Lawyers earned almost half a billion euros last year from processing compensation claims, according to figures obtained from the Irish Insurance Federation.
The Irish Times has learned that the insurance industry paid out €440 million in legal fees for injury compensation alone last year. Altogether it paid €2,405.7 million in "non-life" insurance in 2001 - ie payments in relation to motor, public and employers' liability, property, travel and other claims. Injury compensation accounted for €1,05 billion of this, with the legal fees coming to an additional €440 million.
The figure represents a 12.5 per cent rise on the previous year, when £1,684,000 (€2,138,400) was paid out, more than twice the rate of inflation.
The number of lawyers earning fees this way is difficult to determine. More than 5,000 solicitors practise in the State and about 1,500 barristers.
If each was involved in processing compensation claims, average earnings would compute at €70,000. However, not all lawyers engage in this work and it is unevenly distributed. This suggests that those who are, earn substantially more than €70,000 and the figures also suggest that their fees amount to a very substantial proportion of the overall claims costs.
The Motor Insurance Advisory Board review showed that lawyers' fees accounted for between 40 per cent and 56.4 of the total cost of claims, depending on the type of claim processed.
More than half of all claims last year involved motor insurance, where legal costs accounted for 40 per cent of all such claims. The other half was made up of property and liability claims.
Meanwhile, the Tánaiste has said she intends to press ahead with her plans to establish the Personal Injuries Assessment Board on an interim basis next month.
The Irish Insurance Federation calculates that it would halve the amount going in legal fees.
A spokesman for Ms Harney said the PIAB was not a panacea but just one of 67 recommendations from the Motor Insurance Advisory Board. He pointed to the high proportion of legal costs involved in the cost of claims, adding that in Ireland it took six times longer to process insurance claims than it did in Britain.
Ms Harney's plan on insurance will also attempt to quantify the impact of each proposal on premiums, according to her spokesman.
His comments follow the release last week of a report from economic consultant Dr Peter Bacon claiming that a PIAB could actually make the high cost of insurance worse.
In the report commissioned by the Bar Council, Dr Bacon argued that because people would still have the right to go to court, the PIAB would have to attract people to it by offering higher awards than those available in court, which would have an inflationary affect on awards generally.
He also argued that such assessment boards worked best in countries where social security rather than insurance provided for compensation for injury.