Cliff Taylor: Too much talk and too little action on insurance reform

It is ironic that Taoiseach Leo Varadkar has called in a senior counsel to review the facts of Maria Bailey's insurance claim. This involves two themes all too familiar in the story of reforming our "compo culture" regime – delay and the involvement of the legal profession.

In her RTÉ interview with Sean O'Rourke, Bailey skirted around the issue of who was actually to blame for the accident. This highlights one of the key problems leading to high claims costs and thus high costs of insurance. A culture has grown that if you get hurt on someone else's premises, then you are in some way entitled to compensation – no matter who was responsible.

In lodging her – now withdrawn– claim, Bailey was doing what thousands do every year. In theory, the court decides on the issue of culpability for whatever has happened – be it a car crash, a slip on a wet floor or whatever. But in practice, many claims never get that far because there is a kind of industry in “settling ” – reaching an agreed sum in return for a claim being dropped. This is because the only ones really damaged by this are those buying insurance, who get caught with ever-rising prices, a trend now endangering many small businesses.

There is a kind of industry in 'settling' – reaching an agreed sum in return for a claim being dropped

The normal chain of events is familiar. The person who has had the accident has an incentive to make a claim because there is a good chance they will, at least, get something from a settlement to close the whole thing off. Of course in many cases they are fully entitled to payment due to the negligence of the other party. But in other cases the insurance company of the person being claimed against simply decides against the risk of going to court – and being on the wrong side of a big award and significant legal costs. This means exaggerated or even fraudulent claims can often succeed.

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Legal role

The legal profession plays a key role. There are no detailed figures on the overall legal cost. However, figures produced in a Department of Finance report on the cost of motor insurance claims show that legal costs – for both sides – typically account for some 40 per cent of the amount awarded. Most of these costs relate to cases not settled at the Personal Injuries Assessment Board (PIAB), which has reduced the costs of uncontested claims. So solicitors have an incentive to see claims taken and pursued in the courts.

The level of awards handed down in courts has, in many cases, seemed high, certainly in comparison with UK levels, though recent appeals decisions have, it appears, led to some reduction. For soft tissue awards such as whiplash, awards here have been about 4½ times UK levels. Former High Court president Nicholas Kearns, who chaired the Personal Injuries Commission set up to examine the issue, said that if there was a jurisdiction with higher personal injuries awards in the EU, the commission had been unable to find it.

No wonder insurance companies would try to settle, when otherwise they might quickly face a total bill of €30,000 or more.And then this is reflected in personal liability and motor insurance bills, endangering the future of some businesses – notably those exposed like creches, leisure centres, pubs and night clubs and so on – and hitting consumers.

Insurance companies have been slow to fight fraudulent or exaggerated claims and lawyers have been happy to take on whatever cases come their way

Everyone has seen this problem for years, but the reform programme to deal with it has been slow. The legal profession has questioned whether cutting claims will cut premiums. Insurance companies have, meanwhile, been slow to fight fraudulent or exaggerated claims and lawyers have been happy to take on whatever cases come their way. And so it has all gone on.

The stories about soaring insurance costs and threats to jobs may have brought us to some kind of tipping point – and the Maria Bailey case has added some political fuel to the fire. But still, things are moving slowly.

High awards

The current reform process started in the motor insurance sector, where claims soared after the economic collapse, largely due to previous unsustainable cuts in premiums as companies battled for business – but also due to high award levels. This led to a cost of insurance working group set up within the Department of Finance ,which looked at motor insurance and then public liability costs.

Its analysis was useful and, unlike many such exercises, follow-up progress reports have tracked what has been done and what has not. Some progress has been made on how insurers deal with customers and on establishing a database of claims, but getting a process to uncover full detail of the legal cost of claims is taking a long time, an insurance fraud database appears to have run into the sand and a separate uninsured drive database is taking a long time to get off the ground.

The working group also led to the establishment of a Personal Injuries Commission, which produced more useful work and a recommendation that a special judicial council be set up, including representatives of the judiciary which would recalibrate current guidelines for award levels contained in what is known as the Book of Quantum.

However, the relevant legislation has been crawling through, there was a spat over proposals for some kind of interim arrangement and now it looks unlikely the council will be up and running before the end of the year. And then it will take it some time to come forward with new guidelines.

In the wake of the Bailey affair, we are told this will all now be fast-tracked. But as these issues have been batted around since 2015, the use of a term like “fast-track” seems a bit rich.