By: Minister of State with responsibility for Financial Services, Credit Unions and Insurance; Seán Fleming
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Good morning everyone, it is a pleasure to join you at this event. I would like to thank Insurance Ireland and PwC for inviting me here today, as well as John (O’Leary – PwC) for his warm introduction.
At the outset I would also like to acknowledge the Leaders Survey – it makes for impressive reading, indicating that confidence remains high amongst Ireland’s insurance leaders, despite the uncertainties caused by an unstable geopolitical and economic environment.
It is noted that the insurance industry demonstrated its resilience and improved solvency position last year. Therefore, this sense of optimism in the industry is very welcome at present.
This is important, given that our economy and society are navigating their way through a challenging period imposed by global developments including rising inflation; cost pressures; energy security; supply chain disruption; and climate change risks.
It is my view that the insurance industry is well equipped to assist in tackling some of these issues. I believe it is important that everyone here play their role in making better outcomes for our customers and the economy.
A well-functioning insurance market is an integral part of any economy, providing essential products and services that enable businesses and individuals to protect against risk. This guarantee of protection in turn facilitates the smooth functioning of the economy and society as a whole.
The wider issues notwithstanding, I would like to briefly mention the international aspect of the industry, and then focus on the domestic insurance market developments, and what success looks like for customers here.
Ireland is recognised as a very significant global financial centre and indeed a leader in certain aspects within the EU financial system. Within this, the insurance industry is a successful and significant element of the International financial services landscape, which has evolved in its size and complexity in the recent years.
Ireland is the largest exporter of insurance services in the EU. This an impressive record, given the country’s size relative to many of our EU partners. It is a credit to the insurance industry here that we have such a dynamic and export-driven sector.
Importantly, insurers here employ more than 28,000 people directly, representing 1 in 4 jobs in the financial services sector. These are skilled, well-paid jobs with a strong regional spread. It is important that we continue to increase these numbers – I note that the survey indicated that six out of ten insurance leaders plan to increase headcount in the year ahead, which is to be welcomed.
I also acknowledge, that there are skill shortages issues. I am hopeful that the government’s recently updated Ireland for Finance strategy, together with industry efforts will be able to make a positive change in this regard.
While the international, export-orientated insurance industry here is undoubtedly a success, on the domestic front there have been a number of significant policy developments to which I would like to turn.
This government has prioritised insurance reform, with this work being driven on a “whole-of-government” basis. Our current focus is now firmly on completing the reform agenda within the next few months, particularly in principal action areas such as reforming duty of care legislation, and strengthening the Personal Injuries Assessment Board (PIAB).
The Cabinet Committee Sub-Group on Insurance Reform oversees the implementation of the ambitious Action Plan for Insurance Reform. I am pleased to report that the vast bulk of the actions are implemented and I expect the major outstanding reforms to be completed this year.
These reforms have been sought by industry and the government has delivered. It is now important the savings and benefits generated from these reforms are passed on to the public.
There have been a number of key achievements under the Action Plan. Most notable to date has been the introduction, ahead of schedule, of the Personal Injuries Guidelines to replace the Book of Quantum. These came into effect in April 2021, and initial PIAB data indicates that award levels have since declined by an average of 40 per cent, thus bringing predictability to the claims environment.
As we are still at an early stage, it is important that all stakeholders – including insurers – adhere to the new Guidelines when assessing claims, so as not to undermine this important framework. The government will monitor the impact of the new Guidelines on the industry, including through annual National Claims Information Database (NCID) reports. The NCID is an important resource that provides valuable insights into market developments and assists the insurance reform agenda.
Other achievements include: strengthening of the law on perjury; the establishment of the Insurance Fraud Coordination Office within An Garda Síochána; and being the first EU country to ban price walking in the motor and home insurance markets.
More importantly, government reforms are having a positive impact. This can be seen by the reduction in motor insurance prices as measured by the Central Statistics Office. Data released last week shows that motor insurance prices are down by over 10 per cent in the year to September, and 43 per cent since their peak in July 2016. The scale of this reduction is even more impressive when one considers that consumer inflation is running at over 8 per cent in the same period. I am confident that the impact of the Personal Injuries Guidelines, in conjunction with other reforms, is being reflected in the falling motor insurance costs.
However, the same figures also show that home insurance is on the rise, and as we all know, this is being largely driven by external pressures, and global supply chain issues.
In addition to the CSO data, NCID data also confirms that the insurance market is in relatively good shape and functions well for most customers. The second NCID Report on Employers’ Liability, Public liability and Commercial Property Insurance, published in June, illustrated that for “packaged” policies, which form the majority of policies for these types of cover, 92 per cent of businesses in Ireland pay premiums that are less than €5,000 a year. This is often overlooked and it deserves to be recognised that the market functions well for most businesses.
Of course, I do acknowledge that there are still some business sectors experiencing issues with insurance – be it the cost, or availability of cover. This issue has certainly been made more difficult since the UK’s departure from the EU, as many niche sectors were often able to obtain cover from providers there, due to a similar legal framework and market conditions. Such small sectors, particularly those deemed to be higher risk, need to find ways to co-operate more in a small market. But it is also incumbent on industry to broaden its risk appetite to these group schemes to offer affordable insurance cover.
Sustainable reform to the insurance market for such sectors can best be delivered through a combination of a ‘top-down’ – that is, government-led reforms, and a ‘bottom-up’ – or stakeholder-driven approach. Sectors that are too small to generate premium through individual policies can find solutions in setting up group-insurance schemes: coming together to offer a package of business to insurance companies. We have seen success with this approach for many sectors including childcare, adventure tourism, equestrian and bouncing castles.
Due to growing market confidence in the government’s reform agenda, I am now aware some of these group schemes have seen competing under-bidders, where previously there was none.
I recently met with the Chief Executives of the major insurance companies, along with some of the largest broker firms. The message I am increasingly hearing is that because of the success of the government reform agenda, and the changed liability insurance landscape, underwriters are open to expanding their risk appetite into previously underserved areas including to SMEs which represented many of the identified market pinch-points. It is a very encouraging sign that insurers are responding to reform by moving into these areas.
Furthermore, the IDA is currently engaged in a phased engagement program with selected overseas insurance companies, with a view to leveraging the successes of the reform agenda and persuading them to enter the Irish market. I am confident that the IDA now has a very positive message to deliver.
While a lot has already been achieved under the Action Plan, there are a number of outstanding actions that the government is prioritising in the coming months. As I stated earlier, two key reforms will be the rebalancing of the duty of care in the Occupiers’ Liability Act 1995, and an enhancement of the role of the Personal Injuries Assessment Board (PIAB). Legislation to enable both of these actions to be completed will be progressed through the Oireachtas shortly, and I hope that they get broad support.
I would note that both of these reforms have been key requests by the insurance industry – as well as insurance reform campaigners and business groups – for some time now. I am pleased that the finish line is in sight and would like to reiterate the government’s expectations that cost savings made by insurers as a result of these reforms are passed on to consumers. This is particularly true with PIAB reform as we can reasonably expect that legal costs – which are a significant driver in claims costs – should be reduced under the new regime. Additionally, following the rebalancing of the duty of care insurance firms must expand their risk appetites and offer insurance in areas that have heretofore been considered more difficult to insure.
Officials are also continuing to monitor wider developments in the insurance industry, to ensure that Government can respond appropriately, should the need arise. For example, this year we enacted the Insurance (Miscellaneous Provisions) Act 2022, which includes a new requirement for insurers to notify customers should their claim be subject to a deduction of the value of any State supports they received. This is an element of consumer protection that became clear was lacking at the height of the pandemic, in the context of successful business interruption claims. Nevertheless, reforming the overall insurance environment, while seeking to secure sustainable competition through deepening and widening the supply of insurance services, remains the key goal, and we are open to considering all ideas that may help us to achieve that.
Earlier this month, I launched the update to the Ireland for Finance strategy. Its vision is for Ireland to continue to create 5,000 net new jobs to the end of 2026.
In the updated strategy, we have reaffirmed the strategic vision of developing Ireland as the premier location of choice for green and digital financial services. The sustainable and digital transitions are the defining societal changes that the world is confronting and they are creating long-term opportunities for Ireland in international financial services.
My time with you is coming to a close, so I will wrap up. As I said at the beginning, the findings in the Leaders Survey make for interesting reading and give cause for optimism, as they show that the sector is undoubtedly forward-looking and open to embracing change.
The reforms have had early success, and we need to give them time to bed in. This is particularly true with the Personal Injuries Guidelines and the upcoming rebalancing of the duty of care.
The government is always cognisant that our reforms can be subject to legal challenges. While we hope this never happens, I would like to assure everyone here today that the government will take whatever action is necessary to uphold these reforms and ensure their effectiveness.
It is equally important that insurance companies help the public confront the challenges we face as a society.
This will require the industry to be fair and respond appropriately to the reforms we in Government are putting in place.
Before I go, and hand you back to John (O’Leary, PwC) to go through the Leaders Survey results in more detail, I would once again like to sincerely thank everyone involved in me being here today and to thank each of you for your attention. I wish you all a productive event and an enjoyable morning.
