This article appeared in the July 2011 edition of Business Plus magazine
by Seamus McKenna
We are undergoing an extraordinary period here in
, the nature of which is further illuminated by the situation at Quinn Insurance Group, which is coming out of administration after the announcement of a sale to Liberty Mutual / Anglo Irish bank following serious losses. Ireland
At Quinn, the administrators have crystallised large losses by taking a view, on the advice of a number of actuarial companies, on the likelihood of claims arising from policies that had been written prior to the administration period. Quinn’s strategy of managing its risk up to and beyond the point of claims being made has apparently been abandoned by the administrators.
To explain this we need to remember where Quinn Insurance came from and what the situation was like for client companies that needed cover for employers’ and public liability, particularly those in the construction industry, before its arrival. Then, certain bad features dominated such business. One was a claims culture, encouraged by the policy of insurers of allowing the most spurious of claims on the basis that to contest them would risk incurring legal costs beyond the value of the claim. Such claims were cynically settled in the knowledge that future premiums could be loaded with their costs. No doubt the actuaries had run the numbers and advised that this was the best way to deal with the matter.
What the insured, the people and firms who actually footed the bill, found to be most frustrating was that they had no say in whether the claim should be contested or not. In order to get cover in the first place you had to sign away your rights to challenge all claims, to the insurance company.
Quinn changed all that. Firstly, if you were in business and you wanted insurance to cover liability for accidents in your factory or on your site, you had to submit to an audit of your Health and Safety arrangements by an H&S consultant employed by Quinn. If you did not measure up you did not get cover, at least not until you had convinced the consultants and the company that you were compliant. All this was in addition to the attentions of inspectors from the government’s Health and Safety Executive (HSE). It became easier to comply than not. This reduced accidents, which allowed Quinn to charge lower premiums, made for happier employee representatives and, for those with the wit to appreciate what was going on, more content site operatives.
The second string to Quinn’s bow was to make it policy to dispute the payment of each and every claim. Certain observers have condemned Quinn’s diligence in investigating damages on the grounds that genuine claimants were tarred with the same “claims culture” brush as those who set out to defraud, and often considered themselves to be unfairly hounded as a result. However, it was a breath of fresh air for the industry.
Of course, Sean Quinn didn’t just run an insurance company. While the contribution he has made to manufacturing and other employment in and around the border region is well documented, he also broke the monopoly that existed in the cement industry in
. Certain other operators had attempted to deal with the situation by importing cement, but its bulky, relatively low value to weight nature made this a difficult exercise. Once again, the construction industry had been the direct loser up to Quinn’s arrival on the scene. Indirect losers would include every entity that requires building for its operation. Costs for providing schools and hospitals, as well as houses and offices, were far higher than they needed to be before competition arrived in the supply of such a basic building material as cement. Ireland
Manufacturing cement is a highly capital intensive undertaking. Therefore the risk involved in entering the business is considerable, and would explain how the monopoly existed in the first place. At the stage in Quinn’s career when he started Quinn Cement, it would have taken unique courage to start up such an operation. At the time, all commentators knew this and applauded his actions. Then of course, risk was “on” and real entrepreneurs, who are characterised by risk taking, were heroes.
Now risk is “off”. The business world that Sean Quinn occupied in
is largely in the hands of the receivers who are, to be fair, trained and conditioned to remove risk from the situation to the greatest extent possible. One might as well castigate a rabbit for eating a lettuce. It is what they do. Ireland
Business owners, large as well as small, up and down the country, applauded Sean Quinn not only for creating competition in areas where it was badly needed, but also for showing the way in terms of taking your courage in your hands and getting on with the business.