Insurance industry ‘fundamentally dishonest’ about compo culture

“The insurance industry is being fundamentally dishonest by claiming that our compo culture is to blame for a rise in insurance premiums.” These words of Mr Justice Kevin Cross, who oversees the personal-injury list in the High Court, were quoted recently in The Sunday Business Post.

He added: “The word of a vested interest group has been trotted out without adequate scrutiny by some commentators.”

The judge’s remarks were subsequently debated on RTÉ Radio 1’s Today with Seán O’Rourke on 29 October. O’Rourke refereed the exchanges between the Law Society’s director general Ken Murphy and Insurance Ireland’s Declan Jackson.

Murphy unreservedly endorsed Judge Cross’s comments. He added that claiming that compo culture and fraudulent claims were responsible for the rise in insurance premiums was “just incredible”.

Forensic destruction

He commented that others also held similar views: “We had Pearse Doherty from Sinn Féin in a very forensic cross-examination of insurance CEOs at the Oireachtas Finance Committee in July. I believe that the video of that has been viewed half a million times.

He forensically destroyed the credibility of the argument that was being put forward in relation to fraudulent claims.”

Murphy added that the Minister for Justice Charlie Flanagan had also been highly sceptical of the insurance industry’s assertions. In addition, Minister Michael D’Arcy had talked about his low level of trust in insurance companies.

“There’s a lot of criticism out there,” Murphy pointed out, “and not just from politicians.”

He referred to three major inquiries into the insurance industry in Ireland at present: the European Commission is investigating suspected breaches of EU competition law; the Competition and Consumer Protection Commission is investigating other suspected anti-competitive behaviour; and, most recently, the Central Bank has been investigating differential pricing.

“There are many questions that, frankly, most commentators who have investigated the matter, don’t believe the insurance industry is answering – or capable of answering,” Murphy said.

Insurance exaggeration

He pointed out that Pearse Doherty’s cross-examination related to the insurers’ own statistics on fraudulent claims. The insurers had initially told the Oireachtas that they believed 20% of claims were fraudulent. It turned out, based on the insurers’ own figures, that only 1% were being reported as suspected fraud to the authorities.

“Now, any amount of fraudulent claims is too much, and fraudulent claimants, as far as we’re concerned, should go to jail,” Murphy asserted. “But really, you sometimes wonder who is making the exaggerated claims in this whole situation.

“If there is to be a reduction in the level of awards being paid to claimants, to the innocent victims of accidents, that reduction should not simply inflate the already enormous profits of the insurance industry. It should not go into the insurers’ pockets. It should go to premium payers.

“We have to see all of this in the context of the insurance industry profits, based on the figures published last June,” Murphy continued. “The 17 general insurers in the Irish market made operating profits of a whopping €227 million in 2017, the latest date for which overall data in the sector is available.”

According to Central Statistics Office figures for the years 2013 to 2016, the level of increase in motor insurance premiums was an astonishing 70%. “All this at a time when awards and levels of damages are actually falling. It’s incredible,” the director general said.

Silent voice

“There’s a voice which regrettably is never heard in this utterly one-sided debate,” the director general told Sean O’Rourke towards the end of the interview. “The Law Society believes that it’s perfectly legitimate to urge that the perspective of accident victims should be heard. The innocent victims of the negligence of others have no organised voice, unlike other powerful, vested interests.

“There are already massive profits being made in the insurance industry. Premiums are going through the roof,” he said, “and now they want to reduce the level of awards to victims. There is no justification for that.”