Ireland has certainly taken the long road to insurance reform, particularly in the area of personal injuries. The Personal Injuries Assessment Board (PIAB) was set up back in 2003. Since then the industry has gone through its ups and downs, but a surge in premiums in the period after the last financial crash put a focus, inter alia, on the level of awards and the costs of the process, particularly for those who go through the courts. Now another landmark has been reached with the Judicial Council agreeing new guidelines for personal injury awards and a process designed to provide more certainty.
This is welcome – and overdue. The new guidelines have been criticised both for going too far and not going far enough in reducing current pay-out levels. In most cases the level of awards do not appear unreasonably low – and judges do retain some discretion. Indeed, pressure may yet come on the Government to legislate in relation to award levels if premiums are not seen to fall.
That judges were asked to take on this job in the first place springs from Government fears of being seen to cross the line in the separation of powers, together with particular constitutional issues surrounding personal injuries. The Law Reform Commission said this was the best approach, but that it might be possible for the Government to legislate, provided it could navigate the constitutional risks.
Whether this might be necessary remains to be seen. But, first, it seems sensible to assess the impact of the new guidelines and to remind the industry that lower awards must indeed mean lower prices for consumers and businesses. It would also be welcome if the new guidelines succeeded in delivering more certainty in awards.
It is not ultimately insurance companies that pay for this – it is their customers, via higher premiums
The new regime should also lead to a greater use of the PIAB, as the new guidelines will cover both it and the courts. In the case of claims for less than €100,000 the legal cost associated with litigated settlements is more than 20 times that relating to PIAB awards. In turn this has an impact on premiums and on the risk facing businesses in defending claims.
While most claims are genuine, the high level of awards has also incentivised a racket in false and doubtful claims. However, it is not ultimately insurance companies that pay for this – it is their customers, via higher premiums. The existing system can also provide incentives for claimants to pursue their case through the courts, rather than accepting a PIAB award.
Some progress has been made in other areas of insurance reform, for example in providing better information to consumers and in establishing claims database information at the Central Bank. More still remains to be done, for example, to encourage new entrants to provide more competition in the market and combat fraud. The reform agenda still has a way to run.