Stuart Gilhooly: 'How to ensure insurance industry isn't the only winner from changes to claims culture'
Media trainers are usually agreed on one thing - keep it simple. Don't complicate the message. Find a basic concept and sell it over and over again. The ongoing, seemingly interminable, insurance debate is a classic example of this.
Three years ago, the insurance industry was under huge pressure to explain astonishing rises in motor premiums. After a short period of obfuscation and denial, it settled on a strategy. Blame the lawyers and the courts.
This is a well-worn path and one which has seen much success in the past, particularly around the time of the last crisis in 2002. This time though it embarked on a slightly different tack. Because the Personal Injuries Assessment Board had seen a large reduction in litigation, the focus turned to what was once deemed sacrosanct. The right of the victim to fair compensation.
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Aided by the report of the Personal Injuries Commission (PIC) which found that damages in Ireland were 4.4 times the level of those in England and Wales, a relentless campaign has been waged by the insurers and various business organisations to have damages reduced. Government, in the guise of Junior Minister Michael D'Arcy, has added its voice to the cacophony.
This is all predicated on the assumption that a diminution in damages will result in a consequential reduction in premiums. In spite of requests from the likes of Mr D'Arcy and the chairman of the PIC, Nicholas Kearns, for a public commitment from the insurance industry that premiums will reduce in those circumstances, the silence has been deafening.
This is not surprising, unfortunately. The facts, as we know them, would suggest that damages are not the main driver in premiums. There has been no increase in damages in recent years except in the Circuit Court, where the monetary jurisdiction for personal injury awards increased from €38,000 to €60,000 in 2014, and yet premiums have spiralled out of control. In fact, the robust decisions of the Court of Appeal have seen a decrease in levels over the last three years.
In England and Wales, where damages are so much lower, motor premiums have in fact been consistently higher than in this country over a protracted period of time. Surely, they should be a fraction of ours if the hype about damages is to be believed.
So why have premiums for business owners increased by so much in the last three years?
Perhaps the answer lies in the separate investigations into the insurance industry by the European Commission and the Consumer and Competition Commission.
The industry has been accused by both organisations of operating as a cartel. Is this why businesses with no claims' histories are finding themselves being subjected to swingeing premium increases or not being quoted in circumstances where there has been no real change in market conditions?
We should not expect the competitions probes to improve matters greatly. Firstly, the pace at which they move doesn't inspire confidence. Secondly, although they may eventually increase competition, which is to be welcomed, in the short term, huge fines will be swallowed up by insurers already making supernormal profits and which, in any event, they will likely pass on to consumers as increases.
There are ways to alleviate this crisis though. It will require government to take on the insurers who are currently operating a Wild West-type regulatory environment.
The first solution is well documented. The report of the PIC recommends the introduction of guidelines by the judicial council. As a member of the commission, I endorsed this report and continue to do so.
However, the level of damages outlined in these guidelines is a matter for the judicial council, when established, and it alone. It should not be dictated by business lobbies, the legal profession, former judges or by government. The separation of powers, as set out in the Constitution, makes it crystal clear that government should have no influence over judicial power.
This is of critical importance where the State is a defendant in many cases where damages are paid. The judicial council should decide the appropriate level of damages, having regard to criteria set by the council.
The result of this, whatever level it deems appropriate, will be more consistency and will allow insurers to calculate premiums with more accuracy.
The primary aim, though, has to be to call the insurers to account. In 2018, three insurers alone made nearly €200m in profits yet show no interest in returning any of this to premium payers.
Government needs to set rules which do not allow premium increases where no claims have been made and there has been no material change in risk. The Financial Services Ombudsman needs to be empowered to investigate premium levels which are out of sync with the previous year.
The aim of substantially reducing awards may seem superficially attractive but it merely takes the money out of the pockets of deserving victims, injured through no fault of theirs, and it will line the wallets of insurance company executives and their shareholders.
With a bit of imagination and a desire to take on an industry no one trusts, we can finally give businesses and motorists a break while still fairly compensating victims.
Stuart Gilhooly is a partner in H J Ward & Co Solicitors and specialises in personal injuries. He is also a past president of the Law Society