Surging Insurance Premiums: Urgent Call for Change

Friday, May 03, 2024. 3:04pm
Surging insurance premiums in the sector and an urgent call for change and reform. Image by aymane jdidi from Pixabay
Surging Insurance Costs. Pic: Aymane Jdidi

Surging insurance premiums in the sector and an urgent call for change and reform

In recent times hospitality has been faced with a series of challenges and is now emerging from a period of unrest and uncertainty. Throughout, the hospitality industry has remained strong, resilient, and is looking forward to a prosperous future. However, recent industry reports highlight the exponential rise of insurance premiums, and this increase is putting considerable pressure on businesses. It is an issue which needs urgent attention, and a solution-based approach needs to be applied to decrease these insurance premiums to a reasonable cost.

Michael Magner, president of the Irish Hotels Federation has voiced his concerns in response to statics released by the Central Bank, who conducted research in February 2024 on Insurance costs in the sector.

“The exceptionally high cost of doing business in Ireland is one of the most serious challenges facing our sector. This includes insurance costs, which continue to increase at alarming rates,”

Rising Insurance Costs

This data indicates that insurance providers made a staggering profit of 176 million in 2022, whilst legal costs for businesses are soaring. This research also concluded 84% of businesses within the industry are seriously concerned about these rising insurance costs. Michael deems these figures to be ‘unsettling and unacceptable’ and he calls upon the government to intervene. He asserts that two things need to happen; the savings incurred by reducing insurance costs need to be passed on to the customer and the government must explore ways in which to attract more insurance companies into the Irish market. More providers will lead to alternative options, competitive pricing, and in turn competitive quotations.

Action Plan for Insurance Reform

In 2020, the Minister for Finance, Paschal Donoghue proposed an ‘Action Plan for Insurance Reform‘. This included Personal Injury Guidelines, the establishment of the Personal Injuries Resolution Board Act. 2022. and further consideration of legislative laws around duty of care and personal responsibility

The most current update from the Department of Finance, issued in January of 2023 outlines the objectives of these reform plans.

“Significant reform has been prioritised, with the multi-faceted Action Plan for Insurance Reform setting out 66 actions which aim to bring down costs for consumers and business; encourage market competition; prevent fraud and reduce the burden that insurance costs can have on business, community, and voluntary organisations”.

In September of 2023, there were reports that the government reforms put in place to tackle this issue were already having a positive impact on businesses. The Irish Times ran an article, in which Johnaton Heir of CMF insurance group, claims that a cost of insurance renewal is decreasing by 20-30% and predicts there will be more insurance companies will enter the market.

Tim Fenn, Chief Executive of Irish Hotels Federation alongside his industry contemporises responded to this article.

“It is heartening to hear that some in the hospitality sector are witnessing reductions in insurance premiums and improved policy options. However, we are concerned that the article may give rise to an impression of industry-wide improvements”

“As the main representative bodies for hotels, restaurants, and publicans, such an impression would not accord with the reality of the vast majority of our member organisations who continue to struggle to secure affordable insurance cover, with many members telling us about premium increases on a regular basis and a lack of underwriters willing to insure hospitality businesses”.

Research by Fáilte Ireland

The cost of a comprehensive insurance policy is not an issue which has only recently emerged. In 2019 Fáilte Ireland conducted research into the impact of insurance in both the tourism and hospitality industries. The primary objective of this research was to examine and interpret data which highlights the insurance costs incurred over the previous 2/3 years, the causes and impact of this on businesses within the industry.

Many of the factors that impact the cost of insurance can be influenced internally, within the business itself. Health and safety procedures are of a high standard in this country and many businesses are investing greatly in risk mask mitigation. This should theoretically impact on the cost and availably of ample insurance cover. The investments made, however, are not resulting in reduced insurance premium quotations. These costs have become unsustainable and will inevitably have negative impacts on business, customers, and the economy.

“Health and safety risk procedures are much more rigorous here in Ireland than in other jurisdictions. Despite insurance costs in Ireland continue to increase”.

This report states that 90% of hotels and guesthouses are concerned about the cost of insurance premiums, with 75% agreeing that this will negatively impact their business overall. Also 62% of hoteliers have seen an increase in insurance in the previous 12 months and 5% of businesses have experienced insurance fraud in the last 3 years. In 2017, the average cost of insurance per bedroom was €750, in 2024 it averages over €1000.

Statistics from Vintage Federation Ireland

Statistics from the Vintage Federation Ireland shows that 77% of their members had no insurance claims in the past five years and the average cost of insurance per year is €25,000. The Restaurants Association of Ireland (RAI) states that many of these claims are settled out of court because the legal cost is too high. They have also seen an average increase of 30% for insurance cover annually and even if there are no claims made there is a 20 to 50% increase.

As we can see, no tangible improvements have actualised for the majority of businesses in the industry over many years. It is also questionable as to whether the legislative reform can be implemented effectively and to what extent. As Tim Feen, the C.E.O of the Irish Hotel federation states

“Rather than prematurely celebrating what might still prove to be a false dawn, it is imperative that the Government continue to hold insurers’ feet to the fire until these tentative signs of premium improvements become a sector-wide reality”.

This process is ongoing and the importance of raising awareness of this issue cannot be understated. The industry has displayed much resilience and perseverance and with effective government intervention, we hope to see substantial and concrete reforms.

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