Claims culture hampers Irish sports clubs from obtaining public liability cover

Public liability insurance provision for sports clubs in Ireland can be described as problematic.

For example, according to figures from the Federation of Irish Sport, which represents sports organisations in Ireland, 97% of its members said their insurance premiums had increased by around 45% over the last five years. Correspondingly, research conducted by the Alliance for Insurance Reform (AIR) in May last year revealed an average increase of 204% for Irish liability policyholders, again over the past five years.

Niall O’Driscoll, managing director at Dublin-based sports specialist broker O’Driscoll O’Neil confirmed this: “The public liability market in Ireland is difficult. The big issue in the Irish market is one of pricing.”

However, rising costs is just one of myriad concerns for Irish sport club bosses when it comes to insurance – in particular, the issue of actually obtaining public liability insurance in the first place.

This problem became more visible here in the UK thanks to the plight of Athy Rugby Club, based in County Kildare. The 140-year-old club was under threat of closure because it could not purchase public liability insurance; this was because the club was in the midst of handling one historic and one pending claim.

In December 2019, thanks to the intervention of Irish minister of state Michael D’Arcy, Kildare South teachta dala (TD) Martin Haydon, a member of the Irish Parliament, and the Irish Rugby Football Union (IRFU), insurer Aviva took up the mantle and offered the required insurance to Athy Rugby Club.

For Peter Boland, director at AIR, Athy is one of the lucky ones as the club was able to garner high-profile support. “The vast majority of other organisations wouldn’t have the capability to do that, to organise that,” he added.

“The latest and most worrying trend beyond spiralling insurance costs is the loss of cover. We have very serious concerns for 2020 with regard to cover for sporting organisations,” Boland said. 

Claims culture

In the driving seat of these accelerating costs and the struggle to secure cover is Ireland’s notorious claims culture, especially around general damages for minor injury claims.

This is centred around a legal system that adopts a ‘duty of care’ stance, as opposed to the negligence approach used in the UK. This means that not only are the costs of claims more expensive, but claims actions take longer; O’Driscoll noted that in the UK, claims take on average two and a half years to resolve, while in Ireland this jumps up to between three and a half years to four years.

Furthermore, claimants have an “extraordinary propensity to sue as soon as an injury occurs, regardless of who may be responsible,” added Boland.

He said that fraudulent and exaggerated claims are also becoming more common, while insurance firms appear to be unwilling to defend claims, just to keep costs down. “They tend to settle as quickly as possible rather than looking at the broader issue of deterring claims,” he said.

This disposition towards claims is heavily influenced by the high awards claimants can receive. In 2018, for example, the Personal Injuries Commission found that the average award in Ireland for a soft tissue injury, such as whiplash, was 4.4 times higher than comparable awards in the UK.

This equates to a €17,338 (£14,762.83) award in Ireland versus a €3,798 (£3,233.89) award in the UK. With this much money potentially on the table, is it any surprise that attendees at sports clubs are taking advantage of genuine or staged mishaps?

“The legal system in Ireland is just too expensive,” O’Driscoll said. “Our awards compared to the UK are substantially higher, and until society accepts lower awards here, that’s one issue. The other issue is the legal fees itself. Legal fees in Ireland are very disproportionate to the UK and the rest of Europe.”

A spokesperson for Insurance Ireland, the industry body for insurers in Ireland, told Insurance Times: “In 2017, for instance, the Insurance Ireland fact file showed that for every €1 of premium income that year in liability insurance, insurers paid out €1.12.

“Irish insurers have said that if claims costs come down as a result of the consistent adoption of recalibrated awards then customers will benefit. New guidelines for compensation awards are urgently needed in 2020 to address these costs.”

Reform opportunities

There is a silver lining, however.

Boland said that the Irish insurance market is on the cusp of reform, which will hopefully have a transformative effect on some of these issues.

The Irish government has, for example, established in law a Judicial Council – this body will soon be setting up the Personal Injuries Guidelines Committee (PIGC), which will be charged with investigating the general damages process with a view to reinvigorating the current guidelines.

The reforms also encompass the Irish police force, the Garda, which will be founding an insurance fraud unit. Boland said government funding for this is being confirmed.

Legislation around clarity and transparency is additionally being explored.

“If we get general damages from minor injuries down, it essentially takes the steam out of the situation as it currently stands,” Boland said. “The damages as they  stand will turn good people bad and that cannot continue. It’s not sustainable.”

Boland, however, has a positive outlook on the impact of the Irish insurance reforms. He said: “Post-Brexit, I would be strongly encouraging UK insurers to have a look at the Irish market, because with the reform that’s coming through, we are looking at a situation where the market will become attractive again very quickly.”

Mitigation

But, in the short-term, what can be done to mitigate claims costs around visitor slips, trips and falls at sport club venues?

For O’Driscoll, it comes down to the quality of sports clubs’ premises – in Ireland, clubs will typically fund and build their own facilities, meaning that investment is generally low to keep costs down. Furthermore, smaller sports clubs are often staffed by volunteers, who may not have detailed knowledge of risk management or health and safety legislation.

“The reality is any business has a responsibility in reducing risk and they can’t expect insurers just to cough up,” O’Driscoll added. “But, at the same time, insurers have to buy in for the long haul and work with particular sectors.

“I think understanding what insurance is about for sports clubs is a big issue because too often [it is seen] as a cheap premium that fixes a claim, but it doesn’t deal with the actual problem. There isn’t enough investment in [the] prevention of claims.

“The insurer’s engagement with sports clubs in terms of improving the risk is the big thing, so minimum standards for sports clubs, stronger risk management, [health and] safety operations really makes the risk better and obviously if you improve the risks, claims are lower.”

Boland, on the other hand, thinks it is important that insurers and brokers avoid micro analysing or assessing risks based on smaller sectors alone. This could, in fact, make certain sports uninsurable if its risks are analysed separately, without broader market contexts.

“If you pick any sport which involves a degree of risk, if you analyse that on its own, then it is very unlikely in the future that it’s going to be insurable,” he warned.