Spiralling insurance costs, which are being fuelled by the "claims culture", especially excessive levels of awards and fraudulent and exaggerated claims, are having a major knock-on effect on the local hospitality industry, according to the Irish Hotels Federation (IHF ).
The organisation, which is calling for urgent Government action to address the issue, says almost 90 per cent of hotels are concerned about the negative impact of rising insurance costs on their businesses.
Nigel Canavan, the chairperson of the Galway Branch of the Irish Hotels Federation, says the issue is a "serious challenge" for the industry. He stated that hotels have experienced "enormous increases" in insurance premiums in recent years and that costs are continuing to soar as a result of excessive levels of awards for personal injury claims.
Commenting on the Judicial Council Bill, which is expected to come into law shortly, Mr Canavan said: “While we welcome this legislation, it is imperative that it results in a meaningful review of levels of damages without delay. The time for inaction is over. Awards for soft tissue injuries must be brought down significantly in line with international norms."
Some 62 per cent of hotels have reported hikes in insurance costs in the past year, according to research conducted by the IHF. Of these, the average increase in premiums was 28 per cent year on year. This is in addition to substantial increases in recent years.
Ninety per cent of hotels say they are concerned about the impact of insurance costs on their businesses.
Mr Canavan stressed that current increases are unsustainable and said that exorbitant insurance costs are curtailing the ability of hotels to re-invest in their businesses, which in turn adversely affects the tourism industry. One of Ireland’s largest indigenous industries, the sector makes a significant contribution to Galway, supporting 20,900 jobs and generating €731m for the local economy annually.
He stated that decisive action is urgently required to tackle insurance costs, particularly in relation to the handling of personal injury cases and the “excessive levels” of awards being made which are four to five times higher than in the UK.
“Slow progress by the Government to date is contributing to a ‘claims culture’ which is getting out of control. This is creating a huge challenge not only for businesses, but for civic organisations, sports groups, and charities. As a society it affects us all and needs to be addressed.”
The level of fraudulent and exaggerated claims is another key area that must be addressed, he said. “A zero tolerance approach needs to be adopted in order to create an effective deterrent. This requires the funding of a dedicated central Garda resource specifically created and tasked with investigating fraudulent cases for potential prosecution. It is an area where insurers, the legal system, the Garda Síochána, and the Government all have a vital role to play.”
Kenny Deery, the chief executive of Galway Chamber, said increasing premiums are a major concern for businesses, in terms of discouraging them from investing, expanding, and developing new ideas.
He outlined that the 400 member chamber is supporting the Alliance for Insurance Reform’s lobbying on the rising cost of insurance.
The organisation, a representative group of civic, sporting, and small businesses, all affected by what it terms the “unsustainable cost” of insurance in Ireland, was formed solely to reduce spiralling insurance costs. It says that general damages for minor, fully recovered awards, have been shown to be 4.4 times higher than those in the UK; and even higher than other European countries, many of which do not award damages for minor soft tissue injuries. It is thought that Irish awards for very minor soft tissue injuries may be the highest in the world.
Mr Deery said rising insurance costs are also affecting festivals and activities which stimulate tourism. “It is a challenge for the organisers both to obtain insurance and to afford the premiums.”
He added that the insurance alliance believes Government intervention is the key to resolving the issue of increasing insurance costs and that Galway Chamber supports this viewpoint.