Another motor insurance company goes bust - 14,000 Irish policyholders

[Ceist Beag]

Why would you blame the Central Bank? They had nothing to do with the regulation of this company.

Enterprise was selling motor insurance in a number of European countries, including Ireland, on a freedom of services basis. Its financial position was not supervised by the Central Bank and the Central Bank has no role in that regard.

It was reported in the press over the weekend that the Central Bank specifically asked the Gibraltar regulator earlier this year to review the Irish motor business of Gibraltar-based firms and followed up with a visit to the Gibraltar regulator earlier this month.

Clearly I'm showing my ignorance in this matter so! How exactly does this work then? Are there some operators who are regulated and others who are not (who operate on a freedom of services basis whatever that means)? If so, how is one to know which category the company underwriting your insurance is in? Is this something each customer should get their broker to clarify (if going via a broker and if not, should clarify for themselves) as it is certainly not a question I ever thought to ask before. And also, if this is the case, what exactly is the point of regulating some insurance companies if others are able to freely operate in the same market without this obligation? Sorry if these are stupid questions but I'm a bit surprised at what appears to be how this market operates here.

 

[Sarenco]

How exactly does this work then?

Basically an insurer that is authorised in one EEA member state is entitled to write insurance policies in any other EEA member state, either on a services or on a cross-border establishment basis.

An insurer must confirm its authorisation and regulatory status on all business stationery, advertisements and electronic communications, including its website - you can't really miss it!

 

[mathepac]

Accountants are not self-regulating. Check https://www.iaasa.ie/

Yes they are. https://www.iaasa.ie/About-IAASA/Our-Remit

"IAASA's key RMSU responsibilities are:

• to deliver independent and effective supervision of the Prescribed Accountancy Bodies (PABs) regulatory obligations and promote prompt, robust and proportionate action in instances of non compliance;
• to oversee the performance of functions relating to statutory auditors carried out by the Recognised Accountancy Bodies;
• to promote adherence to high professional standards by accountants, auditors and preparers of financial reports;
• to provide specialist advice and support to the Minister and high quality information to our stakeholders on key auditing and accounting matters;
• to cooperate with other EU Member States regarding education requirements and approval of statutory auditors."

The IAASA has no role in the direct regulation of accountants or accountancy firms. The PABs do that and they are composed of accountants. Accountants are self-regulating like solicitors.

 

[Ceist Beag]

Thanks Sarenco. Just where you say though that you can't really miss it - in this case, if I understand it right, many of the customers impacted would have seen Wrightway Underwriting on their policies, not Enterprise Insurance. So it may not have been as obvious as you suggest to trace it back to find out whether their insurance was with a company regulated in Ireland by the Central Bank or in another EU country by their central bank and even to know if they should have concerns over said regulation (or are we simply to assume that all Gibraltar or Malta based insurance companies should raise a concern?).
So the upshot is, in this case it is the regulator in Gibraltar who is to blame, still hard to see how anyone can hold customers liable.

 

[T McGibney]

Yes they are. https://www.iaasa.ie/About-IAASA/Our-Remit

"IAASA's key RMSU responsibilities are:

• to deliver independent and effective supervision of the Prescribed Accountancy Bodies (PABs) regulatory obligations and promote prompt, robust and proportionate action in instances of non compliance;
• to oversee the performance of functions relating to statutory auditors carried out by the Recognised Accountancy Bodies;
• to promote adherence to high professional standards by accountants, auditors and preparers of financial reports;
• to provide specialist advice and support to the Minister and high quality information to our stakeholders on key auditing and accounting matters;
• to cooperate with other EU Member States regarding education requirements and approval of statutory auditors."

The IAASA has no role in the direct regulation of accountants or accountancy firms. The PABs do that and they are composed of accountants. Accountants are self-regulating like solicitors.

Veering off-topic a bit so I'll restrict myself to pointing out that IAASA will come down like a ton of bricks on the PABs if they're not doing their job to IAASA's liking and that their oversight/supervision role clearly involves a strong element of regulation. If a PAB fails to deal adequately with a complaint lodged by a third party, IAASA can bring them to heel.

On this basis, my point about someone using an unqualified or unregulated accountant and bearing the consequences when it goes pearshaped stands.

 

[Sarenco]

No, the intermediary is required to state the full legal name of the relevant underwriter on all insurance policy documentation and renewal notices issued to a consumer.

I'm not trying to "blame" anybody but there is an obvious risk in buying any policy from an unfamiliar underwriter. In this case, I gather premiums will be refunded to policyholders so hopefully nobody will be out of pocket.

Mind you, it's bound to put upward pressure on motor premiums generally...

 

[Malcolm Tucker]

The real issue here is the ability of Insurers to passport across borders without their home state (the state where they are established and where there solvency is regulated) having an Insurance Compensation mechanism in place. From what I can gather there is no insurance compensation fund in Gibraltar, so a firm can set up an insurance operation at low cost and if everything goes tits up it is the policyholders in the state where they sell the policies that take the hit.

The Central Bank itself has an awful track record of regulating Banks, Investment and Insurance Companies (The DIRT scandal, the Banking Crisis, Custom House Capital, Quinn, RSA) but it can't carry the can for Setanta and Enterprise as it has zero power to allow insurance firms regulated in another EEA state to transact business here. This needs action at a European level. It looks like Enterprise was selling insurance in a number of EU states, so maybe we will finally see some action this time? Setanta were only selling insurance in Ireland, so the powers that be didn't seem too interested in it.

Interestingly the EU produced a white paper on this very problem 7 years ago, but nothing has been done about it since. I can't post the link, as I'm a new member, but you'll find it on the EU website if you google it.

 

[mathepac]

Veering off-topic a bit so I'll restrict myself to pointing out that IAASA will come down like a ton of bricks on the PABs ... If a PAB fails to deal adequately with a complaint lodged by a third party, IAASA can bring them to heel...

My point stands. IAASA has no direct role in regulating accountants, accountancy firms or accountancy practices. They oversee the PABs, which are composed of accountants. Therefore accountants, just like solicitors, are self-regulating, which was my original point.

Unlike passporting motor insurance companies which seem to have no meaningful or enforceable solvency regulation or accountability.

 

[T McGibney]

My point stands. IAASA has no direct role in regulating accountants, accountancy firms or accountancy practices. They oversee the PABs, which are composed of accountants. Therefore accountants, just like solicitors, are self-regulating, which was my original point.

Again its rather irrelevant to the thread but you're wrong in stating that PABs are composed of accountants. The board of CARB for example is by rule composed of a majority of non-accountant members. http://www.carb.ie/en/About-Us/General-Information/

The reason I mentioned accountants in the first instance is that an aggrieved member of the public has recourse to file a complaint, which much be handled and processed to IAASA standards, if they have a grievance arising from an engagement with an accredited Irish accounting firm. (They also have potential remedies in domestic civil law.) They have no guaranteed recourse if they choose to engage with an operator in an "exotic" ie cowboy location overseas.

Anyone would be foolish enough to do so would be laughed off the park if they sought the State to underwrite their losses or otherwise bail them out if things went wrong.

 

[Jon Stark]

Again its rather irrelevant to the thread but you're wrong in stating that PABs are composed of accountants. The board of CARB for example is by rule composed of a majority of non-accountant members. http://www.carb.ie/en/About-Us/General-Information/

The reason I mentioned accountants in the first instance is that an aggrieved member of the public has recourse to file a complaint, which much be handled and processed to IAASA standards, if they have a grievance arising from an engagement with an accredited Irish accounting firm. (They also have potential remedies in domestic civil law.) They have no guaranteed recourse if they choose to engage with an operator in an "exotic" ie cowboy location overseas.

Anyone would be foolish enough to do so would be laughed off the park if they sought the State to underwrite their losses or otherwise bail them out if things went wrong.

All well and good, except that Joe punter in the market for motor insurance has no idea that they are engaging "with an operator in an exotic location overseas", as they are most likely dealing with a high street / household name broker, with whom they routinely deal, and that they believe is offering them regulated products.

To become aware, they'd need to be made aware (by the broker and/or insurer explaining the important distinctions), or else be of a sufficiently pedantic and thorough disposition that they read up on domestic and EU law and do due diligence on potential motor policy underwriters, which frankly is a nonsense...

 

[T McGibney]

All well and good, except that Joe punter in the market for motor insurance has no idea that they are engaging "with an operator in an exotic location overseas", as they are most likely dealing with a high street / household name broker, with whom they routinely deal, and that they believe is offering them regulated products.

To become aware, they'd need to be made aware (by the broker and/or insurer explaining the important distinctions), or else be of a sufficiently pedantic and thorough disposition that they read up on domestic and EU law and do due diligence on potential motor policy underwriters, which frankly is a nonsense...

Ah come on, the insurer's name and credentials appear on the policy documents and insurance cert. All they have to do is read them. They wouldn't lodge their money with Delboy Bank, why insure with Delboy Insurance?

 

[Sarenco]

...do due diligence on potential motor policy underwriters, which frankly is a nonsense...

That's fine but then you, as a customer, are putting your full faith in the robustness of the regulatory framework where the insurer/bank/broker is domiciled.

Your choice but common sense dictates that some level of prudence is merited.

 

[Jon Stark]

Ah come on, the insurer's name and credentials appear on the policy documents and insurance cert. All they have to do is read them. They wouldn't lodge their money with Delboy Bank, why insure with Delboy Insurance?

You're falling into the trap of assuming that other people, less educated and knowledgeable than yourself, will apply the same rationale as you.

I can't really say anymore than I already have, other than that insurance is seen by the majority of us plebs as a highly regulated commodity, like a foodstuff. If you go to a fully licensed vendor of food, and buy a loaf of bread - which you later find out has mercury in it because some EU level legal Mumbo jumbo that the average Joe doesn't know about allowed an unfit product into the shelf - I don't see how that's your fault.

 

[Sarenco]

I don't see how that's your fault.

It might not be your "fault" but you might find yourself with a useless policy nonetheless.

You really don't need to know anything about EU law to at least query whether it's a good idea to buy a policy from an insurer you've never heard of before with an address on a rock.

 

[mathepac]

In this country it's not even a good idea to deal with an insurer or bank you have heard of or might have dealt with for years. There is no protection for policy-holders / depositors / victims of other failed financial services organisations. Why not follow Iceland's lead - burn the bond-holders, jail the wrong doers. The Dellboys flock here and breed because they have lots to gain and risk no penalties.

 

[Leo]

Why not follow Iceland's lead - burn the bond-holders

You've never been to Iceland, have you?

 

[Jon Stark]

It might not be your "fault" but you might find yourself with a useless policy nonetheless.

You really don't need to know anything about EU law to at least query whether it's a good idea to buy a policy from an insurer you've never heard of before with an address on a rock.

Who do you query though? If you've gone through Zurich, who as far as you're aware are a properly legit and reputable crowd. By the time you get anything that says Gibraltar on it you've already handed over your readies, and so much of what goes on these days in the financial world is to do with tax avoidance and routing things through offshore locations that you'd probably just shrug it off.

The people on this thread with the most unsympathetic views towards the unwitting consumer are those who are most educated and knowledgeable about such matters - well sorry lads, the vast majority of punters have neither the time nor the interest to invest in performing due diligence into the provision of a commodity that is, in the lay person's view, offered subject to heavy regulation.

If there is fault here, it's with the brokers who do know better, failing to tell the customer that this quote is from Delboy Insurance Co as Tommy put it.

Or alternatively it's with the domestic industry who for whatever reason despite all their resources, have chosen not to educate the public - and you'd have to wonder why that is - it seems the less the average Joe understands how the industry works, the happier they are, and events like this facilitate a narrative to go with increasing premiums...

 

[Sarenco]

Who do you query though?

Yourself!

As in; "Do I really think it's a good idea to take out an insurance policy with a crowd I've never heard of with an address in Gibraltar? Hmmm, perhaps not..."

If there is fault here, it's with the brokers who do know better, failing to tell the customer that this quote is from Delboy Insurance Co as Tommy put it.

Well, brokers are required to do just that and I haven't seen any suggestion that they failed to do so in this case.

Or alternatively it's with the domestic industry who for whatever reason despite all their resources, have chosen not to educate the public - and you'd have to wonder why that is - it seems the less the average Joe understands how the industry works, the happier they are, and events like this facilitate a narrative to go with increasing premiums...

So you think the domestic insurance industry conspired to sell insurance policies from an under-provisioned Gibraltar insurer to gullible customers so that they could subsequently justify increasing their premiums? Ok so.

In this case, I gather Zurich (a pretty big player in the domestic market) has agreed to make whole the relevant policyholders. They are under absolutely no legal obligation to do so but obviously decided that it was the right thing to do given their interest in the broker that sold the policies. Personally, I think Zurich should be applauded for taking this approach.

 

[Malcolm Tucker]

It might not be your "fault" but you might find yourself with a useless policy nonetheless

You really don't need to know anything about EU law to at least query whether it's a good idea to buy a policy from an insurer you've never heard of before with an address on a rock.

If a Broker is selling you an insurance policy, ask him/her two simple questions: 1) Where is the Insurer located and 2) what is the Insurer's Financial Strength rating.

If the Insurer is located in Gibraltar, Liechtenstein or Malta, can you really be satisfied that a robust regulatory regime is in place? Particularly where the Insurer is located there but is primarily selling into the Irish or UK market.

The Financial Strength rating is also important. If the company doesn't have one it is probably a start-up and although it might be well run, new start ups in insurance always carry a greater level of risk as they don't have the capital to protect themselves against a run of bad claims. I'm not saying don't Insure with an unrated insurer, you may have no other option as in some instances they'll be the only quote you can get, but you need to be aware that there is an added risk in dealing with them. If you have the option of paying a few hundred euro extra to insure with an A rated company located in a country with a well established insurance compensation scheme it might be worth the extra money to do so.

 

[Leo]

Who do you query though? If you've gone through Zurich, who as far as you're aware are a properly legit and reputable crowd. By the time you get anything that says Gibraltar on it you've already handed over your readies...

It'll generally be written in the terms of business that you accept you have read and understood if getting a quote online.

The people on this thread with the most unsympathetic views towards the unwitting consumer are those who are most educated and knowledgeable about such matters - well sorry lads, the vast majority of punters have neither the time nor the interest to invest in performing due diligence into the provision of a commodity that is, in the lay person's view, offered subject to heavy regulation.

And that's their prerogative. I'm sure you can understand the frustration of those who do put time and effort into reading the small print, who often end up with a more expensive policy effectively subsidising those who are not prepared to put that effort into protecting themselves.