Mismanagement causes car insurance hikes, say lawyers

Legal costs play ‘a very small role’ in insurance costs, Oireachtas committee told

The Bar Council maintains that legal costs play only a small part in the rise in insurance premiums.

The Bar Council maintains that legal costs play only a small part in the rise in insurance premiums.

 

Financial mismanagement and imprudent pricing has led to an increase in car insurance premiums, the Bar Council has told an Oireachtas committee.

Appearing before the Joint Committee on Finance, Paul McGarry, chairman of the Council of the Bar of Ireland, said there had been mismanagement of the insurance industry between 2012 and 2014 and increases in premiums were being introduced to “restore profitability”.

He also said a “lack of transparency and incomplete disclosure of data” by the industry was a “significant barrier to a comprehensive understanding of the claims environment”.

Claims

According to the Central Statistics Office, car insurance has increased by more than 38 per cent in the past year. The industry has attributed the increases to a higher numbers of claims, higher awards, high legal costs and increases in fraud.

The finance committee has been examining the reasons behind the increases at a series of hearings since last week.

Mr McGarry said there had been no significant increase in the number of claims processed by the Injuries Board and award levels remained consistent. He also said 70 per cent of claims were settled with claimants directly by insurers and there was no data for those cases.

And he said between 2006 and 2013, barristers’ professional fees decreased by between 26 and 50 per cent.

The Law Society labelled the increased insurance premiums “extraordinary, shocking and excruciating”.

Stuart Gilhooly, senior vice-president of the society, said the cause of the increase “lies inside the closely guarded books of the insurance industry”.

“It is also common knowledge, though rarely admitted by the industry, that much of their profits emanate from the investment of the premium income,” he said.

“It is abundantly clear that recent returns have not been remotely the same levels that they would have experienced in the past, given the recent volatility of global markets.”

Blame

He said the insurance industry had sought to blame everyone but themselves.

“Part of this has been a campaign of snide innuendo about the bona fides of personal injuries victims, while reserving particular ire for the easy target of the courts and the lawyers who seek to obtain compensation for the innocent victim,” he said.

He said legal costs played “a very small role” in insurance costs.

Ken Murphy, director of the society, said the level of competition in the insurance market had greatly reduced and the consequence of that was a “massive increase in premiums”.

He said solicitors worked in a highly competitive market.

“There is intense, white hot competition,” he said, with 2,228 solicitors’ firms in the jurisdiction. If a client was unhappy, he could go to the solicitor next door, he said.

Senior counsel Sara Moorehead said she had not noticed a sea change in personal injuries awards following car accidents, though birth injuries awards had gone up. She said she had not noticed legal costs going up either.

There were some fraud involved in claims, Ms Moorehead said, but she didn’t understand why insurance companies did not go to the Director of Public Prosecutions and say they want the cases prosecuted.

Legislation

Deputy John McGuinness, chairman of the committee, suggested the legal representatives were “hell bent” on blaming insurance companies.

“I expected constructive commentary from yourselves,” he said.

Ms Moorehead responded that legislation to introduce a legal costs adjudicator was awaiting commencement and would improve matters. And the Bar Council would also welcome a revised Book of Quantum, which outlines judges’ awards in various cases, due in January 2017.

But, she said, there was an absence of information from insurers and until it was provided, the Bar Council could not make more constructive suggestions.

Mr McGuinness asked whether solicitors advised rejection of settlements so cases would go to court and there would be “a gig in it for barristers as well”.

Mr Gilhooly said there was only one question solicitors considered, whether it was the right offer, whether a “barrister is getting a gig or not”.