Month: January 2022

Taxpayers lose as insurers keep millions in state funds cut from Covid payouts

Government abandons promise to pursue firms for the value of any deductions made

https://www.businesspost.ie/insurance/taxpayers-lose-as-insurers-keep-millions-in-state-funds-cut-from-covid-payouts-bba7b1c9

By Peter O’Dwyer

Insurance companies are set to pocket millions of euro of taxpayers’ money intended to support businesses through the Covid-19 pandemic, as the government has abandoned plans to pursue them for repayments.

The Business Post revealed last year that a number of insurers had begun stripping thousands of euro from policyholders’ awards by deducting the value of state supports such as wage schemes and rates waivers, in a move which effectively used taxpayers’ money to subsidise their costs.

In response, government ministers warned insurers they would be pursued for the value of any deductions made from the Covid-19 related payouts to their customers.

Seán Fleming, the Junior Minister at the Department of Finance, said he was putting insurers “on notice” that the government was responding to the issue, and added that they would not “be let off the hook”.

Speaking to the Business Post this weekend, however, Fleming confirmed that insurers would not be compelled to repay the value of the supports, since he had been advised it was not legally possible to retrospectively recoup the funds.

“We got legal advice from within the Department [of Finance] . . . It became fairly clear pretty quickly from all advice that you couldn’t make it retrospective, despite what we would like to see happen, and I would say this is a lesson learned from Covid. We’ve learned something on how to be better prepared if any equivalent issue happened in any particular sector,” Fleming said.

He said that in addition to subsidising the vast majority of businesses during the pandemic to keep them afloat, the state had effectively subsidised the insurance industry too, due to the firms’ stance on the issue.

The government last year pumped €13.5 billion into supporting businesses and propping up the economy as the Covid-19 pandemic continued to curtail trading and devastate many firms.

Insurers have generally remained profitable throughout the pandemic, however, with data from the Central Bank for 2020 showing that insurance firms made a combined €163 million profit for the year.

While data for 2021 isn’t yet available, FBD, one of the insurers most exposed to pandemic-related payouts, reported a profit of €22 million for the first half of last year suggesting that the sector remained profitable.

Several business owners have told this newspaper that insurers were continuing to deduct the value of state supports provided to their firms over the last two years or so from compensation payments owed to them for losses stemming from the pandemic.

Almost 4,000 business interruption (BI) claims had been fully settled as of the end of October with more than 850 more interim payments having been made. Insurers had paid out more than €146 million to BI policyholders at that stage.

The Business Post has also seen evidence of at least one insurer seeking to deduct the value of pandemic unemployment payments (PUP) made to the directors of a company from the compensation owed to their business.

The value of other supports including the Temporary Wage Support Scheme (TWSS) and its replacement the Employment Wage Support Scheme, the Covid Restrictions Support Scheme (CRSS) and commercial rates waivers afforded to struggling businesses have also been deducted from awards.

The government intends to pass legislation through the Insurance (Miscellaneous Provisions) Bill, which is currently undergoing pre-legislative scrutiny, that would require the Central Bank to gather data on the number and value of such deductions made by insurers.

It would also compel insurers to notify consumers of any deductions made from insurance claims settlements that are due to state supports they have received. The government intends to have the bill progress through the Oireachtas as a priority.

A spokeswoman for the Department of Finance said it was not possible to estimate the value of deductions insurers had made or would make from pandemic-related payouts but sources had indicated it was likely to be in the tens of millions of euro.

“While such deductions may be lawful and in line with the principle of indemnity, the government was concerned that such behaviour could be seen as insurers in some way pocketing taxpayers’ money. This is why the new bill seeks to increase transparency in relation to such deductions,” she said.

“It is important to understand the extent of such deductions in the market on an annual basis, in order to enhance policymakers’ understanding of this matter in order to facilitate targeted, evidence-based measures, if needed in the future,” the spokeswoman said.

A spokeswoman for Insurance Ireland said any support received by policyholders reduced the losses they incurred and that the purpose of insurance cover was to “put the customer back into the same position as if the loss had not occurred”.

“In this situation, to reimburse the customer for elements that have already been compensated by the state would contravene this key principle of indemnity,” she said.

Insurance Ireland did not directly address queries on whether it was appropriate for its members to retain the equivalent value of the supports, however, and in doing so partly offset the cost of paying the compensation they owed policyholders for valid claims.

The lobby group said it was not aware of any request from government for its members to return the value of the supports to the state.

Fleming, however, said he had explicitly asked Insurance Ireland and the chief executives of the major insurers to do just that.

“Specifically, we did . . . but there wasn’t a legal mechanism to enforce that. We did request it but it didn’t happen – and so did the Central Bank, but that was [just] a request and there was no authority behind the request or no force of legislation,” he said.

Fleming invited the insurers to reconsider their position, saying he would “of course” like them to voluntarily refund the value of the supports they’d deducted from policyholders’ awards.

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

https://www.irishlegal.com/articles/opinion-its-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.

Jason O’Sullivan is a solicitor and public affairs consultant at J.O.S Solicitors.

Insurance chiefs promise Donohoe that premium costs will fall

by Charlie Weston for independent.ie

January 04 2022

Insurance companies have promised the finance minister that they will pass on savings to consumers from reforms in the sector.

Finance Minister Paschal Donohoe said he had met with the chief executives of major insurers here and they are committed to lowering premiums.

This is in response to a cut, agreed by judges, in recommended pay-outs for personal injuries claims.

It comes at a time when premiums here for consumers, businesses, community groups and charities continue to be among the highest in Europe.

Many firms are unable to get cover or have to pay inflated premiums as a number of insurers will no longer quote for liability insurance cover.

Some businesses said they have been forced to close because they could not find affordable cover.

Mr Donohoe said in a recent Dáil reply that insurance companies are now looking at providing cover in under-served sectors in light of the recent reforms.

But insurance reform campaigners have responded with scepticism to the minister’s comments.

Peter Boland of the Alliance for Insurance Reform said: “Left to their own devices, it is unlikely that insurers will reduce insurance premiums this year for the sectors worst hit by the current crisis.”

He said there is not enough competition in the market to compel them to do so.

“It will take a massive effort from Government, in terms of attracting additional capacity into the market, while putting significant pressure on incumbent insurers to share the benefits of the reforms implemented so far, to get any benefits for the voluntary groups and SMEs really struggling right now.”

Last year the judges in the State agreed to new personal injury guidelines which reduced the amount of money judges could award for minor claims such as whiplash or soft tissue damage.

However, the guidelines are set to be tested later this year after a number of challenges were lodged in the High Court.

Figures released by the State’s Personal Injuries Assessment Board last year showed that pay-outs had fallen sharply after the new rules were introduced, but there has been little change in premiums.

Minister Donohoe said in response to a Dáil question from a number of backbench Fianna Fail TDs that insurance companies had promised him they would pass on savings to customers.

“In recent weeks, as part of this work I met with the CEOs of the major insurance providers in Ireland. They have confirmed that they are committed to passing on savings from the guidelines, and other reforms, to customers,” he said.

He also said they “reiterated” their support for the reform agenda and that they are adhering to the guidelines in direct settlements with their clients.

Mr Donohoe said that he also made clear to the companies the need to expand their “risk appetite” for sectors that are experiencing issues with availability and affordability of cover.

High-risk businesses in the leisure sector are finding it particularly difficult to get affordable insurance cover, forcing some to close down.

He said some insurers had indicated to him that they were “actively considering” growing their business in certain areas.

The finance minister also hinted that a new player may enter the market this year.

“Separately, I also recently met with a leading international insurance brokerage firm, and discussed both the question of supply and the Irish market in general,” he said.

The finance minister said the Government would continue to implement the action plan for the sector to bring more choice to the market.

https://www.independent.ie/business/personal-finance/insurance/insurance-chiefs-promise-donohoe-that-premium-costs-will-fall-41208720.html