Over the past three years, and more recently in relation to Employers’ Liability and Public Liability, there has been extensive public debate and analysis on what to do to reduce the cost of insurance for motorists and businesses. Indeed, it was a major theme of the conversations I had at the recent Brokers Ireland conference. There has been understandable public frustration on the issue and while the intensity of the debate has moderated somewhat, the public desire for reform has not. Therefore, we must not let the opportunity pass in 2018 to implement fundamental and lasting reforms of the costs consumers ultimately pay for.
In 2015, Insurance Ireland published a policy document called Driving Change on the cost of claims in motor insurance. This policy called for reforms of soft tissue injuries, reductions in legal fees and more powers for the Personal Injuries Assessment Board, to allow it to handle more claims and prevent them going to expensive litigation. This came at a time of increasing claims costs for insurers, with extreme volatility in the market.
The Government’s response in January 2017 was the Cost of Insurance Working Group Report which included 71 actions and 33 recommendations. For insurers, this was a welcome development and the report includes many worthwhile measures, including on data gathering from insurers that will eventually lead to the introduction of a National Claims Information Database showing the costs in insurance. However, we stressed from the very start that the key recommendations related to the issues of awards and the cost of settling them, so where are we over a year on from the report? It is fair to say we have diagnosed the problem but have yet to implement the critical solutions. The publication of the report was an important statement of intent and there is almost universal acceptance now that the cost of claims must be tackled. Insurers are seeing some positive results in the courts when defending fraud cases, so there is cause for optimism. But to really move the dial on costs more needs to be done, and the pace of reform needs to be accelerated.
The defining issue in the motor insurance market in 2018 is the cost of claims, as it has been for many years. Report after report has shown our costs are out of kilter such as our average soft tissue injury being €15,000 versus €5,000 in the UK, and a minor ankle injury here allowing up to €54,700 compared to €12,554 in the UK. In addition, the UK Government recently announced plans to cap soft tissue injury awards through new legislation.
Soft tissue injuries including whiplash account for 80% of motor injury awards in Ireland so the expected report of the Personal Injuries Commission is critically important as it will benchmark our awards with other countries.
The new legislation to give more powers to the Personal Injuries Assessment Board is listed as priority legislation this year by the Government, although it will take time to become law and to influence the claims environment. Another key recommendation of the Cost of Insurance Working Group report was to look at the impact of legal and other fees on personal injury awards. This was to start in Q1 2017 but will now not commence until July this year when the new office of the Legal Costs Adjudicators is established. Given that €42,400 in legal and other costs is paid on an award of €100,000 according to a report by the Department of Finance, reform of these costs is long overdue.
In addition, given the concerns around Employers’ Liability and Public Liability insurance, the reforms proposed here will help tackle costs in those areas, so they should not be looked at in isolation. To support all this work, insurers have opened their books and provided data on five occasions in 24 months to allow comparisons of our cost of claims. There is no shortage of information to work from and the only question now is when will the key reforms be implemented.
The good news is when we have seen significant reforms like this before, such as in the early 2000s, insurers responded, and customers benefited, so insurers have a strong track record on reform. Like then, let’s take the opportunity to deliver much needed reform.