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Representatives from FBD have blamed the cost of high insurance premiums on people who are too willing to make insurance claims and the Irish legal system which is too generous with pay-outs.
The cost of insurance for small businesses, including marts, was addressed at a Joint Oireachtas Committee on Finance on 4 April, and Jackie McMahon, chief claims officer, and John Cahalan, chief commercial officer, spoke on behalf of FBD Insurance.
McMahon told the committee that: “High pay-outs with no downside encourage claimants and high legal fees encourage certain solicitors and barristers to take and make the case.
“The legal system is difficult to reform and resistant to change and practitioners have little to gain and, perhaps, much to lose.”
€190m in claims
He added that FBD had paid out €190m in claims in 2018 with premiums costing €371m.
It was also pointed out to McMahon that operating profits had increased in FBD by 41% and he was asked by Senator Rose Conway-Walsh of Sinn Féin if he felt premiums should decrease on the back of profits.
For every euro we underwrite, we are getting a return of 10c
In response, McMahon said: “Our current year combined ratio is running at approximately 90%. That means for every euro we underwrite, we are getting a return of 10c. We are a business and we do not think that is an unreasonable return.”
FBD also told the Oireachtas that in terms of the breakdown of its business, approximately 55% of their work is farm-related, 30% related to small businesses and 15% was made up of consumers.
The figures confirm that FBD's key customers are still farmers.
Mart insurance
The issue of high mart insurance premiums was also raised by Senator Conway-Walsh who explained the situation of one small mart whose insurance had jumped to €12,200/year in 2017 after a single claim made the previous year.
She said that “increased were being constantly piled on to the premium holder.”
However, FBD was quick to tell the committee that insuring marts was a loss-making venture for the company.
Marts are currently loss-making for us
“The facts are that marts are currently loss-making for us. Our combined ratio in that sector is approximately 160%, so for every euro it is costing us €1.60,” John Calahan chief commercial officer with FBD told the committee.
He said that part of the problem with high insurance premiums for the mart sector was that other insurers weren’t willing to insure marts.
“Nobody else wants to come into the market because it is loss-making,” Calahan said.
The issue of health and safety in marts has been a long-running concern with marts introducing a farmer ban in sections of the mart to help avoid injuries and potential insurance claims.
However, Calahan said that even with safety measures introduced by marts that the company has not seen premiums “decrease at the rate we would like to see”.
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