Cost of insurance remains a real problem for Irish businesses

'After Covid, two main cost headaches for small businesses will be rent and insurance costs.'
Cost of insurance remains a real problem for Irish businesses

Insurance reform remains a central issue for Ireland's business community. Picture: Sasko Lazarov /

Ireland is now 17 months into the Covid-19 pandemic, and its management by the Government has been uniformly good.

We have not had the see-saw populism evident in the US, UK, and Brazil, which led to rocketing case numbers and avoidable excess deaths.

Management of the pandemic was sub-optimal where Government delegated inappropriately to Nphet at the start of the crisis. To an extent, it benefited Government to delegate the ‘bad news’ function to Nphet at the start. The downside was a reduction in freedom of movement for the Government later on.

When we conduct the pandemic postmortem, we will need to look at the composition of Nphet membership. The absence of external, non-health expertise hampered Nphet’s output, and their contribution to the Government response. For example, the presence of a community policing expert from the gardaí would have generated a better approach to management of the lockdown.

Gardaí were tasked with managing labyrinthine travel restrictions and retail-closure rules without having input to their formation.

Officials from the IDA or Enterprise Ireland would have suggested better ways to manage the restriction of business.

And in view of the recent comments by the legal experts in the Human Rights Observatory at Trinity College Dublin about “a significant lack of transparency” in many key decisions made during the pandemic, Nphet requires a legal adviser, as well as a senior civil servant from the Department of the Taoiseach or the Department of Enterprise to exercise executive control.

But Government has moved rapidly in other areas. ISME foresaw the dire implications of the forced shutdown of the economy for domestic SMEs.

ISME chief executive officer Neil McDonnell. Picture: Sasko Lazarov /
ISME chief executive officer Neil McDonnell. Picture: Sasko Lazarov /

What started in April 2020 as our request to the enterprise minister for “administrative examinership” advanced to enacted legislation this July, remarkably fast for a major adjustment to the Companies Act. 

Credit is due to Tánaiste Leo Varadkar, state minister Robert Troy, and the staff of the Department of Enterprise. We will have to wait and see how the new Small Company Administrative Rescue Process (Scarp) scheme operates, and how flexible creditors and landlords are willing to be with insolvent, but otherwise viable, businesses.

While our pre-budget submission was sent to Government in May, the situation regarding corporation tax has been very fluid. 

The OECD has moved from acknowledging, in 2019, that tax policy was a matter of national sovereignty, and that individual countries were free to set their own rate of corporation tax (or none at all), to advocating a global minimum rate of 15%. Perhaps this volte-face is down to the new occupant of the White House.

Whether this stance by the OECD is right or wrong is irrelevant; there is an emerging international consensus on a basic, minimum level of corporation tax.

Whether this global minimum rate generates any extra yield remains to be seen; in our view, too many deductibles are allowed against the nominally higher rates of corporation tax in other countries.

We view this as an ideal time to look at other commercial taxes, specifically capital gains tax (CGT), which, at 33%, is far too high. A reduction of CGT to 25% would increase the yield by at least 30%, and Budget 2022 is the time to do it.

Last month saw the publication of the ‘Rule of Law Report’ by the EU Commission. Its chapter on Ireland should cause our justice minister considerable pause for thought. While acknowledging that Ireland has the lowest number of judges per head of population in the EU, it also identifies a significant number of issues impeding the efficiency of our justice system.

In no particular order, the EU Commission found that the methods of judicial appointment and training require attention; that Ireland still lacks a system to address judicial misconduct; that digitalisation and modernisation of the justice system are urgently required; that the length of proceedings in the High Court and Court of Appeal is increasing; and that defamation remains a significant threat to self-expression in Ireland, and our defamation legislation remains unreformed. 

That is a significant roster of reform that must be on the table with the Courts Service and the judiciary before the State can countenance any increase in the number of judges.

Despite the much-touted reduction in injury awards by the Judicial Council, the cost of insurance remains a real problem. With the Revenue allowing warehousing of debt for the next 18 months, the two main cost headaches for small businesses will be rent and insurance.

Because of our tort laws and ‘interesting’ judicial interpretation of the duty of care, anything to do with adventurous or physical activities, or children’s play, is becoming uninsurable. Significant change to the Occupiers’ Liability Act is urgently required.

The Central Bank analysis of public liability and employer liability claims information showed our personal injuries litigation system for what it is: A form of State-sponsored, court-endorsed social welfare for solicitors and barristers.

The inconvenient truth is that plaintiffs in an employer liability case worth less than €100,000, or in a public liability case worth less than €150,000, will get less compensation than if they accepted a Personal Injuries Assessment Board assessment. They will also take, on average, an extra 2.7 years to secure this lower award.

To end on a positive note, we must applaud the commencement of the perjury statute on July 28, making perjury a statutory offence for the first time in the Irish State.

We do not see it as the silver bullet in reducing insurance costs, but we hope that it will have a chilling effect on those who wish to lie on oath for personal benefit or enrichment.

Neil McDonnell is chief executive of business representative group ISME

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