Brian Hanley: Government must stay the course on insurance reform
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In the past few years, spearheaded by the Cabinet subgroup on insurance reform, we have seen the introduction of a range of important initiatives intended to create a fairer, more stable insurance landscape, and one where spiralling premiums in public, employer, and motor liability were brought under control.
In motor insurance, we have now seen 14 successive months of premium increases. This is largely attributable to inflation and regrettable after five years of premium reductions (totalling circa 23%).
Now that general inflation has begun to stabilise, we must hope this soon applies to repair costs before much of the good work here is undone. This year also saw OUTsurance enter the motor insurance market, providing additional competition — something that is sorely missing from the public liability market relevant to businesses, sports, community, and voluntary organisations.
Earlier this year, the Central Bank published its liability report for the first half of 2023. It found no meaningful difference in public liability awards, whether settled through the Injuries Resolution Board (€23,122) or through litigation (€23,458), yet legal fees are — on average — 22 times greater in the litigation channel (rising from €1,024 to €22,803).
This demonstrates the effectiveness of the board in resolving claims and providing fair awards.
However, the number of cases settled via litigation remains stubbornly high (72%).
It is most unlikely a majority of these claims are highly complex or contentious, meaning there is simply no reason not to settle via the board — it is quicker, cheaper, and the awards are the same.
Nor is it unreasonable for us to reflect on who has the most to gain by cases moving from the board to litigation in such large numbers.
I read of a case recently where the claimant was awarded €20,000 and legal costs (for one side only) were a further €70,000-€80,000.
This is not sensible, not reasonable, and not necessary in the majority of cases.
Please bear in mind that only 2-3% of cases end up in court, so it can hardly be credible that the disagreements in most cases are sufficiently intractable to warrant extensive litigation.
Earlier this month, the judicial council’s personal injuries committee recommended that awards increase by 16.7%. This is based on its first three-year review of the guidelines and presents a number of difficulties. In the event awards are likely to go up by varying amounts every three years, and given it takes two-and-a-half years to go through the injuries board, why would claimants not move from the injuries board process into litigation to allow more time to see if awards do rise (as well as nearly doubling the overall cost of the claim when legal fees are added in that channel)?
This problem threatens to reduce settlement volumes at the injuries board at a time when the last Government did all it could to increase it.
In the context of the future effectiveness of the Injuries Resolution Board, it is essential that a careful review of the guidelines, the legislation that underpins it, and the role of the injuries board is also now included in the next programme for Government.
Relatedly, special damages (typically vouched for expenses such as loss of earnings) already track inflation — and it is only right that they should do so.
For broader context, I note a recent court case where an Irish citizen injured while on holiday abroad had their personal injury case dealt with here, receiving an award “10 times greater” than that available in the other country (Switzerland).
In this light, a 16.7% increase in Irish awards after only three years with the current guidelines might be difficult for people to accept.
Ultimately, however, it is the potential adverse impact on the work of the injuries board that is of most concern.
We need the new Government to stay the course on insurance reform and we need to safeguard the vital role played by the Injuries Resolution Board in resolving claims.
The nettle also needs to be grasped in terms of the legal costs associated with personal injury claims or, perhaps preferably, greater attention given to the seemingly unnecessary stream of cases going to litigation.
The reforms the previous Government and other stakeholders introduced are already working.
However, in the context of public and employer liability insurance for businesses, sports, community, and voluntary organisations, this counts for little when they see insurer profits continue to soar while premiums remain unjustifiably high.
Brian Hanley is the chief executive of the Alliance for Insurance Reform.