Insurance costs are rising all the time and businesses are feeling the pinch. Small and medium sized firms are being particularly hard hit. “It’s a massive problem,” says Pat Delaney, chief executive of the Small Firms Association. “In fact in a recent survey we asked companies to list 12 factors affecting their businesses and the cost of insurance was the number one issue. Ninety-two per cent of respondents cited it as being in the top twelve while 28% said it was the single biggest issue.”
According to Delaney, companies are facing increases this year of between 42- and 70% in their premiums depending on the sector they are in and in some cases the hike has been as large as 200%. “And then there are some companies who can’t even get insurance,” he says. Delaney believes that a substantial review of the legal framework underpinning personal injury is urgently required. No one, he says, is happy. Underwriters are making losses, premium payers are paying a lot and the government is unhappy because profitable companies are closing down. “What we’ve been saying is that we need a root and branch review of the legal and legislative framework,” he says. “The SFA is very heartened by the review of the Solicitors Act which forbids solicitors advertising ‘no foal no fee’ services and also welcomes the establishment of the personal injuries assessment board (PIAB). However, the pace of reform is still too slow.”
Delaney believes there are other factors that need to be addressed.
For instance, he noted that while the average length of time taken to settle a case in the UK is only four months, in Ireland it can take as long as four years. Furthermore, settlements in this country tend to be more generous than in the UK. “Maximum compensation for a whiplash injury in the UK is about GBP2000 (EUR3142),” he says. “Here, the same injury attracts compensation of about EUR16000. On top of that you have to add legal and administration costs of about 50%. This places us in a peculiar situation. It is impossible to attract more international underwriters into Ireland because it is difficult for them to quantify risk so until we change that we are not going to get competition.”
The SFA has made a number of recommendations to the government, calling for judicial guidelines covering the type and level of awards. The Association also wants to see more cases heard as only 8% of cases make it to court under the present system. “We would also want to see the DPP following up on spurious cases,” says Delaney.
The implementation of these measures may eventually lead to some relief for businesses, but Irish SMEs are hurting now and need to find some way of reducing costs in the short term. Help however, is at hand. At the SFA’s annual conference in early October, the chief executive of Hibernian Insurance, Gary Owens, announced it was about to give companies a chance to cut their insurance premiums by 10% if they use a new risk assessment software package then in development by the company. The package is due for release to the market at the end of November.
“The package is aimed at what we are calling SME customers that employs on average less than 50 people,” explains Willie Ryan, manager, Risk Management Strategy and Policy at Hibernian. Ryan is in overall charge of the project. “That’s not to say we would exclude larger organisations. It is aimed at all industry sectors and we will be adding industry-specific modules at a later date.”
Ryan has been conducting workshops with the Small Firms Association around the country and he says that judging by the level of enquiries coming in there is a very heavy interest in the product with brokers and customers constantly ringing in and asking about it. “We have a field staff of 17 surveyors who endeavour to call out to help our clients manage their risks,” explains Michael Brennan, a member of the team developing the package. “These risks would include such things as health and safety, motor fleet, fire risk and so on. We are under constant pressure to provide added value so a while back we began investigating the possibility of using software to allow people to manage their risks online.”
Once the system is up and running, companies will be able to sign up for the system by contacting their broker and filling in a form. If the company is accepted into the system it will receive a user ID and password to a Website which can be accessed via a standard Web browser and where information can be entered.
“Suppose you are an accounting practice in Dublin,” says Brennan. “You would use the Website to identify hazards and assess their risk.
Hazards would include slips, trips and falls, fire and so on.” According to Brennan the user will be asked to assess two factors: How likely a hazard is to cause an accident and how severe the consequences are likely to be. A user guide will give guidance on providing this information but the site relies on what Brennan describes as a layman’s understanding of the possible outcomes. For instance, an open fire presents a greater risk of fire, while the presence of large amounts of paper would mean a fire would lead to greater severity.
“The next step is control measures,” says Brennan. This would include things like anti-slip strips on steps, fire extinguishers in every room and regular training for staff.
Brennan stresses that using the system is not a once-off event. The software includes a diary function and users will be prompted periodically to carry out reviews, for example, check smoke alarms, verify that fire extinguishers are still valid and so on. “We will monitor companies’ usage of the system,” says Brennan, “and if a company is not using it they will lose their 10% discount.”
In addition to helping manage risk, the software will also help companies record the steps they have taken to minimise risk. For instance, tracking documents proving that staff training has taken place or that other risk management steps have been taken. This can prove invaluable if a company finds itself at the wrong end of a lawsuit and needs to prove in court that it has not been negligent.
Hibernian: +353 (0)1-607 8000
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