Bill Cremin, the owner of a company that runs winter season ice rinks in Dublin and Cork, is phlegmatic about the coronavirus pandemic killing off any prospect of opening this winter.
“To be fair, Government Covid-19 schemes like the wage subsidies and CRSS [the Covid-19 Restrictions Support Scheme] have helped us to keep going with a small full-time staff,” he says.
However, the Corkman is questioning whether his Cool Running Events family business will be able to open rinks next Christmas if his insurance premiums for a three-month season keep rising. Premiums have almost trebled over four years to €162,000 to cover the opening of four locations in 2019.
Last week, the Court of Appeal upheld a €65,000 award to 15-year-old girl injured five years ago at one of Mr Cremin’s rinks in Blanchardstown Shopping Centre and who retains some scarring. Legal costs, which will fall on Cool Running Events’s insurer of the time and will be a consideration the next time he seeks coverage, will amount to a multiple of the award.
“As sure as night follows day, people are going to fall when they step on to an ice rink – and we warn people when they are buying tickets online and with notices placed around our rinks,” says Mr Cremin.
"But we've seen a tendency in the last number of years of solicitors taking cases to the High Court for relatively minor injuries. The maximum you can get for a catastrophic injury in Ireland is €500,000. Yet in this case, the courts have determined that a minor scar is worth almost 15 per cent of that.
“I’m at the end of my tether,” he says. “Covid aside, I’d say the prospects of me opening next winter with the insurance costs I’m facing are slim to none.”
The Government rolled out its latest plan to bring down insurance costs in Ireland in December following almost decade of volatility in claims and premiums. The 66-point agenda includes efforts to tackle insurance fraud and exaggerated claims by making perjury easier to prosecute and plans to rebalance the duty of care of businesses, clubs and community groups against the personal responsibility of consumers.
However, there is little doubt among insurers, businesses and consumer representative bodies alike that a group of judges, meeting virtually at 10:30am on Friday, hold the key to the future of insurance costs in the Republic.
The Judicial Council, set up in late 2019 and comprising 166 members, will consider draft guidelines submitted by one of its key committees in December that will set out the level of damages courts can award in personal injuries cases.
The council will publish the measures when they are adopted, “whether on the 5th of February or a later date”, according to Kevin O’Neill, interim secretary to the body, who added that it will also include a “detailed report explaining the approach and rationale”. He declined to comment further.
The guidelines, set to come into force by the end of July, will replace the Personal Injuries Assessment Board's (PIAB) book of quantum as a benchmark for awards. It follows a government-commissioned report, completed by former High Court president Nicholas Kearns in 2018, which found that whiplash-type soft-tissue damage awards in Ireland are typically 4.4 times higher than in the UK for broadly similar injuries.
He noted at the time that the Republic has “one of the most generous compensation systems in Europe”.
"The Judicial Council guidelines are central to insurance reform. They're at the centre and everything else orbits around it," said Peter Boland, director of the Alliance for Insurance Reform, which represents 39 business and civic groups. He is calling for the council to have regard to the "common good in their deliberations and reduce awards for minor personal injuries by 80 per cent".
PIAB’s book of quantum says that minor injury awards to individuals who are substantially recovered should be up to €15,700, rising to as much as €52,200 for soft-tissue injury “resulting in serious limitation of movement, recurring pain, stiffness and discomfort and the possible need for surgery or increased vulnerability to further trauma”.
While courts are required to have regard to the book of quantum in personal injuries cases, Mr Justice Seamus Noonan, a judge with the Court of Appeal and member of the Judicial Council's personal injuries committee, said last year that it is seldom referred to by lawyers and judges in court cases.
The Court of Appeal, set up in 2014, has pushed back on many personal injuries awards granted by the High Court.
Lack of consistency
But business groups, insurers and PIAB argue that a lack of consistency from judge to judge continues to make litigation a bet worth taking.
“General damages for minor, but fully recovered, injuries are at the heart of the problem,” said Mr Boland. “The issue of fraud and exaggeration, which may be overstated at times, wouldn’t really be a problem if damages weren’t so high.”
Moyagh Murdock, who moved from the Road Safety Authority (RSA) to become chief executive of Insurance Ireland last year, said a move by the Judicial Council to bring about a "meaningful reduction in awards" will be welcomed.
“It will bring certainty and consistency to the market and assist underwriters and insurers,” she said. “As one of my member CEOs said to me recently: ‘If we want European premiums, we need European award sizes’.”
She said her industry group's members "can't get away from" commitments made to the Oireachtas finance committee in 2019 that they will pass on savings to customers if the council reduces awards guidelines significantly. Top executives from general insurers including FBD, Allianz, Axa, Aviva and Zurich made such pledges at the time.
A Central Bank report, published last November, on the motor insurance industry found that legal bills accounted for a third of the average €71,050 settlement of litigated motor injury cases in the Republic in the five years to 2019. The average compensation of all claims amounted to €46,214, double the average of cases settled through PIAB.
Examining claims for less than €100,000 – which make up 94 per cent of claimants – the Central Bank found that the average compensation for a litigated case was €23,572, only marginally higher than the €22,319 amount for a case that was dealt with by PIAB. However, the average legal cost of a claim pursued through the courts was €14,949, compared to €514 for one that went through PIAB.
While the establishment of PIAB in 2004 initially led to material insurance cost reductions, the benefits have been eroded over time as more claimants rejected its recommended awards and chose to pursue the more adversarial route.
Irish motorists faced an average 66 per cent hike in premiums from a low point of €431 in the final three months of 2013 to €714 in the second quarter of 2018 before they dropped 9 per cent to €653 in late 2019. That suggests that the cycle peaked a little over two years ago, according to the Central Bank.
Central Statistics Office (CSO) figures say motor coverage costs have fallen 31 per cent from their mid-2016 peak. The disparity reflects the fact that the Central Bank uses a much wider sample and an element of time lag, with the CSO figures running to December 2020.
Insurers operating in the Republic saw profits on motor coverage lines jump 9 per cent to €142 million in 2019, as the loss ratio hovered around the lowest levels of the past decade and the industry continued to make up for massive losses around the middle of the last decade.
An industry with a history of players chasing market share at all costs and perennial failures in pricing risk properly has seen – in the last 11 years alone – Quinn Insurance imploding after leading industry premiums down to a dangerously low level; RSA Insurance Ireland relying on a major bailout from its UK parent after setting aside too little for large claims; FBD needing a rescue investment from a Canadian group; and Malta-based Setanta Insurance collapsing with about €90 million of Irish claims outstanding.
While motor coverage costs have fallen in recent years, public liability and employer liability premiums have come more into focus, even if data on these segments of the market is limited.
"Both these markets have been difficult for at least 10 years. From 2012, there was very significant hardening in premiums," said Conor Brennan, chief executive of Arachas, the largest insurance broker in the State. "That's probably tapered off in the last year to 18 months. But pricing in the leisure sector and anything to do with high footfall coupled with high awards remains tricky."
The Central Bank plans to start publishing an annual report on employer and public liability from the first half of this year, which will improve transparency for consumers and insurers alike.
“Employer liability is an area that has been loss-making consistently over the last number of years for insurers, and quite significantly so. Public liability is slightly less loss-making, but it’s a mixed bag,” according to Ms Murdock.
Minister of State at the Department of Finance Seán Fleming said that, with judges and PIAB working off personal injury awards guidelines signed off on by the judiciary in future, fewer claimants will bypass the State-run injuries board and resort to the courts.
“Once the courts have set the levels, we want PIAB to be the only show in town,” he said, adding that the organisation will start a public consultation process next month on proposed changes to strengthen its role. “I don’t want to pre-empt that but the outcome will require some legislative changes.”
The Judicial Council meeting takes place on a morning when the High Court is due to rule on a major insurance case brought on by the coronavirus pandemic, involving four pub groups that have challenged FBD’s refusal last year to cover losses caused by business interruption as a result of the crisis.
The test cases have ramifications for more than 1,000 Irish pubs and bars that are affected by the dispute which arose after the insurer refused payouts when the pandemic resulted in the temporary closure of businesses in mid-March 2020.
FBD’s pub policy, dating back three decades, covers losses where a premises is closed under the orders of a local or government authority in the event of “outbreaks of contagious or infectious diseases on the premises or within 25 miles of the same”. FBD has set aside €30 million of provisions to deal with a potential fallout from the pubs case.
Industry under fire
The industry remains in the cross-hairs of regulators on other fronts.
The Central Bank moved in late 2019 to start a review of differential, or dual, pricing in the insurance market where customers with a similar risk profile are charged different premiums. It made an initial finding in September that the practice was more common in the motor and home insurance markets than coverage providers had admitted.
It said in an interim report on the topic in December that homeowners sticking with the same provider typically face a “loyalty premium” of €161 a year.
The Government, which pledged on its formation in June to work to stamp out dual pricing in the insurance market, is waiting for the Central Bank to publish a final report this year before taking action.
Meanwhile, the Competition and Consumer Protection Commission said last September that it has “reasonable grounds” to suspect that a number of Irish motor insurers broke antitrust laws, almost four years after it began an investigation into whether firms were engaging in signalling premium prices to rivals between 2015 and 2016.
Insurers involved in the ongoing investigation have denied the claims and vowed to defend their positions.
Back in Cork, Mr Cremin is sceptical about whether the Judicial Council guidelines will be a game-changer for insurance costs.
“My insurance company took the [Blanchardstown] case all the way to the Court of Appeals because it felt the award was completely at odds with the injury – and lost,” he said. “We have all this talk about reform, but is there really a mindset in the judiciary to bring about real change in the level of awards?”