Plans by Minister for Justice Jim O’Callaghan to hike personal injury awards by 16.7 per cent will only drive-up costs for consumers and businesses, one of the country’s leading insurers has said.
Mr O’Callaghan is preparing to bring a memo to Cabinet on Tuesday to pave the way for draft legislation that would give effect to a proposal by the Judicial Council to hike personal injury awards by 16.7 per cent.
The planned blanket hike has been met resistance from insurers and business lobby groups, who say that the increase will be passed directly on to consumers and companies.
Aviva Insurance said on Monday the proposal “can only be seen as a short-sighted political manoeuvre that will only drive-up costs for consumers and businesses, many of whom are already struggling with cost-of-living challenges”.
READ MORE
The Irish Hotels Federation also criticised the plan.
Aviva Insurance said the move would “disproportionately benefit the legal profession”, with the financial burden “falling squarely on consumers and small businesses”.
Declan O’Rourke, the group’s chief executive, said the approach “risks undoing years of hard-won progress in stabilising the insurance market”.
[ Insurers and businesses call for injury guidelines reform as 17% rise plannedOpens in new window ]
“It is the wider public who will ultimately pay the price through higher insurance premiums, rising legal costs, and the potential unravelling of hard-won reforms designed to bring stability and fairness to the personal injuries system,” he said.
Mr O’Rourke said “immediate and decisive action” is required from the Government, or there is “a real risk of sliding back into a claims culture that benefits only those who profit from legal complexity and inflated awards”.
“It is not too late to take action to stop this increase and move forward with meaningful reform, starting with a more transparent, balanced, and evidence-based approach to reviewing personal injury guidelines,” he continued.
How the wealthy are buying up land to avoid inheritance tax
Mr O’Rourke said a proposal to extend the review period from three years to seven was welcome, but that locking in a 16.7 per cent increase for seven years would “inflict far greater damage, delivering a serious blow to consumers and businesses alike”.
“Benchmarking must come first,” he said. “We need to get this right before imposing such a long-term burden on the public.
“The suggested proposal to benchmark damages against EU norms raises serious concerns, particularly as the public was led to believe this was already embedded in the original guidelines. If such benchmarking was conducted, why was the research never published?”
He added that the Government should ask the Judicial Council to benchmark awards, particularly for minor injuries, across other European Union (EU) jurisdictions, “where the awards are up to 10 times lower than in Ireland”.
The Department of Justice said Mr O’Callaghan has “consulted extensively” with his colleagues in Government and has also considered the latest reports on claims from the Central Bank.
“He is acutely aware of the impact that any such amendments to increase damages for personal injuries will have on insurance premiums, competitiveness and the business community,” the department said.
It also said any decision taken “must provide” for the effective operation of the Personal Injuries Resolution Board, which has “resulted in significant reductions in damages for personal injuries in recent years”.
The Department said a decision will be taken by Government “shortly” on the proposals.
Meanwhile The Irish Hotels Federation has also called on the Government not to approve the proposed 17 per cent increase, warning it would result in a hike in insurance costs for already struggling hospitality businesses.
“At a time when cost competitiveness should be key, there is simply no justification for approving such an enormous increase in personal injury awards,” said the IHF President Michael Magner.
He suggested that current levels of awards in Ireland “are already far higher than in other countries” and said the disparity “feeds directly into the exceptionally high insurance premiums, which businesses throughout our sector and wider tourism industry simply cannot afford.”
