Rarely a week goes by without more insurance industry spin on personal injury claims, particularly whiplash claims. The industry now takes any opportunity to blame personal injury claims for their woes, even in the face of facts which indicate other causes.
Inevitably, the Irish insurance industry is seeking reforms similar to those announced late last year in the UK, including a ban on claims for “minor” whiplash injuries.
AIG, a massive multinational insurer that was in recent years more often in the news for needing an initial $85 billion bailout from the American government, wants a ban to be considered here. Their general manager for Ireland, Declan O’Rourke, told the Irish Times:
Ireland should follow the UK’s lead in considering a ban on whiplash, to flush out fraudulent claims. The UK is considering a position whereby whiplash victims would have their medical expenses and loss of earnings compensated by insurers in a move that it believes could save the sector £1 billion a year and reduce premium costs.
Mr O’Rourke does not go into detail about why a whole category of claim should be banned to weed out the supposed problem of fraudulent claims, but the insurance industry often suggests that all whiplash claims are effectively fraudulent. This is in spite of long-standing medical evidence and opinion. A call for a ban on whiplash claim won’t go far in Ireland, where it would likely be unconstitutional, but other reforms will be demanded. Indeed, it appears AIG has a wishlist of things it would like an Irish government to do, quite a turn-around for a company that had to go cap in hand to the Federal Reserve in 2008 to avoid oblivion. More recently, its Irish operations benefitted from assistance from the Irish taxpayer. One might be inclined to wonder whether any losses or difficulties at AIG could have causes beyond the cost of claims.
Yesterday, Fiona Muldoon of FBD was a guest on Morning Ireland, taking another opportunity to bemoan the cost of claims and the legal system despite FBD’s results telling a different story. FBD has quite reasonably been described as “beleaguered” and has suffered from a range of difficulties which have nothing to do with personal injury claims.
The Times (Ireland edition) covered FBD’s latest results with the headline “Insurance sector too competitive, FBD says” [paywalled]. While the real problem for the industry is in the headline, the article nevertheless begins:
Over-inflated whiplash claims and too much competition between insurers were among the many factors to blame for FBD’s loss-making performance this year, its chief executive said.
The cost of allegedly “over-inflated” whiplash claims is a crutch that the industry repeatedly leans on when in difficulty, while the truth for FBD is that:
Most of last year’s losses stemmed from measures to bolster its capital reserves and €11 million in restructuring costs.
The article also points out that FBD experienced a 9% fall in premium volumes last year – ie. they lost customers. Ms Muldoon continues:
A number of factors had made the Irish insurance sector unprofitable between 2012 and 2014, including too much competition driving down premiums, Ms Muldoon said. “The market in Ireland is very fractured, which meant that companies were competing aggressively against each other and in hindsight they were not charging enough.”
So. Insurance companies have had financial difficulties because they have had to bolster reserves, lost customers and have not charged enough for years. But ask any spokesperson for the insurers about their problems and it’s not long before the cost of claims is front and centre.
This is a remarkable feature of articles on the insurance industry in Ireland over the past year: reports on financial results cover these internal difficulties and challenges faced by the industry which are obviously having a negative impact on premiums. Figures are available to explain the impact on insurers but not, it seems, to explain their complaints about the cost of claims and the legal system.
The reality is that the industry does not have any statistics or figures about personal injury claims that it is willing to make public. Even the Injuries Board, effectively a creature of the industry, has criticised the failure to support allegations about claims, as well as their failure to explain where there premium income is going. The number of personal injury court claims fell in 2014 and the Injuries Board has highlighted that there is a €1 billion difference between the premium income of Irish insurers and published awards.
It’s time for insurers to accept that, this time around, their losses are down to themselves and not due to paying out on claims (which is, of course, what they exist to do).