Wednesday 29 January 2020

'If we aren't careful, the levels of awards will close businesses' - Government considering capping personal injury damages payouts

Minister blames 'out-of-kilter' payouts and fraudulent claims for the high cost of insurance

Stock picture
Stock picture
Cormac McQuinn

Cormac McQuinn

The Government is exploring ways of capping the damages awarded by courts in personal injury and motor insurance claims as part of a bid to bring down premium costs.

It comes amid renewed fears of rising motor premiums due to a new levy on the industry and Opposition criticism that not enough is being done to reduce the cost of insurance.

The junior minister responsible for the insurance sector, Michael D'Arcy, has blamed the scale of court awards as well as fraudulent and exaggerated compensation claims as the main factors impacting on the cost of insurance premiums.

He cited research that shows court awards here are between three and five-and-a-half times larger than in the UK for less serious injuries.

Mr D'Arcy said: "If the awards are high, the premiums are going to be high," and that the situation where Irish court awards are "out-of kilter" with the UK built up over a period of time "mainly because nobody's been prepared to shout stop".

He added: "If we aren't careful, the levels of awards will close businesses, will close voluntary organisations and that's not what we want."

Junior Minister Michael D'Arcy
Junior Minister Michael D'Arcy

The research comparing the Irish and UK court awards was provided to the Department of Finance by lobby group Insurance Ireland.

However, Mr D'Arcy said that the Personal Injuries Commission (PIC), chaired by Mr Justice Nicholas Kearns, is conducting its own benchmarking study with other jurisdictions.

It is due to report in the coming months and Mr D'Arcy said if the PIC comes to a similar conclusion, "hard questions" will have to be asked about the regime of court awards. Mr D'Arcy stressed that the judiciary are independent of Government.

However, he said that the Attorney General Seamus Woulfe has been asked to analyse if the Oireachtas is capable of capping such awards.

He said a request has been made that the Law Reform Commission does a "significant body of work" on the issue in consultation with insurance companies and consumer groups. A decision whether the Commission will take on the task is due in the coming week. Mr D'Arcy said it's important to go through such a process and suggested that a referendum could ultimately be required to cap court awards.

The Wexford TD chairs the Government's Cost of Insurance Working Group which was set up in 2016 amid spiralling premiums being charged to the public and businesses.

While figures from the Central Statistics Office show that motor insurance costs have been dropping, premiums are still higher than they were during a price war that took place prior to a steep rise in 2016.

Last week it emerged that legislation going through the Oireachtas will require insurers to create a bail-out fund to be based on a contribution, or levy, of 2pc of the value of gross written motor premiums. The levy is as a result of the collapse of Setanta Insurance. Mr D'Arcy said that the insurance companies are "profitable and they're well able to absorb it" but concern remains that it will be passed on to customers.

Attorney General Seamus Woulfe
Attorney General Seamus Woulfe

Fianna Fail TD Michael McGrath accused the Government of "tinkering around the edges" in relation to insurance reforms. He argued that the only legislation the Government has introduced is to bring in an additional 2pc levy which he predicted motorists will end up paying.

Mr McGrath said that implementation of some of the Working Group's recommendations has "stalled". He said: "What we have seen from Government so far is a box-ticking exercise and it isn't good enough. We need decisive action to deal with issues such as data, transparency, the award process, in jury payouts and insurance fraud."

Mr D'Arcy said he disagreed with such criticism. He said most of the recommendations in the Working Group's various reports have been implemented but that the remaining actions require legislative change which he described as the "heavy-lifting stuff". Mr D'Arcy said some of the legislation has been delayed due to filibustering in the Dail on other laws. He said legislation on insurance is in the queue for floor time in the Dail and Seanad and suggested the Opposition could offer to use its time "to try and ensure we get this legislation through as quickly as possible to reduce insurance costs".

Sunday Independent

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