Liberty Insurance admits errors as it gets back on track

The head of Liberty Insurance’s international division was in Dublin on Monday for a briefing with management at its Irish subsidiary and a courtesy meeting with the Department of Finance.

Spaniard Luis Bonell is responsible for Boston-based Liberty's operations in 16 countries, including Ireland. It has operated here since November 2011 when it acquired the former Quinn Insurance from its administrators.

Liberty’s experience here has been chastening. It came with the best of intentions, promising product innovation, improved levels of customer service and investment and growth for the business.

Instead, it has had its fingers burnt. Between 2011 and 2014, Liberty’s Irish subsidiary accumulated losses of €22 million while staff numbers reduced from about 1,500 to 580 currently. It has also withdrawn from some lines of business, notably quitting the British market.

Some of the blame lies with the company, some is down to the economic situation that prevailed and some is the result of structural issues within the Irish market.

Bonell accepted that Liberty had made mistakes here, trying to run before it could walk and without realising that the terrain was so rough. But it has implemented the necessary changes and is on track to make a “good” profit in 2017.

One reason for its improved financial performance has been an increase in premiums, which rose on average last year by about 25 per cent.

This is not unique to Liberty, of course. Most insurers have pushed through price rises, particularly on motor policies. They cite an increased number of accidents now that the recovery is under way and legal costs and court awards that are out of kilter with other markets.

Part of the blame also lies with the insurers, who chased market share by offering unsustainable prices.

According to Bonell, the average price of a private motor policy in 2003 was €900. “Today is it less than €500.”

Irresponsible behaviour

Along with other players in the industry, Bonell is angry about the

High Court

ruling in September that the Motor Insurance Bureau of Ireland (MIBI) should be liable for outstanding claims stemming from the collapse in 2014 of Malta-based Setanta Insurance.

The MIBI, which makes payments on claims against uninsured drivers, has been placed on the hook to cover the €90 million in claims rather than the Insurance Compensation Fund, which is designed to facilitate payments when insurers go bust.

“This was not the way the two bodies were designed to work. We come to a scenario where the good companies and the responsible companies will have to pay for the irresponsible behaviour of others. Setanta was an irrational player. Having the [other] insurance companies pick up for the losses of Setanta is not fair. It is a change in the rules of the game in the middle of the game, which we are not happy with,” he said, adding that the cost would have to be passed on to policyholders.

Lack of transparency

Setanta was registered in Malta but operated only in Ireland, offering cut-price products through brokers. Its collapse has highlighted gaps in regulation but should also act as a warning to consumers that they need to be more careful when choosing an insurer.

“In the end, customers have a certain level of responsibility about the type of companies they decide to buy from,” Bonell said. “There is a level of risk that in general people should be aware of.”

It’s a fair point.

Bonell cited another problem with the insurance market here: a lack of transparency. Compared with other countries, the market data is lacking and generally published well after the event.

“As a result, it’s much more difficult for companies to assess trends and to understand where the market is. So the market operates a little blindly because of a lack of information,” he said.

“In many other markets, we get monthly information, we get quarterly information. In Ireland, it comes annually and with months of delay. In other markets, companies share claims cost, frequency, and price increases, and there is more transparency. This is public information. This is something that the industry [in Ireland] should be working for.”

Hear, hear!

Twitter: @CiaranHancock1