Opinion: It’s time for the insurance industry to honour its promise on lowering premiums

Jason O’Sullivan, solicitor and public affairs consultant at J.O.S Solicitors, calls on Irish insurers to make good on their promises to lower premiums.

The lobbying and public affairs industry in Ireland plays an important role in helping to shape public policy and legislative agendas. It is an important function for both commercial and not-for-profit entities to have their voices heard on topics of importance aligned with strategic goals and objectives.

Too often, political decisions of lasting impact on citizens can be rationalised as mere “parish pump” politics or based on party pact allegiances, while the commercial influence of lobbying can be deemed marginal. The latter is not the case; all TDs within Leinster House are lobbied on a daily basis, whether for commercial or societal objectives. It seems fair to say, however, that the industries who have the deeper pockets to fund such activities usually achieve their desired objectives.

Take, for example, the insurance industry in Ireland. Through its relentless lobbying of government in recent years, it has managed to influence a significant piece of legislative policy that will significantly contribute to increased profits for the sector and its biggest players.

The new Judicial Council guidelines for personal injuries came into effect on 24th April this year to much furore. It was heralded as a new era for businesses that would directly lead to decreased insurance premiums, whilst lowering personal injury compensation in line with UK levels.

These guidelines were introduced at a time when the total number of liability-related personal injury claims had fallen by 47 per cent over the previous 11 years between the period 2009-2019, and by a further 16 per cent in 2020.

The Alliance for Insurance Reform carried out a survey in April this year to coincide with the introduction of these new guidelines. The survey found that premiums for homecare business had doubled on renewal, while nursing homes were seeing an increase on average of 35 per cent. Hospitality experienced on average a nine per cent increase despite the sector seeing little activity due to the pandemic.

The latest data on the effects of the new guidelines were released in October this year and found that the value of average awards for personal injuries made by the Personal Injuries Assessment Board (PIAB) had fallen by 40 per cent from last year’s levels.

It was announced last week by the Central Bank in its industry report that insurance companies saw combined profits up to €163 million last year, a 10-year-high and 12 per cent increase.

Given this backdrop of increased profits and a new regime for personal injury damages, the insurance companies have largely negated on their pledge to lower premiums.

The only premiums that have seen a slight decrease is car insurance. Accordingly to the Central Bank report, driver’s premiums fell by seven per cent last year, albeit largely as a result of the pandemic, given decreased driving activity. If one accounts however, for the rebate to drivers, premiums were only down by a mere four per cent.

Business advocates such as ISME warned last week in response to the Central Bank report that many businesses are currently facing a “take-it-or-leave-it” premium increase for 2022, in respect to employers’ liability and public liability insurance for business, sporting and charitable bodies.

It was argued by the Law Society of Ireland, the representative body for solicitors at the time the new guidelines were being debated, that injury victims were entitled to be treated fairly by the courts. It also argued that there was “absolutely no evidence” that reducing damages in such claims would result in lower premiums. And that insurance premiums in the UK, where damages have always been much lower, have on average been consistently higher when compared to Ireland.

The Lobbying.ie website came into effect in January 2016 and is the central register for keeping account of all lobbying activities in Ireland. A mere glimpse of this register gives an insight into the sheer level of lobbying the insurance industry has undertaken to change policy on reducing personal injury damages.

Recent records show Insurance Ireland had been the most active sector lobbyist on the registrar on this policy topic in recent years, with close to 20 entries since 2018. Insurance Ireland is an association of companies that cover over 90 per cent of the Irish motor vehicle insurance market and its members include FBD Insurance, Aviva, RSA, Allianz, AIG, Liberty Insurance and Zurich, all of whom are separately registered as lobbying organisations in their own right.

It is worth recalling that the European Commission declared in June this year that Insurance Ireland breached EU antitrust rules by restricting competition in the car insurance market. The preliminary findings came after the commission opened a formal antitrust investigation into the organisation in May 2019 to assess whether it was operating a cartel. This investigation has not yet finished, but its very existence does place serious doubts on how competitive the insurance industry is in Ireland and in turn how fair Irish customers been treated.

Ultimately, the insurance industry has been more then effective in achieving its lobbying goals, which has worked in their favour and will lead to increased annual profits. The question remains though, whether they will pass on the fiscal benefits to their customers in kind, who are paying some of the highest premiums in Europe as annually reported? Only time will tell.

The Law Society forewarned to the government last year that “the effect of reducing damages will merely be to take from the pockets of injured victims of negligence and place into the pockets of an increasingly profitable insurance industry”.

There is a duty on the insurance industry to step up to the mark and keep its grandiose promises of lowering premiums on foot of these new guidelines. Any failure to do so will not only be a betrayal to their customers, but an injustice to all citizens and in particular to the victims of personal injury.