- Excessive Cost of Claims in Ireland Leading to Increases in Motor Premiums
- Average cost of whiplash in Ireland is €15k, average cost in the UK is €5k
- Other factors such as Setanta judgment will also impact premiums in Ireland
Issued Tuesday, 15 September, 2015. Insurance Ireland, which represents 95% of the domestic and international based insurance sector in Ireland, held a briefing today to discuss the issues contributing to increases in premiums for customers, particularly in the area of motor insurance. Insurance Ireland has identified the high cost of awards in court as one of the key factors driving up the cost of insurance premiums. Other factors include legal costs, fraud and most recently, the High Court’s judgment in relation to Setanta Insurance. Insurance Ireland believes a range of measures are needed to stabilise pricing for consumers, particularly in the area of motor premiums.
Speaking at today’s briefing, Kevin Thompson, CEO, Insurance Ireland, said “Motor claims costs are rising. The level of awards being made in the Courts is at an all-time high. The average High Court award in 2014 was up 34% on 2013 and the average Circuit Court award was up 14% on 2013. In litigated cases, legal costs in Ireland account for more than 60% of the compensation awarded.”
“Motor injury awards made by the Injuries Board averaged €21k in 2014, a very high average considering that 80% of motor injury claims are for whiplash” said Kevin Thompson, “The figures on whiplash alone are very stark; in Ireland the average award for whiplash is €15k, in the UK, the corresponding figure is €5k. The reality is that premiums are dictated by claims costs, and although the Irish market is very competitive, increases in the cost of claims will inevitably lead to increases in premiums.”
The increasing cost of awards made in the Courts:
The level of personal injury awards in Ireland is increasing as the following table shows:
High Court Circuit Court
2014: 304,353 13,550
2013: 227,321 11,941
2012: 252,146 11,452
2011: 215,730 12,362
2010: 219,303 12,662
Source: Courts Service Annual Reports 2010-2014.
“While good work has been done by the Injuries Board over the last 10 years,” said Kevin Thompson, “the average motor injury award made by the Injuries Board is very high at around €21k. Also, more than 90% of claimants to the Injuries Board are represented by solicitors even though the Injuries Board was meant to be a lawyer free zone. Approximately 40% of Injuries Board awards are rejected by claimants partly because some solicitors adopt a policy of non-cooperation, for example claimants not turning up for medicals or not supplying loss of earnings information so that the Injuries Board cannot make informed awards. The consequence of this is that following the inevitable rejection of the award, the case is subsequently litigated, generating additional legal costs.”
“Insurance fraud adds an additional €200m per annum to the overall costs,” said Kevin Thompson “approximately half of which relates to motor, adding around €50 per annum to the average motor premium. Uninsured driving adds a further €30 to the average premium. We believe we are seeing growing evidence that the high level of awards in Ireland, particularly for whiplash, is creating a temptation to commit fraud. For example, we are seeing a number of insurance fraud rings engaging in staged motor accidents to generate spurious whiplash claims.”
Effect of Setanta Judgment
“While everyone agrees that those injured by Setanta drivers should be compensated, Insurance Ireland believes the Insurance Compensation Fund is the right mechanism to do this.” said Kevin Thompson, “The Insurance Compensation Fund has dealt with all insolvencies since its establishment, funded by a 2% levy. The recent High Court judgment said the Motor Insurers’ Bureau of Ireland (MIBI) should be responsible, but we believe MIBI’s role was clearly designed to compensate the victims of uninsured drivers. By April 2015, the cost of Setanta claims was approx. €90m and is likely to rise. Imposing the responsibility for this on the rest of the sector through the MIBI will result in higher premiums and potentially a risk of insurers exiting the Irish market.”
Measures to limit the increase in premium costs for consumers
Outlining the measures that could limit the increase in premium costs to consumers and businesses, Insurance Ireland recommended the following:
- With increased motoring activity on our roads, ensure An Garda Siochana and the Road Safety Authority are supported to maintain an adequate level of enforcement
- Compensate victims at reasonable levels which society can afford.
- Reduce legal costs, which are still too high and which have never been tackled in litigated cases.
- Ensure flaws in the Injuries Board process are tackled so that claimants are required to turn up for Injuries Board medicals and to provide loss of earnings information.
- Act to ensure fraudsters are deterred. Suspended sentences are not an adequate deterrent and give the impression that there is no downside to insurance fraud if caught.
- Fix the Setanta problem by amending the relevant legislation and the MIBI Agreement so that the roles of the ICF and MIBI are clear and unambiguous: ICF to deal with insolvencies generally and the MIBI to deal with claims from victims of uninsured and untraced drivers.