The wheels of change in our insurance regime turn extremely slowly, says Carol Coulter, Legal Affairs Correspondent
It is now over a year since the Tánaiste, Mary Harney, published her draft of a Bill setting up the Personal Injuries Assessment Board (PIAB), the cornerstone of her strategy to reduce insurance premiums. At the time she promised that the final Bill would be enacted by the end of this year, with the PIAB up and running by the beginning of 2004.
That Bill went to Cabinet last week, and was published earlier this week (to be confirmed). It is difficult to see how it can pass through the Dáil and Seanad by the end of the year, so the PIAB is unlikely to be making assessments for some time yet.
In any case, it will first turn its attention to employers' liability, so motorists will still have to wait before they can expect their premiums to see any benefit from it.
The PIAB is only one of the measures proposed by the Motor Insurance Advisory Board aimed at reducing insurance premiums. Many of its recommendationsremain to be implemented. These include reviewing the system of unsupervised driving by provisional licence holders; the setting up of an office of Insurance Ombudsman; along with various improvements in the court system for dealing with claims.
But the proposal that has received by far the most publicity is the removal of compensation, in cases where liability is not contested, from the courts, and the setting up of an assessment board that would assess compensation and order it to be paid. That is the PIAB, set up on an interim basis last year with Dorothea Dowling, the woman responsible for the MIAB report, as its chairwoman.
From the publication of the report she identified legal costs as a major source of high insurance premiums. That report found that these costs accounted for 40 per cent of the cost of each claim, and she has pledged to eliminate these costs through the PIAB. Theoretically, therefore, premiums should fall by close to that figure.
Of course, that will not happen. First of all, "legal costs" include the costs of experts, like doctors, engineers and other expert witnesses brought in to assess liability and the nature of injuries. Both sides in each case typically had its expert witnesses.
Secondly, certain cases will still be contested and the full range of legal costs will be incurred. It is difficult to predict what proportion of all claims will be contested. There are no statistics on the number of contested and uncontested cases, and it is possible that some insurers who might otherwise contest a case will accept liability and go to the PIAB in order to reach a speedy settlement.
Then, the PIAB itself will not be cost-free. The estimates of what it will cost vary wildly, with the legal profession claiming that it will cost more than the existing court system of assessing compensation, and its proponents claiming that the costs are very containable.
According to the draft Bill it will be a paper-based system, with compensation assessed by professional assessors based on medical reports and relevant information from public bodies like the Department of Social, Community and Family Affairs and the Revenue Commissioners. It will use a Book of Quantum, similar to that in use in Britain, spelling out the range of compensation appropriate to various injuries. The Irish Book of Quantum will be based on existing levels of compensation available from the courts. If there is a dispute about the nature or level of injuries, expert evidence will be called.
The draft Bill stated that fees would be charged for the use of the services of the PIAB, with an explanatory note that funding would be primarily from the respondents, that is, the insurers. These fees will be passed on to premiums, off-setting, to some extent, any savings made in legal costs.
Earlier this year Dorothea Dowling told The Irish Times that the set-up costs for the PIAB would be €1.26 million, with annual running costs of between €5 million and €6 million. These estimates have been contested by both branches of the legal profession, with Des Peelo, for the Law Society, estimating the cost at €30 million, a figure that was widely disputed.
Meanwhile, some cases will still be going to the courts. The Minister for Justice, Mr McDowell, is preparing a Civil Liability and Courts Bill, aimed at improving court procedures and punishing those who exaggerate claims. That should have a favourable impact on insurance costs. The Bar Council, the Law Society and the judiciary all have their own proposals to improve the delivery of compensation through the courts.
But other issues remain to be tackled.
There is no sign of the hospitals ceasing the practice whereby they charge road accident victims, who are likely to be compensated by insurance companies, many multiples of the fees for in-hospital treatment and accommodation charged to ordinary patients with medical insurance.
While the penalty points system has been introduced, and has resulted in a reduction in the number of deaths on the roads, other measures to improve road safety are still awaited. There is no sign, for example, of a dedicated Garda traffic corps.
A main source of high insurance premiums is accidents at work, and claims arising from these will be the first dealt with by the PIAB. The best way to deal with the number of claims here is by changing employers' behaviour, and this requires drastic increases in penalties for breaches of the health and safety laws. These have been promised, but progress is slow.
Insurance premiums are affected by a variety of factors. While the level of accidents is one of them, the level of compensation is another, and the method of assessing and delivering compensation is yet another, other factors come into play. These include the incidence of natural disasters (increasing in recent years due to global warming) or terrorist attacks like 9/11, and the performance of equity markets, where insurance companies invest.
Also important, of course, are profit levels. These have increased sharply in the Irish insurance industry over the past year, and it is hard to believe that the industry will sacrifice its profits for the sake of the hard-pressed motorist.
There will undoubtedly be some reductions in insurance premiums over the next few years. But there is little evidence so far that these will amount to the 31 per cent promised by Dorothea Dowling a year ago. And they won't come that quickly.