The boss of insurance firm FBD has hit back at criticism by the Law Society president that blame for the Setanta Insurance fallout and high premiums lay squarely at foot of the insurance industry, saying it was meritless and ‘without fact’, writes Pádraig Hoare.
Fiona Muldoon was speaking as FBD, which has evolved from being a farm insurer to the biggest domestic insurer, said it had posted a profit before tax of €11.9m in the first half of the year, in contrast to the €5.3m loss it had made in the corresponding period last year.
FBD said it had a combined operating ratio (COR) of 93% including a one-time €5.6m Motor Insurers’ Bureau of Ireland (MIBI) provision release following the Supreme Court judgement of Setanta.
The COR is a calculation used in insurance to measure how well it is doing by taking losses and other expenses and dividing them by premiums earned. A rate below 100% is considered profitable.
In May, the Supreme Court overturned previous court findings that MIBI should pick up the bill as a result of the demise of the insurance company Setanta. The MIBI is funded by the insurance industry.
Law Society president Stuart Gilhooly said last month: “The insurance industry scandalously used the entire debacle to excuse their egregious increase in premiums. Now that they no longer have this excuse, they will have to dip into their lucky bag for the next one. It won’t be long in coming.”
Ms Muldoon vehemently rejected Mr Gilhooly’s comments, saying there was a multitude of factors for higher premiums, including legal fees.
“MIBI was set up for uninsured drivers, and was never envisaged to be about insolvency and the Supreme Court said that. The Government response has been to put a levy on so the compensation fund will not have to make good the insolvency. One way or another, the cost ended up being paid by the motorist,” she said.
She added “the premiums of the many pay for the claims of the few” and that legal costs are higher in any of our adjacent countries.
“The Troika tried unsuccessfully to lower legal costs. If you go to court, part of the claimant’s award ends up being legal costs. The level of awards are far bigger here. There is a whole heap of issues, including the insurance industry overly competing the prices down. The product was being sold way below costs. So when the correction comes, it is much more sharp than needs to be. There is more than enough blame to go around.”
She said “urgent reforms” were needed to assist customers who were understandably frustrated.
“It’s tough enough to be in business as an SME without your insurance company coming along and putting 10-20% onto your premium because the courts are awarding more money than they used to and fraudulent claims are on the up. We’re a big enough company but small relative to the AXAs or Avivas. We’re Irish and we’re local so we are not unaware of the environment we are in,” she said.
Mr Muldoon said although FBD had returned to profit after “a long road back” from a difficult few years, it was “too soon” to pay a dividend.
“It is more than two years and we are very conscious that paying a dividend is the last big sign of our return to health but it is too soon to be doing that now. I think it’s a conversation to have with the board next March or April,” she said.
This story first appeared in the Irish Examiner.