Monday 26 September 2016

Court costs and claims culture still the crunch issues as premiums rise, says insurance chief

Published 26/05/2016 | 02:30

The insurance industry frequently points out that whiplash claims in Ireland typically cash in at about €15,000. In the UK, the figure is typically €5,000.
The insurance industry frequently points out that whiplash claims in Ireland typically cash in at about €15,000. In the UK, the figure is typically €5,000.

"We've got the highest number of actuaries per capita in the world," says Kevin Thompson, the chief executive of Insurance Ireland, an industry lobby group, as he sips on a glass of water in a meeting room at the Burlington Hotel in Dublin.

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You wouldn't know whether to laugh or cry. The optimistic view of it is that Ireland has done well in attracting so many global insurance operations to Ireland that the demand for qualified personnel is intense.

Pessimistically, it could be taken as a sign of how banjaxed Ireland's motor insurance market has become. The volatility demands constant vigilance and number-crunching. Motor premiums have risen 34pc in the past 12 months, and are still trending upwards.

That's largely a result of an expected market correction after years of firms pricing policies too low to secure business, married with judicial munificence that has resulted in the cost of settling a claim in the Circuit Court having risen 14pc in 2014, and by 34pc in the High Court.

But the 2014 collapse of Malta-registered Setanta Insurance has also put a rocket under premium costs. The Court of Appeal has ruled that other insurers here must cover the cost of the collapse, which left €90m in unpaid claims. That ruling is being appealed to the Supreme Court.

Most claims, meanwhile, never make it as far as a judge peering over their reading glasses at the file. But Mr Thompson says the courts set the benchmark for those cases that are settled outside that system.

‘People need to be mandated to turn up (at Injuries Board hearings) and provide necessary medical information, because at the moment they’re not,’ says Kevin Thompson. Photo: Robbie Reynolds
‘People need to be mandated to turn up (at Injuries Board hearings) and provide necessary medical information, because at the moment they’re not,’ says Kevin Thompson. Photo: Robbie Reynolds

"There is the argument that not every case gets to court, but the court decisions set the benchmark," says Thompson.

"So if I suffer a whiplash, the first thing a solicitor or barrister will do is look to see that level of awards being made in court decisions. That's their starting point. It has a waterfall effect down through the system. It's a very challenging environment."

The insurance industry frequently points out that whiplash claims in Ireland typically cash in at about €15,000. In the UK, the figure is typically €5,000.

Thompson argues that even if whiplash payments alone were benchmarked against international payments, it would go some way towards improving the overall claims environment. About 80pc of all motor claims are related to whiplash injuries, Thompson points out.

"Just benchmark that. That would have a material impact in terms of reducing costs and bring stability to the market."

He also believes that the Injuries Board, which was created in 2004 as a result of the last major Government review of the insurance sector, needs an overhaul.

"People need to be mandated to turn up (at Injuries Board hearings) and provide necessary medical information, because at the moment they're not. And we have an anomaly also whereby if there's any psychological trauma attached to an injury, that falls outside the remit of the Injuries Board," says Thompson.

A review of the so-called Book of Quantum used by the Injuries Board to determine what awards are made to claimants is due soon.

"The thing is to standardise what the level of awards should be," Thompson explains, adding that this would result in stability in the insurance sector.

Some solicitors proudly assert that they can secure higher payments in court for claimants in virtually all instances where the Injuries Board has assessed an award. Indeed, the Injuries Board was established with the intention that solicitors would not be required, helping to keep costs of claims down. But today, about 90pc of claimants at the Injuries Board are represented by solicitors.

This week, Thompson and his team at Insurance Ireland are playing host to 650 delegates from around the world for the International Insurance Europe Conference. It's a major coup for the Irish organisation, which pitched against France and Spain for the event.

He says the event takes place against a backdrop of significant change in the industry. Technological integration and innovation is changing the way products are pitched to people, perhaps for instance rewarding them if they use devices that relay how active they are.

"Insurance is moving in a very different direction."

He laughs when asked if insurance is becoming sexy. "The dress won't be above the knee-line, put it that way."

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