Insurance has 'a major impact' on profits

Almost 50 per cent of Irish companies now say the spiraling cost of insurance cover in the Republic has become so grave that it is having a "major impact" on their profitability, according to a new survey by employers' group IBEC. One in three firms say higher premiums are forcing them to cut back on recruitment.

IBEC's director of enterprise, Mr Brendan Butler, said companies are being "hammered" not only by the rising cost of employers' liability and public liability policies but by commercial vehicle, fleet and property insurance.

He said Irish industry cannot afford to wait 12 months for the planned Personal Injuries Assessment Board (PIAB) to become operational. At the very least, a system to bring consistency to compensation award amounts needed to be introduced as quickly as possible, he said.

"They have that kind of system in other countries so there is no reason why it could not be introduced here quickly," he said. "The courts system and the insurance companies would have all the data needed to establish set compensation amounts for set injuries. All that is needed is desk research".

IBEC believes the board, which has been approved by the Tánaiste, Ms Harney, should be introduced as soon as possible and said it believed it "should reduce legal costs, which currently account for up to 50 per cent of awards for damages".

The report published yesterday also calls for a penalty system to be introduced to punish those who make "spurious and exaggerated claims". It says "certain advertising practices by a growing number of solicitors, which currently fuel our compensation culture" should be outlawed.

The survey concludes personal injury compensation now costs over €2 billion annually with more than €600 million of that going in legal costs.

In June and July, IBEC surveyed 207 companies, which collectively employ 78,500 workers. Of those companies, 91 per cent said higher insurance costs were now impacting on their profitability with 48 per cent saying that impact was "major". Forty-seven per cent said the increased cost of insurance was causing them "trading difficulties" while 18 per cent defined those trading difficulties as "major".

The survey found the cost of employer and public liability had doubled between 2000 and 2002. Commercial vehicle and fleet insurance rose by an average of 42 per cent over the same period while property insurance costs as a percentage of property values have increased by almost 80 per cent on average since 1999.

The cost of insurance now accounts for over 5 per cent of payroll for small and medium sized enterprises and 3 per cent for larger companies.

The IBEC report reveals that premiums have risen sharply at a time when the rate of accidents at surveyed firms has actually fallen. "The accident rate ... as a percentage of employees, based on this survey, is 4.2," IBEC noted. "This, when compared with earlier surveys, was significantly lower. A similar survey in 2000 indicated a rate of 6.28 per cent."

Sixty per cent of companies surveyed said they had experienced difficulty obtaining quotes from Irish and British insurers.

The IBEC report contained a lengthy section of comments from some of the companies regarding their difficulties in this area. One firm commented: "No one willing to quote - no reason given." Another said they believed there was an insurance "cartel in operation" while a third unnamed firm said there were "too few underwriters in the market".

The Government has said it will implement the 67 key recommendations of the recent Motor Insurance Advisory Board report on driving down the cost of motor insurance.