An open letter to circuit racing competitors re the ongoing insurance situation- from Trevor Gray
An open letter to all circuit racing competitors concerning the ongoing insurance situation
in Motorsport Ireland.
From Trevor Gray, Chairman of Motorsport Ireland’s Race Committee.
I have no doubt that there will be very few of you who are not aware, to some extent, of the current insurance problems facing Motorsport Ireland. In fact, the problems face all branches of properly regulated motorsport with Motorcycling having similar problems. Most of you will be aware that there was a meeting of competitors with Motorsport Ireland in Athlone back in May of this year.
Equally there will be very few of you who didn’t hear about the alleged plans to levy €200 from every competitor and €100 from every official – none of which were actual proposals, just suggestions, yet somehow it became presented as a ‘done deal’, and let’s not mention that all this was claimed to be to reduce rally entry fees, when the reality of the situation is that there is very simply a massive hole in the budget and a long term solution needs to be found.
OK, for the moment, let’s forget the emotions, the anger, etc., as this does nobody any good. Instead let us sort out a few hard facts, and then take it from there. For the purposes of this letter, I’m going to be rounding figures, so please don’t try picking holes and say it’s not €600,000, its €615,123.45 etc because in the bigger picture, it won’t matter.
We’ve all heard about insurance increases, most of us will be aware of levies that were applied to rally entries, and if you are not aware, the way that Motorsport Ireland works is that it purchases a single insurance policy which covers all events – Circuit Racing, Hillclimbs, Autocross, midget racing, rallycross, sprints and of course, rallying. If you look at the event insurance premiums chart (downloadable from the MI website) you will see that the insurance premium for a circuit racing event is €2990 (including €356 permit fees, and €86 legal fees) and after that, €15 of each adult entry fee goes towards Competitors Personal Accident Insurance (€8 for under 18s) which gives
cover in the case where you are injured and need hospital treatment etc. Comparative figures for a hillclimb on closed roads is €3333, and a Kart race meeting on a circuit is €1500. Meanwhile a National Stage Rally is €12,625 + €100 for every starter over 100 starters plus a levy of €191 on every competitor (so if you had 110 entries, that would be a total of €34,635), and all the various premiums collected over all the events that happen over the course of the year all are supposed to recover the premium paid to the insurance underwriter. Going back to the race fees, the €356 permit fee is the only part of the fee that MI are getting that isn’t being allocated to insurance, so that’s about €3.50 per competitor for the average 100 entry race meeting.
In 2015, the MI insurance policy was approximately €500,000 – I did say I was going to round figures. This €500k was effectively recovered by the figures discussed in the paragraph above. In 2016, MI were hit with a significant increase in the premium, increasing it to €1,000,000 (€1 million) – First –Wow! Second – Why? The why is entirely down to the claims culture existing in Ireland and the crazy awards being handed out by our court system. There were a number of claims from crashes in rallying that resulted in life changing injuries to those involved, and despite waivers, ‘you are here at your own risk’ etc, etc, and even cases where people were positioned where they shouldn’t, our courts in their infinite wisdom decided that these people should not take any responsibility for their
actions and that the insurance company should pay through the nose. This attitude continues to prevail where we still hear of people making crazy claims and one judge in particular who is reported as saying that it is not the person’s responsibility to look where they are walking – and people wonder why their insurance premiums for their home and car insurance are going through the roof.
Other countries put limits on claims, €10k for a broken leg, €50k for a severed leg etc. but not here. Anyway, the nett result was that in the couple or so years prior to 2016, the premium to claim ratio for the MI policy was in the region of 400% – ie, approximately 4 times the premium collected was paid out in claims, or in real figures, if the annual premium was 500k, then in the region of 2 x 4 x 500k, ie €4 million had been paid out in claims or was allocated to future value of ongoing claims.
Clearly this is not sustainable, so MI was hit with a substantial increase. Because of our courts system and the ridiculous awards being given, Ireland is considered a ‘basket case’ by most insurers. It is also clearly recognised that the general safety of our events is not in question, but when someone can do something absolutely stupid and the courts don’t make them take responsibility for their own actions, what hope do we have?
So, in 2016 the insurance policy increased by almost €500k – half a million in words. This was to be recovered by putting a levy onto all rally events. The levy ranged from €375 for an international Special Stage Rally to €75 for a Forestry mini rally. This was supposed to bring in approximately €400k with the balance being covered from Motorsport Ireland reserves.
The targets were never achieved because a number of competitors chose not to compete and a larger amount than expected was needed to be covered from reserves. Reserves – the money in the bank that has been generated from decades of watching the pennies. The reserves in question, while I might call them Motorsport Ireland Reserves, are actually the reserves of the IMF (Irish Motorsport Federation) and the RIAC (Royal Irish Automobile Club) – the
commercial bodies that own MI – MI is just a ‘trading name’ of these. In 2015 the reserves were approximately €750,000. They are currently around €550,000. Most of this decrease was due to covering the increased insurance premium. In the past, events such as the Phoenix Park races, which the last two times ran at a loss, have eaten into the reserves to the tune of approximately €82,000.
The current insurance premium is just under €1.3million – yes an extra 300k went on for 2017. There have been no claims in the last two years and obviously we want to keep it that way. There have been discussions on a number of items to reduce the visible risk etc, but these are works in progress, however there is some optimism that the premium might decrease, but no guarantees.
So – If the original premium was covered by the original event fees, and most of the additional premium is being collected by the ever decreasing levies, where is the additional €300k going to come from? The levies on rally events is not working, numbers are decreasing. Yes, we could probably do with running less events, but not until there can be some clear link made between number of events, the risk involved/mitigated and the actual premium. Therefore, in terms of the original premium and the original event fees, a method of raising an additional €800,000 EVERY YEAR is needed until the insurance premium comes down – if it comes down.
This is where that €200 on every competitor and €100 on every official came from. But even that was a flawed proposal because the proposers were claiming that there would be no more levies and it would be for 2018 only. Let’s get real here – The insurance premium is not going to drop back to 2015 levels any time soon – not unless the government takes the bull by the horns and caps personal injury claims and forces people to take responsibility for their own actions.
Included in the massive increases in premiums was a massive increase in the excess – that horrible figure which you, the insured, pay first for any claim. Most home insurance policies are either €250 or €500 excess, car insurance is usually around €250 and usually you can get a discount if you go for a higher excess. Well the excess for MI is €100,000 for the first three claims. That leaves MI/IMF/RIAC exposed to potential claims excess of €300,000. Each year. For 2017 as well as 2018 and beyond. They have committed to covering these from reserves rather than passing them on to the clubs as no club has the reserves to cover them anyway.
Let’s recap the figures. MI has reserves of approx. €550,000 Potential exposure to claims excesses of €300,000 this year.
An increased insurance premium of €800,000 over previously sustainable levels for 2018 Potential exposure to another €300,000 of claims excesses for 2018. That is a situation that is simply not sustainable. Those of you who run your own businesses and are directors of companies will know your responsibilities for trading recklessly and soluble trading and should immediately recognise that unless something is done to bring in a sustainable significant
large amount of money, the directors of the IMF and RIAC would have to shut the doors and close
down and cease trading as to continue would be reckless and they would be held personally liable by
the office of corporate enforcement.
Let’s ‘wing and a prayer’ the figures – Say there are no large claims in 2017 and we get to the end of the year, then the reserves of €550k need to cover the €750K insurance increase plus the €300k potential insurance excesses. Still not viable. If the levy system brings in €350k then the 750k insurance increase is effectively €400k but it still couldn’t be done as there is nothing there to cover three potential insurance claims excesses.
The only solution is to raise a significant amount of money from licences and levies. There have been many discussions on social media about this. There is talk of who contributes what to the MI budget etc. and yes, rallying does contribute the largest to the running costs of MI, but that doesn’t mean that they get to call all the shots. That branch is significantly responsible for the current situation and will continue to significantly pay for it. There is talk from some who say that without rallying all branches of motorsport are dead, this is a simple fact that we know to be untrue because, for example, circuit racing could continue with independent insurance, but it would
increase entry fees by €15-€35 per event – a far cry from the doubling or trebling claimed by some on social media, BUT, it would cause problems as you would no longer have FIA race licences. What does circuit racing contribute to Motorsport Ireland’s budget? Estimated about 340 licences, and then the €2990 from each of the seven Mondello events, plus €130 for each of the 12 registered championships. If we average the licences at €110 each, that’s a total of approximately €56,000, take out the insurance premium and that leaves about €38,000. Out of that €25,000 goes to the Sexton Trophy/Young Driver award (the other half is from Sport Ireland), and the rest goes towards salaries, and the other day to day costs of running the sport such as printing, supporting officials training, all those appeals etc!
The simple fact is that the FIA wants every ASN (ASN = the governing body in each country, MI in Ireland, MSA in the UK etc) to govern ALL branches of four wheeled motorsport, it doesn’t want one ASN for Rallying, one for Racing, one for karting etc, so it does fall to all of us to do what we can to keep Motorsport Ireland running.
I did up a spreadsheet for the Motorsport Commission (MI’s ‘governing council’ if you will) seeing how we could split it across the various disciplines, and after various iterations, the figure that Circuit Racing needs to contribute to the budget is in the region of an additional €34,000. Rallying will be contributing €520,000, Speed (hillclimbs etc) €29,000, Clubman (Mudplugs, trials etc) approx. €15,000. We haven’t figured out exactly how this (ie the circuit racing part) will be collected. The preference is for the majority to be on entry fees, perhaps a €20 levy per race entry, with a small increase in the licence fee of €45 – €50 (bearing in mind there have been no licence fee increase in several years). Unfortunately the reality is that this has to be done in some form. I appreciate that there was a lot of anger when it was suggested that everyone should pay large amounts of money to reduce rally entry fees – and rightly so. However, everyone should pay proportional to their risk to support our governing body. Nobody in circuit racing gets free weekends away out of it, our officials don’t claim expenses – they see it as their hobby with an associated cost, and the contribution circuit racing makes to the overall budget in MI is pretty small on the overall
scale. Even if the amounts hoped to be raised are actually raised, the reserves will still be eaten into by another €100k at least, and possibly another €300k if there are three major claims. However, if there were three major claims in the next 12 months that would be the end of it because nobody in their right mind would insure Irish motorsport – or at least the branch with the claims in – ever again.
It has been proposed that until the situation improves, that we suspend the Young Driver award. This would take €25,000 back and we would then need to only find the remaining €9,000 which would be in the form of small licence increases and small entry levies. I would appreciate your feedback on this. The young driver award has had its good years and its bad years, but mostly good, and we are one of the very few ASNs to provide this type of support. This award is supported by Sport Ireland who match the funding that MI provide. It is not easy swapping hats from my roots as a driver and agreeing fully with the strongest comments you have been making on social media, to being a member of the Motorsport Commission and trying to wear the hat that puts all personal preferences aside and tries to do its best for the sport as a whole, but I am hoping that by giving as much factual information as possible to you that you will conclude that you can take off your racing hat too for a few minutes and support the entire sport.
If you feel that we need to hold a general drivers meeting, please let your class co-ordinator know
and they can correlate the replies and send them back to me. If you feel the need to contact me
directly, you are always welcome, on this or any other matter concerning racing,
Yours in motorsport
Chairman – Motorsport Ireland Race Committee