AIG urges ban on whiplash claims to cut premiums

AIG, the world's biggest insurer, wants Ireland to consider banning whiplash claims to help counter soaring motor insurance charges and to avoid the average cost of premiums hitting €1,000.

In an exclusive interview in Business This Week, Declan O’Rourke, general manager of AIG in Ireland, said whiplash awards here were out of kilter with the rest of Europe with the average premium for new business now about €700.

“In France and Germany, the normal award for whiplash is between €2,000 and €3,000 and the legal fees are in the hundreds. In Ireland, the average award for whiplash is €15,000. So we have the most expensive necks in Europe. Ironically, in the UK, the average payout for whiplash is £5,000 and they dub themselves as the whiplash capital of Europe.”

Fraudulent claims

Mr O’Rourke said Ireland should follow the UK’s lead in considering a ban on whiplash, to flush out fraudulent claims. The UK is considering a position whereby whiplash victims would have their medical expenses and loss of earnings compensated by insurers in a move that it believes could save the sector £1 billion a year and reduce premium costs.

Mr O’Rourke expressed the hope that an update of the book of quantum, which is used to aid judges in their assessment of payouts, would lead to “more realistic awards” here. “We need an updated book of quantum and we need to have reasonable awards that compare with Europe. Or else we need to go down the route of the UK and ban awards for whiplash.”

Mr O’Rourke said AIG lost between €10 million and €20 million last year on motor insurance, and last made money from this business three years ago. This was in spite of a 50 per cent rise in premiums for new business and about 25 per cent for renewals.

In the absence of any reforms, Mr O’Rourke said the only avenue available to insurers would be further increases in premiums.

“There’s only one lever and that’s rate increases and some people are predicting that rates will go up towards an average of €1,000 here. That’s not what we want but that’s ultimately what could happen.”

“We’re hoping there will be reforms here. If you look at motor insurance costs in places like France and Germany, they are all in the €400-€450 mark. In the UK, it might be closer to £500 but in Ireland, if you try to renew your insurance as new business it will be €700 on average. And that’s increasing dramatically. A lot of people have seen a 50 per cent increase in the past year.

“We’re again back in the situation where we are one of the most expensive places in Europe for car insurance.”

Mr O’Rourke said AIG would like to see the formation of a stable government in Ireland post the election.

Business-friendly country

“We want . . . a business-friendly government, and I’ve no doubt that’s the type of government that our head office [in New York] would like to see when they’re investing in the country. There’s always lots of opportunities in a company like AIG for further investment into a business-friendly, open economy like Ireland. Hopefully, we can have a period of stability after the election.”

AIG currently employs about 900 staff in Ireland, including Laya Healthcare.

Having acquired Laya last year, AIG is set to tweak the health insurer’s branding: “They are going to co-brand and put ‘Proudly part of AIG’ with their logo . . . in the next month or so.”