FBD blames insurance costs solely on legal system
FBD Insurance has accused the legal profession of being solely responsible for exorbitant premiums for businesses as it defended its 41% rise in profits last year.
An Oireachtas Finance Committee heard from owners of small businesses, as well as industry lobby groups Isme and the Alliance for Insurance Reform, of rises in premium costs of up to 1,000% in recent years.
The groups told TDs and Senators that many SMEs would go out of business because of unsustainable insurance costs, some within weeks.
Children’s play centre owner Linda Murray told the committee that she was 25 days from closure of her business in Navan because of a 1,000% increase in insurance costs over the past five years.
Ms Murray said she had to take out a personal loan to cover the costs, yet had no explanation as to why the premium rose so much.
FBD chief claims officer Jackie McMahon told the committee that “all roads lead to the legal system” as to why premiums were so high.
He said “high payouts with no downside” when it came to soft-tissue injuries were way out of sync with the UK, and that it "all boils down to too many claims".
Mr McMahon said FBD estimated 20% of claims taken were fraudulent and that it was able to expose 10%.
He claimed the legal system was "too generous in its awards", spurious claims were "incentivised" and by "dragging out" cases for years in the legal system meant "claimants and lawyers win, while everyone else loses".
Senators Rose Conway Walsh and Kieran O'Donnell said FBD was a very profitable business and that the insurance industry was also culpable.
Ms Conway Walsh said FBD saw profits of 41% to €50m last year, yet the firm was settling 80% of claims despite having reservations about many.
Mr O'Donnell said the legal and insurance industries each blamed the other, "and the only one getting the raw deal is the consumer".
If FBD was so profitable, premiums should be dropping, Mr O'Donnell said.
Mr McMahon said €50m was "not super-normal profit" and would be considered a "not exorbitant" double-digit return on investment for shareholders.
Isme chief executive Neil McDonnell said many people were losing jobs and businesses "because of legislative inaction", as well as suffering from a "complete absence of material reform" in the industry.
The hearing came as Davy stockbrokers said FBD is well placed to achieve its targeted return to premium growth", and that the threat of competition in its primary rural customer base by Axa was "being more keenly felt by other insurers".
Davy said it was reiterating its "outperform" rating as "investment returns are protected by an increased allocation to risk assets within the investment book, facilitated by the strong solvency position".
Meanwhile, the Oireachtas Finance Committee also heard from Bank of Ireland management including chief executive Francesca McDonagh, who defended revenues made from using a debit card.
Sinn Féin finance spokesman said customers in the lower socio-economic bracket were effectively being penalised for having less than €3,000 in a current account, having to pay one cent on a debit card tap transaction, 10 cent on a chip-and-pin transaction, and 60 cent when using a teller in the bank.
