New hoteliers can't get insurance thanks to Ireland's 'compo culture'
The Irish Hotels Federation says room rates are being pushed up by high premiums.
THE BODY THAT represents Ireland’s hotel industry claims that new entrants are being effectively shut out from the sector because insurers won’t provide them with public liability coverage.
The president of the Irish Hotels Federation (IHF), Joe Dolan, said that hotel liability insurance has in the last two years become “a huge issue that’s getting bigger by the day”.
“There are so few players in the leisure insurance market,” he told Fora. ”There were 12 to 14 (providers). We’re now down to about three or four.”
He said prices for hotel liability insurance – which covers a hotel in the event of a guest injuring themselves on their premises – have “gone through the roof” since 2015.
Hotel liability insurance is compulsory. A hotelier cannot obtain or renew their trading licence unless they can provide evidence that they have adequate coverage.
Dolan added that many IHF members have seen their premiums increase 30% to 50% over the last two years. The CSO does not compile official figures for business insurance rates.
“I’m aware of one hotel that cannot get insurance, which effectively means they cannot trade,” he said. “It’s not because they have a bad record. They’re a new entrant and no one will touch them because they don’t have any track record.
“They’re automatically assumed to be high-risk. That’s the sort of issue we’re dealing with.”
IHF president Joe Dolan
‘Off-the-wall’ claims
Dolan said rising premiums have coincided with the increasing size of compensation awards.
According to industry body Insurance Ireland, the most recent ‘book of quantum’ – a reference guide for compensation payouts – saw a 55% increase in the payout for a fractured ankle.
Compensation for the injury rose from €35,300 to €54,700, while in the UK the group claims the equivalent award would be £10,000 (around €11,600).
Dolan said he believes many insurers are willing to pay out claims rather than defend them in court “regardless of how off-the-wall they are”.
“That in itself is driving a compo culture,” he said.
Doolan said there is “no question” that hoteliers have a duty of care to their guests, but added: “Just because someone simply has an accident in a hotel, there is not a foregone conclusion that they’re automatically entitled to compensation. That is the perception out there.
“I’m well aware of cases where someone has been coming down a stairs texting, or maybe there’s horseplay on a dance floor, where the people involved have injured themselves through no fault or lack of care on behalf of the hotel.”
He cited a number of high-profile payouts, such as a €20,000 award given to a woman who banged her knee against the leg of a table in the Mullingar Park Hotel restaurant.
“I see that time and time again, significant rewards being paid out,” Dolan said. “It’s just out of control and desperately, urgently needs to be addressed.”
He acknowledged that the issue surrounding public liability insurance was not unique to hotels, but said “we have a higher profile maybe than other workplaces”.
“We’re certainly getting the brunt of it, but it’s across the board.”
Room rates
Dolan said rising insurance costs have “eroded” the benefit of the hospitality sector’s prized 9% VAT rate.
“They’re just driving our costs up and they’re making us really uncompetitive,” he said. “At this time, particualrly with Brexit, there has never been a more compelling reason why we must be competitive.”
He said it was inevitable that insurance premiums would be reflected in room rates.
In a statement, Insurance Ireland said “there is understandable concern among business owners about rising cost of claims”. It did not specifically respond to the issue of new businesses being denied cover.
Junior finance minister Eoghan Murphy
The group said total claims for public liability insurance were €414 million in 2015, up from €355 million the year before.
“It is already well-known that our personal injury awards are out of kilter with other jurisdictions,” the statement said, referring to the book of quantum.
“(We) welcome the recent announcement that the government’s cost of insurance working group will look at this area and Insurance Ireland will contribute to its work to help tackle rising claims costs and cost drivers like legal fees.”
