Cork companies say soaring insurance premiums are unsustainable

AS insurance premiums continue to rise for businesses, Ann Murphy takes a look at the areas being hit and the possible solutions being considered. 
Cork companies say soaring insurance premiums are unsustainable

Michael and Lisa O’Callaghan, owners of Kool Kidz Korner in Monkstown, who have seen their insurance costs jump from €9,900 to €18,500 in the space of a year. Picture: Jim Coughlan

THE future of businesses including pubs, shops, and hotels are being put at risk by soaring insurance premiums and excesses.

That is according to a range of businesspeople in Cork who form part of the Alliance for Insurance Reform, which is currently lobbying for reform of the insurance industry.

Among them is hotelier Michael Magner of the Vienna Woods Hotel in Glanmire. Mr Magner is the head of the insurance committee of the Irish Hotel Federation.

He said that 89% of hotels in the country have experienced an increase in premiums and says that the cost of insurance for the Vienna Woods rose from €86,000 to €156,000 in the space of three years.

He said that hotels are now being hit with large excesses by insurers, ranging from €10,000 to €20,000.

“The situation is unsustainable,” he told The Echo. “There are businesses that cannot continue trading unless something is done.”

According to IHF figures, 75% of Irish hotels had a claim against them in the last 12 months, with the average cost of a settlement being €38,500.

Slips, trips, and falls make up the bulk of claims against many businesses.

At present, businesses and the Alliance for Insurance Reform are adamant that the first area of reform needs to be the establishment of a Garda unit to tackle the area of fraudulent insurance claims.

While keen to stress that there are genuine claims being made, Peter Boland of the Alliance for Insurance Reform said that there are situations where claims are being exaggerated.

Mr Magner agrees, declaring that exaggerated claims are throwing the hotel industry into chaos.

Michael Magner, owner of the Vienna Woods Country House Hotel, says the hotel industry is being hit with ‘unsustainable’ hikes in insurance.
Michael Magner, owner of the Vienna Woods Country House Hotel, says the hotel industry is being hit with ‘unsustainable’ hikes in insurance.

In the Dáil, the Minister with responsibility for the insurance sector, Michael Darcy, said he had met with the Garda Commissioner, Drew Harris, in December to raise the possibility of a specialist unit being set up within the Garda force which could be funded by the insurance industry.

However, Minister Darcy said: “The Commissioner concluded he is not in a position to approve such an initiative as he believes An Garda Síochána should only be funded from the Exchequer.

“I pushed strongly for the establishment of an insurance fraud section within the Garda National Economic Crime Bureau, GNECB.

“I have requested that this be considered and it is being considered.”

Mr Magner claimed that hoteliers are holding off on expansion plans because insurance costs are so high. He added that jobs are not being created in the industry because of insurance costs. This is echoed by Michael O’Donovan of the Castle Inn on South Main Street, who is the chairman of the Cork branch of the Vintners Federation.

He said that staffing costs rank at the top of the outgoings of publicans, followed now by insurance premiums.

He said this should not be the case, adding that expenses such as the cost of the product, and rates, should rank higher than insurance.

He added that insurance costs and tight drink-driving legislation are now combining to make trading more difficult for publicans.

He said that he knows of one pub which closed in recent years where insurance was a factor.

Mr O’Donovan said it is now becoming tougher for some businesses to move to a new insurance company because of restrictions they put in place in order to provide cover.

The Circus Factory’s Cormac Mohally also highlights this issue, pointing out that his circus training business was refused insurance for aerial activities and any activities taking place over 1.5m above the floor.

The retail industry is also being hit, with one retailer saying that his busy shop in the outer Cork city environs has to pay an insurance premium of €27,000, compared with just €7,800 four years ago.

In those four years, the business has had a claim a year made against it and all have now been settled.

Peter Boland of the Alliance for Insurance Reform said that anywhere there is a public footfall is currently experiencing high insurance rates, including creches, shops, pubs, and activity centres.

In many cases, insurance is being provided by companies based in the UK.

In recent days, The Echo highlighted one activity centre in Ringaskiddy — Kool Kidz Korner. The owners have experienced a jump in insurance costs from €9,900 last year to €18,500 this year.

Another business — Chuckies in Togher — experienced a €10,000 jump in insurance costs last year and cannot get cover this year by the same company, while the West Cork Secret activity centre in Kilbrittain has seen insurance costs rise from €7,000 to €25,000.

This case was highlighted in the Dáil by Fianna Fáil finance spokesman Michael McGrath.

He stated: “Unless there is a serious intervention by Government, we are looking at wholesale closures across sectors that have a large amount of public footfall in their business.

“The truth is there seems to be no deterrent for fraudulent or exaggerated claims, so fraudsters are willing to take a chance.

“We need to get tough with those who are scamming the system and we need far more transparency and consistency around award levels for legitimate claims.”

Justice Minister planning review group to look at personal injury payouts

THE Minister for Justice Charlie Flanagan is planning to set up a group to review the payouts in personal injury cases.

The plan is to include judges, members of the Personal Injuries Assessment Board and the Department of Justice in the group. The aim of the group will be to examine the area of personal injuries to establish if the guideline award levels could be reduced.

Justice Minister Charlie Flanagan is planning a review of personal injury payouts. Photo: Gareth Chaney Collins
Justice Minister Charlie Flanagan is planning a review of personal injury payouts. Photo: Gareth Chaney Collins

Guidelines are contained in the Book of Quantum, which has been revised every three years since it was set up. It is due for revision again in November this year.

The group being set up by Mr Flanagan is in the pipeline because efforts have so far failed to introduce the proposed Judicial Council Bill.

“The proposed Judicial Council Bill will provide for the establishment of a Judicial Council and Board of that Council to promote excellence and high standards of conduct by judges,” the Department of Justice outlined.

The bill is due to be moved in the Seanad shortly, according to the Minister with responsibility for Insurance, Michael Darcy.

But Mr Darcy believes the insurance industry needs to move to help reduce the costs of insurance.

“I also believe that the insurance industry needs to reflect on its current position, which in a period of buoyant profitability — three major firms made combined profits of almost €200 million last year — seems to involve them increasing premiums very significantly in certain sectors of the market, or else withdrawing from these markets altogether,” he said recently in the Dáil. “In my view, insurers are being selective about the risks they will cover and are picking, choosing and pricing in such a way as to maximise their profits at the expense of small businesses in particular.”

Last year, a report published by the Personal Injuries Commission was headed up by former High Court judge Nicholas Kearns.

“The level of general damages for soft-tissue (‘whiplash’) injuries in this jurisdiction runs at a multiple of 4.4 times to that of our nearest neighbours England and Wales,” Mr Kearns wrote in his introduction to the report.

“While damages for personal injury in Ireland have historically been greater than those in the UK, the multiple which has now emerged is such as to confirm publicly expressed concerns about such levels of award and the effect they may be having on motorists and businesses who require insurance cover.”

Peter Boland of the Alliance for Insurance Reform said that the situation regarding insurance is leading to increased costs for bigger companies, as well as a paring back of staff levels and delaying expansion plans.

In relation to smaller businesses, Mr Boland said high insurance costs are resulting in some business owners having to pay insurance out of their own wages.

And he added that voluntary and community organisations are also being hit with rising insurance, with some having to pay premiums with grants paid for other activities.

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