Note of Meeting with Minister Bruton and AXA Insurance, Thursday 8 October 2015 DJEL, Kildare St Attendance: AXA Insurance: John O Neill CEO AXA Insurance and Phil Bradley Executive Director AXA Insurance DJEL: Minister Bruton, Breda Power, Assistant Secretary, Derval Monahan AP PIAB Liaison Unit and John Maher AP Strategic Policy Division. Mr O Neill explained to Minister Bruton that he has been CEO at AXA Insurance for the past 16 years and will be retiring at the end of the year, Mr Phil Bradley will then be taking up the CEO position. AXA Insurance outlined to the Minister the difficulties experienced by the insurance sector with the increased cost of insurance over the last year. According to CSO data, there has been a 27% increase in the cost of motor insurance premia so far this year. AXA Insurance referred to media reports where FBD have had to borrow €8m for their reserve position while RSA’s parent company has put money into RSA for their reserves. AXA Insurance explained that they have had the practice of putting aside a certain level of reserves for any future inflation in personal injuries claims and that generally a claim takes approximately 5 years from beginning to end so you have to plan ahead. ‘There was some discussion on the statistics on the number of personal injuries cases from the Courts Service Annual Reports for 2014 and 2013 and the average level of Court awards. AXA said that the Courts were making high awards. The Minister pointed out that medical negligence cases were outside the remit of the Personal Injuries Assessment Board (PAB) process so you would have to exclude these cases which often tended to be larger awards, when making any comparisons. Looking at the statistics for applications to the PIAB, Minister Bruton said that the number of cases to the PIAB has increased slightly over the years from roughly 27,000 in 2010 to just over 31,500 for 2014 . The level of awards accepted as a percentage of assessments made is fairly consistent at approximately 60% during the period 2010-2014, Only roughly 3% of. PIAB applications end up before the Courts. In terms of the level of awards, Minister Bruton pointed out that the majority of the PIAB awards in respect of motor liability claims are under €20,000. The Minister pointed out that consumer prices have increased by an average of 1.8% in the period 2011-2014, however insurance prices as measured by the Consumer Price Index have increased by 25% since 2011 ‘There was some discussion about the large number of untracked cases which aren’t resolved in the PIAB process or before the Courts and they would appear to be settled by the parties involved and their insurance companies. The Minister said that it would be very helpful ifthe Insurance Sector could supply information on these cases so that we have the full picture of all personal injury claims to assess the possible reasons for the increases in the cost of insurance, ‘The Department referred to work undertaken by the National Competitiveness Council (NCC) earlier this year when it looked at the commercial insurance market in Ireland as part of its 2015 Costs of Doing Business in Ireland report. The Council found that in general insurance costs account for a relatively low proportion of the overall enterprise cost base, however, the issue of greatest concern to businesses is the cost they pay for the cover they receive. The Council's analysis did not focus on motor cost insurance in great detail. Overall, the Council’s analysis found that the Irish commercial non-life market is competitive but not particularly attractive to new entrants given relatively low levels of profitability. The Department reiterated the point raised by the Minister that consumer prices have increased by ‘an average of 1.8% in the period 2011-2014, however insurance prices as measured by the Consumer Price Index have increased by 25% since 2011. The absence of data means it is difficult to ascertain the reasons for price increases. The absence of data was the key issue for the NCC, ‘The Department cited Central Bank data regarding the domestic non-life insurance sector in 2014. It shows that Premium income from Irish-risk business rose by 5.3 per cent compared to 2013, as both rates and volume of business increased, in addition the costs of claims incurred has fallen. It was acknowledged that the cost of claims incurred is greater than eared premium income for 3 firms. Taking the market as a whole, there has been a net underwriting loss in the private motor class in four of the last five years. The Department asked if there were reasons for this. AXA cited the roll-over nature of claims which meant ‘that annual data might not reflect actual costs incurred as costs might roll into another year. ‘The Department stated that while there is a need to comprehensively benchmark commercial non-life insurance costs in Ireland. Ideally, data would be collected from both the industry (using standard definitions etc. of insurance classes across countries) from customers, and should be coordinated by the Central Bank. AXA stated that they supplied voluminous data in their retums to the Central Bank but agreed with the thrust of the point regarding the importance of data and added they would raise this with Insurance Ireland. AXA Insurance referred to four newspaper reports of Court cases in 2015 where the Court awarded sums in excess of the amount that the insurance industry would have valued the cases at. AXA Insurance stated that they were not the insurer in any of the cases mentioned. The first case involved Limerick High Court sitting in Ennis in June 2015. The injury was a soft tissue injury with some alleged level of restriction of function and back strain. The insurance industry valued the case at approx. €50,000-€60,000. The plaintiff lawyer was looking for €150,000 before the case started and the defendant lawyer offered €30,000 before the case started. The total award by the Court was €508,000 plus legal costs of €220,000. The insurance industry expected the legel costs to be approx. €71,025. The other three cases also involved the Court awarding more than the insurance industry estimated. AXA Insurance gave copies of reports of the four cases to the Minister.AXA Insurance suggested that a revised Book of Quantum is urgently required and they felt that if there was an agreed Book of Quantum (BOQ) that the PIAB, lawyers and judiciary would use, this would assist in alleviating some of the issues driving the cost of insurance in the industry. Minister Bruton said that he will be meeting Mr Justice Keams President of the High Court shortly. ‘The Department said that PIAB are working on a new Book of Quantum and have been working with Insurance Ireland and other stakeholders in obtaining data on insurance claims and settlements. AXA agreed to work with Insurance Ireland with a view to supplying data to the Department on cases that are settled outside of the PIAB and Court processes. D Monahan PIAB Liaison Unit 20/10/15