Sir, – Business owners and others need to understand some basic facts about the insurance business. Insurance is a business requiring investment like any other, and insurers are there to make money. If that is not what the people want, nationalise it. That will never happen because there are votes in kicking the industry but none if you are dealing with the same problems yourself.
Insurance companies operate under normal market conditions. Like every other market.
If insurers are losing money, they will either put up their prices, go out of business, or leave the market. When profits are being made that justify the investment, another insurer will enter the market and try and undercut the existing players, and that is competition.
Pricing the risk is the sum of the claims paid, the expenses of running the business and an addition of a reasonable profit margin. If premiums were calculated in this way and every insurer got it right, there would be the same price for the same risk from each insurer. That is not how it works. All insurers are entitled to make money or make mistakes and, as far as I understand the situation, that is the law.
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If mistakes are made when consumers are not charged enough, either the insurer will go out of business or put the premiums up. In either case, the consumer pays because levies have to be paid to cover losses where consumers were sold insurance that was too cheap. There is no sugar-coating it. Losses are real and someone has to pay or absorb them.
A businessman stated in your newspaper, "If there was half a billion in awards made this year the insurance industry would just add 10 per cent and pass the costs on to the consumer" ("Cabinet insurance group may present new options by end of year", Business, November 2nd). Is he suggesting that the industry should pay half a billion out and take 10 per cent off the costs and charge that? How long would anyone stay in business themselves if they were running their operation in the same way?
With regard to the common complaint from policyholders that claims are settled without going to court, the consumer knows why – it’s cheaper.
Insurers don’t leave the market because they are making too much money. If, for example, with some types of liability business where insurers were happy to charge between €3,000 and €5,000 about 10 or 15 years ago and won’t take €20,000 for the same risk now and prefer to withdraw from the market, it is not because they are making too much money.
There is no prize at the end of the week for the claims handler that has paid out the most that week or paid the biggest claim.
I have been an insurance broker for over 30 years and have spent five years in addition to that in claims.
To stay in business I need two things. I need clients to work for, and I need insurers with which I can place business and negotiate premiums on their behalf. If I don’t have a client with a viable business, I have nothing. If I don’t have an insurer to place business with, I have nothing.
Like every transaction, there has to be something in it for both parties. – Yours, etc,
FINTAN KEENAN,
Balbriggan,
Co Dublin.