Insurers criticised for not pursuing fraudsters

Former High Court president Mr Justice Nicholas Kearns has criticised the State's loss-making insurers for not seeking the prosecution of people found to have made fraudulent injury claims.

Speaking yesterday at a conference on Ireland’s soaring personal injury costs and insurance premiums, Mr Justice Kearns said: “A particular bugbear of mine is the lack of resolve there appears to be by many insurers to tackle fraudulent claims and fight them to the end.”

When fraud is uncovered in civil cases, typically the claimant withdraws their claim without any further repercussions, he said, with insurers failing to make a complaint to the Garda, who could investigate and refer to the Director of Public Prosecutions.

The issue has been thrown into sharp relief by a recent UK study by Axa, the French insurer, which found that up to a third of respondents have either committed insurance fraud or thought it was justifiable to exaggerate a claim.

Ireland’s insurance industry has been in a state of turmoil in recent years for a number of reasons. Motor claims have been rising as more cars take to the roads in a recovering economy. Court awards have been increasing. And insurers have been less able to rely on investment income to cushion the blow, as they grapple with record-low global bond yields.

In an effort to return to profitability, insurers have hiked motor coverage rates by 35 per cent in the year to May, according to the Central Statistics Office, with house insurance rising by almost 10 per cent.

“Something’s got to give,” Mr Justice Kearns told a room of insurers and lawyers at the event, hosted by stockbrokers Davy and solicitor firms O’Brien Lynam and McDermott Minehane.

The Central Bank said on Tuesday in its latest half- yearly macro-financial review of potential risks in the financial system that all of Ireland's main insurers reported underwriting losses last year, with an aggregate shortfall of €284 million.

“Contributing to this are increasing claim costs stemming from legislative and judicial changes, and increased economic activity,” it said.

Emer Lang, an analyst at Davy, noted that the average bodily injury award payment in Ireland in 2015 of €22,878 compared with £10,680 (€13,460) in the UK. Insurance Ireland says the average Irish whiplash award, which make up most of motor insurance claims, is €15,000, compared with €5,000 in the UK and €3,000 in France and Spain.

Increase in jurisdiction

The main reason for rising court costs, according to David Nolan, a senior barrister and mediator, was an increase in jurisdiction of various courts in 2014, when the maximum circuit court personal injuries award rose from €38,000 to €60,000.

“Talking anecdotally to my colleagues, to solicitors, to the judges, they absolutely agree that the change in the jurisdiction was the one single most important factor,” said Mr Nolan. “However, [the Government] didn’t actually give the resources to the judiciary . . . to deal with the number of claims [coming through].”

In addition, the book of quantum drawn up by the Personal Injuries Assessment Board in 2004 to provide a guide on compensation that should be given for various types of injury, depending on their severity, is being reviewed only now – following years of criticism by both lawyers and insurers.

Meanwhile, a review by the finance and transport departments on insurance sector policy, amid runaway costs for consumers and businesses, is unlikely to yield results or action until next year.

But there is some light at the end of the tunnel, according to Mr Nolan.

The Court of Appeal, set up in 2014, has recently begun to slash some of the injury awards that have been granted by the lower courts. A €65,000 High Court award granted by Mr Justice Kevin Cross last year, where the claimant suffered “soft-tissue injuries”, was subsequently cut by more than half on appeal.

This year, the Court of Appeal almost halved a €120,000 general damages award given by Mr Justice Anthony Barr to a woman who had sustained shoulder, hand and thumb injuries in a car crash. In March, it also cut by 50 per cent a combined €220,000 High Court personal injury award given to a couple who had sustained injuries when their car was hit by another vehicle.

In the Court of Appeal ruling, Ms Justice Mary Irvine "took issue with the conclusions of the learned High Court judge", as the injuries to the pair were modest, they hadn't missed work nor attended a doctor for 14 months after the accident.

“At the moment, the messages are very, very strong,” said Mr Nolan. “Judges of the High Court are being told by the Court of Appeal: ‘Moderate your general damages in these cases.’”