan-European basis or throughout the EU. If I understood Mr. McDonnell correctly, what he is saying is that there is an inconsistency in what hauliers are being quoted by the same company. That is something the Committee needs to take on board.

I would like to get the perspective of Mr. Redmond on the soft tissue injury issues and what seems to be a friction vis-à-vis the Law Society view.

Mr. Paul Redmond: I assume the Injuries Board settlement figure of €23,000 refers to the 20% of claims that it deals with. It just proves the point that they are going outside that figure, and the other 80% of claims are much higher. Not only that, the problem is that within that average, and averages are dangerous numbers, while they will say it is €15,000 or €16,000 for whiplash, this can be rejected and procrastinated on and delayed by the solicitors. That €23,000 becomes €50,000 per individual, and if there are two, three or four in the car who all have personal injury claims, it brings it to over €100,000.

Deputy Sean Sherlock: Has the Car Rental Council engaged with the cost of insurance working group set up by the Minister?

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Mr. Paul Redmond: No. We will be contacting them.

Deputy Sean Sherlock: Is the position the same for Mr. Herron and Mr. McDonnell?

Mr. Joe Herron: No, we have not made contact with the Minister of State.

Mr. Neil McDonnell: No.

Chairman: Ms Verona Murphy mentioned in her opening statement that she made the point at a recent open forum that as hauliers spend 90% of their time abroad, there is only a 10% chance of an accident here. Did they not answer?

Ms Verona Murphy: They "sang dumb", as the saying goes. There was no answer. I have asked it of every broker and anybody I come in contact with. It is not being answered. It is as if they would just like me to go away and stop asking the question but it has to be answered.

Chairman (Deputy John McGuinness): Is the IRHA seeking a meeting with the Minister?

Ms Verona Murphy: Yes. We have not been given notice of the meeting yet.

Chairman (Deputy John McGuinness): I ask all the witnesses whether they have confronted the insurance industry.

Mr. Joe Herron: We have confronted them, but got no answers from them.

Ms Verona Murphy: The IRHA's experience is identical.

Senator Rose Conway-Walsh: The key point relates to the uniform approach. We called it a cartel last year. I am interested in what Ms Murphy is saying and I completely agree with her assertion that if there is even a sniff of a cartel, the matter should be investigated. It appears that the data is available. Who controls that data? Where is it? Is the Government not strong enough to be able to take that data and then have the actuarial resources that are needed to be able to analyse it in order to get to the truth behind what we are trying to do?

Regarding the ESM, I would like to discover exactly who is stopping it and where are the blockages. We made insurance compulsory and we mandated the private sector to provide it, but it is failing to do so. It is also telling that brokers had no reply to Ms Murphy's questions about re-flagging. The insurance industry and brokers seem content to shrug off the cyclical nature of this while we just need to wait it out. Five out of the big nine insurance providers in the country are based in Gibraltar. There is a role for the ESM in examining models to calculate the solvency of these companies. How do we know how many more will go bust in the near future? How will it leave us exposed as consumers? My insurance has increased, but I could save almost €200 if I paid it all now as opposed to running it over ten months. This makes me wonder whether the insurance company will still be here in ten months' time. Why is this €200 included as an extra cost to people who can little afford it? Those who can afford it can pay the amount up front, but why should those who cannot do so and who must spread the cost be penalised by paying an extra €200?

Senator Rose Conway-Walsh: I am alarmed about the three main insurers that Mr. Herron mentioned. There is no point in introducing a rural transport initiative that allows for rural

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communities to increase or introduce taxi provision in areas where there has only been some or none previously only to find out that drivers cannot get insurance quotes.

Mr. Joe Herron: A problem in that regard is that, if a local hackney operator in a small, isolated rural area must pay €3,500 or €4,000 in insurance, the number of jobs that he or she would take would not cover that cost

Senator Rose Conway-Walsh: The whiplash situation was mentioned. The number of 15,000 is interesting compared with some other countries, but what of Finland, which has a proper public health system? Is our situation connected with how much people would have to pay for private treatment, or have the witnesses examined this matter? Under the proposal, certain injuries could be referred to the courts.  That may not work as intended as people ultimately have the right to go to court. If the Injuries Board was working in the way it was intended to work, we would not have that

Mr. Paul Redmond: On the benchmarking issue, it cannot be beyond us to benchmark properly. I can understand there is difficulty because in places like Finland, some of the costs may be socialised and therefore there may not be a direct comparison. It cannot be beyond us to do benchmarking. All we are asking is for somebody to do a proper benchmarking exercise so we can consider if we are considering the £5,000 in the UK and €15,000 here as like for like. If the exercise is done and it comes out we are no different from anybody else, so be it. At least, let it be done so we can all understand the data behind some of these awards.

Mr. Neil McDonnell: It is a fine point of detail but the following important issue should also be noted. The Book of Quantum and general damages has nothing to do with the cost of medical treatment. They are special damages and loss of earnings, etc. is handled separately. It only relates to pain and suffering. It is being paid for. It should be normalised across Europe because it has nothing to do with the cost of delivery of the health care system.

Senator Rose Conway-Walsh: I welcome the call for the CSO to take on a role of collating settlement data. I take it from the delegation's comments they are not convinced that the book of quantum is something where a solution can be found.

Mr. Neil McDonnell: The Book of Quantum is effectively market research among judges and insurance companies, such as what was paid for a broken toe. That produces a maximum and minimum, and there is no science, logic or objective reasoning behind that whatever. It is important when we hear that members of the Judiciary have said the Book is out of date. It relates to nothing other than what the Judiciary and their colleagues are awarding. It is sort of a meaningless statement, to be blunt.

Commercial vehicle motor insurance works totally differently from those of other motorists. I understand how a motorist might have no history of claims over ten or 15 years and the premium goes up, which seems very unfair, as the risk is pooled. We do not necessarily agree with that either. Commercial operators have multiple vehicles on the road.  Unfortunately, one of the insurers said to us that 30% of the vehicles on the road will be involved in some type of accident during their period of insurance, from minor to major. They tend to look at the risk of the individual operator rather than the market risk per vehicle, so they look at it slightly differently.

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Mr. Paul Redmond: On the point about the right of the individual to have a case heard in court, at some point in time we will have to face up to this issue and resolve it in some way. We must resolve the right of the individual versus the common good. It is a classic old debate. The way our system is working is highly dysfunctional, but we must find a way of balancing the rights of the individual and the common good in regard to giving us a market of insurance that will work.

Senator Gerry Horkan: We have heard about averages of 35%, 40% and 45% in the wider motor insurance industry. It is clear that Ms Murphy's industry is being targeted far more, by tenfold multiples. She is saying that somebody who was paying €3,000 is now paying €9,000 or something similar. Does Ms Murphy have any figures on the industry average?

Ms Verona Murphy: No, there is no industry average. It is not possible, because of the variance in the size of operations versus the subjective nature of claims. One member complained to us last week. He is based on a fleet policy, which is a minimum of five trucks. His quote went from €10,000 for the motor section to €28,000. At the 11th hour, his broker was telling him that he could not get him another quote. He did not have specific claims in the motor fleet, but he did have some in the EL and PL areas. They were not major, just two claims, but the same underwriter had all of his insurance so when it came to his motor insurance, the significant increase was €18,000 on what he was paying. He told his broker to insure each truck individually. That meant opening five new policies, but five was not allowed because that is a fleet, so he had to take one vehicle off the road for a period of time and insure the other four vehicles individually. He was not informed by the broker that this was an action he could take. He saved €10,000. That means there was a reduction for the administration of four separate insurance policies versus that of one fleet policy and his insurance was reduced by €10,000. There is nothing to be gathered here, unfortunately. None of it makes any sense. The administration costs are fourfold, yet the insurance went down. He can put the fifth truck back on as an insurable vehicle within six weeks and next year ,he will probably have to take the same action, so it will not be a fleet policy. It is just ridiculous.

Senator Gerry Horkan: Is there an understanding in the industry that there has been an increase in accidents, claims or events that cause insurance companies' costs to rise? It has become evident that everybody feels our vehicles are getting older and that we, as drivers, are getting older and more experienced, yet all our premiums are increasing. There is no change in the driving culture. The roads and motorways have not deteriorated to such an extent that far more claims are being made. The witnesses are of the view that insurance companies are operating in a cartel-like manner. They are basically saying they are going to get together and hike their charges and customers will have to suck it up.

Ms Verona Murphy:  My colleague, Mr. Eoin Gavin, who is sitting beside me, has serious experience in respect of his own renewal. His claims history, which was being presented so that his risk could be assessed, involved, let us say, 11 incidents. The renewal involved an increase of almost 300%. When Mr. Gavin investigated, as many as five or six of the 11 claims had already been settled and should no longer have been on the claims history. There is exploitation by the insurers in the case of hauliers who are not adept at perusing a renewal, like the broker or the underwriter should be. If they do not know about these things, there is no transparency. It took Mr. Gavin to point out these claims, but we do not get enough information about claims either. I have had incidents where my own trucks have been cited in areas where they were not and claims have been paid. That is the opportunist, fraudulent behaviour that goes on in Ireland and across Europe. One is cited and one must defend

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oneself, but because it is so costly to defend and the nature of the claim is generally kept small, it is just paid.

Senator Gerry Horkan: Does Ms Murphy feel insurance companies are soft on claims and easy on settling?

Ms Verona Murphy: Yes. We did have an aggressive culture in the management of insurance some years ago. That was seen as something that was detrimental to the insurance market. I do not agree with that. The aggressive nature of that operator, which is no longer in the market, served the consumer best.

Senator Gerry Horkan:  Is the industry basically dealing with claims itself, or does it have insurance companies dealing with them on its behalf? How does that work?

Mr. Paul Redmond: They are processed through insurance companies but essentially because the levels of excess are so high, the claims settled by the insurers tend to be very serious, involving death, for example.

Senator Gerry Horkan: Mr. Redmond also referred to multiple-injury claims. Is he saying that they put five people in the car and then, at a slow speed, crash it into a wall?

Mr. Paul Redmond: Yes. When incidents like that happen, there is never just one person in the car. That would defeat the purpose of it. One company, for example, dealt with 130 or 140 personal injury claims in a year and, of that, the company reckoned 20% were spurious or fraudulent in some shape or form. That is an indication of the size of the problem. In this example, there were around 50 people involved in such claims and if each claim was settled for approximately €50,000, the potential cost for companies could run into millions of euro.

Senator Gerry Horkan: The data sharing issue is one that has been raised over and over again. Many witnesses have spoken about the lack of transparency and visibility. We have been told that 70% of claims are being settled out of court, with no visibility. The Injuries Board is dealing with approximately 20% of claims, while only 10% are going to court. We were told last week that insurance companies are settling up to 70% of claims out of court because they are not sure which judge will be presiding, what the claims might be and what the payouts might amount to. I ask the witnesses to give their thoughts on that and to outline what they would ask representatives of Insurance Ireland.

Mr. Paul Redmond: In some ways, because of the level of self-insurance, we are almost an insurer ourselves. We have already requested that insurers would share data with us on people who have been involved in fraud, but there are data protection issues involved. The industry is looking at this and trying to determine if it can customise something specifically for the car rental industry that would give us an ability to detect potential problems.

Senator Gerry Horkan: Are they co-operating so far?

Mr. Paul Redmond: Yes indeed, they are endeavouring to deal with the issue with efforts being made to get a database up and running.

Senator Gerry Horkan:  Are there any points that Ms Murphy would like us to put to Insurance Ireland if she were in our position?

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Ms Verona Murphy: Five of the ten appeals that have been put before the new appeals court to date have been halved on appeal. If insurance companies are doing what they say they are doing, they must now be taking cognisance of the fact that awards are being halved on appeal. Therefore, they should be basing their awards on half of what they thought they were paying out. That is not happening. Rather than recognising that appeals are being halved, they keep speaking about exorbitant claims. It is incumbent on Insurance Ireland to collate data in the interests of transparency regarding how brokerages are paid by insurers and consumers. I have no idea how much commission my broker receives from the insurance company by way of commission. I know that when my motor insurance needed to be renewed this year, RSA quoted a price of €12,900 to me. When I went to the market, a quote of €7,900 came back from a different company. My initial broker told me that he would match it and he would not place it with RSA. When I agreed to this and signed my insurance policy, my premium was placed with RSA. This is about transparency and competition, of which there is none. There is just nothing there.

I am not sure that Insurance Ireland can deal with any of this. I refer to the manner in which brokers and underwriters are operating. Insurance Ireland deals predominantly with regulation. It does not do anything in between. It does not seem to reprimand anybody. I return to the fundamental fact that companies that are supposed to be competitors are acting in an anti-competitive fashion. How are they being allowed to do so? How are they back in a market that they say they did not charge enough for? Once they sustain that, they can charge what they like. I would support an investigation by the most effective authority. We need an effective investigation today and not in five years' time, when many people will have suffered and probably gone under as a result of the current position.

Senator Gerry Horkan: I would like to pick up on Mr. Herron's observation that taxi drivers cannot get insurance without experience and cannot get experience because they cannot get insurance in the first place.

Mr. Joe Herron: The number is very small. What is happening now is that instead of individuals getting taxi licences, companies are buying them. People are forming companies to buy taxi licences and put them out with drivers. While that is happening, I certainly do not feel that there is competition as I would know or interpret it to be. There is nothing to stop insurance companies from showing us how much has been paid out in claims on taxis alone. They will not do that, but there is nothing preventing them from doing so if they wish. It would be very simple for them to separate the figures for taxis from the figures for everybody else, but they will not do so.

Senator Gerry Horkan: Would Mr. Herron's members feel that the insurance industry is soft on settling claims?

Mr. Joe Herron: Absolutely. The point is that the insurance companies will pay claims. They would pay one without question if it was a small enough claim. Even if they were aware it was a fraudulent claim, they would not care and they would pay it without question if it was small enough because it would save them money. That is the way they feel about

Senator Gerry Horkan:  What are the things the Freight Transport Association would like to see done?

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Mr. Neil McDonnell:  If one went to a rehabilitation model, one would not technically have a Book of Quantum at all because it only deals with general damages. From the legislators' point of view, one of the first things they would want to get from insurers is the data. There is only visibility of 30% of the problem and the industry is telling us that there is a huge problem somewhere else, in a big dark pool of 70%. The provision of that information is on a statutory footing in the UK and there is no reason that should not also be the case in Ireland.

Ms Verona Murphy:  The records of the PIAB state there is no increase in claims. This is very important. That is the only true figure we can take as a given on the basis that one has to go to the PIAB in the first instance.

Senator Paddy Burke: There is a report with the Department of Transport. Did the IRHA make a submission to the process relating to the compilation of that report?

Ms Verona Murphy: No, we did not. We would have voiced our dismay at what was happening within the insurance sector. At the time, we were not facing increases anything like what we are getting now. They would have been in the region of 10% to 20%, but for a big commercial operation, that is quite a substantial figure. That is why, at the time, they would have been deemed to be 20% or 30%. Again, the blame is placed on the Judiciary, the courts or the PIAB. The report was never issued. I know it is there and it has been deemed to be there by the Department, although it was never published. I do not recall that we were ever consulted.

I believe the operation and administration of the insurance companies and underwriters is failing and is not as adept as it should be. If we are going to consider a model that holds that a person has to have treatment as opposed to a payout, we already have a serious problem with the health in this country. I do not imagine such a model would be fitting as a solution. This is a feasibility issue, a competition issue. Yet, some new model can be looked at in the long term but we need a short-term survival solution to this problem.

Deputy Michael Fitzmaurice: There are many people, or "hackers" as we would call them, in the haulage industry. Yesterday, I visited Westport meeting large companies. They have a system to set up their own insurance. They had it underwritten by foreign companies. Has the IRHA looked at doing anything like that?

Ms Verona Murphy: Yes, we have. We have investigated the possibility but we do not believe that the model would fit. I do not believe the risk assessment would be any different. The captive insurance market is something else. We are hauliers. The FBD model is almost broken as we know it. That was set up by the farmers. FBD is more or less pulling out of our market.  

Deputy Michael Fitzmaurice: I firmly believe there is a cartel in Ireland so why not take the pitch away from this group? We are talking about the most expensive vehicles, rather than cars, so if we took away as many as possible from them, it would be a sore blow. Have we tried to get a foreign company to do the underwriting?

Ms Verona Murphy: All underwriters are foreign but we have not done that to any great extent. We do not have enough expertise, or anyone in the market we could employ to set up such an option. The cost would be at least €20 million and that kind of money is just not there, either as money we could raise from our members or capital from anybody else

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prepared to take the risk. Many of us can hardly manage to sustain the level of increases as they are, never mind invest in something like that. If the Government wants to invest and set it up, we would look at that option but otherwise we do not have the capabilities as an association. I am not sure the model would survive.

Deputy Michael Fitzmaurice: Competition and the idea of an inquiry is great but, realistically speaking, these inquiries take time and it would be two to five years before it was completed and even then, it would not solve the problem. Four or five years ago, insurance levels were okay for everybody but then they started rising. Are rules brought in by Europe and the CBI requiring us to have enough as a back-up for doomsday a factor? When the recession hit, many people got on the gravy train and made numerous claims for whiplash. There is a tendency now to claim for every knock. The existence of a cartel is certainly one factor, but many people are making claims because we underwent a recession. This is something we always see and it is a trend seen in other countries when people get into tight spots. Does Ms Murphy think that, as well as fraud, regulatory measures introduced in the context of doomsday scenarios - as they were in respect of marts and credit unions - when everything would crash and companies would need to be bailed out, are also a factor?

Ms Verona Murphy: Yes, that has certainly added to the situation. Regardless of whether we are in a recession, competitors in the market, who previously said they did not charge enough because to have done so would have meant they could not compete, are now making hay while the sun shines. Nobody appears to be doing anything about it. The short-term solution is to conclude that if Mohammed will not come to the mountain, the mountain must be brought to Mohammed. In other words, we are now citizens of the EU so we should be allowed to obtain our insurance as we see fit. I do not see any other short-term solutions. If that happens in the next six months, and if there is a cartel in Ireland, then it will collapse because the companies here would be operating in a competitive sphere.

Deputy Michael Fitzmaurice: If the mountain did come to Muhammad, given the amount of money paid out in claims, whether we like it or not we must cut to the chase on one thing, namely, that the Book of Quantum must be tackled.

Ms Verona Murphy:  According to existing data, claims have not increased. What has increased is the number of motorists and other traffic on the roads. Since the recession, that has increased by 25%. That brings a significant increase in revenue to the underwriters. While they maintain there is an increase in claims, that is not the case. There is no correlation with what they have garnered since the recession through the increase in traffic. There is a 25% increase on the premium base but there has not been an increase in claims and that is the only significant data on which we can rely.

Deputy Michael Fitzmaurice: What is happening at the moment is that a person who suffers from whiplash or other injury does a deal before the case goes to court or through any other process. A lot of that is going on. It may be the case that politicians must legislate on a Book of Quantum in terms of setting out criteria for what is paid out to people by the courts. We must do something because everybody is afraid of having an accident or that something will go wrong. The reality is that if it is a small tip, one would pay the money out of one’s own pocket.

Ms Verona Murphy: Under the terms and conditions, regardless of whether one pays it out of one’s own pocket, one is supposed to report the incident.

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Mr. Neil McDonnell: The significant issue is at the lower end of the Book of Quantum. If one is talking about a catastrophic injury or death, the claims process becomes a little bit clearer and a decision is made either to fight or concede. At the lower end, the difficulty is that if a claim for up to €10,000 comes into any operator, there is no fiscal incentive for insurers to fight it when they can just pay €7,000 or €8,000 and add it to the operator’s insurance in the same year. It is at the lower end that the disconnect is evident and that is where the Book of Quantum is poisoning the well.

Acting Chairman (Senator Gerry Horkan): Various members of the Judiciary might have different histories in terms of claim awards. Insurance companies are making rational commercial decisions, but there is no visibility. What is happening in other jurisdictions where they are compelled to share data or to allow the State see the data, anonymised or otherwise, would be of huge benefit in assessing whether insurance companies are profiteering, or if the situation is that the claims are not sustainable in terms of what is being paid out versus what they are taking in.

Session 2 - Tuesday

Acting Chairman (Senator Gerry Horkan):  We are joined by Mr. Ken Murphy and Mr. Stuart Gilhooly of the Law Society of Ireland and Mr. Paul McGarry SC and Ms Sara Moorhead of the Bar Council.

Mr. Stuart Gilhooly: We say the answer lies within the closely guarded books of the insurance industry which each insurer seems remarkably reluctant to open to anybody outside of their own company. For years, all insurers engaged in a price war which saw them quote unsustainably low premiums while insuring bad risks. The inevitable upshot has been an increase in premiums to restore profits and thereby compensate for these poor business decisions. It is also common knowledge, although rarely admitted by the industry, that much of the profits emanate from the investment of the premium income. It is abundantly clear to us that these returns have not been at remotely the same levels that would have been experienced in the past given the recent volatility of global markets. While studiously ignoring these obviously significant factors in the manner of how it has conducted its business, the industry has conducted a long-running and widespread public relations campaign in which it has sought to blame everybody but itself. Part of this has been a campaign of snide innuendo about the bona fides of personal injuries victims while reserving particular ire for the easy target of the courts and the lawyers who seek to obtain compensation for the innocent victim. The campaign has included a number of stock phrases and pseudo facts which are either completely untrue or greatly embellished and which appear to have gone largely unchallenged.

One thing that is said is that lawyers have found a way of bypassing the PIAB. This simply is not true. All cases must go to the Board. In fact, it is only an insurer who can decide whether a case goes through the courts or not. The vast majority of insurers want the case to go and the acceptance rate has not changed in any way in the 12 years of operation of PIAB. There is an idea that lawyers have infiltrated the system. Again, this is simply not correct.  Almost

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since the beginning of the PIAB, over 90% of claimants have been represented by a solicitor, at their own cost. They choose to do so at their own cost. This figure has not changed in any way and given the fact that it is the claimant who pays for the involvement of a solicitor, it clearly can have no effect on the level of premiums.

There is a suggestion that claimants wilfully do not show up for medical examinations. Again, there is no evidence of this. There is nothing whatsoever to back this up. The Law Society meets with PIAB twice a year. We discuss matters of mutual interest on these occasions and at no stage has that issue been brought up with us. Over eight years ago, we wrote a practice direction in our industry magazine, The Law Society Gazette, in which we urged all solicitors - lest there be any doubt - to persuade their claimants to go to medical examinations.

There is a suggestion that lawyers are persuading claimants to turn down awards and that there is no penalty if they get less in court. This is absolutely not true. Of course there are occasions on which awards will be turned down, but there is a penalty if one gets less. One simply cannot get costs if one gets less for an award in court and one may have costs awarded against one. There is no incentive to turn down awards unless the person is going to get considerably more.

The suggestion that damages are going up and the judges ignore the Book of Quantum has been put out there on a regular basis. Damages have not gone up. The only manner in which they have gone up is in respect of what we see as the very large medical negligence awards for tragic birth injuries. These do not relate to motor insurance premiums. In fact, if one takes them out of the equation, one will find the awards have actually gone down marginally. Judges are required to have regard to the Book and if they do not, the Court of Appeal is there to deal with any mistake a judge may make. Of course, judges are human and they will occasionally get it wrong, but the Court of Appeal on a regular basis over the last nine months has overturned awards.

The one unheard voice in this debate is the most vulnerable and least represented, that is, the victims of road traffic accidents. They have no representative organisations; there is nobody there to be their voice. That is where the solicitor comes into it. The impression is given that there are a large number of claims that are fraudulent and that whiplash claims are exaggerated. No evidence has been produced to support these assertions and the reality is starkly different. The provisions of the 2004 Act ensure that any exaggerated or fraudulent claims must be dismissed and provide for a mechanism for prosecuting claims by anyone who has exaggerated or fraudulently brought a claim. While the Judiciary has dismissed claims in these circumstances, and does so on a relatively frequent basis, there have been practically no prosecutions and we do not know why. Are the insurers not pursuing it? Are the Gardaí not pursuing it? Whether or not that is the case, we know there are relatively few, if any, prosecutions for fraudulent claims. The truth is that personal injury claimants suffer genuine and often very debilitating injuries and have only one voice, that is, their own solicitor or barrister. The pejorative term "whiplash" that is used to dismiss the significance of neck and back injuries is very insulting to the many citizens of this country who have had their lives damaged and sometimes ruined by such injuries, caused by the negligence of others.

What is to be done? We believe we must uncover the truth. The Law Society calls for a new task force, along the lines of the MIAB, to establish the real reasons premiums are rising at an

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unsustainable rate and to make recommendations to deal with the problem. Real and accurate data is key. The insurance industry's black box must be prised open in the interests of everyone.

Mr. Paul McGarry: There has been no significant increase in the number of claims that have been processed through the PIAB in recent times. A 6% increase in 2015 might be seen as reflecting increased economic and social activity and higher traffic volumes. That mirrors the views of the CBI in its Bodily Injury Thematic Review in November 2015. The levels of award are also consistent with a modest 1% increase in 2015. PIAB has, in effect, succeeded in removing two thirds of personal injuries cases from unnecessary litigation. There has been no significant increase in the number of claims going to court. The High Court saw an increase of 2% in 2015 and the Circuit Court saw an 8% increase, which was expected given the increase in the jurisdiction. This does not reflect the explosion of claims that has been alleged to have occurred by the insurance industry. In 2015, there was an increase of 8% in the total amount awarded in the High Court and a 20% increase in the total amount awarded in the Circuit Court. Again, that is not unexpected, given the jurisdictional increase in the latter court. These figures do not reflect the allegations of soaring awards.

A person who sustains genuine personal injuries is entitled to be properly compensated for those injuries and the concept of reasonableness and proportionality is inherent in the exercise undertaken by a court in assessing the appropriate level of damages in each case. Judges are independent and do not have any vested interest in the outcome of proceedings. Contrary to popular belief, barristers' fees have fallen significantly in the last few years. Published figures from the various State agencies show that professional fees fell by between 26% and 50% during the period 2006 to 2013 and these reductions are mirrored in other areas of private work. We know that the Legal Services Regulation Act introduces a new costs regime that will ensure greater clarity around the principles to be applied by costs adjudicators in assessing costs. That is a replacement for the existing taxation of costs system and we see no reason that provision should not be commenced as soon as possible. That is within the capacity of the Minister for Justice to do at any time. It is a provision of that Act which has been welcomed by all interested parties.

We agree with the cacophony of calls for greater transparency and data sharing. Data relating to settlements entered into by insurance companies is vital to provide greater clarity and to enhance our understanding of the claims environment and the factors contributing to rising motor insurance costs. In 2014, for example, 71% of cases were settled privately by insurers and there is no information or figures available at all on the particulars of any of these settlements. That is more than two thirds of all claims settled privately by insurers, with no information provided. The absence of the data relating to the private settlements entered into by the insurance companies greatly hinders the process.

We also think that the business models operated by insurance companies warrant close scrutiny. There is a €1 billion discrepancy between the premium income of Irish insurers and the published awards. This must warrant some form of investigation. It has also recently been reported in the UK that insurance companies are overcharging motorists for cover despite certain measures, including the Government crackdown on the no-win, no-fee industry which has led to a significant drop in what are described as "whiplash" claims and which has helped the industry to save £500 million in the past three years. Despite this, the cost of premiums has gone up. If the overall cost to the industry of such claims has dropped, then why have motor insurance prices in the UK continued to rise? It is likely that insurance companies are

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trying to recover losses incurred from a period of imprudent pricing or bad management. If this is the case, and policy holders are being asked to pay extra to increase solvency in the financial services markets, then that needs to explained clearly.

Senator Rose Conway-Walsh:  The clearing up of the so-called facts that have had too much influence on this debate is not to say that, as part of the system which includes politicians, insurers and others, there is no role for legal practitioner to play in reducing premiums. For some time now, we have heard calls for whiplash to be singled out as a special case and for a special regime to be put in place for compensation for whiplash. It has been suggested not only that this would be unfair, but also that it may well be unconstitutional. As has been said, it was made clear in a recent Court of Appeal judgment that it is important that when compensation is awarded by the court in respect of pain and suffering, it should be reasonable and proportionate in all circumstances. The court further stated that damages awarded for pain and suffering must be reasonable, having regard to the injuries sustained, and must also be proportionate to the awards commonly made to victims in respect of injuries which are of significantly greater or lesser import. That would seem to imply that any sort of British-style care-not-cash system would be legally difficult to implement.

I believe the main reason we are seeing increases is the insurance industry's investment policies. No amount of spin can change that. If there are other things we can do - things that should be happening in any event - we need to look to them. For example, greater competition within the legal sector might help to bring down legal costs. Given that there is always the likelihood of a judge awarding costs against an alleged victim, the "no win, no pay" line will not work here. The EU believes the current system is illegal.

There has been a great deal of expectation regarding the revised Book of Quantum. Given that time has passed, it is likely the revised Book it will show an increase in most awards, rather than a reduction that would be consistent with what we are trying to do here. Would it be possible to have an accurate updated Book, given that the industry does not seem to be fully disclosing its data? I appreciate that the witnesses do not speak for the Judiciary, but I would like to know whether they believe there is an appetite within the courts for a newer Book of Quantum.

Mr. Stuart Gilhooly: It is fair to say that analysis of the jurisprudence of the Court of Appeal is a sign of a recalibration of how the courts are looking at damages. In the past nine or 12 months, the courts have taken the view that damages must be in line with what society expects from its citizens. In the past nine months, there have been at least five cases in which damages have been halved. I think the courts are taking it on themselves to deal with this issue. I think they would welcome a new Book of Quantum. It remains to be seen what is in it. From what we have heard in the media, and from those who have seen it - I have not seen it - my understanding is that at the lower levels, strangely, it appears as though they are a little bit higher, but at the higher levels, they are going to be lower. We should place our trust in the Judiciary which, in fairness, under the Constitution has been appointed to award damages in the State.

We talk about "care not cash" which is a very specific plan that has been suggested in the

UK. It has not come into play there yet and is not due to be introduced there until April 2017. It is almost impossible to see how it could work in Ireland because we have a Constitution which the UK does not. I am not sure how one would distinguish between the injuries to

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which it would apply and the injuries to which it would not. It would also pose a severe danger of real injustice being done to victims who simply would not be able to understand the difference. I do not think there is any prospect of that plan being successful in this country. I do not believe it will even be successful in England. Even if it does come about in England and Wales, it remains to be seen as to whether it will result in any reduction in insurance premiums. We have seen that no matter what happens and what reductions there are in claims costs, premiums seem to go up. They have been going up for the last two years and it is perfectly clear to everyone here that claims to costs have not been.

Mr. Ken Murphy: With regard to care not cash, I understand the political sponsor of the idea is no longer in office, so it remains to be seen whether it will happen. It is not in place yet, so nobody can say what the effect of it will be. It seems to us to be deeply troubling and a disturbing proposition from the point of view of the compensation of victims of injuries. No organised lobby, or no powerful industry lobby, is prepared to appear before the Committee to talk on behalf of the people who have suffered sometimes life altering injuries and certainly pain and suffering, the consequences of accidents caused by the negligence of others. They have no voice and it seems to us that they are vulnerable individuals with no corporate or collective clout. Their solicitor becomes their voice and their guide through the process.

I was present in the RTE studio last night when Ms Dorothea Dowling, who is something of a guru in this area, raised the question as to whether the insurance industry should be dictating the solutions to this problem. In any case, it seems to us that the insurance industry has caused this problem. The changes that have occurred and resulted in the enormous increases in premiums over the last couple of years originate with matters internal to the insurance industry, not internal to the courts, the PIAB or the compensation system.

Senator Rose Conway-Walsh: Does the uniformity in the approach from insurance companies in premiums cause Mr. Murphy concern? Does he believe it is worth investigating or that it warrants investigation?

Mr. Ken Murphy: For years, I was a practitioner in Irish and EU competition law. I was struck by the insightful remark from Dorothea Dowling on last night's television programme. She referred to the prediction, apparently coming from the insurance industry, of premium increases next year of in the region of 40%. Any competition lawyer or Regulator would immediately recoil and recognise that this is what is known as signalling to the market. It should not happen. It should not be the case that the insurance industry is telling the market and, therefore, each of the other providers, what they intend to charge in premiums next year. This seems to be a dubious practice.

The overall pattern over many years seems to have been a vast amount of under-pricing and under-reserving and, as a result, driving competitors out of the market. As a consequence we have seen the removal of Quinn, RSA, Setanta, and the most recent firm to leave, Enterprise Insurance. All of these firms have now left the market. There is a notorious absence of adequate competition in the motor insurance market in Ireland and the answer is to bring in more competition from abroad. That will not happen, it seems, until there is a greater release of data, the cards that are being held close to the chest of the current insurers.

Senator Rose Conway-Walsh: I am concerned about the view coming from Mr. Murphy to the effect that there is nothing the legal profession can do about the rising costs of insurance

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companies. We do not believe that to be the case in the context of reduction of legal costs and the competitiveness of the sector.

Mr. Ken Murphy: I will address the issue of competitiveness. The point seems to us to have been accepted by the Competition Authority in its report in 2006, although it was critical of other aspects. We were not wholly fans of that report in terms of its rigour, depth or reliability. However, it recognised a considerable degree of competition. All the characteristics of a highly competitive market exist in respect of solicitors' practices in Ireland. Let us contrast the sector with insurers: we are not talking about four or five "competitors". I gather we have 2,228 solicitors' firms in this jurisdiction. They are all competing with each other for clients. They are in different segments of the market, but there is intense white-hot competition in the market.

Personal injury litigation is an intensely competitive area as well. People choose their representatives. Ultimately, in most cases we are talking about cases that either go through PIAB,, and are determined on a recommendation, or those settled by some other form of negotiation with insurers. Most involve no payment of solicitors' fees at all, formally speaking.  These matters are agreed between the individual client and his or her individual solicitor in a highly competitive market. There are no set fees, scale fees or Law Society-recommended fees. These are matters for individual negotiation and agreement in a market in which if any client is unhappy with the fee quoted in advance - he or she is obliged to be quoted in advance - he or she can go to a solicitor next door and find someone with whom he or she can reach an agreement.

Mr. Stuart Gilhooly: The reality is that legal costs play a very small role in this whole process because it seems to be common case at this stage that only 10% of cases actually go to court; the rest of the time, as Mr. Murphy has said, one is dealing with situations in which the costs are being paid directly by the client, so it is effectively a zero-sum game. Bear in mind also that the Legal Services Regulation Act is now in place. We are simply waiting for the commencement of the relevant section. Once the section has been commenced, we are looking at an entirely new cost regime.

Deputy Paul Murphy:  The witnesses are a bit of fresh air in terms of some of the discussion we have heard. I agree with the analysis that there is quite an extensive propaganda war going on by the insurance industry. It has actually been quite successful and is reflected in some of the contributions we have had from people who are also victims. The two buzzwords used to explain the biggest causes of the massive hike in premiums we are seeing are "fraud" and "whiplash", which are interrelated terms and obviously serve the interests of the insurance company. The most important thing that we and the Government need to decide on are what are the key causes of the increase in premiums are. Then we can devise a solution. For example, the care not cash model fits into the narrative of fraud and whiplash as opposed to the narrative of massive profits. That is the point: it reinforces that narrative.

The most important question I would ask the Bar Council and the Law Society is whether they think it is fair to say on the basis of the limited information that they have - I know it is limited; that is part of the point - that the primary reason for the significant increase in costs to drivers that we have seen is an attempt by the insurance companies to restore profits.

Mr. Stuart Gilhooly: It is very much our view. There has been no real change in claims costs over the course of the last seven or eight years. If it is indeed claims costs that are

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driving up premiums, why were they not driven up two, three or four years ago? That just does not make any sense. There therefore must be other factors. I think Dorothea Dowling said on "Claire Byrne Live" last night that it was her feeling that the Solvency II Directive was driving the increase, that there was an unpreparedness for the Solvency II Directive that was driving insurance companies to build up their capital reserves. There is a suggestion that they have already decided that next year will see a further 40% increase. They do not even know what the claims market will be like next year, so I think this is a red herring.

Ms Sara Moorhead: The briefing document prepared for the then Minister for Transport made interesting reading and corresponded with the type of research we had found ourselves. It reads: "It appears motor insurers are now imposing higher premium rates to return themselves to profitability or to boost profitability after a number of years of insurers competing for market share with prices driven down accordingly and possible underwriting losses in some cases." The anonymous civil servant who penned the document goes on to add an intriguing caveat: "The question does arise for motor insurers - if motor insurance is so unprofitable, why does anybody do it?". That of course comes back to the exercise in which Dorothea Dowling has engaged over time which shows that the discrepancy between the premium income that has come in and the actual payment out on awards - all awards, not just motor claims - is €1 billion.  The Committee is hidebound until it gets the information.

Anecdotally, as someone who practises in personal injuries, I had not noticed any dramatic sea-change in awards. In fact, I would have said it was the other way around, because the Court of Appeal has been quite stringent in reducing awards. I certainly had not noticed the costs I was getting going up. I had not noticed more cases coming to court as opposed to being settled by PIAB. We went to the accounts of the insurance companies to see if we could get any information from that as to what they were settling, but de nada. We did a search of the CRO - but we found nothing. Every time it is put to him, Kevin Thompson of Insurance Ireland does not deal with it and, frankly, the media let him go on unchallenged.

The Courts Service reports are available. They are not controversial; they are based on fact. There is the CBI report, which is based on fact, and PIAB, which is based on fact. There are no major changes arising from any of those entities, none of whom are particularly lawyer-friendly, as they would say themselves. We have an excellent relationship with PIAB in the sense that we have dialogue with it, but its role is to make sure people accept awards, do not go to the courts, and minimise costs. Three separate entities cannot see any sea-change in the regime, yet we are told last year the premiums went up by 38%. We all know as drivers, that premiums are rising for no reason. I am the classic profile - middle-aged woman with a full NCB and no penalty points - and my motor premium went up by 25% last year. It does not make sense, but they will not answer the questions, and until they answer the questions and give the data, I do not know where one moves to in terms of solutions. What is really worrying at this stage is that they are already flagging that they will increase the motor premium again next year. How could they know what the claims history is for this year at present?

There is fraud in the system but the whole point of the 2004 Act was to introduce a system that dealt seriously with fraud. It is not just about fraud, it is also about exaggeration. One can have a case in which a person exaggerates a portion of what is actually a legitimate claim. For example, there is a reported case of a man who lost a portion of an arm in a very bad machinery accident. There was no doubt that he lost it and that there was negligence involved, but he exaggerated when it came to his earnings, what he was doing and what he

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could not do. As a result, he got nothing. He did not get a proportion because he was entitled to - he got zero.

We do not know why insurance companies, even as a matter of sending out a message, do not go to the DPP and say it wants the case prosecuted. We see this sort of incident every day in the paper, where a case is dismissed on the basis that the claimant was dancing around on Facebook when they said they could do nothing. We all know that if a message went out from an insurer saying that this is wrong, it would have a significant effect. We do not want to be dealing with fraudulent claims and we certainly do not want to be representing fraudulent people. I dread seeing Facebook coming towards me in any court case, because one never knows what is going to be there. One thing one learns is how indiscreet people are on Facebook. Insurers have that power and they have had that power since 2004.

Judges are keenly aware, despite the myth that they are out of touch, of concerns in respect of the Book of Quantum. While we can always be troubled that we are perceived at the lower end of the scale to have quite generous awards, but one must bear in mind that at the higher end of the scale, we have very low awards. When one tells people that the limit on general damages for a person who is catastrophically injured, who is never going to be able to work or do anything again, is €450,000, the public is horrified. Time and again, the Supreme Court has said that must remain, for public policy reasons, as the cap on general damages. The Court of Appeal has said recently that one must now work backwards from that in respect of all other claims. That has had quite a significant effect in terms of general damages. Judges should be trusted in regard to that, but this can never be resolved until we have the information, which we do not have.

Deputy Paul Murphy:  About 10% of the claims are resolved in court, 20% go through PIAB and the rest of them are out-of-court private settlements. That is all in the black box. How does one go about getting that? Is there any legal difficulty with passing a law that provides for these things to be published because they are in the public interest? Is any work being done on that?

Mr. Ken Murphy: Not specifically, but reports indicate that these data are available in the UK, which is probably the only really comparable jurisdiction because all the other civil law jurisdictions are really apples and oranges. If data are available 90 miles up the road, why should they not be available here?

Ms Sara Moorhead: There is no reality to having an updated Book of Quantum unless it is based on the overall claims experience which is that 70% are settled privately by the insurers who choose to contact the plaintiffs' solicitors and settle them. We do not know whether they have co-operated in terms of the up-to-date Book and given detailed information to PIAB to enable it to update the Book because there would be no reality to it if they have not. It is one of the murky areas where we are simply not aware of what they are doing. It should be readily available and if it is, it gives them far better information on the claims picture. There is no point in having a Book based on 30% of what is going on; we need it based on 100%.

We must remember they have the choice. A plaintiff does not have a choice but to go to PIAB. Frequently, a plaintiff is in PIAB and someone from the insurance company picks up the phone to him or her and says, "Forget about the Injuries Board. Come down and we will meet you and we will pay you." However, we do not have the data.

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Deputy Paul Murphy: How does that happen in reality? In an average case, at what stage does it leave the formal process? Is it at that point before PIAB or is it between the Board and the court?

Ms Sara Moorhead: It depends. There are obviously time limits for lodging with PIAB. Mr. Gilhooly can speak more about it because he is involved earlier in the process. Sometimes it will have gone into PIAB and they will be contacted. Sometimes it will not have gone as far as that and they will be contacted. The reality is that no claim gets cheaper the longer it goes on. It is in the interest of the insurance companies to settle them as soon as possible. It varies.

Mr. Stuart Gilhooly: As we probably all know now, different insurance companies operate in different ways. There will often be correspondence early in a case making an offer which is frequently not acceptable. It tends to work that way as Ms Moorhead has said. Insurance companies will try to settle a case at a lower level early on; that makes sense for them. It can, and often does, make sense for the claimant, and often the case is settled at an early stage. However, there are many cases in which it is just not appropriate to do so.

I have come across increasingly bizarre behaviour by insurance companies regarding PIAB. Occasionally, I will get what I regard as a very straightforward case, for example, a rear-end collision in which clearly liability is not an issue, and the case is rejected by the insurance company even to go through PIAB. I often have to say to clients: "I have no idea why this has happened. Is there something I'm missing here? Did this accident happen the way you said it happened?" They just look at me. Then two months later, having issued court proceedings - as I have to - I get a phone call from an insurance company asking if I want to settle. I am left wondering what happened there and why the insurance company did not let the case go through PIAB. I usually get a blank response with an indication that something happened there. There is increasingly strange behaviour by the insurance companies in how they deal with PIAB.

A case can be settled at any point. It is very simple: if the offer is right, all of us, solicitors and barristers, will advise the claimant to take the money. It does not matter at what stage in the process - pre PIAB, during it or on the steps of the court - if the money is right, it must be accepted. We have a professional obligation to do so and that is what we do.

Deputy Paul Murphy: It is inevitable that there must be some fraud. However, fraud is often spoken about as if it is the factor driving premiums up and there is an absence of facts to accompany any of that.  Can the witnesses give us facts on how many fraud prosecutions take place in a year?

Mr. Stuart Gilhooly: Ms Dorothea Dowling did an analysis of what we call the Section 26 cases. They are the cases where if one exaggerates slightly, the case gets kicked out. Apparently, 32 such cases have been run in the courts, of which 19 have been dismissed.

Deputy Paul Murphy: "Dismissed", as in their claim was dismissed?

Mr. Stuart Gilhooly: As in absolutely dismissed with no money at all and costs awarded against them. I am aware of a number of cases in which judges have referred the papers to the DPP. What happens after that is a mystery to us. It is certainly in every solicitor's and barrister's interest that absolute fraud be treated and prosecuted in the most serious manner. It is of no use to us and it destroys our reputation to even have such a case.

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Mr. Paul McGarry: By the same token, one would imagine that if there were prosecutions on a regular basis, or even one prosecution that was well known, the insurance companies would be all over it. Some of them spend a lot of money advertising on the radio about things like this. Therefore, one would have thought that there cannot be very many of them.

Mr. Ken Murphy: Given the powerful machine the insurance industry has, which strangely enough advertises on national radio in this way on these policy issues, one would have thought that if there were any instance of it, we would hear about it repeatedly. Advertisements claiming "Fraud is money taken out of your pocket. It's no joke," have been running constantly since 2004, as far as we can see. They continuously seek to taint the legitimacy and bona fides of people who have been injured in accidents, so much so that we know anecdotally that many people will not bring a claim because it is seen to be somehow suspect or dodgy. That is the purpose of the propaganda. If they had an actual case of somebody doing this, would we not be hearing about it all day, every day?

Chairman (Deputy John McGuinness): From listening to the replies, it would appear the witnesses are hell-bent on blaming the insurance industry itself. They seem very concerned about the legitimate claims; I admire that part of it. What can the witnesses' organisations do to reduce the costs?

Ms Sara Moorhead: In fairness, I do not think we are hell-bent on blaming the insurance companies.

Chairman (Deputy John McGuinness): The witnesses spent the last while dumping on the insurance companies. By the way, I am not defending the insurance companies; I have my own view on that. However, I was expecting to hear some more constructive commentary from the witnesses as to how the legal process works and how that might be organised in a better way to give better value for money.

Ms Sara Moorhead: We are saying the causes of the problems are not the causes the insurance companies have identified. Until they come and show those are the causes, we will not be in a position to provide huge solutions. We have one solution which we are surprised has not happened. The new Legal Services Regulation Act provides for a legal costs adjudicator. That Act has been in place for a significant period, but has not actually commenced. There is an establishment date of 1 October. That Section of the Act is free-standing. It has always been welcomed by all of the legal profession as a much more transparent system for everybody regarding legal costs. Therefore, if there are issues about our legal costs - whether they are solicitors' legal costs or barristers' legal costs - that should be dealt with speedily by the insurers and the plaintiffs. If the insurers are right that legal costs have greatly increased, the introduction of the Legal Costs Adjudicator, properly financed - it is supposed to be self-financing, in fact - would be a very significant improvement to the whole thing.

We have also welcomed - if it is properly done - a revised Book of Quantum. There is no point in putting something into Statute, as happened in 2004, and then leaving it for 12 years without regularly reviewing it.  If the Book is properly done and revised, that should assuage some of the insurance companies' concerns about valuations of awards and whether awards are increasing. There is an absence of information from insurers. It is why we cannot be as constructive as we would like until they give us the information. If they give us more, we

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may be in a position to be more constructive in terms of what the future holds. As consumers and representatives of consumers, we are concerned about the level of increase in premiums.

Chairman (Deputy John McGuinness): Will the witnesses comment on the process when one is represented by a solicitor before PIAB?

Mr. Stuart Gilhooly: Where a car accident occurs, for example, the claimant will normally attend a solicitor's office and, once a medical report is obtained from the client's treating doctor, what is called a Form A is filled out. With the medical report and fee, that form is sent to PIAB, which would then write to the respondent, that is, the insurance company, and ask it whether it wanted to go through that process. From my own experience, approximately 70% or 80% will go through the process. The ones that do not go through are those in which liability is clearly an issue or where, bizarrely and for reasons that are not clear to me, they just do not because insurance companies have got ideas about them.

Assuming someone's case does go through the process and is not rejected for court proceedings, he or she will be examined by PIABs doctor. There may be more than one doctor depending on whether there are multiple injuries. People will then ask for what we call special damages, those being loss of earnings, medical expenses and any material damage that has been suffered. Having got the medical reports from their own panel of doctors, PIAB will then make an award for general damages, which PIAB will use by reference to the Book of Quantum, and any special damages such as loss of earnings and medical expenses. That award will then be sent to the claimant and the respondent. Both will get to decide whether they accept it. If both do, the case is closed. If one turns it down, the matter presumably proceeds to court.

Chairman (Deputy John McGuinness): The claimant pays the solicitor?

Mr. Stuart Gilhooly: Correct. Out of his or her own damages.

Chairman (Deputy John McGuinness): If the solicitor was paid separately, would that encourage more cases to be settled before PIAB?

Mr. Stuart Gilhooly: It may, but I am not entirely convinced that it would. Very few cases are turned down because the award is slightly out of kilter. They are almost always turned down because they are way off. For the sake of argument, let us say that there is an award of €15,000. If my client told me that he or she would like to take it, I might say that, although the case was worth €16,000 or €17,000, he or she would be much better off taking the award than taking a chance in court. Let us say that my fee is €1,000. In such a situation, there is no way that the extra €1,000 would make any difference to whether the person turned down the award. Most of my colleagues are like me, in that I would only ever advise a claimant to turn down an award where I felt that the case was either worth considerably more or was not ready to be settled at that stage.

Chairman (Deputy John McGuinness): Has anyone a figure for the number of cases that go to court where an award has been offered and for some reason is considered not to be enough.

Mr. Stuart Gilhooly: We know that 40% of awards are rejected and approximately 60% are accepted.

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Chairman (Deputy John McGuinness): Does Mr. Gilhooly consider 40% to be a high figure? Could more be done by PIAB, the solicitors or whoever? Could a better structure be applied to PIAB so as to ensure that a greater number of cases are settled at that level?

Mr. Stuart Gilhooly: We are really only discussing 4,000 cases.  Some 33,000 went to the PIAB in 2015 and 11,000 went to award. Therefore, 40% is approximately 4,000 or 4,500 cases. Out of the 33,000 that went to the PIAB, we are only talking about 4,500 cases, around 13%, that are affected by going on towards the court. That is the figure we know about.

Could there be fewer cases going through the courts? Yes, I am sure there could but I am not entirely sure how that could improve. PIAB was established to deal with cases quickly and fairly. If one has a situation where PIAB cannot deal with the cases quickly, then part of its remit is completely gone. We do not want a situation where claimants have to wait forever for their compensation. If, for instance, cases were longer in the PIAB process, people might still find they were unhappy with the award and might still want to go on to the courts to get their legal and Constitutional right to a hearing of their case by a judge. I do not believe that 40% is off the wall. I believe it has been the same figure the whole way through and if one asks PIAB, it will say that it is pretty much what it expected.

Senator Gerry Horkan: There has been some insurance company bashing, but it is fair to say that there has also been legal system bashing, of the courts, the Judiciary and individuals, either solicitors or barristers, on the issue legal costs taking up a large chunk of the costs involved in the claims process. Reference was also made to the so-called care not cash system and how that might just move costs from the legal system to the medical system , although I am not sure whether that would be true. I take the witnesses' points on the Constitutionality of the plan, the potential for complications, if it could happen and so on.

Will the witnesses indicate how many motor insurance legal cases are taken per year?

Mr. Stuart Gilhooly: The answer to that question is that we do not know. We know that PIAB dealt with 33,000 cases in 2015. It is my understanding that around 70% of those were motor insurance claims. That would give a figure of 20,000 to 22,000 motor insurance claims with PIAB. However, part of the problem is that we do not know what claims do not go to PIAB because some of them may be settled before they get there.

Senator Gerry Horkan: The Committee has been told, and it has been fairly consistent from all the witnesses, that around 10% of cases are going to the courts and that 19% or 20% are going to PIAB. Will the witnesses clarify where the figure of 70%, 71% or thereabouts is coming from? Is it anecdotal or is it insurance industry propaganda? Is it one person's word or someone else's word?

Mr. Stuart Gilhooly: In fairness, I have drilled down into this because I asked myself the same question yesterday about where the figure came from. It does fit in and I believe it comes from PIAB's figures for 2015. Some 33,000 claims went to PIAB. We know it made awards in 11,000 cases, which is around 35% of cases. We know that around 40% of those were rejected. That leaves 10% going to court, 20% settling with PIAB and, presumably the rest in the ether somewhere.

Ms Sara Moorhead:  For 2014, we know 31,576 injury claims were registered, of which only 9,000 went to court or were finalised by PIAB. Therefore, there is no transparency on

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22,000, or 71%. That is not to say those are all the figures. As Mr. Gilhooly has said, there may be other cases that were never seen by PIAB at all. The most we can tell the Committee is that of the cases registered, they are the figures that were dealt with, and there is 71% of them.

Senator Gerry Horkan: Let us say a person is driving down the road and somebody drives into the back of his or her car. That person knows it is the other person's fault and the liability is fairly clear, even though we all have insurance discs that say never to admit liability, even if one is in the wrong. The person might be a bit sore and a bit frustrated the boot of the car is gone, etc. I presume the client has to find a solicitor. We do not have that kind of ambulance-chasing. The person finds a solicitor who says that, by and large, for somebody running into the back of a vehicle, one would get this or that. We have heard over all the sessions that whiplash in Ireland gets €15,000, whiplash in the UK is £5,000 and in the rest of Europe, does not exist. Are there any thoughts or views as to why that is the case, if it is the case?

Mr. Stuart Gilhooly:  The Senator was correct to that point in that a client finds a solicitor and they can then sit down. My experience is the clients practically never ask what the case is worth. If they did, my answer would be that I have no idea. I can tell a client what could happen. He or she could recover in a month, six months or never recover. Those amount to completely different figures and scenarios. We do not just say a whiplash is X and a broken arm is Y. It does not work that way.

I had the case of a very unfortunate lady approximately seven or eight years ago who broke her arm. It was a fairly standard broken arm, probably worth, on the face of it, somewhere between €20,000 and €30,000. What happened to the lady was horrific. Her broken arm developed into chronic pain syndrome and dystonia to the point where she lost power in one arm, then the other and eventually the power in her legs. It was bizarre, but it happened. The doctor who reviewed her said he had never seen anything like it in his time. It went from what seemed on the face of it to be a simple injury to being a catastrophic and life-changing injury that was worth seven figures. One can never tell what a case is worth exactly.

Senator Gerry Horkan: We are all totally sympathetic to anybody dealing with a serious injury. We heard that people are coming from other jurisdictions and faking crashes here in rental cars. It was suggested to us that it is like insurance fraud tourism. Mr. Murphy makes a good point about the victims in that maybe we should try to hear from them if there is a way of getting to people who are involved. We are trying to find out why the average payout for whiplash is €15,000 - if that is the case - in this jurisdiction versus £5,000 in the UK, while it is almost non-existent in the rest of Europe. Has the witness any thoughts as to why we seem to have much greater payouts for whiplash in this country in comparison to other countries, if that is the case?

Mr. Stuart Gilhooly: I am not entirely sure there is necessarily any specific evidence as to what the average whiplash payout is in any country. People are looking at the Book of Quantum in both England and Ireland and making comparisons. However, what is whiplash? It could be a two-month neck injury or a lifetime neck and back injury. There is a world of difference between those two concepts. I do not necessarily think one can simply say it is X here and Y there.

Senator Gerry Horkan: No. Have the witnesses any idea why the average payout we have been told time and again is what it is? There is an argument that people are looking at one

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Book of Quantum indicating €15,000, and another indicates £5,000. Is there any other reason the sums could be different?

Mr. Stuart Gilhooly: Ultimately, it is a matter for the Judiciary to decide. We have a Constitution in this country.

Senator Gerry Horkan: We have heard the Constitutional arguments. I just wonder whether the witnesses have any thoughts themselves. They are far more familiar with the process as they are involved in it day in and day out. I am just trying to discover whether they have any ideas as to why we have, allegedly, much greater payouts in respect of whiplash than is the case anywhere else.

Mr. Ken Murphy: The civil law system in continental Europe, Scandinavia and, really, the rest of the EU outside of the UK and Ireland is very different in its approach. It does not really have the fault-based approach, what lawyers call tort, whereby a person's negligence caused the injury to someone else and therefore creates an obligation to compensate the injured person. Strangely, negligence is not even a concept in civil law. It is a different system in continental Europe where these things are socialised and it becomes an issue for the health system and social support system not a system based on the person causing the compensation to be paid. It is not a valid comparison with the rest of Europe. I accept that the common law system in the UK and Ireland is very similar and hardly distinguishable at all. Again, there may be social or historical reasons why certain things are viewed differently in compensation terms. I do not know whether it is true or not, but it was said to me some years ago that perhaps the experience in the UK of huge numbers of people being injured in World War 1 and World War 2 gives them a greater tolerance for people being injured and putting up with it than was the case here. It is a theory, but the fact is that the system in Ireland, and the Judiciary operating the principles - based on Irish law - of what is fair and reasonable, have produced certain results and it seems to us that is with the support of the Irish people. Interestingly, I do not think one will find it criticised by the victims, the question is whether in fact we should be interfering with this for the benefit of the profits of insurance companies.

Ms Sara Moorhead: Another factor to bear in mind in terms of the system in the UK and Ireland - I appreciate that this does not happen so much with the lower awards - is that we work on a system whereby we pay for nothing for the injured person so one of the issues is that anybody who gets money here loses money in another way. In the UK, everything other than the general damages is covered to a large extent. There is the NHS, much as it is now maligned, and care costs. One of the particularly problematic issues here is that in the bigger claims – I know we are not dealing with the bigger claims – the reason they are at such a level is because it would not be inconceivable that one would spend €300,000 a year on nursing care for a catastrophically injured person who has a fairly normal life expectancy. That is the reason settlements of up to €10 million can be reached. I know we are not dealing with such payments today, but there is a periodic payments provision which it seems to us is a far fairer system for everybody.

Another factor is that people lose their disability payments if they get money. For example, if they get €100,000, they lose their disability payments so they now put in a claim for the loss of disability payment as an actuarialised out-of-pocket expense. That leads one to the area of societal choices as to whether in those circumstances, the insurance company or the taxpayer should pay. It is a complex issue for that reason.

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Senator Gerry Horkan: Comparing the cost of insurance in Ireland with that in Bulgaria and Poland, it is clear that if the system of payouts is totally different then it is quite likely that the system of insurance is quite different. We keep being told that the competition is leaving the market. Surely if the industry were that profitable, all the companies would be clamouring to get in here. Is it Mr. Murphy’s belief that companies are making profits in the motor insurance divisions? There are not that many players.

Mr. Ken Murphy: It was certainly suggested in the statement by the CBI that the current extraordinary surge in premiums was driven by a profit motive. We could actually know how much of the increase is super-profits and how much is completely justifiable, to what extent there is paranoia or excessive prudence being displayed now, and whether the pendulum has swung to the other side. It is thematic in light of what we have being saying. It seems there is an absence of the level of insight that appears to exist in other jurisdictions and which could be, therefore, legitimately available. It seems to us that the Legislature could prise open what we call the black box, but unless that is opened, it is questionable whether we could have the opportunity for more potential insurers. There are numerous other insurers in Europe that are not in this market. In those circumstances, they may be able to see to what extent this is profitable work and determine whether they should come in and join the market.

Chairman (Deputy John McGuinness): Are the companies in the market acting in cartel-like behaviour?

Mr. Ken Murphy: There seem to be certain behaviours that are characteristic of collusion, but I have no knowledge and I cannot therefore say. I know that cartel-like behaviour is extremely difficult to prove.

Chairman (Deputy John McGuinness): We have heard of withholding of information or a failure to make information available. We heard of insurers not answering in an open forum on issues relating to insurance and so on. If we had the information, our work might be far easier, or we might not be here now. Does that smack of an arrangement between the companies? Does it smack of anti-competitive behaviour?

Mr. Ken Murphy: If it is being done individually by each individual decision maker in each individual company, it is not illegal. If it is being done collusively in any way, then it is illegal. That is the question: is it being done collusively or individually? It is always desperately difficult to prove. Perhaps the Committee will not have to worry about that if it sets out to open this up using a legislative mechanism.

Chairman (Deputy John McGuinness): Do you think there is a data protection issue?

Mr. Ken Murphy: It does not seem to be the case 90 miles north of here.

Mr. Paul McGarry: If the Committee asked firms, they would probably say the data is commercially sensitive information, or it is information that, if it were released, would give competitors information about the market and their behaviour. That is a little hollow in light of the other information they are putting out, not to mention the purpose for which the Committee is seeking the information - that is, to see whether they are acting in that way.

Mr. Stuart Gilhooly: Zenith, an insurance company, looked to come into this market. It sought data on what was going on here and did not get it. That was the express reason the

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firm said it would not join the market. There is a theory and we keep hearing stories about it. The line is that it is such a bad place to come and that the incumbent firms do not want anyone else to join the market. That probably makes sense. If a given firm was in a market, it would not want anyone else to join the market. That is the theory behind it.

Chairman (Deputy John McGuinness): That means the firms in the market have to make a collective effort.

Mr. Stuart Gilhooly: They do not necessarily have to get together to do it. They may simply work it out themselves - I do not know. Obviously I am not privy to that. The case of Setanta is consistently used as a reason why premiums have gone up.  That is absolutely not true. Setanta is a one-off, unless one includes Enterprise Insurance, which is a very small aspect of the total picture. Setanta is a €90 million claim at maximum, which, in the grand scheme of things, is very small. Once the Setanta case is over - and that will be very soon because it is being heard in the Supreme Court at the end of next month - I will wager any money that a new MIBI agreement will be signed in which it is made perfectly clear, in black and white, that any insolvent insurer will not be bailed out by the MIBI. That will be the end of that. The idea that companies are not coming here because they are afraid they will have to pay for other insolvent insurers is simply not right or, if it is right, it is the fault of the MIBI and the Minister for Transport, who has it within his power to negotiate a new agreement. With the stroke of a pen, they could solve the Setanta problem. They have chosen not to, presumably because there is ongoing litigation, but as soon as that litigation is over. it will be done. Members may be certain of that.

Chairman (Deputy John McGuinness): It might be done between the two parties.

Mr. Ken Murphy: Between the State and the MIBI.

Mr. Stuart Gilhooly: The Chairman can be certain it will be done between the Minister for Transport and the MIBI. It would be utterly foolish not to.

Senator Gerry Horkan: The Book of Quantum is a statistical back-up as to what judges might do if they feel like it, though they do not have to.

Mr. Stuart Gilhooly: No, it is more than that. It is based on what judges have done in the past, but it is there to provide guidance to those judges who are not familiar with this work. People are appointed on a regular basis and may not have experience in that area. It is there to help them to make sure awards are uniform. They are not obliged to apply it absolutely across the board and they are entitled to take other factors into account. This is for Constitutional reasons.

Senator Gerry Horkan: Is there any statistical information about how often awards are way out of kilter?

Ms Sara Moorhead: No. One of the problems with the original book of quantum is that it is very non-specific. There may be an entry showing awards for a broken leg of between €30,000 and €80,000. The Injuries Board has 12 years of experience and this will allow it to produce a system similar to that in the UK, which is a much more refined and detailed system. The UK system has indices of injuries into which one can shoehorn more specific amounts awarded by the courts. It may give details of a person who has had a hip

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replacement, for example, who has had three years of difficulties and will require ongoing treatment but made a good recovery. There may be five factors in total and it is more specific. One of the problems with the current book of quantum is the wide range within it. The other problem with the book of quantum, although the Injuries Board has been dealing with this in recent years, is that it was not originally intended to assess psychological or psychiatric injury at all. People have mentioned whiplash injuries, but a significant part of what people go through with injuries is the trauma associated with them, and this often feeds into the award. The book of quantum is quite defective in that respect. It is to be hoped that when the new book of quantum comes out it will be a useful tool. If it is a useful tool there is no reason judges will not use it. It is in judges' interests to be reasonably uniform in their approach too, as they do not want the cases to be appealed.

Senator Gerry Horkan: It was said that 70% of claims were settled. Are most of them settled before going to PIAB or afterwards?

Mr. Stuart Gilhooly: We do not have the data so we do not know.

Senator Gerry Horkan: Does Mr. Gilhooly have any idea of the proportion of legal costs as a percentage of the total cost of motor insurance claims?

Mr. Stuart Gilhooly: I do not think there are any statistics that relate to that. What we do know, and what seems to be accepted, is that only 10% of cases go to court. Therefore, presumably only 10% of cases are attracting legal costs.

Senator Gerry Horkan: People who go to PIAB incur costs with the legal profession, as do people who settle.

Mr. Stuart Gilhooly: Anyone who incurs legal costs with their own solicitor is, of course, technically incurring a legal cost. I accept that. However, it is not an extra legal cost as such. It is still part of the same claim, paid out of the claim. The claimant could not engage the lawyer if he or she chose not to. It reduces their compensation. It is a zero sum game. However, when a case goes to court, there is a separate award of costs.

Senator Gerry Horkan:     It is a zero sum game if the claimant only received the figure he or she would have received in any event. If he or she managed to get a better figure because he or she engaged with the legal system, that is his or her right. Nobody is saying it is not. However, if he or she is going to settle with an insurance company for €4,000, but goes off to the solicitor and is told he or she can get €40,000, he or she can get that sum and give the solicitor €4,000, €6,000, €8,000, or 50% of it for all I know-----

Mr. Stuart Gilhooly: They do not.

Senator Gerry Horkan: I am not saying they do, I am not saying they do not. I do not know. However, there is an issue there in that it is a settlement that has not gone to court, yet it involves a potentially significant amount of legal costs and we do not have any data on that.

Mr. Ken Murphy: We have heard how technology can improve and reduce the incidence of uninsured driving, which is clearly a serious factor here, but that is uncontroversial. The insurance industry is hardly likely to admit it if it was involved in an agreement, decision or concerted practice which had the object to effect a prevention, restriction or distortion of

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competition in the EU or if it was involved in anything anti-competitive. Its lawyers would tell it not to. The Committee has all the questions and is in a position to really probe the answers in a way in which some quarters in the media have not done.

Mr. Paul McGarry: No. If people have information about fraud, they cannot simply assert that this is going on without knowing more and having facts at their disposal. Why is that not being prosecuted? Why are they not taking those cases? It does not make any sense to us.

Ms Sara Moorhead: We think PIAB may be engaging with the insurance companies in about 70% of cases. If it is getting the information, it is a much more realistic picture because it does not only involve judges' awards, which are quite a small number because only 10% of cases go to court. However, we do not know, and we never received confirmation, as to whether insurance companies are giving PIAB all the information.

Chairman (Deputy John McGuinness): Is it okay to have it up as far as 2014? Is that information timely?

Mr. Stuart Gilhooly: I would certainly take the view that it probably should be a bit more recent, as the awards have dropped at a certain level over the past nine to 12 months. We do not know that it is not. I am not privy to what they are doing.

Chairman (Deputy John McGuinness): When one goes through PIAB, one gets to the point at which a figure is suggested. It might be €10,000 or whatever. The claimant has to pay his or her solicitor from that amount. At that point, the possibility must be considered that he or she might get a large amount if he or she goes to court with a barrister. There is a gig in it for the barrister as well. They all end up in court. I refer to the barrister, the solicitor, the claimant and so on. How attractive is that, or how often does it happen? Is that where the real legal fees arise?

Mr. Stuart Gilhooly: There is one question that solicitors have to consider, it is whether an offer is the right one. It does not matter if it is the first offer, or the tenth offer. It is a question of whether it is the right offer. The right offer might come after two months or six years. My professional obligation is to make that call. The question of whether a barrister is getting a gig, as the Chair put it, is neither here nor there. The only question that arises is whether I think an award represents the right sum of money for the claimant in the context of the injury suffered by him or her. If the right sum of money happens to be a PIAB award, I will advise him or her to take the money all day long. If I think the proposed award is inappropriate in the context of the injury he or she has suffered - if I think it does not represent proper compensation - I will advise him or her not to take it. Clients do not always take my advice, by the way. Sometimes they take the money anyway. Sometimes I advise them to take the money, but they decide not to do so. That is just the way it is. I cannot make them do it either way. All I do is advise. It is not about a gig. It is all about the work we do. It does not make any difference to me when the case is settled. In a way, I prefer to get it settled quickly. If I have a settled case, that means I have a happy client and a closed file and I will be paid. There is nothing in it for me to go further. If I have to go further, I will have to do more work, for which I will hope to be paid. If I still have to do the work, that means I am not doing work on another file. It is not a question of making big money. The Taxing Master regime we have in this country, and which we will continue to have under the new legislation, ensures one gets paid only for the work one does. Clients do not like going to court. They hate it. They really do not like it. They much prefer to settle and settle early.

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Chairman (Deputy John McGuinness): Is it not the case that solicitors and barristers like going to court?

Ms Sara Moorhead: Not necessarily. I can tell the Chairman that the common theme he will hear from solicitors who work for insurance companies at the moment is that they are told they have failed if they cross the bridge at the Four Courts to negotiate these cases. For the past two or three years, insurance companies have been firmly intent on not using barristers until the last minute.  Someone can often get a telephone call the day before asking them to take on a case. They are cutting back on the use of them even for plaintiffs. I am afraid that barristers getting a gig is becoming a diminishing position for plaintiffs and defence. In fairness to Mr. Gilhooly, if he gets a good offer for his client early on, he does not need a barrister to tell him it is a good offer and, therefore, he does not retain a barrister. Therefore, the barrister does not get anything out of it. I do not think the question of whether the barrister is going to get a gig is something with which solicitors are going to concern themselves, nor should they.

Senator Paddy Burke: Whose job is it to revise the Book of Quantum?

Ms Sara Moorhead: PIAB is carrying out the task, but the level of information it is going to have available to it is a little opaque at the moment. We understand that not only will they have judicial awards, which is not a full picture by any means, they will also have data from the insurance companies concerning the cases they are settling. PIAB should then be in a position to particularise the injuries in a more detailed fashion and set out narrower parameters than the ones it has had to date so that when lawyers and judges are dealing with it, there can be a realistic shoehorning of the injury into the parameters of those awards. We thought it was going to be this term, but by January 2017, it is hoping to have the new Book in place. If it is a realistic document in terms of the day-to-day approach, there is no reason it will not be used by the lawyers, the litigant and the judges.

Senator Paddy Burke: Who is responsible for the legal costs adjudicator?

Ms Sara Moorhead: That is a matter for the Minister. There has been a considerable hiatus in the taxation of costs, which I will not go into here. We are surprised that there has not been more of an impetus to get that portion of the Legal Services Regulation Act up and running because it is a very detailed provision in respect of legal costs. It is very transparent and is supposed to be self-financing. It has been welcomed by all the representative bodies and there seems to be no reason there is a delay in it. There are significant backlogs relating to the awarding of costs. Again, this is not an issue for today but it is a real issue, particularly for plaintiffs' solicitors who are funding litigation on an ongoing basis such as catastrophic injuries cases where they are simply not getting their costs dealt with. There is no reason the costs provision should not be up and running and it will be good for everyone if it is.

Senator Paddy Burke: It is only a question of the Minister for Justice making the order.

Mr. Ken Murphy: The sooner that happens, the better because the current system is in deep trouble and the uncertainties around it need to be resolved by the activation of the new legislative provisions.

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Senator Paddy Burke: The Minister for Finance, who has all of the information available to him from the CBI and so forth, said quite clearly on 20 April that an increase in legal costs could be the cause of the increase in the cost of motor insurance.

Mr. Stuart Gilhooly: With all due respect to the Minister, the comments he made sound fairly wide-ranging. There are a couple of things there with which we need to deal. The suggestion that there has been a widespread increase in claims is not borne out by the statistics.  In fact, there has, as we understand it from PIAB, been a 6% increase in claims. A jurisdiction change was carried out by the previous Minister for Justice almost three years ago. In almost unique circumstances, the insurance industry and the legal profession were in complete agreement that it should not happen. Dorothea Dowling was very clear it should not happen. As far as I am aware, there was only one person in the entire country who thought it should happen, and that was the then Minister. He changed those jurisdictions. I think that was a mistake. I do not think it should have been done, but that was a decision made by Government and not at the behest of anybody else. It could be changed back, although I doubt it will be. Even when considered logically, let us just assume - as it has happened - that if there are more cases now in the Circuit Court, presumably there are fewer in the High Court, which means the legal costs should be lower because Circuit Court costs are generally lower than High Court costs. There are fewer barristers and the fees tend to be lower. That does not make any sense. The argument is that damages are a little higher in the Circuit Court, and they are because the jurisdiction went up. That is inevitable. I am not sure, however, that it makes any sense about legal costs. I am not sure where the Minister is coming from in his point about the legal costs. There are many general comments in there but I am not sure there is anything specific.

Ms Sara Moorhead:  The Minister talks about very large awards and to a large extent, they are not motor insurance awards. They are generally catastrophic injury awards, such as birth defects. There has been a substantial increase in the number of medical negligence cases, which has doubled since 2009, and in the value of the awards relating to them. One of the reasons for this, and it is a matter for politicians rather than lawyers, is that the real rate of return on investments has been adjudicated by the High Court and the Court of Appeal to be only 1%. This means that if a person is buying in care for a catastrophically injured individual, the value has gone up hugely. The answer to that, which has been advocated by all representative bodies, is to bring in periodic payments. That means paying on an annual basis only what it is required to pay. If the plaintiff dies ten years later, that is the end of the settlement, but if the plaintiff lasts to 90 years of age, it continues. That is included in the assessment of the overall matter by the Minister for Finance.

There is no evidence of significant increases by PIAB, or by CBI, because when it did its thematic review, it also made the point that the only increases it expected to see were in the order of 8%, based on the improvement in the economy rather than any massive escalation in awards or legal costs. Premiums have gone up 38% in a year and 70% in the past three years. There is no evidence of a statistical increase of that magnitude in awards, claims or costs. This is not coming from us. It is not insurance bashing. This is coming from the CBI, from the briefing document to the Minister for Transport, and from PIAB - all lawyer-free zones.

Senator Paddy Burke:  The Law Society calls for a new task force along the lines of the MIAB. Is there a difference between the task force and the review set up by the the Minister for Finance?

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Mr. Stuart Gilhooly: Yes, we would see a task force like the MIAB one that existed in the past where there is a collection of experts who have experience in the insurance industry who would be able to drill down to the problems that exist and find a way to obtain the missing data.  We would love to be represented on that because we have the expertise. We are involved in the system. In the past we were never involved in any task force. We know the system. That is what we do. What is required is people with expertise sitting down and saying how can this be fixed.

Committee adjourned.

Session 2 - Wednesday

Rising Cost of Motor Insurance: Discussion (Resumed)

Acting Chairman (Senator Gerry Horkan):  I welcome Conor O'Brien, Stephen Watkins and Maurice Priestley from PIAB, and Gary Dunne and Ronan Mulligan from the Society of Actuaries in Ireland.

Mr. Conor O'Brien: It is very obvious that there is a significant problem with insurance premiums in the country, particularly as they have risen by over 70% in three years. The reasons include under-pricing and under-reserving, increased claims, investment returns, increased fraud, levies, the failure of Setanta, changes to the legal environment and Solvency II. What is not clear is the contributory factor of each of these items to the overall issue. Specific information breaking down the size of those issues would lead to better targeting and resolution of the problem.

Our figures in recent years do not support the level of increase in claims and we cannot see how it would justify the increases we have seen. It is also very important to consider what has changed with respect to the level of claims and awards. One can look at the average level of award at €22,000 and see what has changed in recent years, driving into that increase in premiums. The biggest issue is the lack of data, or the ability to target where the issues are. If the issue is not with claims, is it in direct settlements? Is it in the direct settlements process before or after getting to PIAB? Does it relate to litigation costs or the average settlement amounts? S ome data is available through the courts at an aggregate level and some extra information in terms of a breakdown between personal injury and, for example, medical negligence would be very useful. We could look at the average awards in courts to see if there is movement in the figures.

What is PIAB doing about this? There has been much discussion about the Book of Quantum. That has been finalised and will be issued in the coming weeks, in line with the new court term. If adopted by all parties settling claims, it will bring increased consistency to awards and allow the insurers to reserve more accurately. It is not a silver bullet for current issues with the insurance premiums but if it is used consistently, it will certainly help the issue. The book will reflect closed claims by the courts, the Injuries Board and claims data from the insurers and State claims agencies for the years 2013 and 2014. This extensive exercise was undertaken by independent consultants and involved the analysis of over 50,000 claims. There are also other changes to the book, with more gradation of awards and more injuries

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covered where data was not available for the initial Book. There will also be a better explanation of individual injuries. As with many other bodies and individuals, we are seeking more transparency in claims settlements and the movements in these settlements over the past couple of years. This may be a difficult exercise, but there are four basic pieces of information that could be published:

* The number of injury claims.

* The average settlement amount.

* Average fees being paid.

* The length of time taken to settle those claims.

We are working closely with the Department of Finance working group to find ideas for reducing the cost of motor insurance. There are some specific ideas that could be looked. Others have mentioned the idea of creating a National Claims Register to increase transparency, which would be a significant addition in identifying current and future issues with claims. There would be some other benefits to the introduction of such a database, such as easier and more regular updates to the Book of Quantum because of the immediate availability of information. It would also allow analysis of injuries and accidents in the State to consider root causes and try to bring this back to what is causing the claims in the first place in terms of road and other accidents.

We would also like to see a review of the personal injuries environment in Ireland, perhaps through the establishment of a commission to consider the various options. We would like to see a mechanism by which we could increase the level of acceptance of awards through a number of measures, either through fast-tracking cases into the courts or other mechanisms that could be considered.

Mr. Gary Dunne:  I am the Chair of the of the General Insurance Committee for the Society of Actuaries in Ireland. I am joined by Ronan Mulligan, the Deputy Chair.

The premium a customer pays today will discharge the claims that may be settled more than ten years into the future. The time taken to settle a claim introduces uncertainty when the policy is being priced. Property damage claims are relatively predictable in terms of both incidence and cost, but injury claims are not only the largest component of an insurance premium, they are also subject to the greatest level of uncertainty. The key factors relating to the price of insurance are the total cost of claims - which, in turn, depends on the number of claims and the average cost of an individual claim - the insurance company expenses, including the commissions paid, and the insurance company's profit target. Part of the recent increase in premiums reflects the need to restore pricing to a level that provides better security for claim payments. In effect, this is a return to the correct base level.

CSO statistics indicate that car insurance prices fell 27% between 2003 and the start of 2010. Thereafter, Quinn Insurance went into administration later in 2010, RSA incurred a loss of €240 million in 2013, Setanta collapsed and there have been changes to court awards. In addition, we had the Russell case in 2014, the proposed Civil Liability (Amendment) Bill relating to Periodic Payments Orders in 2015 and the FBD loss of €96 million, also in 2015.

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During the period in question, there has been a 42% increase in the number of PIAB awards for motor insurance as well.

Three insurance companies required significant increases in reserves. This meant their pricing was too low over the period. This is backed up by CBI statistics indicating motor underwriting losses of between €20 and €30 per €100 of premium between 2013 and 2015. Another part of the increase in costs is a higher degree of uncertainty in awards driven by court and other changes. In addition, the experience has been worse than expected with more claims and higher costs. For policy makers to be able to take effective action to control costs now and in the future, while maintaining a properly functioning insurance market, it is essential to have ongoing information on the key factors impacting these costs. This must include information on how these factors are evolving over time. One of the key issues in resolving the rise in costs, however, is the lack of adequate information. As insurance is quite a technical industry, the design of any study is very important.

There has been criticism of the lack of information on claims and market trends in the Irish motor insurance sector and contrasts with the availability of information in the USA and UK. The Institute and Faculty of Actuaries in the UK has undertaken a market-wide analysis each year since 2010. This annual analysis has highlighted factors behind changes in insurance costs which allows policy to be informed by evidence-based research. For example, it was possible to show that after legal reforms, legal costs reduced from approximately 40% to approximately 20% of claims below £100,000. This has also allowed the Institute to provide other support to policy making such as the 2013 Transport Select Committee investigation into whiplash claims. We do not have this market analysis in Ireland and it is therefore not possible to see the contributions of various factors to the overall premium. We have carried out initial work on the feasibility of performing a similar analysis in Ireland. Considerations that we have needed to address include access to data, financing and resourcing the work. We have also received legal advice that there may be competition law considerations. We note now that Insurance Ireland is starting a process to gather industry data and it may be that this data can be used to undertake a market-wide statistical analysis.

Evidence-based research is vital to underpin informed policy making. As such, we support the call of Minister of State Eoghan Murphy for greater transparency and urge the Government to commission an annual analysis similar to that performed in other jurisdictions. Such an analysis should not just cover industry data but also data from PIAB and other road safety data. The Society of Actuaries will be very happy to lend its technical expertise and contribute to the design of such a study.

Senator Rose Conway-Walsh: We have proposed that the CSO take on the role of providing an independent voice in regularly publishing data on the industry. Does the Society of Actuaries feel that it is better placed to do that and, if so, why? Can the Society explain further its relationship with Insurance Ireland? Is it fair to say it has a symbiotic relationship with the insurance industry? Might that interdependence affect its ability to act independently in any role involving collecting data and publishing it in a neutral way? Mr. Dunne stated that the key factors in the price of insurance include the total cost of claims, which in turn depends on the number of claims and their average cost. The insurance companies' expenses, including commissions, and their profit targets are the other key factors. The Committee has yet to hear any evidence that the total cost of claims has increased in any meaningful way. The number of claims may have increased as one would expect in a growing economy, but beyond that, any other claim that costs have significantly increased has been well and truly

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refuted. Given that we have seen a 70% increase in two years, is it the case that companies' commissions in terms of their profit target is responsible for the increases?

There is a view that PIAB is designed to be a lawyer-free zone and that it has been taken over by the legal people. It appears that a high proportion of claimants have always chosen to use the law. Has it increased in the last two years and, if so, by what level? Are there any circumstances in which PIAB covers legal fees? If so, what are they and what has been the cost of that in recent years? Has that decreased or increased?

A representative told us yesterday that the Book of Quantum will show an increase in the lower levels and the higher levels. Is that PIAB's understanding of what will happen? Has the insurance industry provided all of the data it could to the reviewers? How can the process be made more transparent? Is the Book being delayed due to any lack of co-operation on any side? The CBI publishes many statistics on the motor insurance sector. What is missing from the data already published? Why has the Book not been reviewed for such a long time and will it be reviewed more regularly from now on? Is there anything within the gift of PIAB to address the fact that people's first instinct is to see a solicitor when they have had accidents? Does PIAB feel the legal profession is giving people enough information around the services PIAB can offer? How can we reduce the legal tie-in with PIAB as it was never set up to be that?

Mr. Gary Dunne: The first question was on the CSO collecting data. From some perspectives, that could actually be quite a good thing. One of the things I referenced earlier was potential competition law concerns. While I do not speak as a lawyer, it is a difficult area. We would have to ensure that there were no issues there. If the CSO was able to collect data and make it freely accessible, the Society of Actuaries would consider that fantastic. The Society does not want to collect data itself. That is not what we are about. In practical terms, to carry out the analysis that has been done in other countries requires a vast volume of data. The CSO is used to dealing with individual points. To do a proper statistical analysis, one would seek to get a great deal more data. The Society is happy to contribute in terms of the design, but the question of who collects it is one on which we are fairly agnostic. It is more that it should be collected and we should have an annual analysis. The design is crucial to ensure that we find out what the key components are. There are too many anecdotes around why insurance prices are going up and not enough evidence.

I do not know how one would characterise our relationship with Insurance Ireland.  It is friendly. We do not have a formal or informal relationship with it. We meet it on occasion but there is no real need for interaction between our two bodies. We are doing different things. We are a voluntary body - primarily a professional body for actuaries - so there is no real relationship there, but we will happily meet it and discuss any issues as they arise.

The Senator asked a question about independence. One of the things actuaries would very much pride themselves on is the ability to be independent. One of the Society's tenets is to contribute independently to debate, and it does that wherever it can.

Senator Rose Conway-Walsh: Has the society stressed to Insurance Ireland the importance of making the data available in order that it can be analysed properly?

Mr. Gary Dunne: As part of the Society's desire to create or develop this analysis in Ireland, we met Insurance Ireland to see if it would support this. We met informally with a number of

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companies as well to see if, in principle, they would agree to something like this. The answer was a clear and resounding "Yes". Among the companies and industry bodies we met, there were no concerns whatsoever about replicating the UK level of analysis. There were never any concerns mentioned to us. We did not ask them if they had thought about doing it or whether they were going to do it. We were coming up with a solution.

Mr. Ronan Mulligan: This work has been done in the UK since 2010. We were seeking to start the conversation here. It is helpful in the UK in terms of assisting actuaries in doing their work. It is also probably more pertinent now given the issues that have emerged in the motor insurance market over the last couple of years.

Senator Rose Conway-Walsh: Is there any competitive impediment?

Mr. Ronan Mulligan: We received some advice on that, which Mr. Dunne can provide. We took some legal advice which said that there might be competition concerns with this, so we need to take more legal advice to dig into those issues and understand what they potentially are. Our legal system is similar to that in the UK and the latter has been able to surmount this. I believe it pertains to EU regulations as well. We do not believe the problems are insurmountable, but they have not yet been overcome.

Mr. Gary Dunne: The advice we received was that the net issue related to whether the exchange would have the object or effect of preventing, restricting or distorting competition in Ireland. There was a significant risk of this occurring. Ironically, greater transparency in an industry can facilitate collusion, rather than inhibit it, because participants then know more about what each other is doing. The issue is fundamentally quite complex and we are definitely not lawyers. We know the UK has managed to overcome this barrier and we were hopeful that we would be able to overcome it as well. The Society spent money getting legal advice to see if we could achieve this, but we paused our efforts because we understand Insurance Ireland is starting a process to gather more data itself.

Acting Chairman (Senator Gerry Horkan): We were told there are 22 players in the Irish motor insurance industry and somebody else said there are five main players. If you agree that there are five main players, they are nearly all multinationals with operations in both Ireland and the UK. Is that correct?

Mr. Ronan Mulligan: Yes. FBD, of course, is an Irish company but the others are UK and/or European.

Acting Chairman (Senator Gerry Horkan): They have the IT and central services somewhere that have done this type of work for the UK already. We cannot be very different in terms of our market, laws, legal system and so forth.

Mr. Gary Dunne: In fairness to the companies we approached, I wish to stress that they were absolutely supportive. What stopped us was concerns around competition law. One of the pitches we initially made was that we put up the list of the companies that do this in the UK and one can match many of them in terms of having an Irish presence as well. They have different IT infrastructure, but that is okay because the issues in Ireland are a little different as well so we need to get different data.

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Acting Chairman (Senator Gerry Horkan):  Are most actuaries employed by insurance companies or are many of them working on their own behalf as consultants? What is the breakdown in that regard?

Mr. Ronan Mulligan: I do not have statistics on that. Actuaries work for life insurance companies, general insurance companies, pension advice companies and as consultants. Mr. Dunne and I, for example, work as consulting actuaries.

Acting Chairman (Senator Gerry Horkan): It would be fair to say that many actuaries are not employed by and on the payrolls of insurance companies, and certainly not motor insurance companies.

Mr. Gary Dunne: We can categorically say that the overall majority are not employed by non-life companies.

Mr. Ronan Mulligan: The expertise the Committee wants is from people who have operated in the non-life area as well. It needs people who understand and have worked in the market but it needs people who are not beholden to the market. We can service that need. I appreciate the concerns but there is a balance to be struck.

Mr. Conor O'Brien: The solicitor involvement has not changed much over many years. Between 90% and 95% of claimants are represented by a solicitor and always have been. It is a person's choice as to whether they come to us directly, or go through a solicitor. If they decide to come to us with a solicitor, they must settle their fee with the solicitor. We do not allow fees unless there are certain circumstances.

Mr. Maurice Priestley: Independent consultants were commissioned to prepare the Book of Quantum. They collated data from the Courts Service, Insurance Ireland, the State Claims Agency and PIAB from closed claims in 2013 and 2014. The findings are reflective of what is happening currently in the market. It will not have an inflationary effect on the cost of claims in Ireland. Within the Book, each injury has a number of levels of severity and each level of severity has a band of values attached to it. An overall general observation is that there has been some upward movement at the lower end of the scale and a reduction at the higher level. Without having the Book available and going through each injury, it is difficult to comment otherwise.

Mr. Stephen Watkins: We allow legal fees in certain circumstances such as where there is a minor involved, or a person under 18 years of age has had an accident. When we make an award in those cases, a court will ultimately have to rule on the quantum of damages. There are other certain circumstances depending on the capacity of the individual and his or her ability to transact with this. Another example would be in public liability cases where there would be a difficulty in identifying who is the person at fault. The typical person might not be able to determine who is at fault because there could be several people involved. The total amount we allow in fees annually is less than €1.5 million a year, which would have a negligible impact on the cost of insurance. Since 2006 when the O’Brien Supreme Court decision was given, we have had 90% to 95% of people using a solicitor. It is currently 93% and it has not changed over the past three years. We still have 2,000 people a year who will make their claim directly. Over the past ten years, there was only one occasion where fewer than 90% of people used a solicitor. That was in 2008 when we embarked on an extensive advertising campaign which had the impact of bringing it down to 88% for a short period.

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However, that was not sustainable in the long-term. We have carried out research as to why people would use a solicitor and there are valid reasons as to why people would prefer to have somebody dealing with us on their behalf. The main point is that there has been no change over the past number of years.

Senator Rose Conway-Walsh:  Is there any monetary advantage to using a solicitor?

Mr. Stephen Watkins:  There is no evidence to show that one gets more by using a solicitor. We make awards based predominantly on the medical information we get, which comes from the treating doctors' report and independent medical specialists we commission to look at cases. We are not making the award on what a solicitor says.

Mr. Maurice Priestley: It makes no difference whatsoever to the assessment of the claim that somebody is represented or not. It is assessed on the same basis.

Acting Chairman (Senator Gerry Horkan): Will those who do not use solicitors save money on legal costs?

Mr. Maurice Priestley: Whatever arrangement they have with their solicitors for the processing of the claim will have to be paid out of the award.

Senator Rose Conway-Walsh: When making an assessment, does it take into consideration the high medical costs in this country as opposed to others?

Mr. Maurice Priestley: Yes, we do. Any expense incurred as a result of an accident is included. In Ireland, hospitals are entitled to recover the cost of medical treatment provided following a motor accident. If one is entitled to pursue a claim, one is obliged to recover the cost of the hospital treatment. That is automatically included in the assessment.

Mr. Conor O'Brien: The insurers provided data for the Book of Quantum for that purpose only. It was not to be used for any other purpose. On the issue of missing data to figure out what issues are at play, I there are four basic pieces of information, namely, the number of personal injury claims, the average settlement amount, the time it takes to settle and associated fees. If that was tracked over several years, it would certainly help. The Book was originally compiled in 2004 and took several years to come fully into operation. We then went through a long period of reducing premiums. Accordingly, there was no call or context to revise the Book. However, in our 2014 strategic plan, we identified that it was probably time. It was initiated in 2015. We intend to review it on a three yearly basis from this point.

Deputy Michael McGrath: Several weeks ago, Aviva wrote to its customers by e-mail in which it stated Ireland has the highest claim award levels in Europe. It pointed out the average pay out for whiplash in Ireland is €15,000 while it is €3,000 in Italy and Spain, and €5,000 in the UK, and that 80% of motor injury claims relate to whiplash in Ireland compared to 3% in France which adds €130 to the cost of every premium. From experience of dealing with thousands of claims every year, how do Aviva’s claims stack up with its evidence?

Mr. Conor O'Brien: It points back to data again. Those are quite interesting figures and it would be interesting to see the analysis behind that and what other information could be published. A key question is whether they have changed in recent years. For example, if the average whiplash payment is €15,000, has it increased dramatically over the past several

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years or has it remained static? On 80% of claims relating to whiplash, again that is an interesting statistic. We do not know exactly what data is being used to reach that figure.

Deputy Michael McGrath: To be fair, PIAB is in a better position to critically analyse those claims. It is dealing with thousands of claims every year. Do 80% of the motor injury claims going through have a whiplash element?

Mr. Maurice Priestley: There are a number of definitions as to what a whiplash claim is. However, if one uses a general definition of soft tissue of neck and back injuries, it is between 70% and 80%. The value it put on it of €15,000 is probably not unreasonable as an average figure. The real issue is that it has always been that way. There is no suggestion that it has changed over the years. Why it has been identified now as a particular issue in the context of the increase in premiums is difficult to understand.

Deputy Michael McGrath: PIAB has not seen a change in the make-up of, nature of, or the pay-outs in claims to warrant the increases we have seen in premiums.

Mr. Maurice Priestley: From our data, we have not seen anything to that effect. The focus has been on the soft tissue side of the claims.

Deputy Michael McGrath: Of the 33,000 personal injury related claims every year, how many are settled by way of an agreement through the process?

Mr. Maurice Priestley: We are dependent on the insurance companies consenting to us assessing the claims. We get consent on 50% or 55% of them and, within those, we are dependent then on the medical evidence available to us as to whether they are capable of being assessed. We are subject to timeframes. If somebody has an injury and it is not possible to determine the final outcome of the injury within the nine months available to us to assess the claim, we have to release it. That accounts for some of them. Last year, we assessed approximately 12,000 claims and of those 12,000, approximately 60% were accepted by both parties. It would be somewhat narrow-focused just to examine the cases accepted through PIAB because in the 33,000, we are providing information that was not previously available. Of the cases rejected, we do not know what is happening to them. They are not appearing in the courts system, and we believe many of them are being settled just after we have assessed them based on our assessment. It is difficult to get the overall picture of the impact of the board, both direct and indirect, until such time as the information is available.

Deputy Michael McGrath: How many would be rejected by PIAB?

Mr. Maurice Priestley: PIAB does not reject them, as such. Of the 33,000, we filter them to see which are appropriate for assessment. We do not assess claims such as wholly psychological claims. Some of the injuries are so complex they are not open to assessment. I do not know what the figure would be; it may be about 10%.

Mr. Stephen Watkins: We lose a number at the start - it may be 1,000 or 1,500 - that never go anywhere. We do not know whether they have settled or are not being pursued. We are then relying on the insurer to consent to the case or not. They would consent to about 18,000 cases with us assessing. Even after that, we lose a few thousand cases before assessment. They are not pursued. We do not know whether they have been settled or are just not being pursued. The problem is that we can tell the Deputy the exact number of cases we assessed

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and the number we received. We know the outcome, but there is a huge volume of cases about which we do not know the outcome.

The CBI did a study in 2011 in which it asked insurance companies for the outcome of three months of cases that had been finalised. They broke it down into cases that were settled before and during the PIAB process. The outcome was that 70% were finalised either by PIAB, through settlements, or were not pursued. Only 30% ended up going into litigation. When PIAB was originally conceptualised, the view was that two thirds of cases would be taken out of litigation.

Deputy Michael McGrath: We do not know the split of that in terms of the percentage settled through PIAB and those settled directly.

Mr. Stephen Watkins: At the time, they reckoned that approximately 35% were settled before. Various amounts were settled during the process.

Deputy Michael McGrath:  Of the approximate 33,500 that knock on its door, how many reach finality through PIAB? It would appear that it is only one fifth.

Mr. Stephen Watkins: Yes, through the Board. It depends on the way one looks at it. We have no control over cases that will not be pursued, that will be settled, or which the insurer does not consent. We can only assess cases where consent is given, and that is what we do. Another point is that we do not know what happens to our rejected cases. It may be that some of them are settled some weeks later, or that many of them end up going into the costly litigation system.

Deputy Michael McGrath: Do the courts have to have regard to the Book of Quantum?

Mr. Conor O'Brien: The Judiciary must have regard to the Book of Quantum under the Civil Liability Courts Act. The Judiciary operates independently. Its members take each case on its own merits, but we hope they would have more regard to the new Book and the values it contains. We have done a good deal of work to try to address some of the feedback we have had, particularly in the past year, in terms of the levels of detail, the granularity of awards and new injuries that were not in the previous Book.

Deputy Michael McGrath:  The actuaries presentation seems to rationalise the reasons premiums have increased so much. They set out the background and the reasons and, in a sense, a justification for it. They do not reach any conclusion as to whether it is justified, but do we have data on the financial performance of the Irish arms of the multinational insurance firms? Have the insurers been losing money in the motor insurance market in Ireland in the past three or four years?

Mr. Gary Dunne: We have some data. The CBI publish statistics on an annual basis, although there is quite a lag to that. We referenced some CBI statistics that show a loss of between €20 to €30 per €100 of premium on motor insurance. There is evidence to say that they were losing a substantial amount of money from 2013 to 2015, at a minimum.

Mr. Ronan Mulligan: It will show the results by company. One can add them up and get the results for the market as well. That said, if we go back, they have made a lot of money in motor insurance in the past as well. If we consider the period between 2001 and 2007, the

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motor market would have made quite a lot of money. Between 2007 and 2012-13, the market was breaking even. It made money in some years and lost money in others. That is characteristic of an underwriting cycle. Money is made. People chase market share. They chase that profit. Prices come down. What we were trying to say in the presentation is that they came down by too much, and that is a natural part of the underwriting cycle. As companies chase market share, they reduced premiums too much and what we see now is prices coming back again but at a very pronounced level; 70% is an enormous number over the past three years. In terms of understanding that, they are coming from a low base, and then we have this uncertainty in the claims environment that they are pricing in too. There is evidence that they have lost money in the past two or three years. Perhaps we should take a longer term view. We are where we are, and we shall see in the CBI returns over the coming years where the insurers profitability lies.  The problem is that it does not address the issue right now and that information is delayed or lagged because it is published in arrears and the financial results the insurers produce tend to be lagged as well relating to accounting rules.

Acting Chairman (Senator Gerry Horkan):     Of the 33,500 claims received, can the PIAB share the percentage that are motor injury-related?

Mr. Stephen Watkins: Over 60% of the claims we receive relate to motor injury. That has been stable for the past three years. The balance is made up of public liability and employer liability. Public liability is probably double the amount of employer liability.

Acting Chairman (Senator Gerry Horkan): Are there any statistics, or any kind of data, on the percentage of times the judges fall within the Book of Quantum? Is it so vague that we do not know what individual judges are paying out? I was told anecdotally last week, in connection with employer liability or public liability, that insurance companies decide the settlements outside the courts when they hear which judge is on because one individual pays out a lot more than another in similar situations.

Mr. Conor O'Brien: One of the things we have been working on in the new version of the Book is to give a lot more detail about the individual injuries. Where there were three levels of impairment in the original book, we have increased that, where the data is available, to four levels of impairment and have given more description in each of those levels. That will allow judges, and others, to make more informed decisions. The Book is a guideline. It could not possibly encapsulate every personal injury that happens in the State. It can only ever be a guideline and it gives those broad bands to allow people consider relative awards for different injuries. In the overall scheme of things, not many cases go all the way through the courts. We would not have any data on adherence. It would mainly be anecdotal.

Acting Chairman (Senator Gerry Horkan): We were told that because it is relatively out of date, judges are less likely to adhere than if it was current.

Mr. Gary Dunne: Our Society has no access to data that would give evidence either way. The volatility of awards will generally mean there is a higher level of uncertainty and that tends to mean higher prices, purely because it goes one way. Awards go up. They can only go down by a limited amount.

Deputy Paul Murphy: Table 15 of the CBI statistics on motor insurance shows in 2014 a loss for companies with headquarters in Ireland of €137 million, and in 2013, a loss of €195 million. Before that, it shows profits of €145 million in 2012, €156 million in 2011, €7

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million in 2010, €124 million in 2009, €113 million in 2008 and for the five years preceding that, a significant profit of €500 million on a yearly basis. Is it fair to say that, as a whole over ten or 20 years, car insurance has been highly profitable in Ireland? When added together, the results for 20 years come to €2.86 billion in profits for companies headquartered in Ireland. Over three years, premiums have gone up by 70%. That tallies with profits falling, for example, in 2013 they went down. Would the actuaries agree that is consistent with the rise in premiums being an attempt to restore profitability?

Mr. Gary Dunne:  If the losses were sustained over 20 years, if we had lost several billion euro over 20 years, how many companies would want to stay in that market? It is not for us to decide the definition of the word "reasonable" in that instance, but there does need to be a reasonable level of profit. The rate increase does look very high and one reason for that is that the base was too low, so in most recent years, there was an unsustainable situation.

Deputy Paul Murphy: In general, is it fair to say they have been "highly", "fairly", or "reasonably" profitable - the witness can choose his own word - over a long period?

Mr. Ronan Mulligan: Deputy Murphy has to think about how much capital they had to put into the industry to be permitted to trade and what those numbers represent as a return on that capital. The absolute number is a big number, but they have to hold enormous amounts of capital on a regulatory basis to be allowed to trade as insurance companies in the State and therefore, expressed as a percentage of that capital, is that a great return or not for the investments they have made? That is how I would look at it. On that basis, I apologise but the numbers get even more complicated because the capital is supporting not only motor business, but property business, commercial business and lots of different types of activity, each of which has variable profits. Unfortunately, it is very complex and it is not really for me to say they were making huge amounts of profit, or normal or low profits. One could do that type of analysis but it would be complex and get a better answer expressed as a rate of return rather than an absolute amount.

Acting Chairman (Senator Gerry Horkan):  There was a figure I heard that they were losing €20 or €30 per €100. For what period was that loss?

Mr. Gary Dunne: That was specifically 2013 to 2015.

Deputy Paul Murphy: Let us consider profitability in a different way, as an average surplus per policy. How much profit do they make on the average policy? Do the actuaries have any figures for an international comparison?

Mr. Gary Dunne:  The Society does not have access to the data, so it is quite difficult to make the comparison. The Deputy is probably referring to the private motor insurance statistics that the Central Bank has published. That is where it uses the term surplus per policy.  One of our reasons for saying that we feel that we would be very happy to support the design of a study is because the surplus per policy changes over time as claims are paid. If we go out to the ultimate point of the claims being paid over ten years, the surplus in year 1 will be a certain number that will drop and drop and will potentially become negative. In the most recent years, we expect it to become negative. When it is above 100%, one is underwriting losses and when it is below 100%, it is underwriting profits. That would allow for the expectation of how the claims would develop over time.

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Deputy Paul Murphy: There is a different model of insurance, which is a not-for-profit model. That €2.86 billion was paid by people in premiums as a cost. If Mr. Dunne thinks, ideologically, that it is necessary, then it is a necessary cost, but it does not have to be.

Mr. Gary Dunne: Absolutely. There are definitely competing models and other countries have gone down different routes. The UK has not and it obviously feels that competition is the best way forward. One thing I would like to emphasise is that models like that can hide underlying issues. It takes a long time for these issues to surface. Take the example of paying on the price of the pump if one decides to increase the price of petrol or diesel to allow for third-party liability motor insurance costs. The rationale is that the more one drives, the more likely one is to have an accident. That seems fair. However, if there are underlying issues such as inefficiencies in the market in terms of dealing with claims, be they legal, expenses, medical or whatever it may be, they are hidden for a while because it is just the price of the pump and it is spread across absolutely everybody. Therefore, it is a bit harder because it is not being allocated back to the people. There are definite positives to an approach like that, but also negatives as well. As long we consider both of them, we can make an informed choice.

Deputy Paul Murphy: I think Mr. Dunne would have a hard time convincing those who are now facing these massive hikes that the market is particularly efficient right now or is delivering for people.

In terms of PIAB, a big issue is the black box of lack of knowledge that we have, which is all that is not settled through the court or through the PIAB. I accept that. There was someone from the insurance industry suggesting that lawyers are responsible for the majority of claims not going through PIAB and instead, being settled outside of that body, be it in court or privately. Is that the case, given what the witness is saying about the insurance companies only agreeing that something like 55% or 60% will go through PIAB?

Mr. Conor O'Brien: One of the things we do not know is the level of representation in settlements, particularly early settlements, before they ever come to PIAB. We do not know how many of those people use a solicitor and we do not know if fees are paid at that stage or not. As Mr. Watkins said earlier, we have seen no change in that representation in our own data and unfortunately, that is the only data that we have on this.

Mr. Stephen Watkins: If one does not settle one's case directly at the outset, the law is that one must make one's claim through PIAB. The next step in the process is that we notify the respondent, which is typically an insurer, and it has a decision to make. It decides whether we can assess the case or not. The next decision is when we make an award and both parties have to decide whether they accept it or not.

Deputy Paul Murphy: In cases in which it is only accepted by one party and rejected by the other, what is the balance?

Mr. Stephen Watkins: I do not have the exact split, or know whether there is a difference if there is a solicitor involved. 93% of cases involve solicitors so it is reasonable to presume that a similar figure of cases that are accepted or rejected involve solicitors.

Deputy Paul Murphy: What I mean is that when the rejection takes place, is it a rejection by the respondent or the claimant?

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Mr. Stephen Watkins: What typically happens is that about 60% to 65% of claimants, or their solicitors, will accept the award. In the case of respondents, it is usually around the 90% mark. However, there are different dynamics at play. For the respondent, there is the issue of going into a high cost environment. There are different issues for the claimant.

Deputy Paul Murphy: In terms of PIAB, has there been any increase in the amount that was awarded in terms of claims or in the volume of claims between 2015 and 2014, for example?

Mr. Stephen Watkins: No. With regard to motor claims alone, between 2013 and the end of 2015, motor claims received by us went up by 4.95%. That only relates to claims received by us. We do not know how many claims were settled at the outset. This year, the number of claims has reduced by just under 1% in the six months to June 2016 compared with the same period last year. Our average awards are stable. By way of example, in 2013 our average motor award was €21,730. The average motor award in the last 12 months to the end of June was €21,782. If one looks at our average motor awards over the past six or seven years, they fluctuate by 1% or 2% every year, but are basically stable.

Deputy Paul Murphy: Is fraud something that PIAB has a category for and takes note of to say that it rejected X number of claims because it believed that they were fraudulent?

Mr. Conor O'Brien: When the insurer consents to us assessing a claim, it is assumed that liability and fraud are effectively set aside. They have three months to investigate the claim.

Deputy Paul Murphy:  Are there reforms that could be implemented that would make PIAB more effective and bring more people under its remit?

Mr. Conor O'Brien: The Book of Quantum is not a silver bullet, but consistent use of it by all parties would have a beneficial impact and would encourage more people to accept PIAB awards. We would also like to see if measures could be taken to speed up the process for rejected awards in order that they are dealt with as quickly as possible to minimise the legal costs associated with them. That would be very useful.

Acting Chairman (Senator Gerry Horkan): Some 14,000 are not consented to. That would include those fraud claims. What other reasons are there that the insurance company would not consent?

Mr. Conor O'Brien: There is no breakdown of that but some will go away and be settled and some are related to fraud or liability. We think those are generally the reasons why the claims are not consented. It would be very useful to know why.

Acting Chairman (Senator Gerry Horkan):  There is a lot of administrative process taking up PIABs time to ultimately have an insurer say, "No, we are not letting you assess it".

Mr. Maurice Priestley: There are statutory requirements for every claim that comes into us and we have to serve statutory documentation. If the insurance company does not consent, or if the respondent does not consent to the assessment, the case is released. We issue an authorisation for them to go to court. We are doing processing work that does not lead to an assessment.

Acting Chairman (Senator Gerry Horkan):  How are the costs of running PIAB met?

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Mr. Conor O'Brien: The Bard is totally self-funded. Claimants pay €45 per application and insurers pay €600 per assessment for the ones that are consented to.

Mr. Stephen Watkins: The fee for the respondent is set at a level which ensures it will cover all of our costs. It is true that we must do work on those cases that are received, but when we receive the papers, we notify the insurance company of the claim and there is immediately availability of papers to both parties. If that facilitates an assessment that both parties are happy with, then that is a good thing, particularly when it is done speedily.

Senator Paddy Burke:  Nobody has taken responsibility for the increase in costs. It is nobody's fault that cost of premiums has risen by 70% in the past three years, which is a staggering figure. According to PIAB, the figures show that personal injuries motor claims volumes and average award values are static. The witnesses have argued that there is an absence of overall data. It has been argued that improved availability of data may help to reduce the cost. PIAB has also said that there could be an issue with the claims that are settled outside of PIAB, but it does not have access to the full facts on those claims. The Minister for Finance has suggested that legal fees were a contributory factor in the increase in insurance costs. However, representatives of the legal profession refuted this suggestion. They also pointed to the absence of data as an issue. The Book of Quantum has also been raised on numerous occasions. Do the actuaries have any input into the preparation of the Book?

Mr. Gary Dunne: I do not think we had an input the first time round.

Senator Paddy Burke: It was stated that the cost of motor insurance fell by 27% between 2003 and 2010. Did the level of awards drop during the same period?

Mr. Stephen Watkins: No, they did not. In 2007, the average award was roughly the same as it is now. Prior to the establishment of PIAB, cases could really only go into litigation. In the cases that are dealt with by PIAB, while the award levels are maintained, the delivery costs involved are quite low. For example, at the time of our establishment, a typical case that ended up in litigation would have had an additional 50% add-on in terms of costs, according to the MIAB. In our system, the add-on is only 6% or 7%.

Senator Paddy Burke: When the premiums went down, one would think that the cost of awards would go down too. We have heard that whiplash awards in Spain are around €3,000 while they are approximately €15,000 here.

Mr. Stephen Watkins: Our role was to award damages at the prevailing levels. The contention is that damages in Ireland are out of sync with other countries but it has been thus for years. There has been no change in that regard. Even before PIAB, the cost of damages in Ireland was higher than elsewhere.

Mr. Maurice Priestley: It is also fair to say that we have no involvement in the correlation between premium calculations by insurance companies and awards made by PIAB. We are obliged to assess claims on the current level of damages and that is the extent of our remit.

Mr. Stephen Watkins: On an average award of €20,000, the cost would be around €1,300 which is €600 plus the cost of the medical assessment.

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Mr. Maurice Priestley: There are two advantages to our scheme in terms of costs. First, irrespective of the size of the claim, the fee is €600. Second, the net cost is 6.5% compared with 50% or 60% in the litigation system. That is where the real saving lies. It is not related to the level of damages. We just deal with cases based on the current levels.

Senator Paddy Burke: Mr. Priestley has acknowledged that the 70% increase in the cost of insurance in the past three years is excessive, but has argued that there is no correlation between the calculation of premiums and the awards made by PIAB.

Mr. Conor O'Brien: What we have been saying is that there is nothing in our data that supports that level of increase. It needs to be broken down into the different components to see what has been forcing it.

Mr. Gary Dunne:  I think one of the key points to remember is that a lot of things happened in 2003 which led to a decrease in claims costs which then resulted in a decrease in premiums. Claims costs can refer to the average claim as well as the total number. In 2003, PIAB had a clear, visible impact. The amount of money that the injured party received stayed the same but the legal element, when cases used to go through the courts, disappeared or was reduced to a fixed fee. Therefore, the amount that the insurers actually paid out was reduced. At the same time, we had the introduction of penalty points and a major focus on road safety. This meant that the number of claims reduced. So, not only did the number of claims reduce, there was also a saving, at least in part, on each claim. There was also a large campaign conducted on fraud at around the same time. People became aware that it is not a zero-sum game and that insurance fraud is literally taking money from someone else's pocket. As a result, the amount of fraud reduced. A series of things happened that meant that claims costs, as a total, reduced which then led to premium reductions over that period.

Senator Paddy Burke: There are more cars on the road and there are more people paying premiums. Road safety has improved, as has the state of the roads. The country has become more efficient. The courts are more efficient. PIAB is not dealing with more claims than was the case heretofore and the costs awarded have not increased. Why does Mr. Dunne then agree with the increase of 70% in car insurance costs in the past three years?

Mr. Gary Dunne: From the society’s perspective, we do not necessarily agree with the 70% increase but we recognise that we have no evidence to say whether it is right or wrong. It did look like insurers were losing money and therefore the costs needed to come up. It is a complex issue. There are more people on the roads and therefore, there will be more claims. It is as simple as that. Injury claims have gone up quite materially from 2012 to 2015. There are more claims coming through, but ultimately it comes back to the original point that we do need a good robust analysis of the issue in a transparent fashion.

Senator Paddy Burke: Does the Society include fraud in its calculations? From all of the analysis the society has carried out working with companies, is there a percentage included in the projections for fraud?

Mr. Ronan Mulligan: I am not sure whether it is explicit. What we do is look at the total cost of claims. We know there will be a certain amount of fraud, as that is inherent in the process. Senator Burke is seeking to price that but I am not sure whether our pricing actuaries necessarily look to say it is explicitly X amount of loading for fraud. If one looks at the premium, about 70% to 80% of it relates to the cost of claims, so that is the number we are

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trying to estimate. We might break that down between damage claims and injury claims and try to estimate them separately, but I am not sure it is worked out separately how much fraud there is in the system and that it costs X amount. We just know the total cost.

Deputy Pearse Doherty:  I do not suggest it has come from the Society, but there has been much deliberate misrepresentation of what is happening within the industry to create a smokescreen. The sum of €15,000 was always paid out for whiplash claims. They are not the highest in Europe as other EU countries have higher payments. If that level of compensation was always the case, then it cannot result in a 70% increase. If legal fees have not jumped, then it cannot result in a 70% increase. Mr. Dunne is the Chairperson of the Society of Actuaries in Ireland, but is it true that he also works for one of the biggest insurance companies in the country?

Mr. Gary Dunne: No. I am a consultant.

Deputy Pearse Doherty: For Zurich plc?

Mr. Gary Dunne: No. I no longer work for Zurich.

Deputy Pearse Doherty: Did Mr. Dunne have responsibility for Ireland, Europe and Africa?

Mr. Gary Dunne: Yes.

Deputy Pearse Doherty: Is it correct to say Mr. Dunne has a good global view of the insurance market?

Mr. Gary Dunne: Yes, I suppose, in as reasonable a way as I can.

Deputy Pearse Doherty:  We do not have the data and the Society does not have the data. However, given his very senior position within Zurich plc, the sixth largest insurance company in Ireland in terms of motor insurance, which was still recording underwriting losses in 2014 according to the CBI accounts and published statistics, will Mr. Dunne give an insight, as he had an overview of a number of continents, as to why Zurich plc increased premiums so dramatically in recent years?

Mr. Gary Dunne: To be clear, I am here in my capacity as Chair of the Society of Actuaries in Ireland so I do not think I can comment on previous employers. That would be quite unfair to both them and me.

Deputy Pearse Doherty: The only reason I make the point is that there were a number of comments to the effect that witnesses do not have access to the data, but Mr. Dunne would have had access to the data.

Mr. Gary Dunne: Yes. I am happy talk in general terms about comparisons across Europe or globally, but it would be very unfair to discuss my previous employers.

Deputy Pearse Doherty:  The premise is that premiums are taken in and money is paid out in claims. However, there is another element to that, namely, that insurance companies invest premiums. What has been happening in recent years, according to the CBIs statistics, is that we have lost €100 million in three years in terms of investments. Is that not the case? The

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actual investment income attributable to loss has decreased from €278 million in 2012 to €176 million in 2014, which is a drop of more than €100 million. Is it the norm that insurance companies offset underwriting loss with investment income?

Mr. Gary Dunne: It is. We try to make insurance as simple as possible but one can and should layer on complexities to get the full picture, but it is a game of money in and money out, like most organisations. The money in is premiums and also investment income, and the money out is primarily claims, operating expenses for the company and brokerage commissions, among other costs.  You can distil it to that.

Deputy Pearse Doherty: There has been much focus on the expensive necks of the Irish people and fraud, but very little focus on the fact that the insurance companies are seeing a dramatic drop in investment income, which is one of the reasons why premiums are going up because the income to offset the underwriting loss no longer exists. Is this analysis correct?

Mr. Gary Dunne: It is fair to say that it is a component.

Acting Chairman (Senator Gerry Horkan): Is there any historical data saying that the percentage of investment income in the motor insurance business was 20% or 5% of the total?

Mr. Ronan Mulligan: One would be able to derive some of that information from CBI statistics which would break it down between underwriting income and investment income. Some assumptions are needed to allocate investment income, particularly to motor insurance, but one can get the information from there. The model is that one either makes money through underwriting or investment income or, ideally, one makes money through both.

Deputy Pearse Doherty: Does Mr. Mulligan agree with the assessment of the former CBI Governor when he wrote to the Minister for Finance in a confidential letter released under FOI? He said that a number of non-life insurance companies took a very optimistic view of the future economic outlook, built up unsustainable overheads and followed an imprudent pricing and underwriting approach across most business lines. Does Mr. Mulligan agree with that assessment?

Mr. Ronan Mulligan: I would say it is a general comment and I am not sure one can apply general comments across the entire market.

Deputy Pearse Doherty: He refers to a number of non-life insurance companies. He does not suggest that it applied to all of them.

Mr. Ronan Mulligan: During the period, companies were defending market share. It is a very price-sensitive product so the primary strategy they took was to reduce premium rates through that period in an attempt to defend that market share. What we can expect of insurance companies is that they will act in their own economic best interests so they made a judgement that this was in their economic best interests through that period. In respect of Mr. Honohan's comments, and whether it was imprudent or not, we would need to go back and consider the strategies of the insurance companies.

Deputy Pearse Doherty:  Professor Honohan said that several Irish general insurance companies had eroded their capital base. Can we accept that this was a factual point in 2015?

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He was talking about previous years. Part of the letter is redacted, which I presume is composed of figures that I am not allowed to see. Professor Honohan went on to say that the Minister would have noticed as well that these companies had put at their helm new CEOs to effect this return to profitability. Is that not the point here? The point is that these companies were behaving imprudently, saw a massive reduction in their investment income, appointed new CEOs and are now ramping up profitability because they have an issue with their own capital base and because Solvency II kicked in at the start of this year. The other issues, such as whiplash, extra claims and legal fees are important and we need to deal with them, but it does not actually deal with the substance of the big issue, which is that the model at that point in time was not fit for purpose.

Mr. Ronan Mulligan: I am not sure I agree with all of what the Deputy has said. It is true that the CEOs have changed; that we were coming from a position from 2010 through to 2014, for which we have statistics, when insurance prices were at a very low base; that a number of companies did suffer erosion to their capital bases because they were not profitable through that period; and that there were some failures and some withdrawals through that period. The Deputy said the model was broken. Prices were too low for there to be a sustainable profitable model and insurance companies responded.

Deputy Pearse Doherty: They charged on that basis because they were of the view that they would have this type of investment income into the future. Quantitative easing came along and basically said that they could not get the 4% return on their Government bonds that they used to get and would get negative rates. This means that insurance companies have lost that portion of their income, but earlier this year, the present CBI Governor told them not to chase risky investments, so they are now in a situation where they have to charge insurance premiums at a cost that will cover all the claims and the investment income does not really come into it.

Mr. Ronan Mulligan: The Deputy is right in the way he characterised it. During the period, they were underwriting losses but were able to subsidise those with returns on investment. We are now in a place where yields have fallen to very low levels and there is no possibility of subsidising underwriting losses to the same extent because yields are so low now. They are returning to underwriting as a source for profit.

Deputy Pearse Doherty: The problem is that the underwriting or investment losses are not only attributable to the motor insurance industry. In respect of the €100 million that was lost in those three years, or the smaller amount of income generated between 2000 and 2014, a small portion of that came from the motor insurance industry. Is it not the case that because motor insurance is compulsory, losses made by non-life insurance companies in other areas are now being passed on to the insurance companies? Is it true that to make up the shortfall caused by investment losses of €100 million, even though about €40 million applied to motor insurance, they must make up for the losses in other areas, for example, home insurance, but it is being loaded on to motor insurance because motor insurance is compulsory? Is it not the case that basically, we have given the insurance companies a blank cheque?

Mr. Ronan Mulligan:  Other forms of insurance are also compulsory. Employers liability and public liability are products that companies will almost always purchase. Motor insurance probably is the largest piece of business that any of the insurance companies will underwrite ,so one's motor book is obviously one of the principal things one would target in order to return to underwriting profitability.

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Deputy Pearse Doherty: Does PIAB have access to the insurance data that were provided to compile the Books of Quantum for 2013 and 2014, the secret information for which we have been screaming for quite a while, or were they given directly to the private consultants?

Mr. Conor O'Brien: The data passed through us to the private consultants and were expressly given on the basis of their use for the Book of Quantum only. The data also would not contain all the information sought by the Committee; they would only contain part of the picture and would only cover a particular period.

Deputy Pearse Doherty: They would contain information on, for example, the number of claims settled out of court out of the total number not agreed by PIAB.

Mr. Maurice Priestley: No, they did not contain that level of detail. The Book was made up of research of closed claims over 2013 and 2014. The information we received was, say, a list of claims that had been closed, so we had the claim number and the amount paid. That was the extent of the information received. It did not detail the stage of settlement, that is, whether a case was settled before, during, or after it came to PIAB.

Deputy Pearse Doherty:  The Society makes the point that there has been a 42% increase in the number of claims being processed by PIAB. Is that not a reason premiums are rising?

Mr. Stephen Watkins: I think the figure is based on the number of actual awards we made between 2010 and 2015, not the number of claims we received between those years. The number of claims received in that period would be a lot smaller than that - I think it is under 30% - but, again, if we focus on the past three years, we see that is when the problem emerged. The 4.5% increase in motor claims between 2013 and 2015 - it was slightly down in the first six months of this year - shows that the problem of premiums seems to have arisen in the last three years.

Mr. Conor O'Brien: Another problem is that the applications do not reflect the settlement strategy of the insurers. We do not know whether they are settling more or less themselves, so there is a problem with relying on those numbers alone to figure out what the issue is.

Deputy Pearse Doherty: Former Governor Honohan said that the introduction of judicial guidelines would usefully complement the policy framework in Ireland as it has proved effective abroad. Does PIAB support that idea?

Mr. Conor O'Brien: We support anything that will develop consistency of awards across the different systems. Due to the fact that the Judiciary has had to have regard to the Book of Quantum, we have also had very constructive engagement with the judiciary over the summer months on the adoption and use of it.

Deputy Pearse Doherty: Regarding claims that are settled, regardless of how we can fix the process or try to enhance the process, there always will be, and always should be, the right of an individual, or indeed an insurance company, to pursue a matter through the courts. Is it PIABs view that in cases of claims which come before it and are either rejected by the insurance company or by the individual, data on the ultimate level of payout, whether it is on the steps of the court or in court, should be referred to the Board?

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Mr. Conor O'Brien: Yes. Every level of the settlement should refer to the Book because it will maximise the number of cases that are accepted and remove the need for lengthy court cases and the fees associated with them.

Deputy Pearse Doherty: What about when the Book states that for a certain category of whiplash, for example, the award is €15,000 and somebody appeals that to the Judiciary and gets €45,000? How does PIAB deal with that?

Mr. Maurice Priestley: I think it is important that nobody be influenced by cases in isolation. There are always one-off cases in which the level of damages may seem unusual. What we are considering is the general level of damages across the market. The limited number of cases that are going to court now, that actually go to a hearing, are the most difficult cases where, say, the best minds in the Law Library, or in the insurance company, have been unable to settle. It is, therefore, very important that consideration of this issue not be skewed by individual cases. It is the market rate that needs to be considered. Whatever the market rate is, PIAB is obliged to award that.

Deputy Pearse Doherty: I have two final questions. The first concerns a bugbear of many people, namely, those who drive older cars and who are, they argue, very safe on the roads. They argue that they are probably safer on the roads than many others because some of these cars are very old and quite expensive. Have the witnesses seen any trends whereby those driving older cars - some insurance companies refuse even to quote them - are more at risk or have they seen more of a trend compared to the data? Why do such drivers pose a greater risk than somebody who is driving a new BMW, a new Ford Galaxy or whatever?

Mr. Gary Dunne: Until very recently, I was driving 16 year old car so I was in that category. Like everything, these things are quite complex. This is a general standpoint rather than a specific one because the Society of Actuaries does not have access to the data. However, an insurance company might do something like on the basis of what is termed "an underwriting reason". One particular reason, anecdotally - and I am loath to use that word because we are really pushing for evidence-based decisions here - is that there can tend to be more fraud where people have recently purchased cars that are quite old with the intention of making fraudulent claims.  My recent experience, despite having an old car, was that I had no issue renewing. I did not bother going elsewhere because at the time, the premium was relatively low. I did not look to see if there was going to be an issue changing insurer. If it is the case, and I am not aware that it is, that insurance companies are refusing in cases where one has had a car with the same company for ten or 15 years, I do not know a reason behind that. It would be unusual because if it is a profitable policy, why would it not want to keep it? I can see an argument for it if there is a recent purchase of a very old car. From an underwriting perspective, one could say one cannot even price for it. That is the only anecdotal explanation I can proffer.

Deputy Pearse Doherty: My last question relates to the fact we have seen a 70% increase in insurance premiums. I believe there is a rip-off culture and a gouging of customers. One thing I cannot understand is how certain people who have been insured with a company, who have not had any accidents in the previous 12 months, and who have not received any penalty points in the last 12 months, are seeing not a 38% or a 40% increase in their premiums but a 200% and 300% increase in their premiums. My understanding is that the insurance companies simply want these individuals off their books. They have too many 42-year-old

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women living in rural Ireland on their books and they just need them gone so what they do is spit out a 200% increase. What is happening here?

Mr. Gary Dunne:  The principle of insurance is that it is a big pool of money and everyone pays in and the people who have claims take out. To put it in context, on average around 10% of policies have a claim in any given year. Only 1% of policies have an injury claim so it is even a smaller number with which we are dealing that are actually the crux of the problem. The pot can be divided up into risk segments which I think is what the Deputy is referring to. One can say a particular person is more risky. To give an extreme example, a 17 year old on a provisional licence in a Ferrari will be much worse than a 50-year-old nun driving a Yaris. They are quite different risks. One risk will have a particular profile to it and a particular increase, and another risk will have a different increase. Even if neither has had claims, everyone needs to pay more because we do not know who will have the claims. That is the principle of insurance, otherwise the whole system fails so everyone has to pay a bit more. I do not have enough experience, particularly from the Society's perspective, to say exactly why there are some very high increases. What I can say and what I have heard on the radio is that when people shop around, they are able to bring that down to a level that is still high but not near the three-figure sum the Deputy referred to. It is a common sense thing to do to shop around to ensure one has the best price for what one is purchasing.

Deputy Pearse Doherty: That is not a very satisfactory answer. Mr. Dunne has not enlightened me as to why this is happening. Members of Mr. Dunne's Society inform the insurance companies of the risk associated with their policies, the type of person and so on. These are individuals who have been insured by these companies for a number of years. If their premiums were increasing by on average 40% or 50%, that would be in line with what was happening. Even if it was 60%, there might be a riskier profile than for somebody else. That is how averages work. These are individuals, and there is a huge number of people, who are receiving 200% increases in their premium. Is it a case that when an insurer looks at its books and sees an over-concentration of people in the 65 to 70 year age bracket, when it starts to turn the dials to increase their premiums, for that cohort of individuals, it has to turn it a bit further because it needs some of them to come off their books?

Mr. Gary Dunne: It is important to differentiate between the two things which are pricing and underwriting. I know we are getting a bit technical here but in theory, one can price any risk. No matter what it is, one can put a price on it, not just motor insurance but anything. Lloyd's insures satellites and footballers' legs - it insures anything, basically. In theory, one can price on that basis, but then there is a separate thing which is an underwriting decision. From an underwriting perspective, an insurer can say it chose to play in this type of market and within this framework. It can say it is quite interested in taxi drivers, it is the place in which it wants to play, it is a great area and no one else is doing it. It can choose to play in it or not to do so. One has to differentiate between pricing and underwriting. What the Deputy is referring to are potentially underwriting decisions to be made. If someone decides he or she does not want a 50 year old who drive a Yaris, which tend to be a safe risk in relative terms, that is an underwriting decision rather than a pricing one. That would differentiate between the actuaries involvement which is on the pricing side, not necessarily the underwriting side.

Deputy Pearse Doherty: The point is that the actuaries' input last year suggested that this individual, with their input, would be paying a premium of €400. With the actuaries' input this year, the individual, who is just one year older but no less safer on the road, has not bought a high powered beamer and is driving the same type of car, is now being charged

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€1,200. That is a real case example. It is not an underwriting position. Something has driven it. Something has made that happen because it is completely out of kilter with what is happening within the sector as a whole.

Acting Chairman (Senator Gerry Horkan): Deputy Doherty has made a really valid point. If the increase is 40%, 60% or 70%, the premiums of a particular class of person who has not changed his or her car or address and has not had a claim has gone way out of kilter relative to what a lot of people would regard as pretty outrageous increases in the first place. Is it a situation where it is all the actuaries' call or are there other people?

Acting Chairman (Senator Gerry Horkan):  I am not trying to defend actuaries. With every premium, I telephone or go online. Presumably, there are lots of computer programmes. One telephones and has a row with somebody on the phone and all of a sudden, miraculously, he or she always seems to find €50 or €80. That will not solve a €400 increase but it usually gets something off and one feels that their €180 increase is now €140. One almost feels happy even though one should not be. Are there other people, non-actuaries, saying that they are getting into one model or out of another? Actuaries are very important people in the overall process. Do they get overridden or told that the insurers hear them but are going to make another decision that is nothing to do with them and that they have just made a call?

Mr. Ronan Mulligan: We have a role here. That role might be described as like setting the recommended retail price for insurance, but we are not the exclusive owners of that price or the ultimate arbiters of the price the person will receive. Company strategy, the strength of its market position and the ability to actually secure that price in the market are involved. It will decline or hope to reduce its exposure in other parts of the market. Where brokers are involved, they will be given latitude in certain circumstances to adjust the price as well as they see fit, to try to hit targets, generate revenue and optimise that revenue. Actuaries have a role but not an exclusive one.

In terms of some of the prices, 70% in two years, or 30% in the last year is an average number. Some people have not had anything like that while others have had far more. Actuarial involvement in setting that price tends to try to segment the market into risk profiles that are as homogenous as possible and price for them in that pot. There is a distinction between the individual and the group, in that one cannot price an individual, but one can price groups. My opinion is not entirely fact based, but increases tend to happen in circumstances where there is a strategic underwriting decision about what one wants to target and not target.

In terms of risk profiles, many of the large increases are not made in the plain, vanilla, large amounts of data-type instances. Rather, they tend to happen in more marginal cases, those being, very young drivers, very old drivers, perhaps very remote drivers or where circumstances have changed. In those marginal risk profile segments, there tends to be less data. An instance of a claim, in particular a large one, in one of those segments can suddenly cause the perception of that whole segment to change. This is potentially a technical reason for it happening. I am not saying that it is necessarily the reason, though. Insurance companies may be making underwriting decisions independently of this process. I am not sure what the reason is in every individual case, but it is a combination of a strategic decision owing to a desire not to provide cover in certain areas so as to manage the overall risk profile

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and a technical, recommended retail price instance for marginal cases where there are not many people in a segment and a small change makes a big difference to the total risk.

Acting Chairman (Senator Gerry Horkan):  Is Mr. Mulligan saying that, if there are only 60 Senators in the country and one has a crash, the other Senators' premiums are liable to increase?

Mr. Ronan Mulligan: I am afraid that, if one is in the Senator book, then yes.

Acting Chairman (Senator Gerry Horkan): Someone else might be living on a remote island.

We do not want to mention individual companies, as it would be unfair to ask people to discuss previous employers, but what of brokers' fees? I am not asking the Injuries Board, as the fees are not part of its remit, but I presume that actuaries have full sight of data if they are working in the insurance industry. Brokers argue that they face competition, negotiate bulk deals and get extra information, but what are the typical broker's fees? If the motor insurance market pays €1 billion, what do brokers get out of that?

Mr. Gary Dunne: It depends on how much is direct and how much is brokers'. Brokerage commissions vary from business to business. For motor insurance, the expected average is 7.5%. There might be overriders, for example, volume overriders, in that the commission is higher if a broker brings in more business. If a business is more profitable, the commission can also be higher.

Deputy Peter Burke:  The insurance industry has assessed that Setanta will incur a cost of €90 million if the Supreme Court case is carried through. It seems to be causing reputational damage in the eyes of foreign companies that are considering moving into Ireland. Qatar bucked the trend on 31 August when it announced its intention to come to Ireland, but how much has this case affected the level of uncertainty in the system? Professor Philip Lane is on record as saying that a lottery system is operating throughout Europe in terms of regulation. Setanta Insurance was registered in Malta, yet there appear to be unclear lines of responsibility where a company has a passport for providing insurance services in the EU. Will the witnesses comment on this point?

There is a major argument about the lack of data that insurance companies use to assess risk. This will affect foreign companies entering the market. How do we tackle this issue? Is there an unwillingness within the insurance sector to share information and data? Should there be a National Claims Register?

The ICF applied a 2% levy to account for the cost of PMPA and Quinn Insurance. If the Supreme Court holds that the MIBI is not only responsible for picking up the tab for untraced and uninsured drivers, but also for policyholders and premiums where a company fails or becomes insolvent, how will that affect the insurance industry and people's premiums?

Mr. Ronan Mulligan: I will address Setanta first. €90 million is approximately the correct number. I am not sure how to translate that into a cost per policy, as it is a one-off and Setanta Insurance is effectively paid for, but it is a question of taking into account the potential cost of other failures when pricing.

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Regarding the Governor's comment about a lottery system in the regulation of insurance companies, there is a common standard across Europe, Solvency II, which was intended to harmonise the regulation of insurance companies. While that was welcome, is good and has improved the risk assessment and management of insurance companies, its implementation and-or application will naturally vary across jurisdictions. From a consumer's point of view, it is important to be cognisant of where an insurance company is regulated and to make a decision on same.

The MIBI will end up underwriting the failure of insurance companies, but it is funded by a levy on the insurance industry. That is the mechanism that will be used, and if the annual levy to MIBI increases, they will pass that on to the policyholder.

Mr. Gary Dunne: I would be happy to do so. The more transparency there is, the easier it is for foreign or new entrants to assess whether they want to enter the market. In a market where there are reported losses, one is less likely to enter. If the market is profitable, one is more likely to enter.

Eight major players would have a high market share. One could name many other players, but the eight in question comprise a large percentage of the industry. Of those eight, only one is a domestic insurer. The rest are parts of foreign groups.

Deputy Peter Burke: Should EIOPA be taking the lead role in achieving a consensus on regulation throughout Europe? If the Supreme Court holds that the MIBI is responsible for repaying the policyholders of insolvent insurers, will the ICF no longer be fit for purpose or should it continue? Will the whole responsibility be passed on to the insurance sector?

Mr. Ronan Mulligan: EIOPA would probably say it is trying to deliver consensus and consistent application of standards across all the regulatory bodies through the colleges of supervisors and the other regulatory mechanisms it has. I am not sure whether the society has a strong view on whether that could be improved through the EIOPA, or whether the CBI has more of a role to play in terms of considering the application of the regulation in other jurisdictions. I think the ICF will pay 65% of the value of claims. The issue is whether MIBI will pick up the tab for the other 35%. It is not that the decision would make the ICF defunct in some way - it is just that the balance of the 35% would essentially be picked up by MIBI. Previously, 65% of the cost was being funded by a 2% levy. Now another 35% has to be funded from somewhere.

Deputy Peter Burke:  Are we still paying the tab, through the ICF, for insurance companies like Quinn Insurance that have left the marketplace? Does the ICF fully cover the cost of insurance companies that have failed? Is the fund healthy, or is it under pressure in terms of how it operates?

Mr. Ronan Mulligan: I cannot answer that question because I am not familiar with the funding status of the ICF.

Deputy Peter Burke:  I would like to ask PIAB about the process that is followed when individuals put applications through the Board. It was supposed to be a lawyer-free zone, but issues arose with the Constitution. I understand a case was taken to rectify that. It was originally supposed to be a DIY institution. It was supposed to be easy for claimants to bring claims. How difficult is it for an individual who does not go to a solicitor to process a claim?

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Mr. Conor O'Brien: I would like to clarify that PIAB was not set up to be a "lawyer-free zone" per se. People can choose whether to use a solicitor or to come to us directly. The form they have to fill out is not complicated. We have very good processes in place to allow people to go through the entire process quite simply. That legal case related to representation. The expression "lawyer-free zone" was not in our ambit.

Mr. Stephen Watkins: It was conceived as an administrative process rather than a legal process.

Deputy Peter Burke: Is there anything we can do, or any of the services can do, to try to ensure we can get data on them?

Mr. Conor O'Brien: The establishment of a National Claims Register would certainly help with this. Instant transparency on claims - what is happening, what channel they are going through, what the settlement amounts are, and what the fees are - would be provided from the inception of such a Register. It would lead to other benefits. For example, revisions to the Book of Quantum could be done on a more regular and easier basis. This kind of Register would help with investigating the root case of accidents. It would enable people to track more information about car accidents, for example relating to passengers and locations etc. This might help to try to reduce the number of overall accidents.

Senator Michelle Mulherin: The 2014 data for insurance company income show that income on the motor and liability side was €1.4 billion in 2014. The court records show that €169 million was paid out in court awards and €166 million was paid out through PIAB. We need to allow for administrative costs and for the fact that the State does not have to take out insurance. If I am suing the State, I am aware that it is self-insured. The figures that arise when someone trips on County Council property, or whatever, do not enter into this equation. If we allow for administration costs, that brings the total on one side to approximately €400 million. This means that insurance companies have income of €1 billion net of claims that might be taken against them. Every good motorist is carrying a burden.

It could easily be argued, on the basis of the involvement of lawyers and insurance companies, that 60% of claims could be settled outside of court without requiring any litigation at all. Has the establishment of another Government body been justified? It seems to me that in many instances, this system encourages people with spurious claims. It makes it a lot easier. It is not as intimidating as having to pursue a claim in court. While there are legitimate claims and there are legitimate people involved, I wonder what function this structure is serving at the moment. I agree that compensation claims are just a component of the make-up of premiums and what is being charged. I am at a loss about this. In many ways this operates as a gateway; many of the cases being settled might have been settled anyway.

How many underwriters are based in or work in Ireland?

Mr. Gary Dunne:  I do not know how many underwriters are in Ireland as there are no statistics on that. We refer to the top eight having approximately 90% of the market share, with six of those companies having many people on the ground. They are not branches, I suppose, but entities. There are two that are branches of UK companies but there is a legal distinction in how the passporting works. There are six based here with underwriters here, as far as I am aware. With the other two, they may have underwriters here but I simply do not know.

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Mr. Conor O'Brien: In terms of our role and settlements, the number of cases we settle directly does not indicate the absolute picture in terms of the PIAB model.  It is approximately 20% of the total, but we do not know the total of personal injury claims in the State. We only know how many we are processing.

Acting Chairman (Senator Gerry Horkan): I presume not every motor insurance claim involves a personal injury. There are tips to bumpers. We all know, anecdotally, that a bus could get a tip and all of a sudden there might have been 400 people on it. We hear these stories. I presume there are plenty of bumps and tips, with people reversing into pillars and other small stuff. These people probably do not even go to an insurance company in some cases and when they do, the settlement is €400 or €500 in damage and no personal injury claim. The cost of insurance claims is very much related to personal injury rather than material damage.

Mr. Conor O'Brien:  We should be involved with every personal injury claim, as that would not work either. Our model facilitates early settlements by insurers and the problem is a lack of transparency in terms of what is going on in those early settlements, and the contribution to costs and overall claims. In an ideal world, there would not be any need for a process as they would all be settled early. We are the gateway before a party goes to court. I would not necessarily agree that we have failed. One might look at the record over the past 12 years, the 100,000 awards we made and the €2 billion in compensation. These were for people who did not have to go to court. These are also people who had their cases resolved in seven months, as opposed to having to spend three or three and a half years waiting to clear this issue from their lives and get on with it. Some people have been incredibly badly affected by the accidents in which they were involved. PIAB has a very important role and it has made a very significant contribution to lowering the cost of claims and bettering the outcomes for the claimants and people who use the process.

Mr. Ronan Mulligan: There is a UK equivalent of PIAB, the Claims Portal, which allows people to manage and process their claims in exactly the same way as PIAB. It is a low-cost model that has been established for two or three years.

Senator Rose Conway-Walsh: Is there an actuarial rationale for the non-recognition of NCBs for people returning from other countries?

Mr. Gary Dunne: In the first instance, that would be an underwriting rather than actuarial decision. Actuaries work based on actual data and that is our job. With people returning from other countries, one may analyse statistics and say they are better or worse risks; an actuary may allow for that, but there can be underwriting decisions and reasons for it.

Senator Rose Conway-Walsh: It should be easy for any insurance company to access information on whether somebody's NCB is bona fide.

Mr. Gary Dunne:  I can imagine there might be data protection issues. It can be quite difficult for information to go across countries sometimes, even the EU. I simply do not know, but I can imagine that being a consideration, and it might be more difficult.

Acting Chairman (Senator Gerry Horkan): There was anecdotal evidence that the CBI was having difficulty retaining actuaries. I am not sure if that is a matter of what it was

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willing to pay versus the market rate, or rather that the State does not have sufficient numbers of actuaries.

Mr. Gary Dunne: It is fair to say there is a high demand for actuaries from a number of areas, not just industry and consultancies but Regulators as well. Certainly, the complexity of insurance is increasing rather than decreasing, so that lends itself towards actuarial analysis. There is definitely a higher demand for actuaries at this point. It is supply and demand and the price one is willing to pay. If somebody is willing to pay €10,000 for an actuary, there will not be many looking for the work. There is a shortage to some extent, one could argue, as people want more actuaries.

Mr. Ronan Mulligan: On a per capita basis, we have a very high number of actuaries and they practice in many areas. Sometimes there may be a shortage in a particular area as a result, meaning demand goes up. I am not sure we have a real shortage as such. With the CBI, there was a period after the financial crisis when there were issues at the bank relating to compensation, pension entitlements, etc. CBI lost some actuaries in that period. It has recently staffed up again on the actuarial side and it has quite a healthy complement of actuaries there now.  

Committee adjourned.

Session 3 - Thursday

Rising Cost of Motor Insurance: Discussion (Resumed)

Chairman (Deputy John McGuinness): I welcome Ms Dorothea Dowling, formerly of the MIAB, and Mr. Ciarán Phelan and Mr. Paul Carty from the Irish Brokers Association.

Mr. Ciarán Phelan: The IBA represents over 500 insurance brokers in the Republic of Ireland and our members sell motor insurance policies to over 700,000 Irish consumers. Attending with me today are two of our most prominent members and large players in the motor insurance market. Mr. Paul Carty is Managing Director of ARB Underwriting and wears two hats here today: one as a managing general agent and the other as a broker; and Ms Caeva O'Callaghan of O'Callaghan Insurances Limited, whose broker business has a large personal lines client base. Also with me are our Director of General Insurances, Mr. Brian McNelis, and Mr. Frank Lahiffe, our Public Affairs Adviser.

Our members are at the coalface and have had to deal with the many confused and angry motorists whose premiums have increased by over 70% in recent years, although the majority remain claims free. The reasons for the dramatic increases in premium have at this stage been well documented and what I would like to focus on is what we consider as remedies to spiralling premiums, and, ultimately, to what will lead to a more consistent pricing model.

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Insurers have failed in the past and probably will fail in the future. We, in Ireland, have had too much experience of insurers failing. The root cause has always been unsustainable pricing models to win market share. In the 1980s, we had the collapse of PMPA and ICI, and in the past number of years, we have seen the collapse of Quinn Insurance, Setanta and Enterprise, and have also witnessed insurers having to be recapitalised by parent companies and investors to stay in business, namely RSA, FBD and Liberty. Five years ago, drivers could get comprehensive car insurance for as little as €230 which is approximately a third of the price in the 1980s. Putting this pricing into context, it was well below most individuals' motor tax and also if the policy included windscreen cover, the cost of replacing that windscreen was more than the cost of the policy.

To arrive at a sustainable affordable price, certain market dynamics need to be urgently addressed. We, as a body, have witnessed first-hand the dysfunctional nature of the present market whereby we have seen prices increase and margins improve, and yet insurers like Zenith are leaving the market, while at the same time there is not a queue of insurers seeking licences from the CBI to enter, or passport in to, the market. This is because, apart from the small scale of the Irish market, the ability to make a return on capital is too uncertain. If we are to have a functional market that is competitive, we need greater certainty to allow companies price properly and make a return for the shareholder. In the Irish market today, capacity is reducing which inevitably leads to price increases and if the limited capacity is to continue, prices will inevitably rise further.

All stakeholders have a role to play in normalising the market - Government through policy changes, the CBI through proper oversight of pricing and reserves, the insurance industry by being more transparent on claims and the sharing of data, the courts in respect of awards, the broker in providing choice and claims support, and the consumer with regard to driving behaviour and fraudulent or exaggerated claims. In particular, the Government has an important role to play and we believe these important first steps need to be taken as soon as possible.

In essence, Government needs to take the following action. It should ensure the market is attractive to new entrants and competition by removing uncertainty, and tackling the claims culture that currently exists. Greater capacity in the market avoids the cherry-picking of perfect risks, increases competition, reduces price and improves choice for the consumer. It should increase the powers of PIAB, ensuring fewer cases end up in the courts and if they do, that the courts refer to the Book of Quantum. This would significantly reduce legal costs which could amount to approximately 50% of the overall claims cost in disputed cases.

Any innocent third party should be adequately compensated for injuries caused in a road accident. However, up to 70% of all claims are for soft tissue injury with no long-term detriment to health or lifestyle. There is undoubtedly an element of exaggeration, or indeed fraud, in many of these cases and therefore, if the incentive of cash was replaced with treatment for injuries, many of these claims would disappear from the system. We would, however, reiterate that people seriously injured should get adequately compensated.

The Government should remove retrospection with regard to changes in legislation. Insurers price on the factors that apply at the time of taking the risk. However, we have seen in recent years, changes that have affected claims not yet settled, examples of which are where they change the discount rate, court award limits and compensation rules.

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The Government should appoint the CSO to gather information regarding claims data. The co-ordination of existing databases holding claims data, penalty points, driving licence and NCT information is essential in the efforts to fight fraud, improve processes and ultimately reduce costs to the benefit of the consumer. Data protection rules are often used as excuses, but if the availability of data allows for better and fairer pricing models, then in our view, the majority of motorists will agree to allow visibility of relevant data.

The Government should set up a compensation fund to cover the inevitable future failing of an insurer. It could be funded through contributions from insurers who operate in the market relevant to their market shares and by the current insurance levy on premiums. This would ensure a level playing field for all operators in the market, take pressure off the Exchequer when a failure occurs and ensure that the industry does not have to cover the liabilities of an imprudent competitor, which makes no sense and would be a major inhibitor of new insurers entering the market.

Fraud needs to be punished to deter offenders. If a case is fraudulent, wasting time, money and, more importantly, ambulance, fire and Garda resources attending an accident, the perpetrators should be heavily fined and in certain cases, receive custodial sentences.

The CBI needs to make the public aware, from May 2017, of the solvency and financial control report, required under Solvency II regime, for all insurers operating in the Irish market which will greatly enhance transparency of their financial standing. This will enable consumers and their advisers make more informed decisions regarding from whom they purchase insurance.

Insurers need to become more transparent and provide the relevant data on claims so that the whole claims picture is in the public domain. The settling of claims early, and outside the courts, is acceptable if all parties are happy, but the absence of data causes distrust when the industry is trying to explain the actions it is being forced to take. Also, policyholders should be more involved when an insurer agrees to settle on their behalf. In many situations, this only becomes apparent at renewal. We all have heard stories of minor damage being exaggerated and settled without any recourse to the policyholder to defend the settlement.

Courts need to be mindful of the Book of Quantum as a fair assessment of injury compensation so that there is a consistency in awards. Also, if cases are found to be fraudulent, they should be sent to the DPP with a view to criminal prosecution.

The Gardaí should be resourced to reduce the numbers of uninsured drivers who take chances knowing their chances of being caught are negligible. All Gardaí should have APNR equipment so that they can scan registrations to see if cars are insured, and the requirement for insurance discs should be abolished. If vehicles are not insured, they should be confiscated and the driver banned from driving for a number of years.

Drivers also have responsibilities. They need to provide accurate details when acquiring insurance. Education is required with regard to fronting, whereby the parent insures the car as the main driver, even though it is the son or daughter's car and he or she will be the main user of that car. Parents think they are saving their children money when, in fact, their children are driving without insurance.

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With insurance costs so high for young drivers, the premium is now often in excess of the value of the vehicle they purchase. We tend to allow the most inexperienced drivers drive the oldest and less roadworthy vehicles. Most of these older cars do not have the safety features of modern cars and may have previously been crashed or renovated. There is also a strong correlation of older cars being used for fraudulent or staged claims. We also need tougher penalties for speeding, careless driving and the use of mobile telephones when driving.

Brokers play an important role in the arranging of insurance. Indeed, unlike an insurance company, they shop around at time of renewal to ensure their customers are getting the best cover at the most affordable price. As a result of the current hike in premiums, members have seen an increase in new business. However, with reducing capacity, their ability to find better priced products has reduced. Also, certain insurers operate a differential pricing model whereby they offer different premiums for the same risk through different distribution channels. They often also discriminate between new and existing customers. In our view, a risk is the same irrespective of which channel it comes through, or whether it is new or renewal, and the price charged should be the same. In fact, purchasing insurance through a broker not only provides a wide choice of product, but also ensures a fairer settlement as the customer is often represented in the claim.  It is a dysfunctional market with no new entrants and the incumbents are losing money. Unfortunately, we have a system with high awards, which, unless tackled, will lead to further premium increases. The insurance industry not only provides significant employment but invests heavily in the economy and facilitates daily living and business through the transfer of risk. It is imperative that we address the issues highlighted to the Committee if we are to continue to have a competitive and profitable industry. In the past, premiums were too low. Consumers must realise the new norm will see average premiums closer to 1990 levels than what we have been used to in recent times. The correction in premium size was warranted but in a functional market it would have been more gradual and less discriminatory. I will be delighted to answer any questions that Committee members may have.

Ms Dorothea Dowling: I am here in a personal capacity. Committee members may know I was Chair of MIAB, which reported in 2002. The MIAB statutory investigation into the cost of motor insurance started in 1998. We had a very strong Board and a particularly strong statistician. We had to threaten to resign en masse as a Board because of the non-co-operation of the insurance industry at the time in providing data. Our statistician was able to disprove some of the actuarial data models submitted to us and subsequently gave evidence at the Equality Authority on actuarial data produced to justify age discrimination, which turned out not to be age-related. I give these examples from the point of view of how important it is not just to get data but to interrogate it.

At the time, the Oireachtas Committee had an extremely important role in establishing the PIAB. There was never any question of its being a lawyer-free zone. We do not see that anywhere in the legislation and I never said it. The heads of the Bill regarding Section 7 made it very clear that nothing would stop people from getting their own advice from any agent or expert, but they would do so at their own expense. The risk of introducing a streamlined quick personal injuries redress system is what is called the expressway principle - that is, that it would be made too easy. The balancing measure is the Civil Liability and Courts Act, which is the deterrent to what I call exaggerated claims.

We need to discuss the word "fraud," because it can be quite misleading. In 2007, PIAB experienced a situation whereby a small number of high-volume solicitors rejected PIAB

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awards but took the same money the next day and received litigation costs. Unfortunately, the industry did this. Legislation was introduced in 2007 whereby if someone rejects a PIAB award, the amount stands as a tender or lodgement in the court system, in accordance with existing court rules, and if the court does not award any more than this, the party ends up being liable for both sets of costs and will probably receive no compensation.

In 1986, an Oireachtas Committee examined this issue. At the time, litigation overheads were considered to be a mouth-watering 25% of the cost of insurance. We now know that by the time of the MIAB report, this had risen to 46%. I understand PIAB uses a figure of approximately 60%, based on data from the NCC. It ceased to be a good business model to rely on investment income from the time the PIAB came into operation, when the maximum wait would be nine months and the Statute of Limitations was adjusted to two years.

I note with some irony that some representatives of the insurance industry state that they relish the fact that the CCPC is to investigate the high level of awards in Ireland. The question to consider is the real reason we have seen the increases that have taken place. If it is because of unpreparedness for Solvency II, we will not like it, but it is a one-off and we will not have further increases. Let us put a price on Solvency II, as we really need to get to the bottom of this. The data I have point in a different direction. Longer term, because there are urgent actions that need to be taken, we should stop the boom-and-bust economics that seem to operate in the insurance industry.

I am very concerned that insurers are being allowed to dictate the reform agenda without any empirical evidence to support their arguments - in fact, to the contrary. I have provided the committee with some data on this and comparisons with other EU states on average claims costs and average premiums. If insurers had been allowed to dictate the reform program with regard to the MIAB and establishing the PIAB, we would not have had the 40% reduction in the CSO index in the following decade, which was to the end of 2013. It has all gone pear-shaped since then. The real pressing issue for today, in my view, is that reputational damage is being done to Ireland Inc. This is putting the frighteners on potential entrants. I also suggest that there is a potential Constitutional challenge with regard to the Quantum as planned, for reasons of principle and pragmatism.

In its 2004 report, the MIAB had to state that matters had got worse regarding victims' rights under EU motor insurance Directives. The MIBI was given special powers which, in the opinion of the MIAB, are contrary to rights under EU law. As the MIBI is an emanation of the State, it has been charged with this responsibility by the State. In 1999, Mr. Justice Brian McMahon found that there was a danger of Francovich damages against Ireland and, if there are, it will go on the Bureau and the policyholders. It is another emerging bomb that we need to defuse.

We should reverse the Act that increased compensation in the Circuit Court from €38,000 to €60,000.  If we pass a law and it is not working and if it is not done in the EU - we have sovereignty here - then I think we should reverse it. We should simply say that we have tried it, but it does not work because it has not fulfilled any of the objectives and it is having numerous unintended consequences. We should take it on the chin, reverse it and bring back stability because stability is what we all need. Certainly, it is what insurers need. Moreover, we should not operate the Book of Quantum as currently set out.

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We really need to beware of rhetoric, anecdotes, hearsay and short-term thinking. Insurance is a long-term business. We should stick to the available data and then chase the missing data. I have been surprised at the extent to which the existing data has not been referred to by people who would present themselves as professionals in this business. If they are not looking at this data when they are doing their job, then I am sorry but I have to call into question the governance structures within the industry.

My experience on reform is that we need to define the challenge properly before designing the reforms. It is very important to uphold the rule of law. There are things the Committee members could do in the Dáil to stop this rot. Some data shows that Irish motor underwriters are making far greater profits than their UK counterparts. We saw the same in MIAB back in 2004. I am conscious of the fact the CCPC is, according to the press release, signalling for next year a further 20% change. That has to stop.

Senator Rose Conway-Walsh: We will hear later from Insurance Ireland that operators in the sector are underpricing and have been underpricing for some time now. At any point in recent years, did brokers point this out to insurers? Given that he operates at the coalface, did Mr. Phelan point out the question of the low-price culture?

Mr. Ciarán Phelan: We have been very concerned about the pricing models over the years. As I said in my presentation, they started to drop significantly approximately four or five years ago, especially when several of the online distributors started to come into the marketplace. It was as if they had found a new way of pricing motor insurance. We took the view that the pricing was very aggressive. On several occasions, we talked to the CBI about the pricing models to ensure those responsible were happy that those pricing models were actuarially calculated and that there was a basis behind them. We are price takers in the marketplace; we are not price makers. We take the price from the various underwriters that come into the marketplace. We saw aggressive pricing policies and we have lived through failures in the past. Many brokers were around when PMPA failed and certainly many were there when Quinn failed. The Quinn model was based on charging low, settling quick and hoping everything works out at the end of the day.

Senator Rose Conway-Walsh: Is there a written record of the IBA correspondence with the CBI?

Mr. Ciarán Phelan: No. It took place in meetings we had with representatives of the CBI on various topics at different times.

Ms Dorothea Dowling: I will cut across, if that is okay. The index of motor insurance inflation has been coming down every year from 2003 to 2009. In 2009, the CBI asked all the non-life insurance companies to undertake a stress test. Then, the price index actually went up in 2009. There was nothing in the claims market that I could identify which would have caused it. The fact that two elements of data correlate does not mean they are causative, but my reading is that a stress test was done by the CBI. The sense was that there was too much price cutting in light of the new Solvency II Directive regime, which had been flagged since 2007. Then the index went up in 2009. I do not know the outcome of those stress tests. However, it is history now; it is from the old regime. I cannot agree that this is only from past four or five years. In fact, I believe the difficulties started earlier. According to the data, following the stress tests, it started to go up a little. Then, the Gender Directive came in from

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January 2012, according to which men and women had to be charged the same. According to the data, this caused insurance premiums to go up by 25% for males under 35 years.

Senator Rose Conway-Walsh: The insurance sector blaming a claims culture is like police blaming a criminal culture for crime. At the end of the day, we have insurance in order that people can make claims; that is the sector. An insurance sector with a no-claims culture would surely be of no use. There is nothing wrong with making claims. Let us consider whiplash, for example. Do the deputations accept that there would be a serious Constitutional issue moving towards a care not cash system, regardless of whether it is a good idea? It is simply not possible in Ireland, or is it?

Mr. Ciarán Phelan: Since I am not a Constitutional lawyer, I cannot really answer from a Constitutional perspective. However, I can outline what we have seen and what has been documented, although Ms Dowling may dispute these facts. In Ireland, apparently, compensation for whiplash is far higher than in other jurisdictions, including in the UK and France, for example. I am pleased Mr. Carty is at the Committee. He is a Manager in a general agent, a quasi-insurer. If the Committee is willing to hear it, he can share some of the actual cases of exaggeration of fraudulent claims. Senator Conway-Walsh is perfectly right: insurance is all about covering financial loss when the insured body or person suffers a catastrophic event. Claims should always be paid, but if there are exaggerated or fraudulent claims in the system, it impacts on all of us negatively. It will feed back into premiums and we all end up paying more than we need to on the basis of that.

Senator Rose Conway-Walsh: Where there are fraudulent claims, what part do brokers play in ensuring that they are investigated and prosecuted?  Do brokers have a role in following it through?

Mr. Ciarán Phelan: No, that would be between the claimant and the insurance company. A broker may suspect that there is a fraud at play but it is not within their remit to deal with it.

Senator Rose Conway-Walsh: It seems like it is within nobody's remit. It is just thrown out there that there are all these fraudulent claims and everybody who has whiplash is somehow claiming falsely. There are people with very serious neck and back injuries, which is why we have insurance, so putting them in the whiplash category and claiming that all the problems relating to rising insurance prices are down to that is done to hide many other things that are happening within the system.

Mr. Ciarán Phelan: It is a component, but it is just one component.

Ms Dorothea Dowling: I have carried out an analysis of the number of cases that have been fought under the new deterrent for what are called misleading claims because fraud is very difficult to prove, involving as it does the criminal burden of proof, which is beyond a reasonable doubt, whereas under the 2004 Act, this is just the balance of probabilities. From its introduction to June 2016, only 32 cases were fought by defendants and not all of them were insurance industry cases. A total of 19 cases were dismissed. There is a pretty good chance of them being dismissed if the industry pursues them, but short-termism arises. I think the AA said that the industry is not really concerned about fraud as long as it can price for it because it can pass it on to policy holders. It is important to emphasise that of the 19 cases that were dismissed, 12 were what is called "assessment only" where the person who was being sued agreed that they caused the accident but they felt that the claim was exaggerated.

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Two cases involved fractures. In one case, a man maintained he was in a wheelchair for life, video surveillance showed that this was not quite the case and the case was thrown out. In another case, a person was an amputee. That counts for four of the 19. The remainder were what are called "soft tissue injuries" so there is an issue.

In respect of care versus cash, as a Master of Laws, I would say that this would probably be un-Constitutional and would also not be compliant with the EU Directive on motor insurance, which says that victims in motor insurance claims are to be dealt with in compensation terms under national law in no less favourable terms than any other injury.

Senator Rose Conway-Walsh: My concern in terms of "care, not cash" in that we are presenting this as a solution when it will not be a solution at the end of the day. We should try to get to the real solutions. We might be better equipped to do that when we get the real information and data.

Mr. Paul Carty: An awful lot of common sense is being offered here. As everybody has said, there is no one single solution. It is a combination. One area that is very hard to manage involves soft tissue assessment-only cases where there is no liability. In this scenario, it has been determined that an accident, frequently of a very minor nature, has occurred. It can involve soft tissue injury or a psychological impairment of some kind. From the insurance industry's perspective, what is a bit frustrating is that sometimes, one can have an engineering report that shows that an accident was of an extremely minor nature, but those making the assessment, such as the PIAB, the courts subsequently. or the system, must take on board the medical opinions here. In our experience, the medical opinions are not often read in conjunction with the engineering reports showing that they are very mild. As a consequence, one can have some dramatic cases where the actual assessment of the physical damage done to two vehicles can be under €500 but the award can be €80,000 or €90,000. People can suffer significant injuries in those circumstances, but I think it is overplayed and we need some system that allows us to better assess the combination of the actual circumstances of an accident and the ultimate award provided. It is very difficult for the medical profession when members of the profession interview an individual who is trying to explain to them the nature of their injuries, for example, that they have a stiff neck. They cannot judge it. It is very difficult. Naturally, they tend to reiterate what the client has told them in the medical report. Producing evidence to that effect is always much more difficult except in severe cases, which are all too easy to identify and which we all accept must be properly compensated. However, there is a huge range with regard to what we are talking about and right now and I am not sure we are handling it properly.

Senator Rose Conway-Walsh: Again, there is an over-emphasis on that solution, but I appreciate the point Mr. Carty is making. I need to ask about the point made that older cars do not have the safety features of modern cars and may have previously crashed or been renovated. Surely with older cars, it depends on who is driving them. Older cars cannot go at the speed of newer cars so how can somebody with years of experience driving a ten or 12-year-old car at a reasonable rate and obeying all the rules of the road be a higher risk than somebody who is speeding in a new car? How do brokers calculate that?

Mr. Ciarán Phelan: My reference in this report was to young drivers. Unfortunately, many young drivers tend to buy ten, 12 or 14-year-old cars. What I was trying to say is that we put the least experienced drivers into the oldest cars. I have a son of that age and see the constant

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fear of him wanting a car, and his friends buying cars registered in 2000 that do not look roadworthy to me. My reference was to young people driving very old cars.

Senator Rose Conway-Walsh: If young people were driving newer cars, would that suggest that the price would go down for younger people?

Mr. Ciarán Phelan: The price is based on statistics. If someone has more accidents, they will pay a higher price. Statistically, younger male drivers have more accidents. What I am referencing is more the fact that the fatalities and injuries might not be as great in a more modern car than in an older car. Ultimately, it was purely just to reference the fact that these young people might not have the experience to drive as well as more experienced drivers and are driving cars that might not be as safe as others.

Senator Rose Conway-Walsh: From speaking to drivers all the time, experience would tell me that it does not matter what age they are. People driving an older car, be they in their 40s or 50s, are being refused quotes or being quoted huge amounts. How can Mr. Phelan still relate this to older cars?

Mr. Paul Carty: Everything is driven by our statistics, so statistically, certainly in my business, we can see that there is a direct link between older vehicles and accidents. When one breaks it down to individual cases, I understand the point the Senator is making but the statistics ring through. In so far as there are fraudulent cases or set-up accidents, there is a direct correlation between older vehicles and fraudulent activity. This is simply the reality. It is also because the value of older cars is clearly less than that of new cars. One could argue that there is less of an incentive to behave and protect one's vehicle. We are not driven by any malice towards old cars. It is simply because the statistics show that the greater difficulties are concentrated in the older vehicles.

Senator Rose Conway-Walsh: Mr. Carty could also say that it costs less to replace an older car.

Mr. Paul Carty: It is not the cost of the car that causes the problem. It is the third party injury.

Senator Rose Conway-Walsh: I am really concerned about the issue of fronting where parents are insuring cars for their sons and daughters. They are being forced to do this, particularly in rural areas, because their sons or daughters cannot get insurance or have to pay huge amounts and they cannot get to work, an employment scheme or anywhere else without their cars.  Will Mr. Carty explain why they are saying they are not insured?

Mr. Paul Carty: Again, the problem is that the main driver of the car is the person who uses it most, who will drive the most miles, who will drive at night time and so on. A named driver only drives it on an intermittent basis. Fronting is where the insurer considers the driver to be the parent when, in reality, the main driver on the car, though only named on the insurance policy, is the son or daughter. It is a very serious issue and is becoming far more prevalent. Again, given the fact my own son has reached that age, I have seen this situation arise with a lot of his friends, in that the son or daughter is the named driver on the car insurance, but it is his or her car, and he or she is the one driving it most frequently.

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Deputy Sean Sherlock: I want to drill down to this issue of data. It seems there is not perfect knowledge in terms of how the industry operates. We do not have perfect knowledge except through the reports we have from the PIAB. Its submission to the Committee gave the average award from 2009-15, which was approximately €23,000. The PIAB submission stated there is: "...no public information available relating to overall numbers and costs of claims for personal injuries and the only figures that were made public did not contain any information on the costs of directly settled cases. Without access to that information, a full picture of the impact on insurance premiums is difficult to establish... ."

The IBA submission states the same thing. I am trying to grapple with the issue. Insurance Ireland through its public utterances in the past 48 hours or so has been quoting from "independent data sources", from the PIAB figures, from the bodily injuries review published by the CBI, and from the OECD report which states that Ireland is the eighth most expensive country in which to enforce a contract, given the average award of a Circuit Court increased by 21.2% in 2015, following a 13.5% increase in 2014. The point I am getting at is that I do understand why Insurance Ireland is not sharing data. I am making an assertion that is it not, so the witnesses can correct me if I am wrong and I would like to get the IBA position on that. If we had perfect knowledge in regard to all of the claims, we would be able to drill down to the reason people's premiums have gone up by 70% to 80% or why some people are not being insured at all. To give an example I have used before, if a premium goes from €500 on a Thursday to a cost of €800, which is a surcharge of €300, what percentage of that €300 is what I call super-normal profit and what percentage is attributable to the cost of the historical decrease in insurance and the provisioning that is necessary? The witnesses should correct me if my analysis of the situation is wrong. I am directing my questions in the first instance specifically to the IBA. The second element I need an answer on is in regard to Zenith. There seems to be a contradictory position between what Insurance Ireland is saying and what Zenith is saying. If I understand Mr. Humphreys correctly - he is on the public record so I have no issue about naming him here - he is saying Zenith is exiting the market because it does not have access to proper data. If so, I would like to have an assessment or a view from the IBA as to why that is the case or what its take is on that.

I was very taken by a point in the IBA submission, which states: "All Gardaí should have APNR equipment so they can scan registrations to see if they are insured, and the requirement for insurance discs should be abolished." If we think about that logically, the driver gets the insurance disc in the post and slots it into the pouch on the window, and the technology now exists to scan or copy it in order to create a false disc. If we are depending on a Garda at a checkpoint with hundreds of vehicles passing through to intimately examine the disc, there is a case to be made for the APNR model so this can be based on checking of registrations, and we can look at the enforcement procedures thereafter.

Mr. Paul Carty: There are three questions within that. At the outset, I want to point out I am a Managing General Agent and I represented Zenith in Ireland, so I have to be careful. I wanted to put that on the record so we know where we are.

I want to deal with the disc piece first. I liken discs to the old airline tickets in that it is time they were gotten rid of. It is a paper chase, given we need special printing, we have to stick them in envelopes and get things to hold them up on windscreens, and so on. We have gone way beyond that. Gardaí should be able to go to a car and know it is insured, taxed and registered - that is where we should be. I do not think we should be deflected from that target, so let us go for that. That is the way it should be.

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On the question of the hypothetical €300 increase, the Deputy is looking for some sort of apportionment of how much one could blame on the various factors. The Deputy knows we cannot give him more than a view. I believe a significant portion is that it was underpriced in the first place because the market had just gone down. Whereas we hear lots of quotes about a hypothetical Mrs. Brown whose premium has gone from €300 to €460 in a year, maybe it should not have been €300 in the first place. Whether it should have been €340 or €360, I do not know, and perhaps six years earlier, it could have been lower again. We are taking it at a particular point, so there is a correction.

There is the question of the environment we are in, to which Ms Dowling and my colleague, Mr. Phelan, referred. We do not know the effect of Solvency II, which historically was very important here. We have to remember that under Solvency II, all insurers next May have to publish what is called an SFCR - a Solvency and Financial Control Report - on their figures for 2016. We do not know what balance sheet re-jigging is going on this year to make sure it looks the right way, but that can have a bearing on what insurers might do. They will hardly publish that they are doing that for the purposes of their SFCR.

As to Zenith and Mr. Humphreys, whom I know well and who is a very nice man, they have signalled they are withdrawing from the market. They have said that for a variety of reasons, they are simply unhappy with the courts system and the uncertainty, they are unhappy that PIAB is not dealing with the number of cases they would like it to deal with, and they are unhappy - their words - with the co-operation they have been getting from the industry. All I can say is that my company is an associate member, not a full member, of Insurance Ireland and we have access to the data enrichment and risk intelligence to help us underwrite the risks.  Those are the facts.

Deputy Sean Sherlock: Is Mr. Carty telling us that he has access to the data?

Mr. Paul Carty: By virtue of our associate membership of Insurance Ireland, we have access to two databases: the Risk Intelligence Database and the Data Enrichment Database. This helps us to look at and underwrite the individual cases we are going to underwrite.

Deputy Sean Sherlock: If Mr. Carty has access to risk intelligence, presumably that forms the pricing mechanism.

Mr. Paul Carty: Yes, it makes a contribution. It does not give us the pricing. It is just another piece of information regarding the claims in the background, or the vehicles.

Mr. Ciarán Phelan: For clarification, Mr. Carty is talking as a Managing General Agent rather than as a member of the Irish Brokers Association which does not have access to any information of that type. I want to clarify that for the record.

Deputy Sean Sherlock: If the insurance I am paying for suddenly increases by 20% or 30%, I will scratch my head. Most people will accept that, historically, it might have come down for a certain demographic. Where is the loading? Mr. Carty has referred to the SFCR. If I am interpreting him correctly, he hinted that the corporates are rejigging balance sheets and preparing for the Solvency II rules. It seems to me that the victims in this, if I can use that word, are the people who are driving cars in Ireland. Regardless of the age of their vehicles or their own ages, their risk profile has not increased over a short period of time. It does not matter if their cars are three months old or 30 years old. If they have passed the NCT, they

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are roadworthy. This is the point. It seems to me that ordinary people are becoming victims or pawns in a bigger corporate game. There is a bit of re-provisioning going on. There is pressure to adhere to the SFCR rules or the Solvency II rules. There is a bit of naked profiteering going on as well.

The market is not perfectly competitive. If it were, anyone who wanted to enter the market tomorrow would have perfect knowledge of all elements of data. PIAB is telling us one story. As it is a public body, we absolutely believe in the veracity of its figures. Not everybody is going through PIAB. Why are the insurance companies settling? We know there was a Constitutional case relating to the right to legal representation. I have sympathy for the IBA position in respect of transparency around the insurance system and the measures that can be taken. Everyone is saying the same thing with regard to data. We do not have perfect knowledge from the insurance industry.

Ms Dorothea Dowling: An EU regulation exempts insurance specifically from anything to do with collecting data. Such an exemption is normally considered to be contrary to competition. It is because of the nature of insurance that there is a specific EU regulation that provides for an exemption in the instance of insurance. It is important that there is symmetry of information.

Deputy Sean Sherlock:  It appears that the data are proprietorial, in effect. It is questionable whether we can legislate to make that data available to all comers. I would welcome a view on that. If the data are of a comprehensive nature, and if they profile every single purchaser of insurance, we can crack the nut here by getting access to them.

Mr. Paul Carty: I cannot comment on what Insurance Ireland does or does not make available. All I can do is give the facts as I have them from my perspective. We must understand the macro-level context in which Solvency II is being introduced. I understand and have a great deal of sympathy for the Deputy's comment about the impact on the individual insurer. The flip side of that coin is that the rationale for Solvency II is to prevent collapses in the first place, so that we do not have to end up discussing cases like that of Setanta. There is clearly an upside to what Solvency II is seeking to achieve. That has to be taken into account as well. I ask the Deputy to bear in mind that many of these decisions are not being taken domestically here. We have a very small domestic insurance base. Most of the Head Offices where these decisions are being taken are external.

Ms Dorothea Dowling: We can tell the Committee, based on the statutory returns, what the average motor claim cost is here. The details are set out in slide No. 9. In 2013, which is the most recent year for which I have data, the average overall claims cost was €4,472. This includes claims for windscreens and theft, etc. The equivalent figure in the mid-1990s and late 1990s, before the MIAB was established, was approximately €4,900. It has come down below the level it was at back then. Slide No. 14 gives details of the average cost across certain EU States. Figures are not available for all the States, but that is another discussion. These figures are price parity adjusted to take account of the purchasing power in various jurisdictions. The average across all the EU member states that provided data for 2013 was approximately €4,000. I cannot adjust for price parity because I am not sure of the methodology. I can make a comparison between our figure of over €4,400 and the EU average of €4,000. That is a margin of 10%. I do not know to what extent an adjustment for price purchasing parity in countries like Bulgaria would skew it in either way.

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Deputy Sean Sherlock: If it is supposed to be a perfectly competitive market, those who want to enter the market should have access to all the information they need to do so. If there is a blocking mechanism, there is a suggestion that cartel-like behaviour could be at play. I want to get a sense from Ms Dowling, and the representatives of the IBA, of whether they believe this sector is operating in a cartel-like manner. If Insurance Ireland is not giving us access to all the data we require in the interests of transparency, and to enable the Oireachtas to make a set of recommendations that can potentially be legislated on, it is arguable that we are on the back foot.

Ms Dorothea Dowling: The Minister can give PIAB additional functions under Section 54 of the PIAB Act 2003, which sets out the functions. That Section provides that PIAB has a data-collecting function and a cost-benefit analysis duty. In my view, additional functions can be provided under that Act without any need to amend legislation.

With regard to transparency, the MIAB made recommendations in 2002 about providing a breakdown of the motor sector. This would have provided more transparency to those of us involved in public policy and to external parties that might have been thinking of looking at the market. The CBI published such a breakdown from 2002 until 2009, but it stopped publishing it in 2009. When I challenged it to ascertain why it had stopped publishing this information, it emerged - reading between the lines - that the insurance industry had told the CBI it was too much hassle and it did not want to do it anymore. In its 2005 report on the insurance industry, the Competition Authority said not only that what the MIAB had recommended should be done, but also that it should be done in respect of public liability and employers' liability as well. That is relevant to the motor sector because they all involve injury. We can see the injury trend here. Rather than taking the advice of the MIAB, the CBI did a consultation process, largely with the industry. Anybody could have been involved in the consultation process, but I am sure those who were most interested in it were involved in the industry. As a result, the MIAB recommendation died a death. It never became a reality.

Deputy Michael D'Arcy:  I would like to ask about the SFCR reporting for 2016 and the Solvency II rules. I presume they must be met in the other jurisdictions where these products are offered.  How can that be offered as a reason for a rise of X percent in premiums? If that were the case, the rise in premiums and profits in other countries and jurisdictions should be similar to here.

Mr. Paul Carty: The Committee should probably have somebody in before it who is an absolute Solvency II expert.

Deputy Michael D'Arcy: I am not asking about that. I am saying if it applies in those other jurisdictions, should the percentage rise in premiums and profits not be in line with ours?

Mr. Paul Carty: No, not necessarily, as there is a link between capacity, or volume of business that is written, risks taken on board and the solvency ratio. For instance, they might decide to reduce capacity and take on less risk, and at better pricing their ratios will be enhanced. It depends on such factors, no matter what is the jurisdiction. It could mean an insurer might decide to stop writing a particular line of business that is not particularly profitable. They would write less business and would require less capital to support the business they are writing. There are external issues at play here, which will be revealed in this particular year as this is when Solvency II bites. Starting from 1 January, it will be published next May.

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Deputy Michael D'Arcy: In the main, we should not be talking about multiple times the profit or premium rises.

Mr. Paul Carty: No, I never said that. I said it was a contributory factor. That is all.

Deputy Michael D'Arcy: The rises and profitability here are multiples of those in other jurisdictions. The witness is offering Solvency II as the evidence.

Mr. Paul Carty: They are different jurisdictions, that is all.

Senator Kieran O'Donnell: What type of business is underwritten by Mr. Carty's company, ARB Underwriting Limited? Does it underwrite motor insurance?

Mr. Paul Carty: We do.

Senator Kieran O'Donnell: In which market does it underwrite? Is it the Irish market?

Mr. Paul Carty: The Irish market.

Senator Kieran O'Donnell: Purely the Irish market.

Mr. Paul Carty: Yes.

Senator Kieran O'Donnell: We represent people across the spectrum, including young drivers. The witness has access to the databases. Why have premiums gone up by 60% in some cases in the past three years?

Mr. Paul Carty: The underwriters have looked at prior years and some of the underwriters I use lost money in 2013 and saw they were underpriced. They also saw they were underpriced in 2014. They increase the prices for that reason. It is simply because they were losing money.

Senator Kieran O'Donnell: I shall put a question to Ms Dowling. The data she is showing us appear to indicate the average level of claims with PIAB and in the courts has not gone up in recent years. The level of value of claims certainly did not go up to that level. This is really the nub of the matter.

Ms Dorothea Dowling: We must be very precise. I bring the Committee's attention to Page 27 in the circulated presentation. It is very easy for the market to say it has made a loss, but I have broken that down. In 2013, the year referred to by Mr. Carty, the industry representatives argued it made a terrible loss of €281 million. This can be said because RSA got into difficulty, with a hole in the claims reserves of €270 million from the Head Office. Taking that out as a statistical outlier, the rest of the market made a profit of €73 million. If that is expressed as a percentage of the earned premium income, it is a return of 5%. Some will have made more than that and some will have made less.

Senator Kieran O'Donnell: How did that compare with the return, percentage-wise, in 2012?

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Ms Dorothea Dowling: The English motor insurance market has not even broken even since 1993. There was a period of super profits for quite some time. It is a real case of share the pain, share the gain.

Senator Kieran O'Donnell: Would it be fair to say, in Ms Dowling's expert opinion, that the motor insurance industry in Ireland has continued to make profits from 2013 to date when we take out the outliers like RSA?

Ms Dorothea Dowling: The Senator need not rely on my expert opinion as he can examine the data. In the appendices, at Page 63, there is the actuary analysis of the returns in the Irish and English markets. The 100% mark is break-even, meaning premiums coming in match claims, management expansions, etc. The page is titled Irish and UK Motor Market Results, and the sources are the databases we have spoken about, Risk Intelligence Ireland, INCA and Deloitte. The green line represents Ireland and was over the break-even point from 2002 to 2008. I mentioned the CBI stress test done in 2009 and perhaps that is why it came down. The sector went into profit again. Looking at the red line, the combined ratio for the UK is well below break-even.

Senator Kieran O'Donnell: For a layman, did they continue to make profits on the motor insurance business?

Ms Dorothea Dowling: Yes. That is a market aggregate figure. Some will not have made a profit. These are independent data.

Senator Kieran O'Donnell: This is the nub of the matter. We had representatives from road hauliers, the taxi federation and others before us. I asked them the direct question of whether they believed a cartel was operating in the motor insurance industry in recent years in Ireland. They all stated categorically yes. The CCPC, about two hours later, moved to instigate an investigation. The witness comes from the other side of the equation and he is an underwriter, the person effectively providing access to motor insurance in Ireland. Is there a cartel in operation at the moment?

Mr. Paul Carty: Not that I am aware of. I am not an underwriter, but rather a broker, so I represent certain insurers who write business in Ireland. I assist by providing a facility to do that. Zenith was mentioned specifically. Even with the statistics quoted, I am simply saying it lost money in 2013, 2014 and 2015. It is one specific insurer mentioned today. It is not a figment of my imagination but a reality. I cannot give any evidence that there is any form of collusion. All I know is I compete day in and day out with everybody else in the market.

Senator Kieran O'Donnell: It is extraordinary that the level of increases appear to be disproportionate to the level of incremental changes in claims in motor insurance between 2014 and now, relative to previous years. Ms Dowling mentioned three databases.

Mr. Paul Carty: They are not the same databases.

Ms Dorothea Dowling: They are run through different consultants. The data is gathered from the industry. This relates to underwriters. In fairness to brokers, although Mr. Carty might use them, he would not put in the data. I have given the figure for brokers' commission every year.

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Senator Kieran O'Donnell: Does Mr. Carty pay a fee to access them?

Mr. Paul Carty: I am a broker. We have recently been admitted to associate membership of Insurance Ireland and we pay for that.

Senator Kieran O'Donnell: Does Insurance Ireland own that?

Mr. Paul Carty: The Senator will have to ask Insurance Ireland. I assume it does but I cannot answer definitively. I am merely a recently admitted associate member of Insurance Ireland.

Senator Kieran O'Donnell: Can Mr. Phelan tell the Committee whether the Irish Brokers Association has access to that database?

Mr. Ciarán Phelan: No.

Senator Kieran O'Donnell: If an insurance broker operating in a small town has been dealing with a customer for ten or 15 years and that customer wants to renew his or her motor insurance, what happens in practice and how does the broker come back to the individual? How does that differ from what Mr. Carty does?

Mr. Ciarán Phelan: My colleague, Ms O'Callaghan, who is actually a broker dealing with these things, might be able to help.

Deputy Sean Sherlock: We have to distinguish between Mr. Carty as an underwriter and the IBA position for the purposes of this.

Senator Kieran O'Donnell: Mr. Carty might elaborate. He says he works for an underwriter.

Mr. Paul Carty: There is a fundamental difference. I do not carry the risk. I am not an insurance company. I am an insurance intermediary and an insurance broker. I have a retail brokerage and what might best be described as a "wholesale brokerage". We provide access to the Irish market to insurers who might wish to enter it without going through the full rigours of establishment and hiring of staff, including claims settlement people and administration staff.

Senator Kieran O'Donnell: For argument's sake, if insurers are entering the Irish market-----

Mr. Paul Carty: Such as Zenith.

Senator Kieran O'Donnell: Such as Zenith. If Ms O'Callaghan as a broker wishes to get a quote from an insurance company which Mr. Carty's company represents in Ireland, does she contact Mr. Carty?

Mr. Paul Carty: What will happen typically in a situation in the Deputy's town-----

Senator Kieran O'Donnell: It is the city of Limerick.

Mr. Paul Carty: In the city of Limerick.

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Senator Kieran O'Donnell: Never call it a town.

Mr. Paul Carty: In the proud city of Limerick, if one goes down to the Crescent, one will find some very fine brokers. One will walk in there and deal with highly competent staff.

Senator Kieran O'Donnell: Mr. Carty is doing well so far.

Mr. Paul Carty: They will have to be trained up and will have their APA accreditations. They will listen to what one's requirements are and carry out an analysis of them. Having done this, they will inquire of their computer system or, more typically probably, computer relay, enter the details and be provided with the names of the various insurers the broker can offer. I might be listed as just one of those. The broker will then try to select the best deal.

Senator Kieran O'Donnell: Typically, a person comes into Ms O'Callaghan. What changes has she seen in the last three years in terms of the different companies? Are they all quoting the same rates? Has there been a change in the way they are quoting? What has she seen in terms of the increase in premiums? What is it like at the coal-face?

Ms Caeva O'Callaghan: We have seen increases in premia, restricted acceptance criteria and, in the last few months, only one insurance company in Ireland right now will provide a quote for a person who has a non-EU licence. Somebody coming back from Australia, or an Australian coming here, can only get insurance from one company in Ireland right now. That is different.

Senator Kieran O'Donnell: What about someone from Limerick who went to Australia for three or four years, was insured there and comes back to Limerick?

Ms Caeva O'Callaghan: He or she would not have a NCB, so he or she would be starting out. We would advise the person that it would be useful if he or she had proven driving experience from the period during which he or she was in Australia and could document that for us. It would be difficult and expensive for the person.

Senator Kieran O'Donnell: Can Ms O'Callaghan explain the trend? I am more interested in the trend. Is there a consistent trend among all the companies?

Ms Caeva O'Callaghan: Yes, it is getting more difficult for returning emigrants.

Senator Kieran O'Donnell: Is there a competitive market any longer?

Ms Caeva O'Callaghan: For returning emigrants, no.

Senator Kieran O'Donnell: Not for motor insurance. Was there a competitive market in 2012 and 2013?

Ms Caeva O'Callaghan: It was more competitive than it is now?

Senator Kieran O'Donnell: Has it become less competitive?

Ms Caeva O'Callaghan: In my opinion, it has.

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Senator Kieran O'Donnell: Are the rates being quoted almost identical across companies?

Ms Caeva O'Callaghan: No. I could not say that without looking at my system. It would be very easy to do that, but I think there is variation in prices. However, the trends are that they are all going up and that there are more restrictive acceptance criteria.

Senator Kieran O'Donnell: In certain categories, will there be only one insurance company which will quote?

Ms Caeva O'Callaghan: Yes, that often happens.

Senator Kieran O'Donnell: Has that become a feature more and more?

Ms Caeva O'Callaghan: Yes.

Senator Kieran O'Donnell: How many years has Ms O'Callaghan been in the business as a broker?

Ms Caeva O'Callaghan: More than 20.

Senator Kieran O'Donnell: As such, Ms O'Callaghan is hugely experienced. I presume she operates with all driver age groups.

Ms Caeva O'Callaghan: Yes.

Senator Kieran O'Donnell: Has it gone up consistently across the board for all age groups?

Ms Caeva O'Callaghan: It has gone up for everybody, but the worst affected are elderly people and anybody with an outstanding claim. They are in a nightmare position this year. Anybody with a young driver is affected. It is any of the smaller, more vulnerable groups. They have real problems.

Senator Kieran O'Donnell: Anyone putting in a claim on a motor insurance policy will go through his or her broker first.

Ms Caeva O'Callaghan: Absolutely, yes.

Senator Kieran O'Donnell: Has there been an increase in the level of motor claims from 2013 to date?

Ms Caeva O'Callaghan: No, but we do not keep track of that.

Senator Kieran O'Donnell: Yes, but Ms O'Callaghan would see it.

Ms Caeva O'Callaghan: I do not see any big difference in the number of claims reported to us, or with which we are dealing.

Senator Kieran O'Donnell: In Mr. O'Callaghan's considered opinion, what is the reason for the incredible spike in the cost of motor insurance premiums?

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Ms Caeva O'Callaghan: In 2013 and 2014, each of the companies had big ambitions to become the biggest insurance company in Ireland. The fastest way to achieve that goal would be to sell many below-cost car insurance policies. Car insurance, believe it or not, constitutes over 40% of the whole insurance industry. The more a company controls that segment, the more it controls the whole market. Below-cost selling was a big feature. It does not make sense to anyone to sell a car insurance policy for €300. The cost of replacing a windscreen alone, which is covered free in everyone's policy, is €300 and that is without paying the man to come out to replace it.

Senator Kieran O'Donnell: How many motor insurance companies are on Ms O'Callaghan's system at any one time from which she can get quotes?

Ms Caeva O'Callaghan: There are approximately 11.

Senator Kieran O'Donnell: Does Ms O'Callaghan believe there is a cartel in operation with those?

Ms Caeva O'Callaghan: I would not like to say.

Senator Kieran O'Donnell: Has the market become significantly less competitive?

Ms Caeva O'Callaghan: My view is that it has, but I do not think a cartel is involved. The insurance companies are very nervous at the moment. It is the cost of the awards. Before we came in here, Mr. Carty was talking about two particular cases which are so interesting and so telling that it would be very useful for everyone here to hear about them.

Senator Kieran O'Donnell: Mr. Carty might enlighten us.

Mr. Paul Carty: I had not intended to, but they illustrate what is happening day to day. We can be hidebound by statistics and fail really to grapple with what it is like.

Senator Kieran O'Donnell: That is what we want to hear.

Mr. Paul Carty: With the Chairman's permission, I will disguise the parties to ensure that the appropriate rules are observed. By their nature, these are extreme examples, but they illustrate a point. I ask the members to imagine a Transit van about to pull, rather than reverse, into a parking space. If one is pulling into a parking space, one will be going pretty slowly. As this Transit van was pulling into a parking space in rural Ireland, it glanced off the front of a people carrier in the space behind. Whether the people carrier was moving out at the time is another matter. Our chap moved in and claimed liability. As such, it was assessment only and one is not arguing about who was to blame. The Garda who attended said it was hardly an accident at all.  According to the engineer's report we got, there was a pencil mark on our Transit van. There was some scraping on the other vehicle. The bottom line is that the person in the other vehicle claimed €950 in damages for a car, which is neither here nor there, and actually got €380. There were two ladies in the car - one was pregnant - and four children. The final award was approximately €85,000 because of claims of psychological impairment to the four children. The courts have to rule on any award that one provides. We offered more than €3,000 per child, for example, but the judge would only rule for a minimum of €7,500 because of allegations that the children were wetting their beds. Nevertheless, €380 of physical damage was done to the vehicles and the cost was

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approximately €84,000. I am not saying that the children might not have deserved that, but what questions were asked and how would one challenge that?

I have a case this week involving a Jeep. Our insured driver ran into the back of a Jeep. It was a tap. Our insured driver had a cracked number plate. The Jeep had a tow bar. There was an impact on that and damage done to the radio. The Jeep's driver is claiming €500 because orange juice spilled on the radio. Two people were in the Jeep and we have received a solicitor's letter. The process will go to PIAB but the dance has started. God knows where it will take us.

Given our day to day experience, we believe that PIAB was a terrific revolution under Ms Dowling's guidance - it needs to be reviewed and we would like to see it enhanced in some shape or form - but many assessments are rejected by clients. This means that cases automatically enter the court system. Hypothetically, if PIAB offers €15,000 and the person feels that he or she can get more, we must pay two sets of lawyers. We are threatened with a Circuit Court action. Given that court's jurisdiction, we are threatened with the certainty of having to pay out approximately €20,000 in costs. We would not want that action to proceed in the court, particularly given the medical and legal costs, so we would put an extra few bob on top of what PIAB was going to give. In an economic sense, one would be rewarding the non-acceptance purely to avoid costs running out of control.

Ms Dorothea Dowling: The acceptance rate of PIAB awards has been stable for the past eight years at 61%. That is a hard piece of data. I have listened to what Mr. Carty stated. Part of the reason that the industry has not supported PIAB is because the industry does that sort of thing. With the assistance of the Oireachtas, we introduced amending legislation. If one rejects the award, which is a statutory award and has the same status as a Court Order, it stands as a tender or lodgement. If one does not get more, one is at risk in terms of both sets of costs. Short-termism on the part of the insurance industry means that it offers someone €600 for fees. It is the same amount of compensation. This is a hypothetical example. The person will not accept the PIAB award tomorrow because the industry has just told him or her that it will pay a little bit more if he or she rejects the award. There should be a higher level of consent to PIAB awards, since only 6% of claims go to trial. Given what someone called the bizarre behaviour of underwriters, however, PIAB does not have full data. It should have full data on all claims in 94% of cases. I do not know whether this was a strategic decision on the part of the industry, but I will say no more on that. Mr. Carty is correct about the cost-benefit analysis. If one engages in short-termism, one must consider the cost of going ahead with something.

When I worked in the self-insured sector and we were an identifiable defendant, one would go all the way with it because two messages would go out quickly, the first of which was "soft touch". The second was that, if we went hard at them, got an award for costs and went to collect €5 from them every Friday night, they would be asking whether we had nothing better to be doing. They would be in the pub complaining about a utility coming to collect €5 every week. This sends out a good message to the effect that it is not a free ride and there are downsides. However, the insurance industry does not follow this type of model like it used to in the old days when I worked in the industry.

Senator Kieran O'Donnell: What should be done with PIAB?

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Ms Dorothea Dowling: Very little in this sense. I have made a number of suggestions; the first is not to publish the Book of Quantum as planned. We were told that it was based on data, which is a problem in itself, from 2013 and 2014. In November 2015, the Court of Appeal stated that Ireland needed to do this in a completely different way. Using the maximum in a celebrity case - it was €400,000 for a quadriplegic, a person who, sadly, was not getting better; such people are the serious cases - as 100% on our scale, one would calibrate the other injuries down that scale to 1%. There are large official actuarial losses for care costs but if €400,000 is generally the maximum, then whiplash will probably be 1% or €4,000. This would bring us into line with the approach taken on mainland Europe, from where we want to attract new players, but it would require buy-in from doctors to prepare reports in a more scientific manner.

Senator Kieran O'Donnell: From Mr. Carty's perspective, what would reduce insurance costs for the ordinary motorist in 2017?

Mr. Paul Carty: What Ms Dowling outlined would increase certainty. In a practical sense, however, we cannot be certain. We do not volunteer our money easily, but one is left in a climate of fear and might not be confident of getting support in the courts were one brave enough to fight many cases. One would be playing with someone else's money. It is stacked against us. I agree with the proposal outlined by Ms Dowling, as it would increase certainty. We need to be able to predict with reasonable certainty, having taken all of the facts into account as well as properly analysed medical reports, not just recitations of what clients have told doctors. One needs to use common sense when taking what actually occurred and its impact into account. One should then try to avoid any form of confrontation or litigation. I am outlining the assessment-only cases. We are not here to dispute the facts. We have already agreed that an award is to be made. It is only a question of deciding how much and what is reasonable. This is the approach that we would like to adopt.

Deputy Pearse Doherty: Mr. Carty cited an interesting story about a claim. As legislators, we all know that one story should not shape legislation and we need to approach it in the round, but was that a court-awarded settlement?

Mr. Paul Carty: For the minors, yes. It was a ruling.

Deputy Pearse Doherty:  A court judge believed that the children were affected.

Mr. Paul Carty: Yes.

Deputy Pearse Doherty: I do not know the children from Adam, and I am sure that the way Mr. Carty presented the figure will make for great headlines, but if children were affected in such a way and the case was tested in an Irish court of law with the insurance companies present to challenge it, it is not right for a broker, underwriter or Director of an insurance company to suggest in one way or another that the children were somehow gaming the system. It is not appropriate.

Mr. Paul Carty: It is a judgment call. As I stated at the outset, the system is there for people with justified injury claims. That is why one has insurance.

Deputy Pearse Doherty: Mr. Carty presented that picture as if it were an unjustified, fraudulent or excessive claim.

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Mr. Paul Carty: I am presenting a fact. I allow the Committee to be the judge of that fact. Even court systems have to be judged. I am only trying to present the facts coldly. It could well have been the right decision. That is all that I am saying. In each of those cases in which €7,500 was awarded, the costs were €7,800 per child. I am only here to illustrate what can be a small case on the face of it.

Deputy Pearse Doherty:  Mr. Carty mentioned "our Transit van". Did he mean his company's own vehicle?

Mr. Paul Carty: The insured vehicle.

Deputy Pearse Doherty: While we had a discussion here in the context of Mr. Carty representing brokers, he also is an underwriter and the Director of an insurance company. Is that correct?

Mr. Paul Carty: No, Deputy. I am an insurance broker, but a wholesale broker. I have both a retail service for some direct clients, but many of my other clients are brokers themselves because we bring an insurer into the market, provide services to that insurer and consequently act in-----

Deputy Pearse Doherty: Yes. Is that ABP?

Mr. Paul Carty: It is ARB.

Deputy Pearse Doherty: As for Insure4Less, the company that is regulated by the CBI----

Mr. Paul Carty: Yes, that is a subsidiary in Dingle.

Deputy Pearse Doherty: Is Mr. Carty a Director of that company?

Mr. Paul Carty: Yes.

Deputy Pearse Doherty: Could I buy motor insurance from Insure4Less today if I wished?

Mr. Paul Carty: Yes.

Deputy Pearse Doherty: Consequently, Mr. Carty is the Director of an insurance company.

Mr. Paul Carty: No, an insurance brokerage. Both are registered and authorised insurance intermediaries. The key differentiating factor is we do not carry the risk.

Deputy Pearse Doherty: Most people who saw the company's website would think they were getting insurance from the company. Is that correct? When such people receive their insurance particulars, would Insure4Less appear on the top of the page?

Mr. Paul Carty: Yes, if they were trading with Insure4Less, it would be on top of the page as the intermediary with which they were dealing.

Deputy Pearse Doherty: Were I to take out insurance, would I believe I was insured with Mr. Carty's company?

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Mr. Paul Carty: No, because we would send the Deputy the insurance company's documentation. We could send the Deputy, for instance, a Zurich policy or an Aviva policy, as appropriate. It would be as though the Deputy was dealing with any other broker. He would be dealing with a broker; it is just called Insure4Less.

Deputy Pearse Doherty: I refer to the issue mentioned regarding the discs. I agree completely with the view that we should get rid of paper discs for both motor tax and insurance claims. When an insurance company issues a disc and an individual decides to pay by direct debit, as most people cannot afford the prices insurance companies now are asking of them, if that individual cancels the policy, a request is made that the disc be returned. Is that information shared with the Gardaí when the policy's cancellation has taken place?

Mr. Paul Carty: No.

Ms Caeva O'Callaghan: I think it is done by the insurance companies.

Mr. Paul Carty: The insurance companies do it, but it is not done by the broker. The Deputy was asking about the broker and the broker does not.

Deputy Pearse Doherty: Consequently, the Gardaí are informed of all cancellations of insurance policies.

Ms Dorothea Dowling: Yes. It actually is an EU rule that it cannot be regarded as cancelled unless the insurance company has told the Gardaí.

Deputy Pearse Doherty:  As for the data, the problem is when an individual still drives a car with an insurance disc for which he or she paid for the first month but for which the other 11 months now are cancelled, a Garda who looks at or shines a torch on that disc has no way of knowing it is cancelled unless he goes into-----

Mr. Paul Carty: That is right.

Ms Dorothea Dowling: There is another issue regarding the payment by instalments. In my view, that is a credit arrangement and should be compliant with EU and national law on consumer credit such that one gets to see how much is the APR, and how much extra one is paying. I am a chartered insurer, but for many people, they get documents stating they do not need to do anything if they wish to continue and they think that is great. However, were people to see a large interest rate APR, it would be a different issue..

Mr. Paul Carty: There should be joined-up systems. An individual Garda should be able to read and see straight away, and many discs are not returned.

Ms Caeva O'Callaghan: Even more than that, there should be a single database that contains all the details pertinent to that vehicle in order that a Garda can pop in the car registration number and confirm it is insured with insurance company X, passed its NCT one year ago and is taxed. Consequently, the Garda would know it is insured, it is on road legally and is roadworthy. This information should all be held together on a single database. Insurance Ireland is working to collate this information and to have it available, but brokers are finding it difficult to break in to use this system with Insurance Ireland.

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Deputy Pearse Doherty: However, it is not the reason for large insurance increases.

Ms Caeva O'Callaghan: No, it is not a reason for high insurance costs, but it could be a large contributing factor to reducing the cost of insurance.

Deputy Pearse Doherty: I agree with that. I welcome the fact, which is why I said I agreed with it but I just wished to tease out that issue about the discs.

Ms Dorothea Dowling: I think the insurance industry is stating it is a cause. In the media recently, the industry stated there was an increase in the number of uninsured and that it was part of the reason for the premiums going up.

Deputy Pearse Doherty: Yes, but in my view, the argument the industry is making is not valid.

I will move on to some other areas. On the example Mr. Carty gave about the high payout in the courts, does he accept the statistics put out on the median payments to the effect that the increases are not at all significant?

Mr. Paul Carty: Given that I do not have access to industry-wide data, I can only speak from my experience that we have been taken by surprise by the level of awards. I agree with Dorothea Dowling's remarks regarding the jurisdiction of the courts having an impact right in this critical period. We have seen the awards increasing because we price to try to make money; not to lose money, and the reality is we have been losing money for some of those years. We now believe the market hopefully is correcting and that should stop.

Deputy Pearse Doherty: Mr. Carty believes that High Court awards have increased substantially. Does he believe comments from some insurance companies that they have increased by 34% in the past year?

Mr. Paul Carty: I believe there has been an increase and I cannot put a number on it but I would like the statistics to be revealed.

Deputy Pearse Doherty: What does Mr. Carty believe to have been the level of increase?

Ms Dorothea Dowling: I have to hand the raw data from the courts. One uses the median value and it has not gone up.

Deputy Pearse Doherty: Does Mr. Carty dispute that?

Mr. Paul Carty: I stated that in my own experience, the awards have been higher than we anticipated based on the pricing we put in during those years, that is, in 2013, 2014 and 2015.

Deputy Pearse Doherty: Mr. Carty is representing brokers, he has an underwriting facility and has his own Insure4Less company.

Mr. Paul Carty: Yes.

Deputy Pearse Doherty: He has come before the Committee to make a point about the High Court awards and has given two examples, which he has presented colourfully here.

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However, hard data are being given to him stating that the argument being made for the industry and his own argument do not hold up at all. I need to get to the bottom of this. Does Mr. Carty believe in the High Court data in respect of the median instead of the highest award that is paid, which is what the industry wants to put out because that gets the headlines and everybody thinks this is crazy stuff? However, does he accept the data on the median award which, as people like Mr. Carty understand, is what one should do?

Ms Dorothea Dowling: My slide No. 17 shows the median in 2013 was €65,000 and fell in 2014 to €63,400. While it increased last year to €67,121, we do not know how many of those involved motor insurance or how many are cases against the State or whatever. They simply are the data.

Mr. Paul Carty: I do not dispute Ms Dowling's data and nor am I commenting on those data; I am stating that the court's data are the court's data. I can only relate it to the experience we had specifically with Zenith, which is that the awards increased, and that is one contributory factor in its decision to leave.

Deputy Pearse Doherty: The job of this Committee is to consider the official court data in the whole, instead of the individual personal story that an industry might wish to put out that could help to skew the impression of what is happening when the question is considered as a whole. Ms Dowling makes a point about the Book of Quantum and suggests it should not be done by the consultants but should be taken from them. I am not sure about that and have some issues I wish to deal with, but does it really matter who puts it together?

Ms Dorothea Dowling: Hugely, yes.

Deputy Pearse Doherty:  I understand the Judiciary and the CBI will become more involved in this regard. I questioned PIAB yesterday on whether legislation should be brought in that would ensure the Judiciary was obliged to pay more regard to it.

Ms Dorothea Dowling: Separated powers.

Deputy Pearse Doherty: Yes.

Ms Dorothea Dowling: I will be blunt. There are two reasons I do not believe it should be based on High Court awards. I heard that it was the data from 2013 and 2014. The Court of Appeal has changed completely the manner of assessing compensation from November 2015. In the first of half a dozen cases, Payne v. Nugent, the Court of Appeal has stated one takes the maximum severity, which is €400,000, to be 100% and one puts everybody else on the scale all the way down. I am explaining it very simply. The whiplash awards will end up being a lot lower than is the case now and that is the way it is to be done in the future. The law has changed; that is the Court of Appeal.  Since then, from looking at the published judgments, the High Court judges are not following that direction from the Court of Appeal. If the High Court judges are not following a direction from the Court of Appeal, they are most certainly not going to follow a direction from the executive or from a book prepared by the PIAB. The second reason why it should not be based on settlements by insurers is that insurers are telling the Government - and this Committee, I suspect - that High Court awards have gone up by 34% when they have not. That would mean that they have been telling their staff that they are going to have to pay up to 34% more on High Court cases to get rid of them. They have actually been throwing money away.

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Alternatively, when we produced the original Book, to take the "guessing game" out of it, as one academic called it, we did not rely on data. We had a professional person who is expert in this area, Dr. Brian Greenford, who went in and examined the actual files. He also went over to England to examine files there. At that time, our damages were 12 times what they were in the UK. They are now twice what they are in the UK. There may be reasons on a insurer's file why a certain amount of money is paid out. The claimant does not feel confident about the case and takes half the value. If one only takes the data, which is the final settlement figure and seems to be all the PIAB have, one does not see that nuance or realise that a claimant thought that he or she was on the back foot or that the insurance company paid less that the claim was worth. Therefore, data in itself are not sufficient. There has to be the qualitative and well as the quantitative aspect. I also have a trust issue in regard to data from the industry, in light of the MIAB's experience over the years.

Deputy Pearse Doherty: The Book of Quantum is only based on what was paid out on these claims over the last period.

Ms Dorothea Dowling: Historic. But the Court of Appeal has changed the future.

Deputy Pearse Doherty: So the witness is basically saying to scrap that idea of what we paid out in the past and look at what we should be paying out in the future based on the maximum going down, which would actually bring some of the soft tissue injuries down to an appropriate level.

Ms Dorothea Dowling: That is the separation of powers. That is what the Court of Appeal has said is to be the law in this country from now on. It is not up to the PIAB to contradict the Court of Appeal. The Court of Appeal has said that what we have been doing in the past is not proportionate, is not treating like cases alike, is not scientific and is too arbitrary. There are issues with doctors who are appearing here all the time. They simply change the name on the top of the form, whether it is a whiplash report, soft tissue or whatever.

However, there are issues around the value we put on injuries in this country. For example, the Northern Irish Book ofQ is much higher in compensation than the UK average. There are no reasons for these things. They are just historic but that is not necessarily the way we want to go in the future. The Court of Appeal has said that this ought to be the way of the future. It is also the way it is done in mainland Europe - the percentage of disability. It would make this market much more attractive to new entrants who would be used to that scale and would know where it slots in. Predictability is the big issue for everybody, both claimant and defendant.

Ms Caeva O'Callaghan: I just wish to point out that one of the IBA's recommendations is that we would very much like to hand over the collection of claims data to the CSO. In that case the whole market, whether it is brokers, insurers or lawyers, will always get an independent and unbiased interpretation of the facts.

Deputy Pearse Doherty: That is something with which I agree. I have written personally to the CSO to ask it to consider taking that over under its new work programme.

I wish to ask questions on two final areas. They relate to the submission by the MIAB. There is so much in it and so many recommendations. Ms Dowling mentioned that there are sections of the PIAB and the Civil Liability Acts that have not yet commenced and that

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commencing them would help to solve the data issue we keep coming back to. It was mentioned there again by the IBA.

Ms Dorothea Dowling: The database can be done through that Act.

Deputy Pearse Doherty: Is that a silver bullet - actually commencing a piece of legislation that we already voted on many years ago?

Ms Dorothea Dowling: Yes. There are several pieces in that Act alone as well as in the PIAB Act. In the Civil Liability Act, they have to be activated, such as setting a discount rate, as they do in England, mediating conferences and strengthening special offers. The idea of the central database is that all settlements have to be registered somewhere. The CBI produced an analysis of settlements and found that the average settlement had gone up by only 8%.

Deputy Pearse Doherty:  Are they ministerial orders that are needed to authorise the Section of the Act that has already passed?

Ms Dorothea Dowling: No. I would suggest that this one could be activated through the Tax Consolidation Act in the forthcoming Budget. While receipt of compensation would still be tax free, the payee would have to pay the top rate of tax if they do not register the details of the claim settlement in this central database. I suggest that the PIAB run it because it has most of the data. All claims must be registered there. This would not only be helpful with data in the insurance industry, it would also tackle money laundering because there is organised crime involved in some of these cases. It would also tackle the situation which can arise in which some claimants receive an award for medical expenses, put that money in their back pocket, make a claim for tax relief on medical expenses or get money back from the hospital, which is entitled to charge the full economic rate for a hospital in a road traffic accident. They put that in their back pocket as well. These payments would all be registered. For example, if somebody wanted to make a tax relief claim for their medical expenses, Revenue would have the details and be able to say the person in question had already got that money back in a claims settlement. From the point of view of the Exchequer and hospitals, if the full economic rate is due to a hospital for a claimant being there for five nights or whatever, that amount is paid straight to the hospital. At the moment, the HSE has to chase the plaintiff to get the money. Administratively, it has so many potential advantages.

Deputy Pearse Doherty: People want to figure out what is going on here and why it has gone on. If the cause of this is Solvency II, the insurance industry should just say it, apologise, get on with it and stop all this pretence that it is about something else that is not related to the issues that have appeared over the last two years. The EU stress test that took place in 2014, which 60% of the insurance sector voluntarily took part in, found that we were very vulnerable to a period of low interest rates. We know that is exactly what happened as a result of quantitative easing.

My own assessment of looking at the core data here is that the medium of High Court awards has not gone up, legal fees have not gone up - indeed it is argued that they have gone down - the amounts paid for whiplash have been paid historically at that level so it cannot be the factor, and the frequency in claims has not gone up. All of these issues do not stack up. Fraud has not increased in the last number of years. It has always been suggested that is has been €50. Whether one believes it is €50 or not, we will leave that for another day. Therefore, what

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is the factor that has driven a 70% increase? From my view, it is the issue of the investment arm of these insurance companies which lost over €100 million in their investment or had their investments reduced by €100 million over a two-year period. Solvency II kicked in and meant that they had to increase their capital base. This is not based on risk at all. It is based on the fact that the companies have to ramp up their profitability. They have had to do it over a very short period of time because they acted in my view recklessly up until then. The people that are now feeling the pinch are those who are getting a 40% premium, if they are lucky enough to be on the average, and the outliers who are seeing 200% or 300% increases. That is my own assessment from what I have heard so far and from what I have investigated so far.

Ms Dorothea Dowling: I would give Deputy Doherty questions to ask of the CBI when it comes before the Committee as the Regulator because there was a stress test done on life insurance, or so we were told, back in 2009. Presumably, the companies passed that stress test in regard to claims reserves, etc. That seems to be reflected in the CSO. There was a bit of a hike as well. Back in 2009, we were all fine on the question of solvency. At an actuarial briefing in November 2013, there was a survey as to how many companies were ready to implement Solvency II. Only 13% of companies had it fully implemented. We are not talking about some little accounting thing that can be done overnight. It is raising capital and it is a long process. 40% of the companies in the survey had partially implemented it. How did we not know this was coming down the tracks? We had a stress test, or so it seems, by the CBI in 2009 and everything looked rosy. Remember that the extra requirements in Solvency II are not just the EU-imposed ones. As the MIAB stated in its report, the Regulator in this country has a habit, in order to sleep well at night, of requiring much more than what the EU requires. I am not sure if that is the case now, but it is a question that might be asked. Another question is of the €1 billion motor premium income, how much extra would have been required on that to bring it up to solvency? Is it an extra 30% or 40%? We then park that. It is a one-off. It will not happen again. We must look now at the rest of them that we need to do something about rather than starting off by cutting victims' rights and doing many other difficult things that are probably doomed to failure.

My research shows that the rehabilitation system which was introduced in the UK in 1999 turned out to be a disaster because the medical professionals were arbitrating the system. There was as much fraud that way as any other, and that has been the experience in some parts of New Zealand as well with their no-fault system.

Deputy Pearse Doherty: Do the brokers have a view on the reason for the 70% increase?

Mr. Paul Carty: The pricing was irresponsible for the reasons we covered here today. It certainly went below where it should have been. That is probably indisputable now. I believe the courts jurisdiction made a contribution, and I agree with the Deputy - I cannot put a finger on it, but I suspect it is very significant - on the effect of the adjustment to Solvency II, with all the impacts we are talking about here. The investment market is very difficult for the insurers. They must value their assets at market value, whether it is marked up or down. All of that will be revealed right now. This is the year it has first taken effect. The Deputy mentioned the stress tests. All of this will be published on 1 May next year when they have to publish something in a comparative sense. I can only remark that this is a fact. I do not know what contribution it will make, but I suspect it is making a contribution.

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Ms Dorothea Dowling: In case I misled the Deputy, I want to clarify that the court data on the awards made to date has not gone up to the extent the insurance industry has maintained, but I can tell him, as a chartered insurer, that it took the volatility out of it. We had a Circuit Court award. A reserve of €38,000 could be put on it in terms of costs, and that was it. They are probably all being reserved now at €60,000 because we do not know what will happen due to the volatility created, but it is not happening yet. All the costs that insurers talk about are mostly estimated costs.

Mr. Paul Carty: A recurring theme here is statistics. We are operating blind. I do not know whether it is true, but I can only quote what is written here. It is by one of the largest players in the market here, Aviva. It is a slide. I cannot stand over it, but it simply states that personal injury awards increased by 34% in the High Court and 13% in the Circuit Court. These are not my statistics; I am merely quoting. I am using this example to indicate that we do not have the information we require to categorically say that this is or is not a fact. I wish we did have those.

Senator Gerry Horkan: Everybody has come before the Committee and blamed everyone else to a certain extent. It was never the fault of the person in the room; it has always been the fault of many other people.

Ms Dorothea Dowling: In slide No. 47, I have given some connections to an increase in profits being announced by these companies and projecting profits for 2017. Whatever has gone on in the past, it cannot go on forever because it seems that with regard to the suspicions some people had about restoring profitability, talking out of the other side of their mouths, they are actually telling shareholders and investors that they will be in profit or that in one place, they are already in profit.

It is also ironic to be complaining about "passporting" insurers when some of the insurers who were based here have now shifted to Head Office in England, and they are "passporting" into Ireland. Brexit will be important for us. We have to look after ourselves. We have partners in England. If many insurance companies decided that they can no longer be located in England, and companies do not like uncertainty - they want to plan for tomorrow and next year - they will base themselves in Ireland to do the European market. We then have the potential to have many new players in this market, provided it is benign. Currently, however, we are sending out all the wrong signals to potential new entrants, and we are depriving them of the data which exists, but is only available to members of Insurance Ireland, and companies should not be obliged to join in order to get the data. The CBI should have it. The overwhelming opinion of the insurers was that it should be an independent body nominated by CBI. I want to stress that it is all anonymous. I was questioning the methodology of something they said and they replied that they could not do any more than that because of data protection, which is not true. There are many exemptions under Section 2 of the Data Protection Act. If someone is doing something that is required by legislation, by Ministerial Order, in the public interest such as prevention of crime, and there is an entire list of them, everybody seems to say, "Oh, data protection. We cannot do that". That is not true. There is no barrier to the collating of data. The 2005 Competition Authority report specifically states that there is an exemption under an EU regulation because in all types of insurance, it is vitally important that there is not information asymmetry and that all the information is available publicly so that public policy as well as new entrants have access to it.

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Senator Gerry Horkan: We were told that it was not valid for us to compare costs across Europe because most of Europe, other than the UK, does not have a legal system like ours. In other words, it just does not happen. Whiplash does not exist, so to speak, because there is not an at-fault culture or concept. All health costs are socialised and so on. We are told constantly about judges' Constitutional right to award what they want and so on. That is true, but they are basically saying it is not comparable to compare whiplash in Ireland with whiplash anywhere else in Europe because whiplash in the rest of Europe does not exist because they do not have a legal system that does that kind of thing.

Ms Dorothea Dowling:  Dr. Peter Bacon did a report for the Bar Council when they were trying to stop PIAB being set up and they estimated that it would cost ten times what it actually cost. It required 30 times the number of staff it actually cost, but he did an analysis of Ireland versus the EU States, which is helpful because they are not comparable. It is apples and oranges for a number of reasons. Some studies on that have been done with regard to costs also.

Senator Gerry Horkan: For example, they do not have whiplash and we do. Why are their premiums relatively comparable if they do not have all these costs?

Ms Dorothea Dowling: It is an entirely different system and one we might have to consider moving to in the long term. In mainland Europe, the vehicle is insured. End of story. They get very little uninsured driving cases. There are very few legal disputes. If the Senator and I were identical insurance risks, and gender no longer applies, and I drive his car and he drives mine in an emergency and I have an accident, technically, I am uninsured even though the Senator has paid a premium and I have paid a premium.

Senator Gerry Horkan: Unless the policy allows open driving on all vehicles.

Ms Dorothea Dowling: I am talking about what is compulsory. It is very important that when people get their renewal notices, and I gave the Senator the number of the statutory instrument that can be used for that, they should state that of the premium quote, this is the amount that is compulsory insurance and this is the money for all the other bells and whistles. It is the same when it comes to one's car. My car is 12 years old and those in the industry would write it off. What is the point in my paying for comprehensive cover? I would not submit a claim in any event because I would be afraid of losing my NCB. One can see from an insurance renewal the insurance cover that is compulsorily required by law and one can pay that amount. However, one would say, for example, that they do not want the breakdown cover as they already have AA membership and that they do want personal accident cover as they have that cover on their household insurance. All that is enforced by law is the compulsory insurance component. In other EU States, that cover can be unbundled whereby one can get compulsory cover with one company and comprehensive cover with another. One can get cover for one's test and one would lose one's bonus on that, but one would not lose one's 60% NCB on the big part of the premium, which is for third party injury cover.

Many people do not understand the insurance cover they buy. The compulsory insurance cover is nothing to do with themselves or their car, it is to cover for somebody else being injured. One gets a huge number of documents with one's renewable, which is mandated by the CBI. I got 19 pages with my motor renewal. I could understand the detail because I am a chartered insurer but it did not give me any of the information I needed. It is a complete waste of money, a burden on the industry and of no benefit. I always haggle. I telephoned

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another company regarding household insurance and I got a scripted call from the person to which I responded that I was busy, I am a chartered insurer and that I understand all about averages and the duty with respect to misrepresentation. The person apologised and said that they had to go through all that. Most people have to listen to such scripted calls and we have no regulation effectively where we need it. We have lots of burdensome, costly regulation. That is not doing anything except doing a CYA for the insurance industry whose staff say that they told the caller about the small print during the course of a scripted telephone call. It is meaningless.

Ms Caeva O'Callaghan: There is a huge difference between insurance brokers and people working for direct insurers in call centres who are not trained, have no qualifications and read from script on scripted calls. If one contacts an insurance broker, one talks to a qualified person who has been trained, whose business is regulated by the CBI and with them, it is all systems go where they can answer any question that is put to them. There is a big difference between the two.

Ms Dorothea Dowling: I support the comments made by Ms O'Callaghan.

Senator Gerry Horkan: I am driving more than 20 years and I have seen my insurance increase by the same percentage as most other people, from less than €300 not that long ago to more than €300, and then by a further additional amount. I had an increase of exactly 33.3% with a premium increase from €390 to €520 this year and the car is getting older, I am getting older and no claims have been made on my policy.

Ms Dorothea Dowling: To support that point, research shows that there are passive renewals. Many people who do not have a broker who would give them a wake up call every year will think they have had insurance cover with a company for many years and having spent half a day telephoning other companies and not getting any great offer of a discount they will just renew with their company. Once a company sees a policyholder renewing, it will give that policyholder a higher premium than a new applicant.

Senator Gerry Horkan: I interrogate my insurance company about my premium and I end up changing my cover and I do it through an intermediary who, apparently, is not a broker but is nearly one.

Ms Dowling referred to when insurance companies gave data previously to MIAB and was able to prove that the data given were inaccurate, "inaccurate" being the Parliamentary word for what other people might call it.

Ms Dorothea Dowling: Subsequently actuarial models were presented to us that were not what they were presented as being. The third instance I quoted was when a more mature person was being discriminated against. That is only permitted if the insurance company can produce data which justify that extra charge and that was presented to Equality Authority and our MIAB statistician disproved that actuarial data as well. That is in the public domain.

Senator Gerry Horkan: We have spent the entire week saying that access to data and improved sharing of data would be vital.

Ms Dorothea Dowling: Raw data, not data that somebody else has crunched.

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Senator Gerry Horkan: Ms Dowling said that the raw data or somebody else's number-crunched data were inaccurate. If we got raw data through some anonymised source or black box type scenario, it is would be workable and useable.

Ms Dorothea Dowling: Yes.

Senator Gerry Horkan: Ms Dowling said that she got data from insurance companies and even that data was unreliable. If we get and process all that data, hopefully we will get improved transparency on the insurance industry with respect to what it is saying versus, for example, the letters Aviva is sending out detailing the cost of whiplash claims. My argument regarding whiplash awards, albeit that the average award here is €15,000 compared to €5,000 in the UK, is that they have always been €15,000 here and €5,000 in the UK.

Ms Dorothea Dowling: Exactly, there has been no change.

Senator Gerry Horkan: That has not caused an increase in premiums. Also, road safety statistics have not really changed, nor has the number of vehicles on the road, albeit there is a larger number. There are not 70% more vehicles on the road. The early days of the NCT would have flushed out the old cars. We get all the data and we still wonder why insurance premiums have gone up by 70% over the past two to three years. Some 10% of claims are resolved in the courts, 20% are resolved with the Injuries Board but we have no visibility on 70% of claims. On those 70% of claims, is it credible that all of the increase the industry states is required, separate from the element of Solvency II and element of lesser investment income, could be due to the revolving a greater number of claims at a higher level? If all the PIAB claims are reasonably static and the courts claims are reasonably stable, it is hard to believe that all the extra increase is warranted because the industry has decided to settle a great number of claims out of court, some 70% of them, at a much higher level than it used to. That is possible but I doubt it. It does not seem to me to probable.

Ms Dorothea Dowling: It is a matter of consistency of messaging. If the industry is telling this Committee and brokers that High Court awards have gone up by 34%, it must be telling staff that they have to pay more in cases that could go to the High Courts. Otherwise it is telling the Committee something and it is telling its staff something completely different. I know from handling a very big risk involving 290 million passengers journeys a year where every single penny went, how much was spent on doctors, barristers, court fees, third party costs, on our own barristers and solicitors and on compensation. I assume an insurance company would have the same kind of system and if it is telling the Committee it does not, then the law and economics model that indicates that handling this through the insurance industry is the most efficient way has broken down in Ireland and we have to look at something else.

Senator Gerry Horkan: In terms of legal cases, if say PIAB makes an award €16,000 and the courts make an award of €15,999, the plaintiff does not get their costs covered.

Ms Dorothea Dowling: The plaintiff is also responsible for the other side's costs.

Senator Gerry Horkan: If the courts make an award of €16,001?

Ms Dorothea Dowling: There is also provision in the Civil Liability and Courts Act 2004, which is not being used and may need to be strengthened, that provides that a plaintiff

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required at quite an early stage to state what their minimum terms were. The plaintiff might say they are not happy with an award of €16,000 and they want €20,000. However, what is happening is people are coming forward with stupid offers saying they want €100,000. They have done their bit and made their offer, but that provision in the Act needs to be strengthened. If one does not get more than 25% in that respect, one will not get one's costs covered.

Senator Gerry Horkan: Is it valid to say that if a person refuses an award of, say, €16,000 from PIAB and subsequently is given an award of €15,999, that they will have the burden of covering their costs and the other side's costs, but if they have been given an award of €16,001, they would not have the burden of those costs?

Ms Dorothea Dowling: Yes, but the awards do not usually work out like that.

Senator Gerry Horkan:  I accept that but is that not part of the problem?

Ms Dorothea Dowling: This is where Section 19, I believe it is, of the Civil Liability and Courts Act, which provides for a plaintiff making a reasonable offer as to what their minimum terms are, could be strengthened and that would put them on risk. They are not on risk at the moment, that is true.

Senator Gerry Horkan: Reference was made to Quinn Insurance, which is gone now. It charged a low premium and settled claims quickly. It was fine if one did not have a claim and but if one had a claim, it might have been a bit difficult. I am not sure that Ms O'Callaghan's point about windscreen cover is particularly valid. I have been driving more than 20 years and I have had never had a windscreen replaced. If motorists are not getting their windscreens replaced, it does not matter what is the replacement cost. If 20% or 30% of drivers were getting them replaced, that would be a different figure. I do not have the statistics on the number of windscreen replacements.

Ms Dorothea Dowling: Some 90% of policyholders every year do not make a claim. That is set out in the statistics.

Senator Gerry Horkan: The figure we were given last week is 92%. It appears that 90% to 92% of policyholders are paying for 8% of claims. That is the purpose of insurance, so fair enough. Do you believe current behaviour in the insurance market is like a cartel? I am sure all of the witnesses have had dealings with many different insurance companies and underwriters.

Ms Dorothea Dowling: Given that the CCPC has started its process, it may be best if we do not answer that question.

Senator Gerry Horkan: What question would Ms Dowling like us to put to Insurance Ireland?

Ms Dorothea Dowling: When will it provide me with access to the three databases?

Senator Gerry Horkan: Would there be value in having a public database from which, when people input a car registration, they could find out whether a car is taxed, insured and

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has a valid NCT? It is important that type of information is publicly available and not only available to Gardaí.

Ms Dorothea Dowling: Under an EU Directive, we should be already doing that. However, that is probably a discussion for another day.

Chairman (Deputy John McGuinness): On a point of clarification, what are the three databases to which Ms Dowling requires access?

Ms Dorothea Dowling: They are referenced in some of the slides. There are different sources of data mentioned.

Chairman (Deputy John McGuinness): Does the Association, by virtue of its membership of the insurance group, have a right to access the three databases?

Mr. Paul Carty: I do not know which databases the Chairman is referring to and so I cannot comment.

Chairman (Deputy John McGuinness): That is why I sought clarification in relation to the databases.

Mr. Paul Carty: The databases relating to NCBs relate to previous claims. In terms of insurance links and data enrichment,we are given access to the databases but not in terms of the detail of which Ms Dowling spoke.

Chairman (Deputy John McGuinness): The Association has access to the data that others do not have.

Mr. Paul Carty: All other insurers have the same access. They are all members.

Chairman (Deputy John McGuinness): Yes, but outside of that they do not have it.

Mr. Paul Carty: That is correct.

Chairman (Deputy John McGuinness): Does the fact that the Irish Brokers' Association is an associate member limit it to the range of data that is available through its associate membership?

Mr. Paul Carty: I cannot comment because I do not know the full range of data that is available from Insurance Ireland. I cannot comment as to whether the Association is being given full or part access.

Chairman (Deputy John McGuinness): The data to which the Association does have access informs companies from outside of Ireland that engage with it what the market is like.

Mr. Paul Carty: One has to reduce it to the individual motor insurance case that one is underwriting. It means that when I am deciding to take on a particular case on particular terms, I am armed with the information I need to be able to make a valued judgment.

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Chairman (Deputy John McGuinness): In respect of a company from outside of the country that avails of the service of the Irish Brokers Association, the Association has access to data that insurance companies from outside of Ireland who do not avail of its services do not have.

Mr. Paul Carty: Yes.

Chairman (Deputy John McGuinness): Therefore, in respect of a company coming into Ireland and availing of the Association's services, the Association would be able to provide it with the data for Ireland and whether to come or not?

Mr. Paul Carty: Yes.

Chairman (Deputy John McGuinness): How much does associate membership cost?

Mr. Paul Carty: I am not sure, but I think it cost us €10,000. We are willing to put the cost on the record, but I do not have it to hand.

Chairman (Deputy John McGuinness):  That is fair enough. In the context of big insurance companies, €10,000 is very little.

Mr. Paul Carty: That was the cost for membership. In addition to that, there was a charge related to scale and size. I am happy to put on the record that the full cost of access to the data was €120,000. The cost of membership alone is €10,000 and the access cost for the two databases is €120,000. I do not have the information with me because I did not expect to be asked for it, but I can forward it to the Committee.

Chairman (Deputy John McGuinness): Knowing what Mr. Carty knows about the databases in terms of what information they contain, would be say people should contact him?

Ms Dorothea Dowling: The Competition Authority was of the view that it should not be a requirement that companies coming in would join an organisation which basically in this context is dominated by the six existing players. Companies should not have to be brought into that tent. There is no legislative requirement to join. One is required to contribute to MIBI and the ICF, but Insurance Ireland is a type of gentleman's club that a company might not want to join and should not be forced to join.

Mr. Ciarán Phelan: We need a profitable insurance industry operating in the marketplace. Companies want to make money and that is why they exist as plcs. If they are making money it will attract other competitors into the market. We need more capacity in this market if prices are to stabilise. The less capacity there is, the more prices will increase.

Senator Gerry Horkan: On that point, surely a more profitable industry than currently exists will not be possible without policyholders being required to pay more than they are already paying.

Ms Dorothea Dowling: I would question whether they are the two main stakeholders. This compulsory system does not exist for return on capital for shareholders in financial services companies. It exists in theory and in practice as supposedly the most efficient way of

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ensuring that people who are injured on the road receive appropriate and proportionate compensation and of ensuring policyholders get a good quote. Everything else is secondary. All businesses have to make a return on capital but those that compete in a competitive market will find a way of doing that on quality, or in some other way. Motor insurance is completely different from any other business. We need to be very aware of that.

Mr. Paul Carty: I agree with Mr. Phelan and what Ms Dowling said at the outset. I am in the business of trying to introduce new carriers into Ireland. That is what I do. We need certainty in the Irish market. This is very bad publicity for us in the round. We need to be able to resolve many of the problems that have been highlighted today if we are to be able to introduce new players into the market. We also have to realise the scale of operations in this country. Ireland is a small country. The major players are not focusing on this market. It is simply not big enough to attract them. That will only be possible if we can show them that they have a reasonable prospect of making an underwriting profit.

Ms Dorothea Dowling: Qatar obviously determined that it can do that because it is coming into the Irish market.

Mr. Paul Carty: Yes. As I understand it, it is doing so on a very limited basis and for a very limited capacity. It is a toe in the water but it is a very good sign and one to be welcomed.

Committee adjourned.

Session 4 - Thursday

Rising Cost of Motor Insurance: Discussion (Resumed)

Chairman (Deputy John McGuinness): I welcome Mr. Fergal O'Leary, Mr. Patrick Kenny and Ms Karen O'Leary from the CCPC.

Ms Karen O'Leary: As a member of the CCPC, I also have responsibility for criminal enforcement and corporate services. Mr. Patrick Kenny is responsible for competition enforcement and advocacy and Mr. Fergal O'Leary for consumer enforcement, communications and market insights divisions.

Our consumer helpline has received 1,466 queries since the middle of last year about motor insurance, 227 of which were specifically about increasing motor insurance premiums. The CCPC, consists of a Chairperson and membership structure which together form a collegiate decision-making Commission. In addition, each member has individual executive

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responsibilities. In relation to the financial services sector, Government policy means that, along with consumer protection, the CBI imposes the sectoral rules and codes of conduct under which financial services providers and the market must operate. The CCPC enforces competition legislation which, in contrast to regulation, provides for intervention after a breach has happened. We also have a specific remit in terms of personal finance information and education for consumers.

The CCPC has been active in the insurance sector over the years. In 2005, the then Competition Authority undertook a major study which identified a number of reasons competition among insurance companies was not as strong as it could be. For example, consumers were slow to switch to another insurer. The study recommended greater disclosure of risk related data as a lack of data acts as a barrier to entry. New entrants would find it extremely difficult to assess the overall market risk without accurate data. We have on several occasions investigated complaints relating to alleged anti-competitive behaviour by industry participants. These included an investigation into whether private motor insurance companies had regular access to competitor future pricing information through a shared IT system. This was resolved by means of legally binding agreements and undertakings obtained from the relevant parties involved. As part of our statutory personal finance education role, we provide information to consumers to help them make informed choices. Along with conducting consumer awareness campaigns, we publish periodic insurance surveys which help consumers become aware of the options available to them and we regularly publish switching reports to encourage consumers to find the best deal available to them.

In October 2015, we engaged with Insurance Ireland with regard to concerns about price signalling. No immediate enforcement action was required, but we implemented a strategy to monitor the sector more closely and establish whether there were grounds for suspecting a breach of competition law. The industry has in recent times openly signalled upcoming increases in premiums. We have noted public statements made by insurance companies forecasting, with confidence, that premiums will rise, at times specifying the amount of the predicted rise, and that these increases were inevitable. Statements signalling future pricing intentions may result in a degree of unspoken co-ordination which may breach competition law. We have been very concerned by these statements and this week, after detailed planning over a number of months, we issued summonses and formal requests for information to players in the sector. The evidence collected will allow us to establish the facts and take appropriate action.

On the question of what would make things better, our views on the market are informed by our activities. It is clear to us that there are significant issues of transparency, disclosure and confidence in the sector. Parties that have come before the Committee have offered different and often conflicting views on what is happening. This does nothing to promote confidence in the market, and the frustration of motorists facing sustained increases is understandable and well founded. We are extremely active in the sector, but our actions alone will not explain what is happening in the market. We are glad, therefore, to see that the Department of Finance working group, on which our parent Department is represented, is studying this issue as a matter of priority. We are available to assist either this committee or the working group as necessary.

As for what we would like to see, it is clear that publication of more detailed, up-to-date and extensive statistical data, particularly relating to claims and settlements, would allow for a better diagnosis of what is happening in the sector. This could be done perhaps by either the

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Regulator or the PIAB and it should restore some confidence. It may also, in turn, promote the entrance of new firms to offer competition, something which is vital to the long-term health of the sector. We must also ensure this competition is healthy, and both the Regulator and ourselves have different, but complementary, roles in this regard. We would welcome any initiative that would allow for consumers to switch provider more easily, thus encouraging competition and greater choice.

We urge the Committee and the working group to scrutinise the cost of legal services, an area in which we have advocated for years, and their impact on the cost of insurance. We will be represented on the Board of the Legal Services Regulatory Authority which is being set up at present. We are of the view that the work of this Committee and the working group is shining an important light on the issues in the sector which we hope will result in recommendations, legislative changes or co-ordinated action that will have a positive and lasting effect on this vital market.

Chairman (Deputy John McGuinness): For clarification, Ms O'Leary said the CCPC was very active in the insurance sector and that, as part of its work, the Competition Authority had undertaken a major study in 2005 which recommended greater disclosure of risk related data because a lack of data acted as a barrier to entry. That is exactly what we have heard since we started these hearings. Is it not anti-competitive to withhold information and not to disclose it to possible entrants to the market? Is this not also the case when individuals in the market can obtain it for €120,000? If somebody is active in the market, they will know that the recommendation the authority made was not acted on. They will know that, for a fee, a member or associate member of Insurance Ireland can get the information. However the information is compiled, its owners are selective about it.

Ms Karen O'Leary: The recommendation was that policy-makers make it mandatory for the information to be published. We maintain that doing this would assist, and the and other market players have said the same thing.

Chairman (Deputy John McGuinness): It is, therefore, something for legislators.

Ms Karen O'Leary: At the moment, there is no law requiring the publication of such information.

Chairman (Deputy John McGuinness): The Authority recommended it, however. Has there been any follow-up on the recommendation since 2005? Is the CCPC asking why it has not been implemented?

Mr. Patrick Kenny: I think there were 47 recommendations in total and there were four outstanding. That is one that was outstanding. Other issues have emerged in the market that probably were not covered by the recommendation - information on cases that are settled outside the system and things like that - but I accept that this recommendation, along with a number of others, has been outstanding since 2005.

Chairman (Deputy John McGuinness): Finally, would the witnesses consider that the withholding of that information by Insurance Ireland, thus preventing an entrant access to the market, is anti-competitive?

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Mr. Patrick Kenny: In general, where an industry has information that is necessary for entry, such the cost of claims or other information in other sectors, the withholding of information could be considered a breach of competition law.

Chairman (Deputy John McGuinness): Why has the CCPC not taken action since 2005?

Mr. Patrick Kenny: I do not believe we have had any complaint from an insurance entrant saying they could not get access to information.

Chairman (Deputy John McGuinness): Mr. Kenny should ask the insurance companies. They have been here over the past few days telling us that, without data, they have nothing. They do not understand the market because they do not have data on it. Everyone knows Insurance Ireland has that data. It is a fact that they have not been co-operating and it would appear that Mr. Kenny's organisation did little or nothing about that lack of co-operation, thereby preventing people from entering the market.

Mr. Patrick Kenny: I am fairly confident that we have never received a complaint along those lines.

Chairman (Deputy John McGuinness): That is not the question. The question is whether the CCPC knew that there was little or no movement in the market and that companies were actually leaving it. Should the CCPC not have been proactive in alerting the legislators of this House to the difficulty, or should it not at least have brought in Insurance Ireland to ask why it was not sharing the data? Everyone who has come before us has raised the issue of sharing the data and it would appear to me that the CCPC did nothing about it.

Ms Karen O'Leary: There is a distinct difference between sharing market data and excluding a competitor from the sharing of that data, which could indeed breach competition law. Insurance Ireland has no legal obligation to publish data and make it freely available. It goes back to what PIAB and other commentators have said about the gap in respect of the cost of claims. PIAB is very clear about the cost of claims that are assessed under its remit and the Courts Service publishes the cost of claims. What is not published is data about claims that are settled directly by insurance companies.

Chairman (Deputy John McGuinness): Ms O'Leary knows what I am saying to her. The data is there and it is held by Insurance Ireland. One individual represented the brokers this morning. He had a business whereby someone coming into the market might use the services offered by his company to access the data that Insurance Ireland has - at a price, I am sure. We know Insurance Ireland holds the data, we know it is critical to the examination of the market by an outside company, and the CCPC knows that, but it did not take any action to say Insurance Ireland is holding the data and not sharing it, and to at least question Insurance Ireland on it. That is the point I am making. As a result of that, we have all these companies, some of them withdrawing from the market, which is contracting, with very little competition. The witnesses represent the CCPC. They should not be waiting for a phone call if they are on top of their game.

Deputy Sean Sherlock: I want to come at the data issue from a different angle. Let us start at the beginning, because the CCPC has said it is going to open up an investigation into, to use Ms O'Leary's term, the issue of pricing predictions or intentions that "may result in a degree of unspoken co-ordination". What does the expression "unspoken co-ordination" mean, in

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layman's terms? Could the witness speak to the punter who has seen a 50% increase in their insurance premium?

Mr. Patrick Kenny: When we look through the prism of competition law, we would have agreements that are formally made in smoky rooms where people actually sit and make agreements. That is one type of offence, a very serious one. Another type of offence is just reducing the amount of uncertainty in a market by making announcements that people take on board and in accordance with which they adjust their behaviour. It is when somebody says they intend to raise their prices next year by X% and they throw that into the open. It is in a public forum, so their competitors can hear it. It is information competitors would not normally have, because normally the last thing one would want to tell one's competitors is what one intends to do with one's prices. One is, therefore, putting information that would otherwise be private into the public domain. If people act upon that, it can have an anti-competitive effect.

Deputy Sean Sherlock: What Mr. Kenny is telling me, as somebody who has just seen an increase in their own premium, in layman's terms is that this could be adjudicated or there could be concerns around cartel-like behaviour in that instance.

Mr. Patrick Kenny: In layman's terms, the word "cartel" means many different things. We mean a hardcore cartel, where people meet and agree to raise prices or share customers, but from a layman's perspective it is some form of conspiracy to raise prices against their interests.

Deputy Sean Sherlock: Mr. Kenny used the analogy of the smoke-filled rooms. If one fast-forwards to modern language, it is air-conditioned rooms in glass towers, on the 15th floor, but it is the same type of behaviour, where an influence is being brought to bear on the market in the context of pricing. Whatever way one parses the language, what Mr. Kenny is essentially telling us, on behalf of a statutory agency or body, is that there is a concern about cartel-like behaviour. Let us not be too prescriptive on the word "cartel" as Mr. Kenny has elucidated it to us. That is de facto cartel-like behaviour, where one is influencing the price determination for a project.

Mr. Patrick Kenny: This is a case that other agencies, including the EU Commission, have taken in industries. As a joint consumer and competition agency, we also see it as bad in the sense that it reduces consumer resistance to price rises. The average consumers hear prices are going up X% in whatever market and then they ask themselves why they should look around. My colleagues will elaborate later on the topic of switching. Active switching is the only way consumers can protect themselves in this type of market.

Deputy Sean Sherlock: The Chairman has raised the issue of data. We know what PIAB pays out, but there is a whole indeterminable figure that we do not know in respect of settlements. We do not know the true cost of settlements because there is not perfect knowledge. If the CCPC is investigating this without having access to the three so-called databases, it could be argued - correct me if I am wrong - that it is on the back foot in respect of this investigation. Unless it can get access to what is on Insurance Ireland's databases, then, short of a legislative change, Insurance Ireland could block the CCPC out of that and not give it access to the database. I do not know how the legislation could be changed. Ms O'Leary alluded to this matter earlier, and forgive me if I am incorrect, but if there are any number of insurance houses in this country and they are all under an umbrella organisation

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and not everybody has access to the databases vis-à-vis settlements out of court - about which figure there is no perfect knowledge, generally speaking - then how is the CCPC going to crack this nut? What is it going to do? Where are the powers of compellability in respect of that data from the CCPC's point of view? If it does get access to that data, what can it do to assure consumers that their premiums will reduce as a result? I have been using the following analogy for the past few days: if my insurance premium has gone from €500 to €800, which is a €300 increase, what proportion of that €300 increase is reprovisioning or rebalancing? What proportion of that is to deal with the Solvency II rules or the financial systems control review report? What proportion of it is absolute and naked profiteering? Where will the CCPC come in to shed light on that for the people we represent?

Mr. Patrick Kenny: The investigation announced this week relates to pricing. It relates to the prices all of us face. If there were a pool of data to which people were contributing but refusing access to others, then that would be a different case. The same powers we have used in respect of this or any other case will always be available to us.

Deputy Sean Sherlock: From a statutory point of view, does the CCPC have the power to go into any insurance house, any of the big names? Three of the biggest names in the world in this sector begin with the letter A. Can the CCPC go in to those houses and explain that they want access to all the data on pay-outs? We know what PIAB is doing. There is perfect knowledge of its activity and the average level of claims.

Mr. Patrick Kenny: If we believe there is a reasonable suspicion of a breach of the Act, we can.

Deputy Sean Sherlock: The CCPC obviously does believe that. Otherwise, it would not have notified of the fact that it is undertaking an investigation.

Mr. Patrick Kenny: Yes, and, as I have explained, that relates to potential price signalling on the retail market. That is what the investigation relates to.

Deputy Sean Sherlock: Is that not the nub of it? We are talking about huge increases in premia. The CCPC has received complaints. We already know the scenarios. Let us suppose a person's car has an NCT certificate, he is over a certain age, the car is roadworthy and he has never been a risk before. Then, all of a sudden, he is paying a 50% increase in his car insurance. There is no justifiable reason for it if insurance pricing is based on risk and there is no change to the risk. Then, obviously, there is behaviour within the industry that are determining the investigation. Can the CCPC compel the insurance industry to yield onto Caesar their databases, which show the level of claims that are settled out of court? We, as ordinary citizens, have no knowledge of this. That is where the gap in data materialises. If we are talking about absolute transparency, then we need to have access to the data. Now, from where I am sitting, there is only one relevant entity, aside from the CBI reports and PIAB. It is opaque and there is no perfect knowledge relating to the data.

Mr. Patrick Kenny: Let us suppose there was a case where we believed we were looking at abuse of dominance. If a firm was dominant and we believed there was individual pricing abuse, we could do those things, because we might have a reasonable suspicion that a given dominant firm was causing an excessive price. The difficulty we may face in a different situation is where we have a number of players in the market, none of whom are dominant.

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What we are asking in that scenario is whether their costs stack up. That is a different question.

Deputy Sean Sherlock: Can the CCPC ask that question?

Mr. Patrick Kenny: We would have to have a suspicion of a breach of the law under the Competition Act.

Deputy Sean Sherlock: From the consumer's point of view, the CCPC has issued summonses to the motor insurance providers. Their press release clearly states that there was a signalling of price increases. If they cannot get access to the reasoning behind the price increases, even on issues like re-balancing, provisioning or the historical reduction in premia in recent years, then what does a successful outcome of the investigation look like, from the point of view of the consumer? Let us not couch language here. The CCPC is going in now to take a look at the insurance sector, as it relates to motorists. That will give people some degree of comfort, but it will only give them comfort if they know there is an outcome that results in a reduction in premium prices.

Mr. Patrick Kenny: In a price signalling case, the question we have to answer is whether the signals were sent, received and acted upon and prices changed, made higher, in response to that. It is the delta on the price that we will be looking at in this investigation.

Deputy Sean Sherlock: What does that mean? What is the delta on the price?

Mr. Patrick Kenny: The increase that would have happened otherwise.

Deputy Sean Sherlock: The CCPC can make a determination that there was an increase in price as a result of what criteria?

Mr. Patrick Kenny: In any case like this, what we are looking for is whether the information was received and considered and whether it entered into the person's thought when he made a pricing decision.

Deputy Sean Sherlock: In effect, there is no justice or restorative function of the CCPC in that regard. The CCPC can make a "Yes" or "No" statement.

Mr. Patrick Kenny: We would have to go to the court and the court would have to make a finding that there has been a breach of the law. Let us be clear about that.

Deputy Sean Sherlock: Essentially, this investigation could take how long, roughly?

Mr. Patrick Kenny: In any investigation, we have a plan. We have planned for it over several months. From our experience and the experience of our colleagues abroad, we are conscious that speed is the friend of success.

Deputy Sean Sherlock: We live in the political world. With all due respect, I am not satisfied with hearing that speed is the friend of success. The CCPC is a statutory body and one of the Commissioners, Mr. Kenny, is before the Committee. Can Mr. Kenny give us a timeframe by which the investigation will be completed? What could the outcome potentially be after the investigations? If the CCPC makes findings against the insurance industry, what

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recourse does the CCPC have? Mr. Kenny has not given us a timeline. He has said months, but we need to be more definitive. If it runs to court proceedings after that, then this could conceivably take years. I am pressing Mr. Kenny because if we have to wait for the CCPC to make a determination, but the industry has already signalled a 20% increase for next year, then it seems to me the firms are not going to stop that increase pending the investigation the CCPC intends to carry out. Therefore, the consumer will still end up paying more. Not only will consumers be subject to the 2016 increases, they will also be front-loaded with 2017 increases as well while this investigation is going on. Can the CCPC stop the increases while the investigation is going on?

Mr. Patrick Kenny: In the case of any investigation, the fact that we have opened an investigation and taken a public step absolutely gets the attention of the parties involved. I am not talking about this particular case. It is a general issue. When a Chief Executive gets a summons and a request for information that is four or five pages long, and he must appear in person, it make it very real for him and he takes it very seriously. In the case of investigations generally, agreement investigations can take up to a year. It depends on the complexity and the barriers put in our way. It could take up to a year or more. If we go to court subsequently, we are in the hands of the courts. To recap, we believe that when we announce an investigation, it has a big impact on a market. It changes the dynamics in the market from the day that the investigation becomes public. People are very careful after that.

Deputy Sean Sherlock: With all due respect, Mr. Kenny cannot say that definitively. That is a rather subjective statement. The proof of the pudding in that case will become evident. As Mr. Kenny has said, there is potentially a year in this. He cannot say for sure that premia will not actually increase as a result of the fact that the CCPC has signalled an investigation.

Mr. Patrick Kenny: There may be a number of factors pushing premia up. People may decide independently and perfectly in compliance with competition law, and that may still continue. What we are after is the degree to which in any market, signalling accelerated or exasperated a given price increase. That is where we come in for this purpose. I accept the Chairman's point that there may be other breaches of competition law that are separate.

Deputy Sean Sherlock: What we are hearing is that the CCPC will look at one element of what is effectively a much bigger picture, if I am to sum up its contribution. As the Chairman articulated, there is still the issue of data, of having perfect knowledge within the sector. It is clear that in the absence of perfect knowledge, we, as legislators, are in the dark. If we are expected by the consumer to make a set of recommendations, until we have access to that data and those databases, in terms of the qualitative analysis of that data, the industry can continue to behave as it has behaved.

Mr. Patrick Kenny: If I may, I will use, as the Deputy says, the window on the world into our meeting to say that if anybody has information in that respect, he or she should come and talk to us as soon he or she can..

Chairman (Deputy John McGuinness): Mr. Kenny will be aware of the fact that cartel-type behaviour has been cited, mentioned and discussed. Mr. Kenny will be aware of all of the issues that were put before the Committee relative to access to the three databases that are next to nigh impossible to get at by any outside company.

Mr. Patrick Kenny: Yes. We will track-up on all of that.

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Chairman (Deputy John McGuinness): I am extremely disappointed that the investigation will be limited to the commentary in the newspaper about the 40% increase suggested by the insurance companies because if one is looking at pricing, surely one must look at why they are saying that. They are saying that as a result of the information they have which the CCPC does not have. However, the CCPC does not seem to be of a mind to pursue them to get that information.

Mr. Patrick Kenny: I would think that in these investigations, the first thing that the companies involved do is state, "Here is everything that is pushing prices up and we will give you everything to show there is nothing else, except what is pushing these prices up".

Chairman (Deputy John McGuinness): So Mr. Kenny thinks the CCPC will get that information.

Mr. Patrick Kenny: They will certainly say that they are giving it to us. Then we would ask the question, is that what it is?

Chairman (Deputy John McGuinness): Therefore, to be clear about this, the CCPC will get access to this much-protected set of databases.

Mr. Patrick Kenny: I would say they will not give us line-by-line access to the database. What they will say is, "Here are the figures which show that what we are saying is not what has happened."

Chairman (Deputy John McGuinness): Surely the CCPC investigation will test those figures? In testing the figures, they must drill down, presumably, to prove their point and to offer the documentation necessary to prove their case.

Mr. Patrick Kenny: That is what they will do. They will try to show that there is nothing else.

Chairman (Deputy John McGuinness): Will the Commission ask them for that?

Mr. Patrick Kenny: Of course, we will look at that. We will look for evidence. I do not want to talk specifically about a case that is open, but in a price signalling investigation, we will look at whether that information was considered, how it was considered, and how it was used in the pricing decisions.

Chairman (Deputy John McGuinness): I return to the question I asked Mr. Kenny about becoming an associate member of Insurance Ireland and being able to access the databases, not knowing whether or not it is the full data one is accessing and then to be able to use that data to inform an outside company as to the market. Is that withholding information which, if given, would be in the public interest because it might create competition, bring down the prices, etc.? Will that form any part of the questioning in terms of a complaint such as this?

Mr. Patrick Kenny: There is nothing that could preclude us from looking at that matter separately.

Senator Rose Conway-Walsh: I warmly welcome the move to call the industry in on the signalling of the price increases in the future. CCPC is a key actor in what we are trying to

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get to the bottom of here and how we are trying to bring down prices. In order to be able to assess whether the main driver of the increases is down to risk association and analysis of the risk or, as we suspect, because of the compliance with next year's changes, which is what we are trying to get to the bottom of, one needs the raw data and that raw data will have to be supplied. I would see the CCPC role evolving and becoming more pertinent as time goes on. Can it confirm that it wrote to Insurance Ireland in October last on the same issue? What was its response and what follow-up did it carry out? Is this week's statement about calling in the industry part of an ongoing investigation, or is it the start of a new one? What powers are open if it finds evidence of cartelism? Can it do anything more than give a slap on the wrist? Does the CCPC have a checklist against which to check an industry's behaviour to determine what constitutes a cartel?

Mr. Fergal O'Leary:  In October 2015, we wrote to Insurance Ireland. The response that we got meant that we did not open a formal investigation at that stage - we did not have grounds to do so - but what we did from that point onwards was keep a watching brief to monitor what was being said by the industry. Over the course of the summer, the statements that came out concerned us more. That happened in May, June, July and August. At least, the fact now that our summonses and our action is out in the public domain places responsibilities on those who have received those summonses. Going back to October 2015, that is when we started looking at this, and we have been looking at it since, but it clearly escalated as things happened in the market over the past number of months.

Mr. Patrick Kenny: Following on from that, we saw additional statements by CEOs in the newspapers. We spoke to our colleagues in the equivalent agency in the UK and asked whether this was happening there, and they said it was not to the same degree. When one is looking at a market where these things are evolving, one can have a starting point but eventually one says we now have to start investigating. Therefore, from the middle of the summer, the division under my direction prepared a brief and we asked if could we commit resources to this. This is how we work because if one is conducting one investigation, one is not doing a number of others. That was approved in the summer. It is the first public phase in an ongoing investigation.

Senator Rose Conway-Walsh: I asked specifically about the powers and the checklist.

Mr. Patrick Kenny: When the Senator talks about powers, does she mean sanctions or the powers to require evidence?

Senator Rose Conway-Walsh:  If it determines that there is a cartel in operation, what power has it?

Mr. Patrick Kenny: In the system in Ireland, we go before the courts and ask a judge to make a finding in a case. That can be in the civil courts to make a declaration and get an injunction. If, in a case, we found that there was what we call a "hardcore" cartel, then Ms Karen O'Leary's division would produce a file to be considered by the DPP.

Senator Rose Conway-Walsh: The "hardcore" cartel might warrant explanation. How difficult is that to prove?

Mr. Patrick Kenny: It must be proved beyond all reasonable doubt in the Central Criminal Court. What we are looking at there is a secret agreement to share markets, raise prices or

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divvy-up customers. It is hidden from the public. It is not done in public. I am afraid it is more common than most people would like to admit.

Senator Rose Conway-Walsh: So it is a crime. It is interesting that the CCPC actions in this field have been with its competition hat on.  What about the consumer side? Surely this is as much a consumer issue. In terms of financial services, does the CCPC give way to the CBI? Wearing its consumer protection hat, has the CCPC discussed this with the CBI? Does the latter's mandate over financial services need to be removed? This may be a wider question but, in light of the tracker scandal, the mortgage rip-off and so on, that appears to be the case. Is there a conflict of interest in the Regulator also being the consumer protection body? As consumers, what rights do drivers have to query 100% or 200% increases? How does the consumer protection part of the CCPC represent them?

Mr. Fergal O'Leary: In the past 16 months or so, we have received approximately 1,400 calls to our consumer helpline regarding motor insurance. It is steady. What is not steady, though, is the fact that 227 consumers contacted us about rising prices. That is not consistent with earlier periods. We were most contacted about the mortgage question, with motor insurance being second. That is part of what we do. We have a role in enforcing consumer protection legislation. At this point, we have no evidence to suggest that it has been broken. We would examine anything that came to us. Anything that looks to us like a breach of legislation is generally escalated from our consumer helpline to enforcement teams and considered fully there. Currently, no investigation on our consumer protection side is ongoing.

We have a co-operation agreement with the CBI, which has powers complementary to ours in terms of consumer protection. We have a financial education role, which is funded by a levy on the industry. Through that, our helpline, our website and other channels, we give information to consumers about financial services generally, including insurance.

Senator Rose Conway-Walsh: The delegation stated that the previous investigations ended with agreements and undertakings. Will the witnesses provide more detail on the nature of those agreements and are they public? Was Insurance Ireland involved? How much has the CCPC spent on its campaign encouraging people to switch providers? Is there a contradiction in the CCPC putting its consumer hat on and telling people to shop around while, with its competition hat on, publicly announcing its investigation into industry collusion to keep prices up? Is the CCPC satisfied that it would get a variety of quotes across the spectrum if it sought them?

Mr. Fergal O'Leary: We last conducted this survey formally in 2015, when there was a wide variation. We have conducted smaller, more informal surveys since to get a sense of whether there are still differences. They do not appear to be as wide or large as previously, but there does seem to be some difference.

We have spent very little on telling people to switch insurance. It is almost nothing, in fact. There is no dedicated spend towards it. This year, we have spent money under our levy functions on giving information to consumers about their options in the mortgage market. One of the many solutions to increase competition in that market is for people to move around more. We conduct switching surveys across 19 markets. Motor insurance is the most switched service at approximately 25% or 26%. According to the CSO, the high increases seem to have topped out on average. I am not referring to any individual consumer's quote. A

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large part of the reason is that consumers have done the hard work of shopping around and ensuring they are not just getting one quote from one business. We advocate for consumers to continue applying this vital downward pressure on the market.

Senator Rose Conway-Walsh: The CCPC has no plans for a further campaign encouraging people to switch.

Mr. Fergal O'Leary: Not specifically on switching motor insurance at this time.

Senator Gerry Horkan: Is there a staff of 20, 200, 2,000 or 20,000? It seems to be very difficult to prove cartel-like behaviour - I will use that phrase, as it will probably not get me into as much trouble - where everyone appears to be doing the same thing. When almost everyone goes one way but someone else goes a different way, a person might get suspicious. For example, a bank might do something that ultimately did not prove profitable despite looking like it would, yet other banks will have already followed it down the same line. Given that this investigation seems to be just about price signalling, it is limited. The witnesses mentioned a year. How many bodies will be involved? The investigation will be limited and I do not know how easy it will be to prove price signalling beyond what would be a reasonable doubt in court.

Ms Karen O'Leary: We have 90 staff and an approved head count of approximately 106. We are actively recruiting. Many vacancies arose from the moratorium on recruitment and the reduction in numbers. We are not enormous, but we are not tiny.

Senator Gerry Horkan: The CCPC's investigation is not currently into cartel-like activity.

Ms Karen O'Leary: No.

Senator Gerry Horkan: If it were, the CCPC would be signalling - pardon the use of that word - or indicating that it was investigating a cartel-like behaviour. It is just investigating price signalling. This investigation has been ongoing; it is not all as a result of what happened on Tuesday.

Ms Karen O'Leary: How does a cartel usually come to the attention of the CCPC and other competition authorities? It is normally in one of two ways. The first is through an immunity application. We have an immunity programme with the DPP and we have a special hotline for immunity. That happens when an industry player decides it no longer wants to be part of a cartel. It phones us and asks to be first in the queue for immunity. In return, it must tell us everything it knows about the cartel. This is known as a leniency application in other jurisdictions, and across Europe, that is very often how agencies hear and find out about cartels. By their nature, they are secret and hidden. A whistleblower is needed, or a cartel member who says "This is not working any more," or who fears someone will find out about it and so wants to be first in. The other way we find out about cartels is through bid rigging - for example, in procurement. This happens when several market players come together for a public or private sector procurement and agree on prices so that one wins this time and another the next time, or one gives the other the work afterwards. That kind of agreement is very serious and is a criminal breach of competition law in Ireland.

The DPP has agreed to prosecute a bid-rigging case we sent to her. It will come before the courts in the first quarter of 2017. We have another active investigation into bid rigging

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which came to our attention through procurement officials. In one case, a disgruntled former employee made a phone call and blew the whistle. Cartels are secret by nature and very often we have to find out about them from an insider. That distinguishes them from other anti-competitive behaviour that is not criminal in our jurisdiction or in others, such as this case, which was made known through public pronouncements. Were those announcements followed by action? That is the differentiating factor: is it secret and private - does it need a whistleblower - or is it in the public domain?

Senator Gerry Horkan: People are probably signalling all the time, possibly unintentionally. Ms O’Leary stated: "We have been very concerned by these statements and this week, after detailed planning over a number of months, we issued summonses.... The evidence collected will allow us to establish the facts and take appropriate action". That is fairly strong stuff. If they are allowed to, can the witnesses say what raised the level to “very concerned”? What was the flag that made the CCPC decide to bring this to a head? They can go to the courts, which can say something, but what happens then?

Mr. Patrick Kenny: As a general policy - I am not talking about this case - when we see what we think is price signalling, we always contact the company and make it public that we have done so. We think we have to fight the public announcement of the price going up with a public warning that it could be illegal, because nothing illegal has happened until people take the information and change their behaviour.

Senator Gerry Horkan: Am I correct in saying that signalling is not illegal, only behaviour on foot of it?

Mr. Patrick Kenny: If a company received a summons this week, the CEO’s general counsel would say, “I told you so many times, never mention price increases because you have put yourself in hazard. If somebody else acts on them you might as well have agreed with them.” The difference is that very often when we intervene in that way, we track what happens and normal levels of activity are seen. In other cases, something else might happen. Then we have to ask whether that is the outcome that was predicted.

Senator Gerry Horkan: Has this kind of investigation happened before?

Mr. Patrick Kenny: In other agencies, yes it has. It has happened in other competition agencies in Europe. What we have seen mostly in our history so far is that by publicly intervening, we put people on notice and people understand.

Senator Gerry Horkan: Has CCPC ever had a successful finding of price signalling leading to anti-competitive behaviour in this country?

Mr. Patrick Kenny: Not that I am aware, and I should be because I have been there for almost 20 years.

Senator Gerry Horkan: What barriers are there to switching now? I know there is general inertia among people, but motor insurance is becoming a more significant purchase for everybody from year to year as a result of these premiums if nothing else. It is a fairly hefty one-off purchase in a year, apart from buying houses and cars. What else can be done to improve that situation instead of having to dig out bits of paper? Surely everybody should be able to know what everybody else has got. I was dealing with a particular intermediary and

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was going from one insurer to the other within the same intermediary. I had to get the documentation and send it in, although it would have been on the intermediary’s records because I dealt with one agent. Are there other changes in bureaucracy that could help people to switch.

Mr. Fergal O'Leary: As I mentioned earlier, motor insurance is the most switched product. At the other end are bank accounts and mortgages. Unfortunately, people have the most to save on their mortgage. We heard through our parent Department, which is represented on the working group, that it is analysing the amount of paper involved, making it easier for people to switch. In the mortgage sector, it is considering giving people longer to switch. At the moment we have between 15 and 30 days to renew motor insurance. If people had longer, would that incentivise them to switch? The prices at the moment are a great incentive for people to look around. I hope that when people do that, they are rewarded.

I understand the working group is also considering discounts and loyalty bonuses. From a consumer perspective generally in terms of switching, there is inertia but we need to make it as easy as possible for people to switch and to get any barrier lowered. Technology can do that. The more paper we have, the harder it gets. It is often in the industry’s interest for no one to switch. There may be a role for the Regulator to consider how easy it is, as it does with current accounts and mortgages.

Senator Gerry Horkan: On the consumer protection side, each of us gets a policy and because the trend has been for a massive increase in the past few years, we might haggle and fight with the insurer who then brings the price down a bit. We feel marginally better because we successfully negotiated a €200 increase down to €180 and saved €20, but in fact we have paid €180 on top of what was there before. The policy is generally just a figure. Can the CCPC, wearing its consumer protection hat, ask or require motor insurance brokers, intermediaries, ultimately insurance companies, to break down the policy to show why we get the quote - for example, our age, the area we live in, car type, and discounts because we have not had a claim, because it is shared with another driver, or because there is an alarm or electric gates around the house? At the moment we do not know what bit is for the free windscreen cover and what bit is for the no-claims bonus. It is all very vague. Some computer programme somewhere must have baseline figures, showing 45 year old accountants do X and 22 year old students do Y, typically.  Obviously, they then factor in that so-and-so does this or that. We have seen older people being hit when, in fact, they drive less at night and on motorways and generally drive slower. We are being told this statistically and most people would generally agree with those assertions, yet their premiums seem to be being loaded, as are those of young drivers and, in some cases, rural drivers.

The more information a consumer has, the better. People should know what they are paying for the windscreen, or for NCB protection. Most of us fear changing policies because, even if we do not know what is in our policy, we know we have had it, and when changing, we do not know what we will lose. It is very difficult, even for those who are numerate and well educated, to compare prices given there are some 2 million people insured to drive in the country. With that hat on, what can the CCPC do to make it easier for people to interrogate various different quotes and pick the best quote for them?

Mr. Fergal O'Leary: As far as I know, and I will check this, there is nothing within our consumer protection legislative remit that could mandate that kind of detailed breakdown of quotes. That is not a power I believe we have at the moment.

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Senator Gerry Horkan: Should the CCPC have that power?

Mr. Fergal O'Leary: We are always focused on what will make things better for the consumer. If that information gave some comfort to consumers, we would be in favour of it, but I am not altogether sure it would. From the calls we get, I know consumers are very concerned about these increases and it is the reason the Department of Finance set up the working group earlier in the summer. I believe there is a loss of confidence around what is happening in the sector around data, claims and settlements. Obviously, there are conflicting views on the reasons. I certainly think there is a role in terms of finding that information in order that consumers can have a little more certainty about why prices go up. We have all looked at the data going back to 2003. Prices were very low then, they started to increase and now they are a lot higher than they were ten, 12 or 14 years ago. We would welcome any powers that might be granted to us, or indeed to the CBI as the Regulator of the sector, that would make things better and give more confidence and certainty.

Senator Gerry Horkan: Many people may neglect this issue and I accept 70% of them are not switching. At the same time, this cost is a very big figure if it is a one-off payment, and even if people are paying by direct debit, it is still an initial bill which hits once a year. People really do not know why €390 has become €520. If a person had entered a different age bracket, moved house, changed car, changed job, or started working nights rather than days, that would be some explanation. I do not know as I am not an actuary, but the more information we can have, the better. This is a discussion we will have with Insurance Ireland and is one we have had with most other witnesses. However, given Mr. O'Leary's role in protecting the consumer, getting the most amount of information available would be helpful to the consumer.

Mr. Fergal O'Leary: I can say generally that the third of our four strategic priorities is to give information to people in order that they can make an informed decision. That is absolutely something we support. We know, however, that consumers are often overloaded with information, particularly in the insurance sector where a lot of information comes in through the door and hits the mat and a lot of disclosure information is required by Irish and EU legislation. An honest answer would be that perhaps the CBI would be better placed to look at that type of disclosure information and to say what would make things better for consumers in terms of allowing them to make an informed choice and, one hopes, incentivise them not just to go with the supplier they were always with.

Senator Gerry Horkan: Even though his role is in consumer protection, Mr. O'Leary feels the CBI has a role in protecting the consumer or that it is better placed to do that particular task.

Mr. Fergal O'Leary: It is the Regulator of the sector. It has all of its consumer protection codes and the so-called know your customer process, and all of that type of thing is catered for there. I think it would be a quicker and easier process for it rather than us to look at it.

Senator Gerry Horkan: In terms of refusal to quote and the indication that an insurer can suddenly pull out of a particular market, whether it be a rural market, an over-70s market or an under-25s market, what role, if any, does the CCPC play in saying "You must..." or "You have to..."? Is it anything to do with the CCPC? In terms of consumer protection, what if a chunk of the population is being ruled out? If the average quote is €800 and some drivers are being quoted €8,000, that is not realistic.

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Mr. Fergal O'Leary: There would be the anti-competitive angle if that was being done by a particular set of companies which were somehow agreeing to exclude a particular subset for whatever reason. On the consumer protection side, there would be a possibility in this regard. Anecdotally, it has been said at this time that certain groups or certain ages of vehicles are being almost priced out of the market. If we got evidence to that effect that we could pursue, we would do so. However, the way it is set up statutorily at the moment is that if a driver is refused by a number of providers, he or she goes elsewhere and gets a quote, and we do not police that.

Senator Rose Conway-Walsh: The problem with that is they have priced them so high, they know drivers cannot afford it. The witnesses said previous investigations ended with agreements and undertakings. Can he provide more detail on the nature of those agreements? Are they public and was Insurance Ireland involved?

Mr. Patrick Kenny: This was an investigation into a software programme that was used by brokers. It was almost identical to an investigation in the UK some five or six years ago. The issue with the software was that it enabled brokers to see all competitors' prices a month before they came out. If they were then channelling that information back to the underwriters, they could adjust their prices. The investigation was brought to our attention by players in the industry telling us this had come up elsewhere. We worked with them in terms of getting an agreement or undertaking to ensure the software provider would not develop software that enabled that to happen, and the firms themselves said they would ensure they did not either send or receive information from other competitors. It was an example where the industry was in favour of having a reasonable compliance culture in regard to something that would have been quite serious if it had gone as far as allowing them to see each other's exact future pricing by risk category. That has been on our website since the summer.

Senator Rose Conway-Walsh: Was Insurance Ireland involved?

Mr. Patrick Kenny: No, it was just the insurance companies and the software house.

Chairman (Deputy John McGuinness): The Society of Actuaries told the Committee that it had approached numerous insurers to request data that would enable it to carry out data analysis. The insurers said they were willing to provide the information, yet legal advice they received suggested there could be competitive issues around that.

Mr. Patrick Kenny: In both the case that is in the newspapers and the one I just spoke about, it was future pricing intentions that were really sensitive and critical because that is what is going to happen in two or three months. In all insurance markets, historical data is anonymised and shared because it is essential for the proper functioning of the market.

Deputy Sean Sherlock: Obviously not in the Irish market - it is anonymised and shared but only among those who are in the largest organisation, which is Insurance Ireland.

Mr. Patrick Kenny: If somebody had the database that was necessary for entering a market and they refused entry on reasonable terms, that reads as a standard abuse of dominance concern.

Chairman (Deputy John McGuinness): The fact of the matter is that the data that would inform those who might come into the market is not being made available. It is being

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withheld. One can only get the data if one pays a particular fee to be an associate member or member of Insurance Ireland. Surely that is the formation of a club, or dare I say it, cartel-like activity, which holds the information at the centre and holds the country to ransom because nobody will come in without the data.. The CCPC has been watching. The consumer is suffering, the industry is suffering and contracting because there is no competition and they can get away with it.

Mr. Patrick Kenny: The question would be whether it is available under fair and reasonable terms.

Chairman (Deputy John McGuinness): No, it is not. That is the point.

Deputy Sean Sherlock: PIAB has stated that there is no public information available in respect of overall numbers and costs of claims for personal injuries as the only figures that have been made public do not contain any information on the numbers or cost of directly settled cases. It stated that without access to this information, a full picture of the impact of personal injury claims on insurance premiums is difficult to establish. The witnesses can tell us that CCPC is looking at the notified intention to increase pricing but that is still only one element of it. After this submission, we still will not know whether there is a legislative basis that can be provided or whether a case can be made for legislating for perfect knowledge within the industry, aside from whether or not one is a member, that is locked in or out of Insurance Ireland or whether one is a broker, an underwriter, a small indigenous insurance house or a large international insurance house. It remains the case that if there is a proprietorial element to that data, there could be all kinds of Constitutional provisions around that in respect of who owns the data, who minds it and how one interprets it. We can have all sorts of assessments and can make a rough adjudication on what is in the Book of Quantum.

Perhaps we have to wait and see what Insurance Ireland tells us, but I am trying to ascertain here is whether or not we can provide a legislative base to compel the sector to anonymise the data and give it up. There is separation of powers but that would at least provide guidance for the Judiciary, where something is not settled through PIAB to allow it to quantify the extent of the damages so that there is no back-loading or front-loading on the cost of premiums. No matter what way one parses this, there must be an element of profiteering here if a premium increases overnight by 50%, 60% or 70% or if certain people have been locked out of the market when by any objective analysis their level of risk has not increased. My level of risk has not increased from 9 to 10 September when I renewed my car insurance.

Ms Karen O'Leary: We must understand the distinction between public market information that is in the public domain and can be accessed by anybody, and a proprietary system that industry players pay to access. Mr. Kenny is a bigger expert on competition law than I am and will correct me if I am wrong, but my understanding is that where it is a proprietary system and market entry is being unreasonably or too expensively withheld from a competitor or potential competitor, that is a different issue to the need for the market and the stakeholders, including the public and public representatives, to know what is happening in a market we are hearing about from our own public.

Deputy Sean Sherlock: Can the CCPC adjudicate?

Ms Karen O'Leary: They are not the same thing from a competition law perspective.

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Deputy Sean Sherlock: From a competition law perspective, can the CCPC adjudicate on the nature of the sharing of that information intra industry as opposed to the public domain in terms of the deliberations we have in this Committee?

Mr. Patrick Kenny: That is something that would be covered by competition law.

Chairman (Deputy John McGuinness): If one makes a distinction between proprietary and pay to access and so on, I will make a distinction along the lines of the questions asked by Deputy Sherlock. In the public interest, it would appear that if this information was made available to the industry, we might have greater competition in the market. Therefore, it is a case of the country coming first. The information is necessary to get the country and its people right and, therefore, it should be made available to the industry. The other side of that question is to make it publicly available across the board. We have heard where an open forum asked questions of the insurance industry which the industry would not answer even though it knew the answers. The industry would not give a customer in the market the information that was required for the customer to make a commercial decision or to understand why the premium was at such a level. There is no flexibility on both sides.

There is no doubt that Insurance Ireland withholds the information. That has been the complaint from the outset. On the other side in respect of policy holders, they never explain or will not explain it even to the largest players. On one side, it is competition. What is happening is anti-competitive. The consumer is being short-changed and is not being given the information they need to understand why the insurance premiums have gone up. Yes, there is frustration and anger because it seems that nobody wants to challenge the insurance sector. We do not know what is going on.

Deputy Sean Sherlock: Someone will correct me if I am wrong, but to reinforce what the Chairman said, Zenith, which I can name because it is on the public record, is telling us through the Irish Brokers Association that it was de facto locked out of a process of data sharing relating to the market.  We are told there are three fundamental databases, but it appears that not everybody operating within the market, or seeking to become a member, can access them. It is like a club, I suppose. If somebody is in Insurance Ireland, he or she is away on a hack, so to speak, as the person would know the pricing mechanisms and how to game the pricing systems. I use the word "game" as the person would have perfect knowledge of reserves and how much of a profit can be made. Even taking historical factors into account, we were told there was a reduction in the market for premiums, with certain players trying to get to the top of the market or have the most market share, resulting in a reduction in premium costs, but all of a sudden there is a reset going on. If that is happening, one does not set a price based on an intention to earn super-normal profits. The price is clearly being reset based on the fact that there must be resetting of the market to meet reserves, the Solvency II rules and what we spoke of earlier.

It would appear the insurance sector is confining its behaviour to a certain number of larger firms, to the detriment of other players. On the face of it, that is what appears to be happening. They are using Setanta as cover for that. They are using the dysfunction in the market as a resetting mechanism to profiteer. That is the theory here. It comes back to whether we can legislate to get access to data.

Ms Karen O'Leary: This responds, in part, to the Chairman's point about information on why premiums have increased, if the industry is the only player that can argue that increases

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are down to claims, with nothing to dispute that in the public domain, although not within the industry. That will not solve the issue and there is no external validation of whether those claims are accurate. That is the gap. I appreciate the information about the internal element of the industry, which could be a potential breach in competition law. We could examine that. There is also the issue of public information where the industry states one thing but everybody else wonders if that is actually the case. We will not know until the claims data that is hidden from the market is revealed. It is not PIAB or courts data but public with a capital "P". I do not know if legislation is required to mandate that, although I suspect it is. I suspect the Department of Finance working group, or this Committee, may recommend that. From a competition law perspective, they are two different elements. That is why enforcement powers are focused on one area and advocacy powers calling for public data are in a different space for a different type.

Committee adjourned.

Session 5 - Thursday

Rising Cost of Motor Insurance: Discussion (Resumed)

Chairman (Deputy John McGuinness): We are joined by Mr. Kevin Thompson and Mr. Michael Horan of Insurance Ireland

Mr. Kevin Thompson:  Our members make up 95% of the domestic market and over 80% of the international life insurance market in Ireland. Our role is to represent and support the development of our sector in the interests of our members and their customers. To put the insurance sector in context, the overall tax contribution from the insurance sector to the Exchequer is approximately €1.8 billion. Almost 28,000 people are employed directly or indirectly in insurance. The Committee's efforts are in the interests of consumers and of the sector itself. We believe these interests are very much aligned and we can best serve the Committee by focusing on two key questions. What is causing the volatility in the market? How do we address it?

The motor insurance industry is acutely aware of the concern and frustration that exists with regard to rising premiums. We want solutions, but if we are to find solutions we have to recognise the fundamental concepts of insurance. In essence, insurers price risk and liability; that is, the likelihood of something happening and how much it could cost to address it if it happens. At present, risk and liability are increasing. I emphasise that an annual rate increase in excess of 30% is not in the interests of the Irish motor insurance industry. This steep rate of increase is causing motor insurance to become unaffordable for some motorists. This is resulting in higher levels of uninsured driving, as evidenced by the recent figures from the MIBI. Would any sector reasonably wish to have to impose such price increases on its

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customers in the knowledge of the irritation and hardship this causes for consumers and businesses as they seek to go about their daily business? I cannot emphasise enough that as an industry, we are not happy with the current market dynamic. Consequently, we have been working for the last 18 months to call for structural reforms. We believe the proposals in our Driving for Change document, when taken with the cost restructuring undertaken by each of our member companies, will remove the volatility from the Irish motor insurance market.

Some commentators have made the point that the current situation is primarily attributable to two factors: previous under-pricing by motor insurers and the fall-off in the performance of investment returns. On under-pricing, a long-established underwriting cycle that is common to every insurance market and not unique to Ireland dictates that, following a soft market, there has to be a period of correction when rates are adjusted upwards to reflect the cost of providing the insurance. We have publicly acknowledged that this was the case in Ireland, with rates driven too low by over-competition in the market and insurers fighting to maintain market share. This process was accelerated by new entrants to the market. The subsequent collapse of some of these companies left a financial burden on customers, the State and prudent insurers. While we do not deny this was a factor - rates had become too low and a correction was needed - we stress that under-pricing on its own does not explain the level of premium increases we have seen.

With regard to the decrease in the performance of investments made by insurers, the low interest rate environment has an impact. In the main, these are low-risk investments which are adequately matched against liabilities, including current and future claims. The reduction in yields has contributed to premium increases, but it is not the main reason for them. We have made it clear that the main factors leading to the current steep increases in premiums are the extreme volatility in the claims and compensation environment and the significant increase in the associated legal costs. The compensation situation was further compounded by the changes in court limits in 2014, which required insurers to increase reserves for claims in the pipeline and carry such costs into current premiums. The consequences of recent insurance liquidations such as the liquidation of Setanta Insurance may be added to this. The proposed solution is forcing responsible insurers to pick up the tab for the failings of less responsible companies. Put simply, there are more motor insurance claims and they are costing more. This is not solely my view or the view of my members, it is borne out by independent data sources, which we are happy to discuss with the Committee.

We believe the key factor in halting the upward spiral in the cost of premiums is achieving consistency and reasonableness in the awards regime. We have called for certain things to be done to that end. We believe there is a need for consistency in awards to help reduce volatility in the market. Inconsistent awards increase volatility, which is reflected in pricing. We think there is a need to tackle whiplash. Eight out of every ten motor injury claims in Ireland are for whiplash. Awards here are three times higher than those in the UK. The average award here is €15,000, compared to €5,000 in the UK. As premiums are a function of the cost of claims, high awards mean higher premiums. We believe the powers of the PIAB hould be reinforced to resolve more claims and reduce costly legal fees. Insurance Ireland supports PIAB and its good work, including the swifter settlement of claims, but it needs new powers because the claims environment has changed. For example, claimants should be compelled to provide loss of income information and to attend medicals. Insurance Ireland first made these points in 2014. They should be legislated for as a matter of urgency.

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We believe the Book of Quantum should be internationally benchmarked. There is a need to ensure it is reviewed on a regular basis. As part of this review, the Judiciary should have a role in drafting the contents, which is what happens in the UK. The size of awards should be internationally benchmarked. We believe there is a need to fix Setanta Insurance. The Government’s proposed policy response to address the claims of an insurer in liquidation poses a systemic risk to the motor insurance market. This policy exposes insurers to unlimited liabilities of competitors. This would have to be factored into pricing. No other industry has to do this. It is the equivalent of Dunnes Stores bailing out Tesco. We believe there is a need to reduce legal costs. The NCC has said that legal costs are at a six-year high. PIAB costs are 6%, versus legal costs of 60% in litigated cases. We think there is a need to act to ensure fraudsters are deterred. Suspended sentences are not an adequate deterrent. Insurance Ireland believes that convicted insurance fraudsters should face the full rigours of the law in terms of custodial sentences. We believe the resources given to road traffic enforcement should be further increased because there is no substitute for enforcement.

High premiums are not in the interests of insurers because they raise the threshold of affordability, which leads to more uninsured driving. Our strong preference is for a more consistent and reasonable level of premium, sustained by a reasonable level of claims costs. We acknowledge that insurers also have their part to play. Rates had become too soft and returns from investments had declined. These factors alone do not explain what has happened with premiums. It is our view that the majority of the premium increase that we have seen in the motor market is due to volatility in the claims environment. As an industry, we have responded in the past when policies were put in place to reduce the cost of claims and we will do so again. In addition, the issue of industry data has been mentioned. We acknowledge that work must be done on this issue and we are committed to doing this.

Chairman (Deputy John McGuinness): Given that Mr. Thompson has been following the proceedings, it is interesting that he left it until the last paragraph of his submission before he mentioned the sharing of data. Can he comment on Insurance Ireland's databases? Will Insurance Ireland share its data? Most members want to know Mr. Thompson's thinking on those issues.

Mr. Kevin Thompson: It might be worthwhile for me to begin by explaining the data we collect and who we currently share it with. It is shared at very different levels and for very different purposes. First, we collect data in respect of uninsured driving and, more importantly, vehicles which are insured.  That is in an ANPR system. Our insurers provide the ANPR database of all insured vehicles, with the purpose of passing that data on to the Gardaí so that it can check whether a car is insured. That is the first data we share.

The second level of data share relates to InsuranceLink, a database which monitors claims, with the sole purpose of trying to identify profiles in fraudulent claims. That data is shared, again with insurers, with the sole purpose of combating fraud.

The third database we have is the IIDS, which is the Information Insurance Data Services. That relates to the area of penalty points where our database is connected to the national fleet database, which is held in Shannon. In terms of what we do, our members, through that database, can access it to verify people's disclosure about penalty points. That information is shared.

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The next data about which there has been much talk is in respect of aggregate market data, that is, how well the industry performs in terms of profits, loss, claims and so on. In respect of that area, we report to the CBI under our legislative and regulatory obligations. We also produce our own fact file. The CBI also produces the private motor statistics, which we feed into. That was borne out of a statistical analysis the MIAB did. The CBI has continued on with that. We collect that as well from the industry and pass it on. I hope that gives the members some oversight in terms of the type of data we collect, the reason we collect it, who we collect it from and with whom we share it.

Chairman (Deputy John McGuinness): What does Insurance Ireland say in response to the claim that this information is not being shared widely or that it should be shared publicly?

Mr. Michael Horan: We supply data to the CBI. Insurance companies supply many individual returns to the CBI. They supply their net underwriting revenue accounts for their total business - accounts for accident insurance, motor insurance, marine, aviation and transit, fire and other damage to property, liability - these are all individual returns - credit and suretyship and other classes. The CBI then produces an Annual Report, Insurance Statistics, which is available on its website. Members can see all the individual company returns, and the market returns for each year. That is one service we provide, and it is there for anybody to see. That is also available through a software programme, which is available from a service provider, where people can interrogate the individual forms, look at claims development patterns, and so on. One can see how claims and the cost develop over time.

Chairman (Deputy John McGuinness): What information is being withheld that might influence another company's view of the market or that would inform a company that wanted to come into the market?

Mr. Michael Horan: I would say that we also supply to the CBI detailed individual policy and claims information on private motor insurance - 20 fields of information on individual policies, individual claims, the cost and so on. That was a recommendation of the former MIAB, and the document is published on the CBI website every year. That is a huge amount of data that is available to the Irish market, and also to international insurance companies.

Chairman (Deputy John McGuinness): Is there data that Insurance Ireland does not publish?

Mr. Kevin Thompson:  We publish everything we are asked to publish.

Chairman (Deputy John McGuinness): That is not answering the question. Does Insurance Ireland publish everything that would be required to inform those who have to be informed of the conditions in the marketplace in Ireland?

Mr. Kevin Thompson: We believe we do. I refer to the private motor insurance statistics published by the CBI in October 2015 covering the insured years from 2003 to 2013. It breaks down the settlement rate in terms of how quickly claims are settled over different years. It also breaks down the costs per claim based on age profile, so there may be an age profile between 17 and 20 years, 20 and 25 years and between male and female drivers. It also shows in its appendix, not on a name basis but with an indicator A to Z, the profile of each company. For example, it shows that Company A seems to have more young drivers

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than Company B, and that Company B has more older drivers than Company C. It is all broken down and is there for people to see.

Chairman (Deputy John McGuinness): What would Mr. Thompson say to all the witnesses who came before us here and said that he does not share his data? What would he say to the witness who appeared this morning to say that, as an associate member, he was paying a significant amount of money for data and was not sure whether he had access to all of the data? Mr. Thompson listened to the hearings. Will he address those specific questions because those are the questions raised with us about the data and data sharing, the cost of membership and associate membership of Mr. Thompson's organisation, and what that entails?

Mr. Kevin Thompson:  An associate membership fee for Insurance Ireland is €10,000 per annum but I qualify that by saying that we are a voluntary, non-profit organisation. That is the way we work. We know the associate member who was here this morning. When someone becomes an associate member, they have access to all our data. There is no blockage whatsoever. In terms of the fee they are charged on top of that, we have databases so if they want to get a connection, they pay an InsuranceLink set-up fee, which ranges between €2,000 and €4,000. It is a one-off fee. It does not go to us; it goes to our IT provider for connecting that service to them. They then pay an InsuranceLink usage fee. As I said earlier, InsuranceLink is about monitoring claims so every time someone accesses the system, it is on a pay-as-you-go basis. They get charged every time they access it. The charge will depend on one's usage. A very large player who has a large market share and who accesses the system frequently will pay a lot more proportionately than a very small player in the marketplace. We believe that is the right way to proceed. A figure was quoted this morning of €100,000. That is not the figure. There was some confusion in that regard. That figure relates to our IIDS system. Regarding penalty points, what we have within our IIDS system currently is that our direct providers, that is, insurance companies, have access to it. We are building an enhanced module to it which will allow brokers to have access to it. That overall IT enhancement and development will cost approximately €100,000. That is the figure we have been given by our IT provider. That is in terms of associate member costs and the comment regarding €100,000 made this morning.

Regarding our databases such as ANPR, and particularly InsuranceLink, where we are trying to combat fraud, the system is only as good as the number of people in it. If someone who is trying to combat fraud has only have 50% of the market, they are only capturing 50% of potential fraudulent claims. They want as many providers as possible to be in that system. The more providers they have, the more robust the system in covering the entire market and catching potential fraudsters. It is in our interest, therefore, to have as many people as possible in that system.  I hope that clears up the point about the associate membership question.

Chairman (Deputy John McGuinness): There have been complaints that Insurance Ireland does not share the data.

Mr. Kevin Thompson: We do share our data. We share our data publicly. Anyone who is a member of our organisation has access to our data.

Chairman (Deputy John McGuinness): That is not publicly, access is confined to the membership. It is a club.

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Mr. Kevin Thompson: No, it is not a club. If one is signed up to our InsuranceLink database, one has access to it.

Chairman (Deputy John McGuinness): If one is an associate member, one pays €10,000. Who pays €100,000?

Mr. Kevin Thompson: The €100,000 is related to the module that is being built to extend the functionality around InsuranceLink.

Chairman (Deputy John McGuinness): Where is the misunderstanding about the €100,000 then? Mr. Thompson said there was a misunderstanding.

Mr. Kevin Thompson: In terms of the fee they pay to access InsuranceLink. They currently access InsuranceLlink. The sum of €100,000 relates to IIDS, which is a different system.

Chairman (Deputy John McGuinness): So to access all of the system, it is €110,000.

Mr. Kevin Thompson: It is €100,000 spread across all members. It might come in at about €800 per member.

Chairman: So it is not €100,000.

Deputy Paul Murphy: How much is full membership?

Mr. Kevin Thompson: Full membership ranges from a standard fee and the amount depends on one’s market share.

Chairman (Deputy John McGuinness): How much is a standard fee?

Mr. Kevin Thompson: It is €10,000.

Senator Gerry Horkan: I do not wish to get overly bogged down in the inner workings and revenue streams of Insurance Ireland, but it is relevant to much of what we have been discussing. We have all seen insurance premium increases of 35% to 40% in a year, 70% over two years, and individuals have experienced vastly greater increases. As a corollary, some people must be lower than the average but there are huge increases across the board affecting everybody. The witnesses are the voice of the insurance sector and their role is to represent and support the development of the sector in the interests of both their members and customers. That is fair enough. How many staff are in the organisation? It has been said it is a not-for-profit organisation and is not a return-to-shareholder type scenario.

Mr. Kevin Thompson: We have 17 full-time staff.

Senator Gerry Horkan: A total of 17 staff. What are the revenues from the various activities? I presume it is public information. Is it millions or billions?

Mr. Kevin Thompson: Our revenue is split between two amounts - standard operating costs of €2 million; and then we have what is called projects costs, which is an additional €2

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million, that is where the members themselves decide they have a specific project they want us to do or a specific system.

Senator Gerry Horkan: So Insurance Ireland spends €4 million from its members between membership fees and charges for the various databases and then the money is spent running the organisation.

Mr. Kevin Thompson: The majority of the general administration budget amount of €2 million goes on staff overheads. The other €2 million is at the discretion of members and they decide. Some years they might decide to spend €2 million, and some years they might decide they do not want to spend €2 million on any specific project.

Senator Gerry Horkan: Are all the motor insurance databases in the country that exist, or that co-ordinate data, run through Insurance Ireland? I refer to the information on penalty points. Please forgive me but I would have thought there was some Garda database of penalty points where the penalty points are recorded by the Garda and presumably by the GoSafe cameras and it goes into a State database to which the witnesses get access or are they just sharing the information people tell them about penalty points and they do not have any access to the Garda system?

Mr. Michael Horan: There has been a lot of commentary about data and people talk about data without defining what it is.

Deputy Sean Sherlock:  Who talks about data without knowing what it is?

Mr. Michael Horan: Just commentators in general.

Deputy Sean Sherlock: Mr. Horan should be specific because if he is laying that at the door of members, I would say bí cúramach because it is an integral part of what we are talking about here today.

Senator Gerry Horkan: Almost every commentator talked about the lack of clear data, the lack of explanation and the lack of visibility in terms of what is going on in the motor insurance sector. We can see the personal injuries information in PIAB and we can see what is going through the courts system. That is only 30% of the overall amount of claims, so 70% of cases are settled and most people who appeared before the Committee said they did not believe they had any great visibility on that. Are the witnesses saying that if one becomes a member of Insurance Ireland, one gets access to that information, or is it available to the public through the Central Bank figures? Many of us, including me, asked what questions other witnesses wanted us to put to Insurance Ireland. They wanted to know the number of claims, the average cost of the claims and therefore the total amount of claims that are being settled, because if PIAB claims are not increasing in value year-on-year or are relatively stable, and likewise in the courts – certainly not 70% increases – the explanation then must be, other than the Solvency II Directive or the reduction in investment income, that the rest of it is being picked up by a massive increase in the cost of the claims that are being settled. We do not appear to have any visibility on those figures. Is that visibility already there for us or is it only there if we sign up to the databases and join the organisation, or does it exist at all?

Mr. Kevin Thompson: It is there. I draw the Committee’s attention to the private motor insurance statistics published in 2015. To give the history, that statistical exercise was born

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out of the MIAB’s second report in 2004. The CBI entral Bank has carried that format forward and we have fed into that. I commented earlier on the type of data in there. It gives claims costs, so if one looks at the claims costs from 2006 to 2013 – that is in the report and it is up on the CBI website and one can access it.

Deputy Michael McGrath: Is that the CBI insurance statistics 2014?

Mr. Kevin Thompson: It is the private motor insurance statistics published in 2015.

Deputy Michael McGrath: Is it a 36 page document?

Mr. Kevin Thompson: We can circulate it.

Chairman (Deputy John McGuinness): If it is that freely available, are those who are paying €10,000 per head a bit naive?

Mr. Kevin Thompson: It is different. What we are talking about is market statistics. In response to the original question, if people want to know what is happening in the claims environment, they can see the market statistics both in our fact file and in the private motor insurance statistics published in 2015.

Senator Gerry Horkan: Can they work out from those statistics whether the motor insurance industry is profitable or loss making? I know we saw the figures that said insurance companies generally are losing €20 to €30 per €100 of premium paid. That statistic was quoted to us earlier in the hearings but I have not had an opportunity to study the statistics. It appears to me that many of the people who appeared before the Committee were not aware of these statistics or they certainly gave us the impression that they were very lacking in data about what is going on within the motor insurance industry. The witnesses are pretty much refuting what everyone else has said. If that is the case, so be it, but those people are investigating the industry and they do not seem to know all the information exists or else the witnesses are telling us something exists and what they want is not what exists.

Mr. Kevin Thompson: I think there are two issues. The first is that we are not saying that more data should not be provided. What we are saying is that there is data on claims. To give a high level piece of it, if one looks at the private motor insurance statistics published in 2015, they will show that between 2006 and 2013 there has been a 23% increase in claims costs for comprehensive policies and a 38% increase in claims costs per policy for third party.

Senator Gerry Horkan: Neither of those figures is anywhere close to 70%.

Mr. Kevin Thompson: I am just giving an example and we can come back to that point.

Mr. Michael Horan: We recognise that people want more data and we are working on that because we recognise that more work needs to be done at our end in providing more transparency.

Senator Gerry Horkan: What are the barriers to delivering that because the ANPR recognition system that was installed in all Garda vehicles is virtually useless because one in four hits they were getting for a car that was neither taxed nor insured was producing data that was not correct.  For example, Gardaí got a flag of a vehicle that was not insured and

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then it turned out that it was insured. There are obviously difficulties there. We are all sitting here with phones in our pockets that are more powerful than computers that were guiding aircraft 20 years ago. What is the problem here?

Mr. Michael Horan: There have been problems with the ANPR system. It is an exercise to help the Gardaí enforce road traffic legislation on uninsured driving. The idea is that by feeding data into the system for Gardaí, they would be able to tell whether a vehicle was insured or not with their hand-held devices. That is how it works. There have been some data problems with it.

Senator Gerry Horkan: Is the data it is getting inaccurate?

Mr. Michael Horan: The reason it is difficult to be 100% accurate with it is because people are changing motor policies the whole time. They move from one company to another and so on. There is an issue around fleet vehicles, that is vehicles that are on motor fleets.

Senator Gerry Horkan: Is it not a real-time database that is constantly updated or is there a backlog of a month or a week's processing?

Mr. Michael Horan: It is updated on a daily basis.

Senator Gerry Horkan: Some 25% of their hits were inaccurate. One in four of us is not switching on a daily basis.

Mr. Michael Horan: That was some time ago, but we have done a lot of work since then on the technology to try to improve that. The InsuranceLink database is an anti-fraud claims database that insurance companies feed into. It was established back in 1987. When an insurance company registers a claim, it puts it onto the InsuranceLink system. If it gets a match on the system, it might mean that the insurance company would take a closer look at the claim. It does not mean that anybody is fraudulent. It could just means that they have had more than one claim. It could be as innocent as that. It is a tool to help the insurance industry fight fraud..

Senator Gerry Horkan: Whose database is the penalty points database?

Mr. Michael Horan: It falls in under the integrated insurance data service. There are two modules to it; penalty points is one of them. What we have is a centralised hub. The data is actually with the National Vehicle and Driver File in the Department of Transport. Through this hub, insurance companies can check at renewal whether somebody has penalty points. Non-disclosure is a problem in the motor insurance market. Not everybody declares they have penalty points when they have them. It means that insurance companies can see whether somebody has penalty points or not. That is the purpose of that.

Senator Gerry Horkan: If somebody says they do not have penalty points when, in fact, they do, are they then penalised on their premium for telling lies?

Mr. Michael Horan: If one is telling lies in any respect in relation to motor insurance, one could run into problems at the claims time.

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Senator Gerry Horkan: I accept that, but I am talking about when the insurance company is raising the premium. One is putting in one's application and being quoted a figure and perhaps one is refused because one has denied that one's penalty points exist. How does that work? For those people who have told the truth and will suffer the consequences if they have penalty points, there should be some deterrent to people who deny their penalty points exist as opposed to being told "By the way, you forgot a few points." We have seen a 60% to 70% increase over two years and a 38% increase in the past 12 months. How much of that is attributable to Solvency II, how much to there being less investment income and how much to increased claims? We do not know.

Mr. Michael Horan: On the penalty points issue, if somebody has penalty points they have not declared, at the very least the insurance company would rate on the basis of the penalty points that are showing on the database. It would be open to an insurance company to not quote at renewal on the basis that one has said something that is flagrantly incorrect. On the question of how the premium increases break down, it is very hard to disentangle all the different factors. For us, the main factor is the volatility in the claims environment, higher court awards and uncertainty. That has driven claims costs up. Premiums are primarily dictated by the cost of claims.

Senator Gerry Horkan: Mr. Horan is saying there is volatility in the claims environment. We know the court award figures did not increase by 38% in a year and PIAB figures did not increase 38% in a year, yet insurance premiums have gone up 38% in a year. Mr. Horan needs to reconcile that with us.

Deputy Sean Sherlock: I am looking at this from the point of view of whether the market is competitive. Whether it is perfectly competitive, or not, remains to be seen. There is still a fundamental question about whether there is perfect knowledge around the market. We all recognise there has to be a surplus on every premium derived by a company. That is a given, but we are finding it difficult to reconcile the extent to which premia have increased. It is a steep, unaffordable rise. If insurance companies are pricing risk and liability and if by any reasonable, objective analysis the individual motorist's personal circumstances have not changed, the car has passed its NCT and nothing has changed from the motorist's point of view, yet they are incurring a cost of 30%, 40% or 50%, they are asking themselves, "What is going on here?". Most people will accept the argument around the resetting of the market to adhere to rules and provisioning. The witnesses' opening statement outlined that the price of premiums had reduced significantly over quite a number of years. What most people cannot reconcile is the extent of the increases. Mr. Horan speaks about the private motor insurance statistics report in 2015, the IIDS, the ANPR and so on. In the PIAB submission to us, it states there is: "...no public information available relating to overall numbers and costs of claims for personal injuries and the only figures that were made public did not contain any information on the costs of directly settled cases. Without access to that information, a full picture of the impact on insurance premiums is difficult to establish".

If we take Insurance Ireland's submission before us today and its willingness to seek a solution to this issue, and layer on the fact that it is saying there is adequate data available to make an assessment of the market, why is it that the PIAB, which is a statutory body, is telling there is not perfect knowledge?  How do the witnesses reconcile this statement?

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Mr. Michael Horan: We have explained there is a lot of data. We accept that people require more data. We have said we are scoping out an exercise and we are working on this at present. This is our position.

Deputy Sean Sherlock: What does "scoping out an exercise" mean? If Insurance Ireland provides statistics to the CBI, then yes, there are statistics, but the issue is how they are mined for quantitative analysis of the data so that decisions can be made. Will the "scoping exercise", whatever that is, result in transparency around the cost of a premium? There is no breakdown of the cost of an average motorist's premium. The witnesses still have not explained this, not even in their opening submission.

The witnesses have not spoken to us about behaviours in the insurance industry regarding the settling of claims - whether the insurance companies interrogate fully every claim that comes before them, or whether they settle them just to get them off the desk and out the door. We do not know who the members of Insurance Ireland are. The witnesses state that it is representative of 95% of the domestic market but, presumably, all of the big insurance houses are members of Insurance Ireland also. We know it is a not-for-profit organisation. We are all intelligent people here, presumably, so we know Insurance Ireland gets its riding instructions from those paying subscriptions. The question is whether Insurance Ireland is here to speak for all of its members, including the big insurance houses. We now hear there will be an investigation by the CCPC, but we none the wiser after more than half an hour into these proceedings. I am still ignorant as to why there has been such a stark increase. The witnesses state that the data is available, but clearly it is not.

Mr. Kevin Thompson: Regarding the data, we are doing a scoping exercise. We have engaged with the Society of Actuaries and other stakeholders. We are trying to get to the UK standard and the level of data produced there. It will take time to get there and we are very clear about this. For the data to have any meaning, it will have to be in track for a good number of years, but we have started the journey and are engaging on it. One difficulty we are cautious about regarding the UK data is that it projects future claims and premiums, and we must look at this from a proprietary point of view and a competition point of view. This is where we want to get with the data.

Deputy Sean Sherlock:  Mr. Thompson states that the data is proprietary but, at the same time, he states that Insurance Ireland is yielding up sufficient data to statutory organisations and the CBI. Effectively, he is giving the impression, with regard to its intervention, that there is perfect knowledge in the sector because he stated it has the IIDS and InsuranceLink, notwithstanding the ANPR issues, and the private motor statistics with the CBI. Insurance Ireland is creating an impression that it is yielding the data unto Caesar, so to speak, but it is not telling us, in very real and simple terms, why the increase is happening. We do not have visibility as premium holders on the level of profit that will be made and the stark increases that have been made. This is the real issue for motorists. To be fair about it, the risk profile for the vast bulk of motorists by any actuarial standard has not actually increased. We do not have perfect knowledge on what insurance companies settle out of court on the steps with solicitors. The witnesses will not give us this information.

Mr. Michael Horan: The general point made by the Deputy is fair. We have said we are committed to working on data. It is an exercise that takes time to go through, with the best will in the world, to try to define the requirements to consult with people, and that is what we are committed to doing. Regarding the question on why premium increases are as high as

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they are, this is primarily dictated by the cost of claims in general and by an individual's claim experience. Motor insurance and premiums are based on a number of rating factors such as age, driving experience and claims experience. The overall claims costs underneath the surface dictate what way premiums will go, and this is the fundamental issue. Some of the issues we are speaking about are internal to insurance companies, some are about insurers' pricing, and some are external to insurance companies - for example, the level of awards and legal costs. A holistic view needs to be taken on how to address all of these issues. We need to focus on the large size of awards in the country, particularly for whiplash. We need more consistency in the awards. We need lower legal costs in litigation cases.

Deputy Sean Sherlock: The reality contradicts this. If I am to be very frank and blunt, insurance is a hard-nosed business and is highly competitive. The companies have shareholders and a bottom line. The witnesses cannot come into the Oireachtas and state that there are eight aspirations or solutions to this and that the sixth is to reduce legal costs, when we know, anecdotally and factually, that insurance companies settle out of court without investigating to a large extent whether a claim in the first instance was fraudulent, or where there is a history of repetitive cases involving people who are up and down the steps before it goes into the courtroom. There is a culture of settling before going to court, where the case could be interrogated properly, and the industry is not taking on the fraudsters. The companies have realised it is much easier to just settle and get cases off the books and off the table.

  The second solution suggested is tackling whiplash. The witnesses have stated that eight out of ten motor insurance claims in Ireland are for whiplash and awards here are three times those in the UK. They stated that premiums are a function of the costs of claims, so high awards mean higher premiums. However, they did not tell us the percentage of these whiplash claims which are settled without going through PIAB, or are settled outside the doors of the court. Until we can drill down into this information, it appears that the insurance industry will ride the storm, apply the further 20% increase in the premiums already signalled to the market, go through the investigation with the CCPC, and pay lip service to what we are trying to achieve, which is lower costs for motorists. It is plus ça change, plus c'est la même chose.  There is no evidence here that the industry is really making an honest effort, beyond aspirational language, to reduce premiums.

Mr. Kevin Thompson: In response to the charge that we are settling too easily and are not fighting enough, I would refer the Deputy to the private motor insurance statistics on settlement rates. Between 2009 and 2013, the first-year settlement rates, that is, the speed at which we settle a claim, reduced by 13% for comprehensive policies and by 17% for third party insurance. Settlement rates have been slowing down, and that is reflected in the statistics from the CBI. That indicates to me that the sector investigates every claim. Let us be clear, though. Our job is to pay claims. Our job is to settle claims. We cannot treat every claimant as a potential fraudster. When people have a genuine claim and are entitled to financial compensation, they expect insurers to settle those claims quickly and diligently. We are also mandated by the CPC to do that and to do it fairly. There is a balance to be struck between paying claims quickly in respect of genuine claimants and giving them a fair level of compensation, while also having proper systems in place to make sure that where there is a suspicion of a fraudulent claim, we follow it through. I urge the Deputy to look at the latest statistics from the CBI which show that our settlement rates in the first year have been reducing. That says to me that we are taking more of an active role as an industry in investigating claims, but it is a fine balance. We cannot treat every claimant as a criminal.

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Deputy Sean Sherlock:     There is an inverse at work here. Mr. Thompson has said that the industry is settling more and tackling fraudulent claims, but it is increasing premiums at the same time. It does not figure.

I wish to go back to the PIAB statement which argues that there is no public information available on the overall number and cost of claims. PIAB has access to the same report that Insurance Ireland furnished to the CBI. One would also assume that because it interfaces with the insurance industry all the time, it has access to InsuranceLink or can get a sense from Insurance Ireland of the IIDS, for example, yet there is a contradiction between its position and that of Insurance Ireland on the availability of information.

Mr. Kevin Thompson: That is why we have a scoping exercise. We have said that we will try to provide more information. That is why we have engaged with PIAB and the Society of Actuaries and taken their comments on board. We also send raw data to the CBI. We collect data and send them on. There is a deficit, but it takes time. I want to manage expectations here. It is not about us putting it on the long finger; far from it. We want to be transparent, we know that the public demands it and we have no problem with that. We are working to bring this forward.

Acting Chairman (Senator Gerry Horkan): The witnesses said that everything was being shared, but then said that everything that had been asked for was being shared. They also said that there was a need for more work and a scoping exercise. There is an inherent contradiction between what the witnesses said at one point and what they said later on.

Mr. Kevin Thompson: This is evolving and always will be. I am sure when we have scoped this and come back to it in five years' time, there will be new requirements. That is just the nature of the business we are in. It is constantly changing and there will always be new requirements and new regulations. We accept that.

Acting Chairman (Senator Gerry Horkan): Mr. Thompson said that Insurance Ireland had been sharing everything it had been asked for, but it then emerged that it has not been able to deliver everything it has been asked for, so there is an inherent contradiction in that.

Deputy Michael McGrath: The latest official data from the CBI that we have relate to 2014 and show the total amount paid out in respect of motor liability claims. Does Mr. Thompson have the figure for 2015? Does he have the aggregate figure for 2015 for the overall motor liability claims paid? I trust Insurance Ireland has submitted its returns already to CBI and the statistics will probably be published in the next few weeks.

Mr. Kevin Thompson: We are actually collating the data. The data we have here today show that for motor insurance alone, the total is €1.2 billion.

Deputy Michael McGrath: This is the kernel of the matter really because, put simply, Insurance Ireland has said that there are more motor insurance claims and those claims are costing more. The data show an increase because the 2014 figure was €1.0145 billion or thereabouts and last year it was €1.2 billion.

Mr. Kevin Thompson: It was €1.258 billion.

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Deputy Michael McGrath: That means it has increased by more 20% on the 2014 levels. Let us look at the data that we have. In 2011, the figure was close to €1.6 billion; in 2012, it was €1.070 billion; in 2013, it was €990 million; in 2014, it was €1.014 billion and the figure for 2015 is €1.258 billion. By my calculations it is 24%. That is a significant increase. Those are hard data. That is the amount that has been paid out by insurance companies in respect of all motor claims, including direct settlements, court awards, PIAB awards and any other payouts. Is it correct to say that the figure captures the lot?

Mr. Kevin Thompson: It captures the claims, yes.

Deputy Michael McGrath: It is up 24% over 2014 levels but it is still significantly below the 2011 levels. That said, that seems to be an outlier in the data contained in the insurance statistical review. Premiums have increased by 70% in three years but the payouts three years ago were just under €1 billion, and were just over €1 billion in 2012 and 2014. While there has been a 24% increase, that is not 70%. How did we arrive at a point where premiums are up by 70% in three years if the industry is saying that the main factor driving that is claims payouts? That is not borne out by the evidence.

Mr. Michael Horan: There are a number of factors contributing to premium increases. As we said in our opening remarks, there was a certain amount of underpricing in the market as well as lower investment returns and higher claims costs. We believe the claims costs are the major factor. The CBI recent thematic review shows that claims frequency was up by 8% and the average cost was also up by 8%. Another factor is the adverse development of existing claims. This is where insurers have claims already on their books and have to increase the reserves on them. A number of things happened in 2014 that caused the change. We had three changes in 2014 that had a retrospective effect on claims that were already open and had already been made but not settled. The main change was the increase the financial limits of the courts. The Circuit Court limit increased from €38,000 to €60,000. There were two other changes as well. Legislation introduced what was known as the recoverable benefits and assistance scheme. Previously, insurers could deduct social welfare benefits from personal injury claims, but the legislation required them to make repayments to the Department of Social Protection. The third change related to what is known as the discount rate at the end of 2014. This affected catastrophic injury claims. Given low investment returns, it was determined that we needed higher lump sum payments. All these had a retrospective effect and required insurance companies to effectively go back and increase their reserves. This fed into the cost of claims and that has been a factor.

Deputy Michael McGrath: I hear all of that, but let us be straight with people. The insurance industry has been pointing the finger for premium increases squarely at the issue of increased claims costs. The level of premium increases far outstrips the actual increase in the amount of claims paid out by the industry. Insurance Ireland has repeatedly said that premiums are a function of risk and the amount of claims being paid. I accept that there are many other factors. Does Insurance Ireland have monthly data for 2016? Are claims pay-outs going up again in 2016? Does Insurance Ireland have that data?

Mr. Michael Horan: No, we do not have monthly data. Premiums are dictated primarily by the cost of claims. Other issues also play a part. Competitive forces play a part.

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Deputy Michael McGrath: Maybe Insurance Ireland should say that a little more. Premiums have gone up approximately 70% over three years while overall claims pay-outs have gone up by less than 25%.

Mr. Michael Horan: We believe claims costs to be the main factor. The other issues are also factors.

Mr. Kevin Thompson: That is the point. When we refer to claims costs, they include the claims that occur at the moment, but it could take up to five years for the book of claims to unwind. Sometimes, we price for now. Let us suppose there are 100 claims this year. We know that will probably only settle 20 of them. We will probably settle another 20 in year two, a further 20 in year three and so forth. Given the retrospective changes since 2014, along with the discount rate and the implications of the recoverable benefits, in the case of all the claims that have been notified and which are still not settled, we have to go back and add an additional cost for these developments. These are claims costs, but they are claims costs that we have to price for now. There is a lag. We have to price for it now, unfortunately.

Deputy Michael McGrath:  Where is it headed, without intervention? Where are premiums going?

Mr. Kevin Thompson: We accept that there are multiple factors. We want to try to get stability into the marketplace in order that we do not have volatility. We want consistently in awards and pricing as well as in terms of the level of awards for particular injuries. We are keen to get consistency into the marketplace. There is another point relating to Setanta. If we can get consistency around what happens in a failure, or not, it is the unknown. It is very hard to price for unknowns. The more certainly we have, the easier it is to price, and then that feeds through to premiums.

Deputy Michael McGrath: Mr. Thompson has put numerous ifs in there. The question is relevant whether there are no changes or no intervention in terms of legislation and awards and so on. I am not making any allegation around a cartel or anything like that. Where is this headed? Is there going to be an upward drift? Is that pattern going to continue unless something changes?

Mr. Kevin Thompson: All we know is that we are in a period of unprofitability and volatility in the marketplace. That is one core outcome. It makes the market unattractive for any new player to come in. If we want to get new players in, increase capacity and if we want incumbents to increase their underwriting capacity, then we need to get stability. If we do not get stability, we will not get extra capacity. People will retrench.

Deputy Michael McGrath: What does that mean for premiums?

Mr. Kevin Thompson: We do not know. We simply do not know.

Deputy Michael McGrath: In how many cases have insurance companies referred alleged fraudulent claims to the Gardaí? Do we have data on that?

Mr. Michael Horan: We do not have a huge amount of data on it. We have considerable co-operation with the Garda Bureau of Fraud Investigation. We have agreed a protocol for the

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reporting of suspected fraudulent claims. What happens is that insurance companies make complaints to the Gardaí. The protocol sets out how we present our evidence and package it.

Deputy Michael McGrath:  Do we know how many cases were referred in 2015 or 2014?

Mr. Michael Horan: I do not have exact figures on it. The thing about fraud is that it is difficult to prosecute through all the way to the end, but we would refer a reasonable number of cases.

Deputy Michael McGrath: That is up to the Gardaí and the DPP. The question was how many cases have insurance companies referred as potentially fraudulent claims.

Mr. Michael Horan: We can come back to the committee on the exact figure. The insurance industry regards fraud as something that we have to fight on behalf of honest policyholders. Most claims are genuine. A small number of people make fraudulent claims.

Deputy Michael McGrath: Mr. Horan has cited it as one of the reasons behind premium increases.

Mr. Michael Horan: It is, but I do not think it should be over-stated as an issue.

Deputy Michael McGrath: Who should pay for the collapse of Setanta?

Mr. Michael Horan: All insurance company insolvencies since the establishment of the ICF in 1964 have been dealt with by the Fund. There is a 2% levy and this has a smoothing effect over time.

Deputy Michael McGrath: It is the policyholder, ultimately. In any event, whether it be MIBI or the ICF, it is the policyholder who is going to pay for it.

Mr. Kevin Thompson: We accept that, but there is a subtle difference in that if it goes through the MIBI, it has an immediate impact on policyholders in terms of pricing. If it goes through the ICF, there is a smoothing effect in that the repayment is spread over a longer period.

Deputy Michael McGrath: Why have people with older cars and younger drivers being particularly hard-hit? What is wrong with an older car that has an up-to-date and valid NCT and that is being properly minded by the owner?

Mr. Michael Horan: The practice varies between insurance companies. Certainly, some have established that their claims experience arising from older cars has been very poor and, therefore, their risk appetite for older cars is not great. At the same time, there are other insurers who have a less conservative risk appetite. There is a market, even for older cars.

Deputy Michael McGrath: Does Insurance Ireland have data on the premium increases affecting cars over 15 years old?

Mr. Michael Horan: We do not go down into that level of segmentation. We do not have that information.

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Mr. Kevin Thompson: It would be down to an individual company, its underwriting philosophy, pricing philosophy, and its risk appetite for a certain class of business.

Deputy Michael McGrath: Are the positions of individual companies publicly declared?

Mr. Michael Horan: Some insurance companies have openly stated that they do not have a risk appetite and have explained why. In the case of other companies, I have seen commentary. The threshold varies between companies in terms of how old a given car is. Insurance companies compete with each other. They each have a portfolio of risk. They consider the cost of claims coming from the portfolio of risk and they charge their premium accordingly. They compete with each other. They do not all take the same attitude. That is why customers get such a wide variety of quotes when they are looking for a motor insurance quotation.

Deputy Paul Murphy: Insurance Ireland runs ads from time to time around the question of fraud. In some of them, the slogan it used contained the phrase "taking money from your pockets" and was very memorable. The evidence from witnesses indicates that what has been happening is a major campaign of spin on the part of the insurance industry. The Law Society called it a long-running and widespread campaign in which the industry sought to blame everybody but itself. The massive hikes in premiums have been the subject of a campaign of misdirection, away from the issue of profits and the drive to return to profitability and towards the issues of costs, in particular those related to claims, and fraud. In his opening statement, Mr. Thompson said, "Put simply, there are more motor insurance claims and they are costing more". He repeatedly gave that as the driving factor in the course of his contribution. The figures for 2015 do not illustrate that this was the driving factor. If there are increases of 70% in premium costs and increases in the cost of claims over the same period of 25%, that does not amount to a majority of 70%. He referenced independent sources such as the PIAB, but the PIAB figures show that personal injury motor claims volumes and the average value of awards were static this year. PIAB does not agree that claims are going up so how can Mr. Thompson stand over this idea? He has not produced any facts whatsoever to substantiate it.

Mr. Kevin Thompson: On the question of claims being the driving factor, we have simply cited independent data that are out there, from the CBI on private motor insurance statistics and the results of the bodily injury-themed inspection conducted in late 2015 for 2013 and 2014, which showed an 8% increase in frequency and in the level of compensation that was being awarded. We also looked at statistics from the Courts Service which give information about the level of increases it has seen. As for our messaging, we have said this is the main factor but we have also said that prices have gone too low and we have explained the part we have played in that. The statistics are there. They have been validated by the CBI and the Courts Service.

There has been commentary on the direction of associated legal costs. MIBI statistics of 2004 stated that litigation costs had an overhang of 43%. PIAB states that there is a litigation overhang of 60%, so there has not been that much movement in that space. As a sector, if we have to give everyone with whiplash €30,000 we can price that. If we give them €50,000 we can price it too, but if we want affordable premiums and stability in our premiums, we need consistency in the level of awards and a level of awards which we can reasonably afford as a society. That has been the core of our messaging.

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We have our part to play in this and in the issue of the data. We know we have a part to play in terms of the settling of claims. We recognise the figures from PIAB, but we need to put them into context. PIAB settles non-contentious cases, where liability has been accepted. Both parties agree that there is no issue - it is just a question of what the level of the award is to be. We would expect steady amounts in these cases, without fluctuations or inconsistencies. The claims we deal with outside of that process, either pre-settlement or post-PIAB, are where liability has not been accepted or it is in contention. It is different and it will deliver different results.

Deputy Paul Murphy: Someone from the Insurance industry said the reason more stuff was not settled at PIAB was the responsibility of the claimants and the lawyers. I put that to PIAB and its spokespersons said that was not the case. They said that in more cases, the responsibility was on the insurance companies because they have first refusal. The claimants have to go to PIAB and the insurance company gets to decide if it accepts this or not.

Mr. Michael Horan: Insurance companies are very supportive of PIAB and believe it has been very successful in the ten years since its establishment. It is designed to deal with claims where there is no argument about liability. If an insurance company believes something is not a PIAB case, it is because there is an issue around liability and an argument about who is at fault for the accident. We would like the powers of PIAB to be strengthened to include, for example, the power to require people to turn up for medical exams and to provide information on loss of earnings. We would also like the scope of PIAB to be expanded. At the moment, the legislation requires it to deal with a claim within nine months. If it cannot do so, the case has to be released. Insurance companies would like as many cases as possible, where there is no argument on liability, to be dealt with by PIAB. An injury about which there is no argument about liability may not settle down for 12 months, 18 months or two years, and there should be no reason PIAB cannot deal with it. If it could and did not have to release them back into the litigation system, it would be a good result.

There are systems issues that could be looked at to address the costs of claims and changing the legislation around PIAB to expand its scope and give it more powers to deal with more claims, is one such issue. One does not have to have a major societal debate about that. Other issues about the level of awards, and whether they are too high or low, are subjective but the systems issues can be dealt with. It is something we would heartily support.

Deputy Paul Murphy: Listening to the earlier words of the witnesses, one would get the impression that things are very transparent, but then they rowed back a little bit from that. Mr. Thompson referenced the report for 2013 that came out in October 2015. In this report, CBI stated that in the context of the data provided, it was not possible to obtain a comprehensive assessment of all costs and revenues in the industry. It talks about the weaknesses of the data which are provided, but that is the witnesses' example of transparency. Mr. Horan then said he agreed and that there would be a scoping exercise on giving more data. Why should people believe him? In 2002, the MIAB report stated that it had not been the experience that insurers had willingly provided all material information. Ms Dorothea Dowling made the point today that she did not get co-operation from the industry in terms of data. Why on earth should we believe that will change?

Mr. Michael Horan: I was on the old MIAB. Insurance Ireland and the companies did a huge amount of work at the time but I do not deny there were difficulties along the way. There were two MIAB reports. The second one says, in fairness to Insurance Ireland at the

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time, that we co-operated hugely and implemented many of the recommendations. We respect the work of the Chairperson at that time, Dorothea Dowling. She did a lot of good work and many reforms resulted from it.

We want to try to put forward solutions to the problem. The example I gave from PIAB is something that could be done reasonably easily. In terms of award levels, insurance companies accept 95% of the awards from PIAB. A total of 31 judicial reviews were taken against PIAB over ten years by the legal profession. We did not undertake any such reviews. We have wholeheartedly supported PIAB since its foundation. As far as we are concerned the more not-at-fault cases we can bring to PIAB, the better because then we do not get back into the situation we had in the past of a Mexican stand-off between the two sides and cases being litigated all the way to the steps of the court. The further we go down that road, the higher the legal costs. We want to avoid that.

Deputy Paul Murphy:  The core point missing from the picture is the insurance figures produced by the CBI showing the profits year by year. For those insurance companies with headquarters in Ireland, the profit on motor insurance over 20 years is €2.86 billion. That is a lot of money and a very profitable industry. It is a return on premiums of approximately 12%, which is high by, for example, UK standards. Is that money coming out of the pockets of young or older drivers? Is it coming from all of these policyholders? We pay the people Insurance Ireland represents a significant profit over 20 years. That went down over recent years but I suspect it is back up again. The industry is attempting to restore profitability because of bad investment decisions, which are the mistake of the companies represented by Insurance Ireland, on the back of massive hikes in premiums. That is the fundamental driver for the 70% increase.

Mr. Kevin Thompson: If one looks over any time horizon, one will come up with a certain profitability figure but this runs in cycles. In the late 1990s there were no profits, but high premiums. Insurers and consumers were suffering. Then we saw the birth of PIAB, reforms went through, profitability was restored to the sector and there was a 40%-plus decrease in premiums. Companies and consumers benefited. There is now a hardening of the cycle again, we are back into a lack of profitability and we have seen the stresses on the premium rates again. It is in the consumer’s interest to get the market players back into profitability. If profitability is brought back into the sector, there is an advantage to consumers because there is a widening of capacity and more risk appetite in the sector in terms of taking on the risks the Deputy has talked about. It is in our interest to get the profitability back. I do not believe there will be super profits out of any of this. As we have seen in the past, and we are no different from any other market, new players will enter. That is an important point. Compared with the UK, the insurance sector here is no different from any other sector, whether the farming sector or whatever. We are in an open economy. We do rely on capacity being brought into this country to service the market, unlike the UK which is a self-sustaining market. There are 300 plus insurers there. It all works. They do not need that level. It is the biggest insurance market in the world. Profitability is not a bad thing. If we get it back to profitability, we will attract new entrants. That releases capacity and consumers benefit. These things run in cycles.

Deputy Paul Murphy: I fundamentally disagree. Profit is a transfer from those who pay the premiums to the insurance companies. That is unnecessary. It is an extra cost. For example, if there was a non-profit State-run model, it would not happen. That would be €2.6 billion over 20 years that would be in car owners' pockets instead of the pocket of insurance companies.

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There is discrimination against certain groups of drivers who face increases greater than the average 70%, such as young drivers, older drivers and older cars. The older cars issue has been addressed. The discrimination against older drivers has not. Age Action Ireland made a strong case that there is no evidence to suggest that older drivers are a higher risk, yet they face higher premiums. What is the explanation for that? The question was asked but not answered about young drivers. According to the CBI report that Mr Horan referred to, younger policyholders continue to present the highest average surpluses. That is surplus per premium which over time will equate to profit. While younger drivers are a higher risk and I think they would accept that, the CBI is saying that the extra they are being charged is greater than the extra risk they present. How does Insurance Ireland explain that discrepancy?

Mr. Kevin Thompson: The same report said that over time younger drivers got the most consistent and the greatest decrease in premium when the market was in a more profitable state. There are pros and cons.

Mr. Michael Horan: Insurance companies differentiate between risks based on their statistics. They charge a premium according to the riskiness of the person taking out insurance. Young drivers historically have had more claims and their claims cost more. I know the Deputy is referring to that particular report, but there is quite a lot that is not in the system which relates to incurred claims that are not reported and various other things. I think they were referring to year one development. In other words, we have not seen the claims develop right through. It normally takes about five years for all injury claims to wash through, from notification to final settlement.

Young drivers tend to pay more for the reason I have said. Insurance companies compete with each other for business across the market in the segments they are interested in. In respect of older drivers, the point is the same: it is differentiation between risk based on the actuarial statistics that individual insurers have. That is legitimate as long as the actuarial statistics they have justify the position. It is based on the riskiness of the people according to the statistics the individual insurers hold.

Senator Rose Conway-Walsh: Last October, the CCPC warned Insurance Ireland about signalling price rises. It has had to do that again this week. In that time, insurance prices have increased enormously but the industry is still flagging up and softening up the market for more increases. On leaving this market, Zenith was clear that it had been excluded from important pooled resources and that Insurance Ireland members enjoyed putting it at a disadvantage. This Committee has also heard about the unusual nature of the Irish market where quotes do not vary between companies to the expected degree. They are all on the same page to an unnerving degree as far as pricing goes.  The motor insurance industry in this State exhibits many characteristics of a cartel and must be investigated. Is Insurance Ireland a cartel?

Mr. Kevin Thompson: To be quite clear, we are not a cartel. We do not operate or facilitate a cartel. With regard to the CCPC, we co-operate fully with it. We have no problem there at all and we are very confident that we will be exonerated through the process. Not wishing to make any other comment, we will let the process take its course in that regard.

The Senator raised another issue relating to Zenith Insurance. I have not seen any official commentary from Zenith Insurance and it has not reached out to me to say it has left the market because it has been excluded. I heard a statement this morning from the

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Managing General Agent, its underwriter, which said that it left because of the claims environment. That is what I have heard. We have not excluded a member. Actually, the member who was here this morning is an associate member of Insurance Ireland and has full access to everything, and its underwriter was Zenith. I hope we have cleared that fact up.

With regard to quotations, we are not on the front line in terms of quotations being given or the like. However, it is a competitive market. There are more than 40 players in the market, although eight or nine players are well established and probably account for over 95% of the market. From our experience, they compete fiercely in the marketplace.

Senator Rose Conway-Walsh: That is not my experience with the people who deal with me. I thank Mr. Thompson for clearing up the matter of Zenith Insurance. Others might disagree with him, but it is important to have it on the record.

With regard to volatility, the argument of Insurance Ireland is that volatility is to blame. That is just nonsense. Steady increases are not signs of volatility, but signs of price increases caused by a failing business model. The witness argues that there are a number of claims from PIAB. I have the same table. The average award in 2010 was €22,271 and in 2015 it was €22,878. That is not a volatile claims environment. In fact, it is a very static environment. There are more claims because there are more cars on the road, which means more business for the industry, a bigger market and less competition. There are no more people as a percentage using solicitors in the PIAB process than previously. The court awards are not much higher if one cuts through the spin. Where is the volatility? The one place where there has been volatility, of course, is the international bond markets. We live in an age of 0% interest rates. Is that the volatility to which the witness refers? Did Irish insurers fail abjectly to plan for Solvency II reserve requirements? Is there an aggregate figure for the increase in the reserves over the last couple of years? It would appear that motorists are bailing out the insurance industry.

Mr. Kevin Thompson:  The Senator referred to a steady claims inflation. We do not see it that way. As I said in my earlier comment, PIAB is dealing with non-disputed claims where both parties are in agreement, so there will be a steady level of award. That is my first response. Since 2008, there has been a 34% increase in the number of claims going through PIAB, but there has been a corresponding 13% increase in economic activity over that time. Some of it is probably related to an increase in the number of cars on the road, but there is a big difference between 34% and 13%.

There has been an increase in court awards. These are Courts Service statistics, not ours. The statistics that we quote relate to the lower court, which is the Circuit Court. We have not quoted the High Court. We accept the point regarding medical evidence and we know how distorting that can be in the High Court. However, the soft tissue injuries and lower-value claims are in the lower court, the Circuit Court. In its annual report for 2015, one can see a 22% increase in awards in the Circuit Court, and that was on top of a 13% increase for the previous year. We have seen it come through.

Regarding volatility, our point is that there is a situation whereby there is an inconsistency or fluctuation in court awards for any particular injury - that is why we believe the Book of Quantum and giving more powers to PIAB are so important - and a general increase in the level of awards going through the court. In addition, there is the case of Setanta and a

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proposal from the Government that basically creates a situation in which, in the case of future failures, prudent operators in the market have unlimited liability for their competitors' losses. All of those matters start feeding through and must be priced for, and it is the variation and fluctuation within them all which results in the level of volatility within the marketplace.

Senator Rose Conway-Walsh: Does Insurance Ireland have an aggregate figure for the increase in reserves over the last couple of years?

Mr. Michael Horan: We do not have an aggregate figure but one can see the figures in the CBI insurance statistics. It can be worked out from that.

Senator Rose Conway-Walsh: The witnesses are saying there is no correlation whatsoever between the failing of, and decreases in, the bond market and the increase in the price of insurance.

Mr. Michael Horan: We said in our opening remarks that lower investment returns have played a part, but not the main part. If one looks back ten years, insurers could have expected more in terms of investment income. However, the yields have fallen. The thing about general insurance is that one must keep one's funds liquid, because the claims are what is known as short-tail - they are settled in the not-too-distant future - so one puts one's investments into low-yield products that one can access quickly. One does not put them into high-risk or long-term investments. For example, one cannot put vast amounts of investment into property because one needs the money to be liquid to pay the claim. Investments end up being in Government bonds and the like.

Senator Rose Conway-Walsh:  Are the witnesses concerned about the Solvency II Directive or that any of the insurance providers will not meet its criteria?

Mr. Kevin Thompson: Solvency II is a heavy legislative measure and it was in the pipeline for eight to ten years before coming to fruition. It is a risk-based model supposed to enhance the regulatory environment and to enhance solvency in terms of protecting against future failures. Our companies have been preparing for it for a long time and they illustrate that point. There might have been some commentary around Irish insurance companies not preparing for Solvency II, but most of our companies are subsidiaries of larger multinational groups and those groups would have subsidiaries in other EU countries that have been preparing for Solvency II. It is just not credible that a subsidiary of a multinational group in the Irish market would not be following the group-wide Solvency II initiative that it would have across all of Europe. Our companies have been preparing for a long time for it and it has come as no surprise. We see it as a good thing. It will allow more transparency around the solvency of each company into the future.

Senator Rose Conway-Walsh: Will Insurance Ireland provide and publish the data for out-of-court settlements for 2015?

Mr. Kevin Thompson: We have a scoping exercise. It is our intention to do it as part of this exercise in terms of enhancing our data for the public and PIAB.

Senator Rose Conway-Walsh: Is that "Yes"?

Mr. Kevin Thompson: Yes.

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Senator Rose Conway-Walsh: When will that be available?

Mr. Kevin Thompson: We are scoping, so it would be wrong of me to commit to a date. However, there is urgency behind this and we have been talking to stakeholders well in advance over the last few months, prior even to notification of this Committee hearing.

Senator Rose Conway-Walsh: Are the witnesses stating that all the raw data are available to CBI and to CCPC? If CBI has the requisite actuarial resources, does it have the raw data to be able to provide all the information needed to be able to regulate properly?

Mr. Michael Horan: CBI requires insurance companies to complete returns, all of which are listed in the annual insurance statistics publication which cover revenue accounts for all the different classes of business, including motor. If more information or more granular information is required, insurance companies will provide it to the CBI as it is the best repository for this information because it is the organisation that has the supervisory authority over the entire market.

Senator Rose Conway-Walsh: Has Insurance Ireland ever refused to supply the CBI with any information it has requested?

Mr. Kevin Thompson: No.

Senator Rose Conway-Walsh: In respect of claims and out-of-court settlements, does Insurance Ireland have information on the breakdown between the payout, the legal costs and the commission involved, as well as on any other costs involved? Is the information already broken down to that level?

Mr. Michael Horan: No, it is not. It would be necessary to work out the detail in that regard, and as I stated earlier, we have gone through a scoping exercise. The CBI is the best place for it to go but we must be sure as to our definitions to ensure the data actually are worthwhile and usable.

Senator Rose Conway-Walsh: The witnesses have stated that if it requests any information across the board to do with the insurance industry, it will be supplied to it and that nothing is kept from it.

Mr. Kevin Thompson: If the CBI makes a request to any of our members - it has the power to conduct themed inspections and to focus on a particular issue - that information is forthcoming. There is no question whatsoever in this regard. On the point made by Mr. Michael Horan regarding the scoping exercise, that is why we are engaging with stakeholders. That is why we are engaging with PIAB and why we have engaged with the Society of Actuaries. We seek the views of all stakeholders because if we are to conduct a scoping exercise, it is not something we really wish to revisit any time soon. We want to get it right. Another point regarding the implementation and which is part of the scoping exercise is that each of our companies is working off different systems. They may have different ways of recording stuff, and consequently we must understand exactly what each company does in the marketplace. We must then ask how those data can be extracted and aggregated in a way that is meaningful and which the public can understand.

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Senator Rose Conway-Walsh: It is important to have raw data and not interpretations of them. That may be where fears arise in this regard. While members know the amount paid by PIAB and the courts for whiplash, for example, they have no idea how much is paid in the out-of-court settlements.

Mr. Kevin Thompson: Our view is that if the CBI is the best place to collect and if we must provide that information - we are scoping it ourselves and are trying to enhance our data - we do not see an issue.

Senator Rose Conway-Walsh: Insurance Ireland will give it to the CBI as and when.

Mr. Kevin Thompson: Yes.

Chairman (Deputy John McGuinness):  The witnesses have stated CBI is the best place for that information but Insurance Ireland is not providing that information for it. To be clear, they are stating that were the CBI to request information, the insurance industry would provide it.

Mr. Kevin Thompson: There are two sides to it. First, under current regulation, there is information we must provide that the CBI seeks from us periodically and annually and we provide that. The challenge that now has been put to us as an industry by our stakeholders and the public is whether we can make more transparent what is happening in respect of our claims and how we settle. Our point is we are conducting a scoping exercise to bring that to life and to make that happen. In some ways, that rests with the CBI. If Insurance Ireland as a body starts to produce a statistic, there will always be a question mark as to whether we are putting our spin on it and whether it is the real thing. Our point is we want to scope correctly. We want to extract the data and we wish to make sure there is independent oversight of those data which can verify that what is available is a true and fair reflection of what is happening in the marketplace.

Chairman (Deputy John McGuinness):  Would Insurance Ireland not volunteer to do that? At present, it is getting a bad name because the Committee has been told it is withholding information and is causing the absence of competition in the marketplace. Surely the reaction to that or the action required by such statements is to talk to the Governor and to provide the information.

Mr. Kevin Thompson:  We are doing it. We are working on it at present. We want to scope first as we first want to know what is possible for us to collect and within what timeframe.

Chairman (Deputy John McGuinness):  As an industry, what information has Insurance Ireland collected as a matter of fact in terms of dealing with the different companies it represents? Surely Insurance Ireland is already collecting some of these data.

Mr. Kevin Thompson: We collect aggregate data at a high level and we will publish our fact file. We will state the gross written premium and claims paid. The fact file will state the profit across different lines and we do that as matters stand. It is available online.

Chairman (Deputy John McGuinness):  We have been hearing that Insurance Ireland is withholding data and that it has the data. Mr. Thompson is stating that Insurance Ireland has access to the data but has not broken them down. Consequently, Insurance Ireland must

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collect those data and publish them or give them to the CBI and the Committee must ask CBI to engage with the industry and make sure these data are collected because Insurance Ireland is stating they are not being collected at present.

Mr. Kevin Thompson:  We want to get more granular regarding the data we collect and to make those data more available to our stakeholders.

Chairman (Deputy John McGuinness):  Insurance Ireland has put all the information it has into the Central Bank in a non-granular format.

Mr. Kevin Thompson: Our individual companies report to CBI on an individual basis. They do not report via Insurance Ireland. Each of the companies represented by us is supervised by CBI and will make its periodic and annual returns to it. CBI collects data on an individual basis from each company.

Senator Gerry Horkan: Is it the case that no one in Insurance Ireland is collating all these data? It is going in individually by member.

Chairman (Deputy John McGuinness):  The point is if the insurance industry is signalling to the market there will be an increase of 30% or 40%, it must have a reason for saying that. Insurance Ireland must have hard data giving it the information that this will be the case. The witness who appeared before the Committee this morning was paying €10,000 - there are others - for a raft of information. If, as Insurance Ireland is stating, everything it has is in the public domain through the CBI, what are such people paying that money for?

Mr. Michael Horan: Each year we publish a document called Factfile, which is aggregate information on motor, property, liability, total business and so on. However, it is at aggregate level and merely shows the premium claims, the result, etc.  Equally, CBI produces its insurance statistics document every year which shows all that aggregate information as well. What we are talking about now is whether there can be a further level of data which says a bit more about the cost of claims. Rather than just saying here are the reserves and how they move during the year in light of how injuries are developing, it is a question of whether we can do more.

Chairman (Deputy John McGuinness):  I have a question as to the €10,000. A sum of €10,000 was paid for information that is already available. The person in question did not pay the €10,000-----

Mr. Michael Horan: There are other databases, etc., that we described earlier on. We have the InsuranceLink database, for example, which is an anti-fraud database. Just think of them as databases that can help insurers at the underwriting stage and-----

Chairman (Deputy John McGuinness):  Can Insurance Ireland make that available?

Mr. Kevin Thompson: To whom?

Chairman (Deputy John McGuinness):  It is making it available to the guy who pays it €10,000.

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Mr. Kevin Thompson: It is of no interest to PIAB. It is of-----

Chairman (Deputy John McGuinness):  I am not asking who might be interested. I am asking why Insurance Ireland does not publish that information.

Mr. Michael Horan: InsuranceLink is an anti-fraud claims database which-----

Chairman (Deputy John McGuinness):  No. Why would Insurance Ireland not publish it? It is anti-fraud and we want to know about it.

Mr. Michael Horan: Yes, but it is not publishable because it is a database of a couple of million claims records.

Chairman (Deputy John McGuinness):  Why is the person in question paying €10,000 for it?

Mr. Michael Horan: It is a useful anti-fraud tool.

Mr. Kevin Thompson: For him.

Mr. Michael Horan: If I receive a claim as an insurance company-----

Chairman (Deputy John McGuinness):  Would it not be a useful tool for other operators that might want to come into the market?

Mr. Michael Horan: Yes. It is open for them to come in and-----

Chairman (Deputy John McGuinness):  And pay Insurance Ireland the €10,000.

Mr. Michael Horan: We are a non-profit organisation. The money we take in services the cost of providing this service.

Chairman (Deputy John McGuinness):  That is fine. What the witnesses are telling me now is that, apart from the published information throughCBI, there is other information that is helpful to the marketplace in terms of insurance houses and big companies. If they were to pay Insurance Ireland €10,000, it would make that information available to them. Is that right or wrong?

Mr. Michael Horan: We have described the data that go to CBI. In addition to that, there are data, specifically InsuranceLink, which is the anti-fraud claims-sharing database that goes right back to 1987. That means that if an insurance company registers a claim, it puts the claim into InsuranceLink and it can see whether there is any match. In other words, if a company puts in "John Smith" and his claim, it might see three matches coming back. It does not mean that John Smith is making a fraudulent claim. The company might take a closer look but there could be a totally innocent explanation. He might have had two or three claims. InsuranceLink enables insurance companies to focus in on some claims because they cannot investigate every single claim they receive from start to finish.

Chairman (Deputy John McGuinness):  Is that the only add-on piece of information this man is getting for his €10,000?

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Mr. Kevin Thompson: We need to be clear on this. With regard to paying for associate membership, we are hung up on data and what he gets for his €10,000. He gets many other services as well. We run events and seminars-----

Chairman (Deputy John McGuinness):     Does he receive extra data for his €10,000?

Mr. Kevin Thompson: He receives access to the claims database.

Chairman (Deputy John McGuinness):  The witness is not answering the question. Insurance Ireland sends its data to CBI. I understand all that. Is there extra information that is available to Insurance Ireland that it makes available to the likes of the client that we had this morning that it does not put into the public domain but that may be of interest to companies coming into the market? Is that the case?

Mr. Kevin Thompson: Correct. When he joins Insurance Ireland, he receives access to InsuranceLink, supported by an outside vendor. That allows him to combat fraud. He may decide that is of value to him, but equally there are companies that may decide it is not of value to them and they do not want to enter. There are niche players. We have many foreign insurers that write business on a freedom of services basis, in that they are not based here and write from London or wherever. They may equally decide that the service is of no use to them. Therefore, it is up to the individual person. To get to the nub of the question, do we restrict anybody or act as an impediment to anybody coming into the market? No, we do not. I believe that is the most important point.

Chairman (Deputy John McGuinness):  I believe the most important point is this, Mr. Thompson. I now believe, from this exchange, that Insurance Ireland has information that it does not share and that it should share to enable Ireland Inc. to have a competitive insurance sector. That is what I now believe from this exchange.

Senator Rose Conway-Walsh: I believe it is astonishing that that information has not been shared before now. There were probably 13 different bodies in here before Insurance Ireland. Consistency is a word that the witnesses said was very important in the insurance industry. Consistently, those bodies have told us that the information they need is not being provided and is being kept hidden from them. It is for companies trying to enter the market to say whether the lack of data is an impediment to them or not. We need to get to the bottom of this. However, I am satisfied leaving here today that the witnesses are saying that absolutely any information that CBI wants in regard to the insurance industry will be provided by Insurance Ireland in a timely and up-to-date manner. That should at least give us something to work on because so far, we have been unable to do the analysis. It is important that it is the non-interpreted data and the raw data that are provided. I believe we have made some progress even in the past 20 minutes in this regard. It is unbelievable that it has not been done to date. Either CBI or other bodies have not requested it, or it has not been provided. Obviously, the information is there. If I was running a small corner business, I would know how many of each item I was selling and how much profit I was making from each one. I would have to know that. It is hard to believe that an industry the size of the insurance industry does not have all of this information to be able to plan forward and, as the Chairman said, to be able to project increases for the next year and the year after. I see that even FBD are looking forward to a profitable 2017. The other insurance companies' profits were up 39%. It is a very profitable industry and we are told that it is not. It is more profitable than the UK. There are profits to be made here. Competitors do want to enter the market and we

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are trying to examine why they are not. What they are telling us is that the data are not available. That is the crux of what we are trying to get at. If we have truth and transparency, I believe we can get to the bottom of this with all of us working collectively.

Mr. Kevin Thompson: I agree with the Senator. I wish to clarify one point about InsuranceLink because I believe it is important. I note the Chairman's concern about the €10,000 to access it. However, our database is also linked to another database within risk intelligence whereby companies that are non-members and self-insured - they may be big State bodies, semi-State bodies or big companies that insure their own risk - enter their claims into a database which cross-matches with ours. There are companies and self-insurers that are not members of Insurance Ireland that have access to InsuranceLink. I want to have that on the record.

Chairman (Deputy John McGuinness): There may be issues that we would like to address again. I would hope that if that were to be the case, the representatives of Insurance Ireland would come before us again to bring this to a head.

Senator Rose Conway-Walsh: I just want to knock on the head the idea that the Book of Quantum is internationally benchmarked as well as the whole cash-for-care model. We cannot compare different countries in terms of the costs of medical expenses. Therefore, how can it be benchmarked? Should we ignore the fact that British health care is free?  Our Constitution will not allow a cash for care model in any case. Will Insurance Ireland's out of court settlements be used by the Book as a reference point, or is that something it just wants other people to do?

Mr. Kevin Thompson: There may be merit in the care not cash system and we are starting to evaluate it. We know it is in place in Canada. However, it is very early. Much more work has to be done in that sphere.

Senator Rose Conway-Walsh:  Could Insurance Ireland use the evidence from the UK to say it has not worked? In one sense, it is a red herring to lead us down another route. Constitutionally, it will be impossible.

Mr. Kevin Thompson: Neither Mr. Horan nor I are qualified to comment on the Constitutional aspects. From memory, care not cash has not been enacted in the UK yet. The policy decision has been made, but it has not been enacted. What we are saying is that it is probably worth looking at at some point but I will come back to my colleague's comments earlier. When one looks at something like PIAB and how we can get more claims through it, there are probably far more systems issues we could address to bring quicker solutions to the table rather than care not cash, which probably needs to be evaluated further.

Chairman (Deputy John McGuinness):  We may return to the matter in the context of our report and what the CBI might say. The Irish Road Haulage Association stated it had a public forum for its members and a question was raised by the President in respect of insurance for trucks that were abroad 90% of the time and their insurance premiums, but Insurance Ireland did not answer.

Mr. Kevin Thompson: I have no record of that but we can look at it.

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Chairman (Deputy John McGuinness):  We will write to Mr. Thompson in relation to some of the queries. I just wanted to put that on the record and we will check with him again.

Senator Gerry Horkan: It would be of benefit to bring Insurance Ireland back at some point. At the end of this session, we still do not have any clear answer as to why we have had a 70% increase in premiums over two years. We saw how much extra we are getting. There is about a 25% increase in claims payouts. Mr. Thompson said they are already prepared for Solvency II and investment income is relatively small in the context of the premiums being charged. We still do not have an answer. It is grand to say that we do not have the data and the figures, but it is very hard to believe that a 70% increase is justified.

Chairman (Deputy John McGuinness):  Yes. We will return to it. We will now adjourn until 9 a.m. on 29 September, when we will meet the Ministers.

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