There is “no single policy or legislative initiative” that the Government can take to make insurance providers cover Irish leisure, tourism and adventure operators, according to the minister for state with responsibility for financial services and insurance.
A spokesperson for Minister of State Michael D’Arcy said the Government will continue to “improve the environment” within which insurers operate but said that, ultimately, it is constrained by constitutional reasons in terms of what it can do to resolve the issues in the sector.
Leisure and adventure tourism providers have faced increasing difficulties when it comes to securing insurance in recent years. Soaring premiums have been accompanied by insurers exiting the market, a situation which is placing thousands of jobs at risk all over the country.
The issue re-emerged in recent weeks when UK insurer Leisure Insure announced its plans to exit the Irish market. It confirmed it will honour current policies, but will not renew or accept new business.
Its departure from the market had been flagged: the Irish Inflatable Hirers Federation (IIHF) had written to its members in April warning that Leisure Insure was looking to exit the Irish market.
While the insurer has noted Brexit as being a factor, it had told the IIHF that for every €100 it takes in in Ireland, it pays out between €140 and €160 in payouts.
But, despite the forewarning from the likes of the IIHF, the decision to withdraw will be potentially catastrophic to providers of adventure tourism and leisure facilities, as well as the operators of kids’ play centres, climbing walls, bouncy castle businesses and more.
Research from Fáilte Ireland shows that more than one-third of all overseas visitors to Ireland took part in leisure or adventure tourism activities, including watersports, equestrian pursuits, cycling, hiking and fishing. Further damage to the sector could undermine this element of Ireland’s tourism offering.
A spokesperson for Fáilte Ireland warned that rising operational costs and insurance are a concern for tourism businesses all over Ireland.
The tourism body called for “an insurance model that is viable for businesses of all sizes” and said that it is embarking on a “significant body of research to benchmark insurance costs in Irish tourism” in comparison to competitors in other countries. This will commence late this month.
The departure of Leisure Insure is the latest in a long line of issues for the sector and has prompted renewed criticism of the Government’s action in the area. Leisure and tourism providers say that if the status quo remains, there will be nobody left to operate in the area in just a few years.
In a statement to the Irish Examiner, a spokesperson for Minister D’Arcy said the Government is limited in what it can do to improve matters.
“Minister of State D’Arcy acknowledges that the level of awards and the inconsistency in such awards is undoubtedly a factor in Leisure Insure’s decision not to continue in the Irish market.
This differential in award levels was confirmed by the Personal Injuries Commission (PIC) in its September 2018 report where it concluded that soft tissue injury award levels were up to 4.4 times higher in Ireland than in England and Wales
The PIC recommended the establishment of a Judicial Council to prepare guidelines on personal injury award levels, replacing the Book of Quantum, which outlines the general level of awards for specific injuries.
“Now that the Judicial Council Bill has passed through both Houses of the Oireachtas and is due to be signed by the President shortly, it is hoped that the judiciary will recognise the importance of this issue and prioritise it accordingly by targeting an end-of-year completion date for an initial set of guidelines, which take account of the PIC’s benchmarking report,” the statement said.
Minister D’Arcy is “hopeful” this will result in the lowering of award levels.
“If this were to happen, he would expect the insurance industry to take account of such reductions in their pricing and as importantly broaden their horizons as to the future risks they will cover,” the statement said.
“There is, unfortunately, no single policy or legislative initiative which the Government can take to persuade insurers to provide cover to the leisure sector as it would appear that insurers have not had a positive experience with this sector over the last number of years.
“In addition the Government is constrained as to what it can do as for constitutional reasons, it cannot direct the courts as to the award levels that should be applied, and for legal reasons it cannot direct insurance companies as to the pricing level which they should apply in respect of consumers or businesses seeking insurance.
“Instead, it is doing everything it can to improve the environment within which insurers operate, thus explaining why the practical implementation of the soon to be enacted Judicial Council Bill is so important.”
‘We need to take away the option of no win, no fee’
The Irish Association of Adventure Tourism (IAAT) is working on securing a group insurance scheme to cover its members in the coming years.
It is also optimistic that a new insurer could enter the market in the coming months, potentially giving an option for the companies that were reliant on Leisure Insure for their cover before the UK company’s decision to exit the Irish market.
Derek Binchy, a member of the IAAT board and owner of Fota Adventure Centre in Cork, said leisure providers and adventure tourism operators have been left to fend for themselves in the wild west of the insurance market.
He said the group met with Minister for State with Responsibility for Financial Services and Insurance Michael D’Arcy and that they were “promised the world”. But, he said, nothing has been delivered.
“We need constitutional change,” he said.
“We were told that the Judicial Council would be in by July 31. While that wouldn’t solve all the problems, it would tether awards to the Book of Quantum and might go some way towards minimising higher claims.”
He said the State also needs to consider making the exaggeration of claims a crime.
We need to take away the option of no win, no fee,” he said, adding that people are simply chancing their arm, knowing that they won’t be out of pocket even if they lose the case.
Mr Binchy is the owner of Fota Adventure Centre, an outdoor adventure centre which welcomes about 10,000 people each year, including schools, camps, foreign exchanges, championship soccer and All Ireland hurling teams, corporate workgroups and children facilitated through Tusla schemes.
He said they are insured until the end of August and after that, he simply doesn’t know what will happen. He is hopeful that the IAAT group scheme or a new insurer will offer an avenue for businesses like his but conceded that it is an uncertain time.
He was insured with Leisure Insure since 2013 and their latest premium was due to expire before the summer but they managed to convince the insurer to extend it until the end of the peak season. On obtaining that extension, their premium went up by 91%.
“As it is, our insurance is effectively the same cost as another full-time employee,” he said.
“It is around €20,000 — that means you need an awful lot of bodies to come through the centre. We have bookings from September onwards we intend to honour but in the longer term, you have to ask whether or not it is worth it.”
Mr Binchy said it makes no sense for many UK providers to act in the Irish market as they have no idea of what level of payouts they can expect.
“There is no control over claims here,” he said. “If one came in, chances are that it would be five times more than an equivalent claim in the UK. Economics determine the market: if it was Brexit-related, all the insurance companies would leave. This is about economics and insurance companies won’t leave a profitable market; the reason they are leaving is because they cannot determine the payouts. It is the number of claims, the ease of claims and the size of claims.”
Oysterhaven Activity Centre sees 50% premium rise
Oysterhaven Activity Centre was hit with a 50% increase in its insurance premium earlier this year despite having an unblemished claims’ record for 39 years.
Oliver Hart is the owner of the popular activity centre, which is located 8km from Kinsale. He said that the turbulence in the insurance industry has rocked leisure and adventure tourism providers.
“It is a worrying time for anyone in the outdoor industry,” Mr Hart said.
While Oysterhaven Activity Centre is not directly affected by the Leisure Insure decision to withdraw from the Irish market, Mr Hart said it has already faced difficulties. This year, the premium increased by 50% and he doesn’t know what impact the departure of one of the few leisure insurance companies from the market will have.
“We are caught in a very difficult position. We were suffering hugely during the recession and most of our prices have remained unchanged since then,” he said.
“But we have experienced significant increases in costs since that period. It is a very tight situation to be in. We cannot consider operating without insurance; we would have no option but to shut our doors,” said Mr Hart.
Brexit is also a factor, with Mr Hart unsure how this will impact the UK companies operating here. Leisure Insure has already decided to leave, citing Brexit and high claims as factors, and it is unclear whether others will follow suit once the UK leaves the EU.
All operators are trained extensively in health and safety but, according to Mr Hart, Irish operators are being penalised for the perceived risk of payouts, which comes from dubious claims and inconsistent, high payouts.
“There is no such thing as an accident these days. “We are dealing with adventure sports which, naturally (by definition), comes with a sense of uncertainty. If the outcome is certain, it’s not an adventure,” he said.
Mr Hart said they take every step to ensure that nobody gets hurt. This includes safety equipment and training for staff but something unexpected can still occur, such as the winds changing when out with a group sailing.
“It is part and parcel of the risk. We take precautions but you can take every precaution and someone can still have a small accident.
“It is hard to pin the blame on someone for that happening but that is exactly what the courts are doing. They are pinning the blame on the outdoor activity provider and it means that we are very exposed,” he says.
It is a significant concern. Like others in the outdoor leisure activity sector, employment levels can vary but for the peak season, Oysterhaven employs an average of 25 instructors, four office staff and three catering staff. It also hires contract housekeepers for the self-catering accommodation on the site, meaning that there is a significant amount of people reliant on them for employment.
While these numbers decrease during the quieter months of the year, even during the closed season, it has up to five staff.
‘There will be no businesses left’
If the Judicial Council doesn’t implement sector-wide reforms, there won’t be a single operator left in a few short years.
That is the warning from Lisa O’Callaghan of Kool Kids Korner, a children’s activity centre in Monkstown, Co Cork.
Kool Kidz Korner is insured by Leisure Insure, the UK operator which is exiting the market. They renewed in March, meaning they are safe until early 2020 but Ms O’Callaghan said she has no idea whether they will be able to continue operating after that.
She said that without insurance, she cannot consider opening the doors of the play centre, and that options for renewal were already limited before her latest renewal.
Kool Kidz Korner marked 10 years in business this year. In the first few years, they were paying between €2,000 and €3,000 in insurance premiums. These have crept up and the firm was hit with a massive increase this year, which almost forced it to close.
“We paid €18,500 in March, which really put pressure on us. It was an increase of €10,000 from the previous year,” Ms O’Callaghan said.
We were going to close this year but we gave it one last push, thinking that this has to be worst of it.
The financial pressure is so severe that Ms O’Callaghan said she doesn’t know if the company will last the next nine months, let alone beyond that. “It put savage pressure on us, it is such a severe increase,” she said.
“We can’t put that increase back onto our customers because they would stop coming, so we simply have to shoulder it.
“We are covered until March; it gives us some bit of security, we should be ok. But if this situation isn’t resolved before then, we will be closing the doors, there’s no doubt about that.”
Kool Kidz Korner has never been the subject of a claim, Ms O’Callaghan said.
It is part of a group of 80 or so play centres, open farms, and leisure facilities that are working together to solve their insurance woes.
She said that in joining the group, she discovered that others in the sector have faced claims for minor injuries to the value of €20,000 or more. And while the courts may not always find on the side of the claimant, Ms O’Callaghan said it is simply unsustainable.
“The equivalent in the UK would be €4,000,” she said.
“The Government needs to act faster. We formed our group months ago and have spoken out in the media frequently and we are still at square one. There is very little being done.
“Every company in the leisure industry is feeling it. The Judicial Council is essential. It doesn’t need to take as long as has been mapped out. In two-and-a-half years, there will be no businesses left.”
Aqua Dome board wants PIAB dismantled
The establishment of the PIAB in 2003 has directly led to soaring insurance claims, according to the chair of the board of one of the country’s biggest water parks.
Denis Reen, who chairs the board of Tralee’s Aqua Dome, has launched a stinging criticism of the PIAB, describing it as unfit-for-purpose and calling for it to be dismantled.
Mr Reen said that the PIAB and the Book of Quantum, which outlines the general level of awards for specific injuries, has created a culture where even a minor injury now means a payout for many people.
He said that the market has been decimated and that even the biggest leisure providers in the country are now struggling to keep afloat. He said that compo culture has made it increasingly difficult for any leisure company to get insurance and that the situation is getting progressively worse.
“The situation is as simple as this: insurance premiums are going up and we are running out of insurers,” he said.
The Aqua Dome has had four insurers in the last five years. No claims were lodged with three of the insurers, but they exited the market, Mr Reen said. At one stage, the Aqua Dome’s premium cost €15,000. This year, their premium is €58,000 and comes with a €150,000 excess.
Last year, its premium was €55,000 and the excess was €75,000. That insurer simply said it was exiting the market and would not be considering a renewal. When the Aqua Dome found a replacement insurer the excess had doubled.
“We are liable for the first €150,000 of any claims,” Mr Reen said. “Together with the premium, that is more than €200,000 that has to be allocated for insurance in the budget. We have a turnover of €1m, almost a quarter of which has to be set aside for insurance each year. Where does that leave us?
“It is very difficult and totally obscene. Therein lies the crisis. We cannot operate without insurance and the insurance costs are so high and getting higher.
“Putting it simply, this country is a basket case.”
Mr Reen said that it is clear what has resulted in the current situation.
“This country is at a stage where when someone has an accident, they simply think ‘money, someone has to pay’,” he said.
“And the root cause of all of this is the PIAB. PIAB is not fit for purpose and the Government needs to look at it.”
PIAB has “no way” of assessing the worthiness of a claim, he said. It simply tacks on a value to an injury.
“Once that happens, leisure centres and activity centres are dead in the water, there is nothing they can do. The Book of Quantum values are five times the European norm and PIAB sets the benchmark.
“You have no recourse as an operator. If you challenge it, you could end up in the High Court where the costs are enormous,” said Mr Reen.