Thursday 22 August 2019

Insurance chief: judges too soft on bogus claims

Muldoon on attack over role of lawyers and judges in big payouts

Defence: FBD boss Fiona Muldoon denies insurers are making huge profits. Photo: Damien Eagers
Defence: FBD boss Fiona Muldoon denies insurers are making huge profits. Photo: Damien Eagers
Charlie Weston

Charlie Weston

The head of one of the country's leading insurers has hit back at allegations the industry is making super profits.

FBD chief executive Fiona Muldoon has also questioned if judges and lawyers are doing enough to tackle high award levels and insurance fraud.

The comments of Ms Muldoon are the latest round in the war of words between insurers, lawyers and politicians, as consumers and businesses grapple with surging premiums.

The insurance crisis is closing businesses, threatening jobs and forcing charities and sports groups to cut back on their activities.

Ms Muldoon also defended the industry from allegations it is exaggerating the extent of fraudulent claims to justify higher premiums.

In the last few days the leading sports bodies in the State warned sports activities are being curtailed due to the escalating insurance crisis.

Statutory body Sport Ireland and the Federation of Irish Sport - an umbrella body for the GAA, IRFU and the FAI - said crippling insurance costs are damaging sport.

The groups said clubs, athletes and volunteers need to be protected from what they said was the "devastating impact" of rising insurance costs and the fear of claims.

It comes after charities recently said they were being forced to cut services due to the impact of the insurance cost crisis.

A combination of high awards being made in the courts, no sanctions for insurance fraudsters and profiteering by insurers have been blamed by experts for the insurance mess.

But Ms Muldoon has defended profit levels in the industry and said that she never claimed fraud was the only issue pushing up premiums.

She also hit out at judges being soft on exaggerated court claims, and solicitors for encouraging exaggerated injury claims.

Pressure

Ms Muldoon attacked as "false" claims that her company is making what she described as outsized profits.

FBD and its rivals Axa and Allianz came under pressure when they appeared before the Oireachtas Finance Committee last week when they were accused by Sinn Féin's Pearse Doherty of exaggerating the issue of false claims to justify huge premium hikes.

And the three insurers, which represent 50pc of the market, had to admit to the committee they were up to twice as profitable as they planned to be last year.

FBD made profits of €50m last year, a margin of 13.4pc compared to a target of 8pc. Allianz had targeted a 6pc margin but made €37m profit, a 7.4pc margin.

Axa made profits of €89m in this country last year on premium income of €770m. This gave it a profit margin of 11.5pc, compared with a target of 5pc.

FBD is the only Irish-owned and publicly quoted insurer in this market, and has a huge market share among farmers and in rural areas.

In a comment in this newspaper, Ms Muldoon defended the industry against charges that insurers are making huge profits.

Profits may have jumped by 1,300pc between 2016 and 2017 for the industry here, but the figure is meaningless as the profits were "tiny" in 2017.

Over the last five years FBD had a profit margin of just 1.2pc, Ms Muldoon stated.

She said injury pay-outs are driving premium rises.

Ms Muldoon quoted former High Court president Nicholas Kearns, who chaired a commission that found that pay-outs here are four times those in England and Wales.

"These huge pay-outs also incentivise fraud and claims exaggeration which further adds to cost as we try to keep pace with the fraudsters," she wrote.

FBD and its rivals Axa and Allianz came under pressure when they appeared before the Oireachtas Finance Committee last week when they were accused by Sinn Féin's Pearse Doherty of exaggerating the issue of false claims to justify huge premium hikes.

FBD had stated that about 20pc of claims are suspected fraudulent or exaggerated.

Ms Muldoon defended this, saying they range from staged crashes to someone who is genuinely in an accident, but grossly exaggerates the pain or the impact on their lives in the hope of a bumper pay-out.

"Of the two, exaggeration is much the bigger problem. Despite the recent political bluster, FBD has never claimed that fraud is the only issue."

She complained there are very few instances of judges dismissing a court claim that is exaggerated. Judges actually rule in favour of claimants despite openly questioning their credibility.

She said gross exaggeration is fraud, but the way the legal process operates means it is not a criminal offence.

"Encouraged by some solicitors, many people, who consider themselves otherwise honest, seem to believe that exaggeration is fair game," Ms Muldoon maintained.

Irish Independent

Also in Business