Insurance premiums won't fall significantly until Ireland stops being a country where fraudsters can stage accidents with impunity, company chiefs have told an Oireachtas committee.
Executives from AIG, Aviva and Zurich rejected accusations that their companies enjoyed exceptional profits from Ireland’s prevailing high premiums. They told the Finance Committee that Ireland’s payouts for even simple accidents averaged 4.4 times the size of awards in England – and fraudsters rarely paid any price at all.
“That is a huge magnet. We have people who simply come into this country with no other purpose than to perpetrate crime, to commit fraud,” said John Farrell, head of claims at Aviva.
He said Aviva currently was “fully defending” a case against an Englishman who is seeking payment for his own single-vehicle accident in Ireland - and was asked to return to Ireland to confirm his claimed injuries.
“He committed another single-car accident on the day of the medical,” Mr Farrell said.
In another recent case, an Aviva customer rear-ended another car and caused €80 damage to one car. “Some time after the accident, which is not unusual, we were presented with two personal injury claims,” Mr Farrell said. The first claim went to court, where the person was awarded €105,000. The plaintiff’s lawyer submitted a bill for €98,000 that was negotiated down to €65,000.
Committee chairman John McGuinness intervened to question whether he had heard the car damage cost correctly: “€80, you said?”
“Yes, €80 damage,” Mr Farrell replied. “To a bumper.”
The three insurers said their fraud units were identifying many hundreds of suspicious claims a year, but reported only the cases with the strongest evidence to gardai.
Sinn Fein deputy Pearse Doherty accused the three of violating Section 19 of the Criminal Justice Act, which requires insurers to report cases of suspected fraud to police.
“It is not for insurance companies to decide whether there is enough evidence there to reach the threshold of prosecution. It is a clear responsibility on you to report where you believe that there’s suspicion of fraud to the gardai,” Mr Doherty said.
But AIG general manager Declan O’Rourke said fraud convictions were almost impossible to secure without CCTV footage. He noted that of AIG Ireland’s approximately 2,500 motor insurance claims last year, some 450 involved suspected fraud and went unpaid subject to court orders – but AIG reported only 10 cases to gardai “where we had proof”.
Just one of those 10 cases ended in conviction, Mr O’Rourke said, and only because the man claiming to be in a vehicle collision had been captured by CCTV footage elsewhere at the time of the accident.
“We spent a lot of money on that case,” he said, “and that person got community service for that offence.”
Mr Farrell of Aviva said under-reporting of fraud cases to gardai was not the problem. “The real problem is what happens with the ones that are reported. Of the hundreds that have been reported, there are virtually no convictions,” he said.
He said police officers lacked “dedicated resources to follow up on fraud”. Aviva, he said, was spending millions annually in identifying suspicious claims with an 80-member fraud unit headed by a former garda superintendent, then spending millions more fighting in court to avoid paying fraudsters.
“But what happens?” he said, offering an anecdote to illustrate how legal costs drive up premiums.
“We have a case of a businessman who burns down his premises. We plead fraud in open court. We have to defend that case on behalf of innocent policyholders. We are forced to spend 21 days in the High Court at a cost of over €1m. What happens is that that man simply walks away from his claim. That €1m has to be paid by our SME (small and medium-enterprise) customers around this country.
“And when they say they haven’t had a claim and why is their premium going up? That is why,” he said. “And as long as claims in this country are a free-risk endeavour, people will continue to commit fraudulent claims.”