Monday 20 November 2017

The upside of all those cracks? Maybe a little light will come in

The US Congress could yet oppose Trump’s plans to cut the US corporation tax rate
The US Congress could yet oppose Trump’s plans to cut the US corporation tax rate
Dearbhail McDonald

Dearbhail McDonald

Waking up to news of the death of Leonard Cohen on Friday morning, it was hard not to curse the living daylights out of 2016 whose ill winds brought us Brexit, the slaughter in Aleppo, the failure to find meaningful solutions to the migrant crisis and, latterly, President Donald Trump.

It also stole many of the artists who held up a critical mirror to our nature and prejudices including singer David Bowie, actors Alan Rickman, Frank Kelly and Caroline Aherne, boxer Muhammad Ali, broadcaster Terry Wogan and now that great poet Cohen.

It's hard, in this the first stage of post-Brexit, post-Trump grief to see any silver linings. But we must try.

"There is a crack in everything, that's how the light gets in," implored Cohen in his song Anthem. He also told us in his iconic Hallelujah that there's a blaze of light in every word.

Mind you, Cohen's lyrics in Everybody Knows also go to the heart of one of greatest challenges facing the global economy - income inequality - one that strikes at the heart of the virulent populism that is sweeping the globe.

"The poor stay poor, the rich get rich, that's how it goes, Everybody Knows," wrote Cohen who, despite his angst, always sought for redemption in his art.

One of the redemptions of sorts we had hoped to rely on in the wake of the elevation of a controversial businessman and reality TV star to the highest political office in the world was that Donald Trump's inflammatory rhetoric during his Presidential campaign would be tempered once he moved into the White House.

Hopes of that were somewhat dashed when the President elect launched a petulant Twitter attack on "professional protesters incited by the media" - so much for healing America's deep divisions.

The second came in the form of threats, via new US tax policy, aimed at repatriating Irish-based US multinationals within the first 100 days of the Trump administration.

That prospect was conveyed during a series of interviews by Stephen Moore, one of Trump's senior economic advisers, who warned that plans by the US to cut headline corporation tax from 35pc to 20pc or even 15pc - perilously close to our 12.5pc one - would precipitate a flood of companies leaving Ireland.

Such a move, if it made it through Congress, would probably not force long-established companies anxious to maintain access to Europe's 500m strong consumer economy, to leave.

But it could pose a challenge to Ireland Inc, whose model of economic development for decades has been based on inward FDI serving (mostly) European markets, in attracting future investment.

Even in a post-Trumpageddon world where Ireland maintains some semblance of a corporate tax advantage, our indigenous economy will come under increasing pressure as Britain seeks to leave the EU, however long that torturous process will last.

If it lasts.

Brexit is arguably a worse phenomenon than recent events in America.

Trump's tenure is not likely to exceed his four-year term, but then most pundits predicted he wouldn't make it to the White House at all.

One hopes that the checks and balances of the US constitution should minimise any Trumpesque excesses and that its institutions are strong enough to do the same.

However, Brexit, with its fundamental constitutional and structural changes, may leave much more permanent scars to the Irish economy and psyche.

At an ISME conference last Friday, my fellow panellists and I were, during a debate on the challenges and opportunities facing the Irish economy, chastised from the floor about being too pessimistic about Brexit.

Brexit will, of course, give rise to many opportunities, especially to companies that are nimble and innovative and diversify their sources of growth and can exploit sterling's post-Brexit collapse.

There are a lot of cracks, let's hope we find the lights that will illuminate a dark and mournful year.

A rebuttable presumption is an assumption of fact accepted by a court until that fact is disproved.

Innocent until proven guilty and the like.

However, such is the success of the long-standing fraud awareness campaigns by the insurance sector, there is now a rebuttable presumption that all insurance claimants are fraudsters until we prove ourselves otherwise.

The burden of proving one's innocence as well as one's injuries, it seems, has well and truly shifted.

There is no doubt that fraudulent and the harder to prove category of exaggerated claims are a major cause for concern that adversely impact on the premiums.

They always have been, which is why insurers build (or are supposed to build) those predictable risks into their pricing models.

There is no doubt, too, we are in the midst of an insurance crisis, one that is sadly all too familiar. Indeed, the history of Irish insurance is littered with 'one-off' emergency levies that are now part of our permanent legislative framework.

Once again, we are caught up in a crippling insurance crisis, but are we really in the midst of a fraud epidemic?

The raft of surveys that have been produced in recent weeks appears to suggest that we are. But I wonder.

Earlier this month, a survey commissioned by insurer AIG claimed that 15pc - or almost one in five of the Irish public - know someone who has falsified an insurance claim. And just last week another survey reported that seven out of 10 insurance companies have reported an increase in falsified claims over the past year.

We've been here before.

In 2003, compensation culture anxiety peaked amid claims of rampant fraud and consumers were exhorted to report thy neighbour instead of loving them.

Back then the Government introduced a series of unprecedented measures to tackle a then (as now) genuine spiralling insurance crisis, with wide-ranging reforms that were the envy of insurers and police forces across the globe.

These included the setting up of a mandatory, non-adversarial, lawyer-free Personal Injuries Assessment Board (now Injuries Board) that was aimed at cracking down on costly litigation. A Book of Quantum was introduced to help the Injuries Board keep a lid on compensation.

The Government also introduced a series of draconian laws to tackle fraudulent and exaggerated claims, with plaintiffs now facing the prospect of a criminal prosecution if they have lied or embellished their story.

Now, I'm no actuary, but something does not quite add up. The Injuries Board has stated that there has been no major increase in either claims or awards to warrant rises of 70pc in the average premium over the past three years.

The question of whether insurers have increased premiums to return themselves to or boost profitability is a salient one. But giving insurers the benefit of the doubt and assuming fraud and exaggeration are as extensive as it claims, is the industry guilty of enabling that culture?

Only 10pc of personal injuries cases go through the courts and only 20pc of cases are assessed through the Injuries Board.

This means that seven out of 10 claims are being settled privately.

Does this mean a lot of fraudsters are being financially rewarded for their misdeeds? If true, and it must be true to some extent if the private settlement figures are anything to go by, this is a pity.

And that is because the courts have demonstrated a willingness to throw out cases of fraud under the new regime.

Prosecutions of fraudulent claims are extremely rare.

But they will remain so if insurers take a view that it is cheaper to settle suspicious claims than pursue them in court.

Sunday Indo Business

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business