The Cost of Insurance Working Group has presented its first report on the Cost of Motor Insurance (“the Report”) to the Government.
The Working Group, established in June 2016, is chaired by the Minister of State at the Department of Finance, Mr Eoghan Murphy. The stated objective of the Report is to identify and examine the drivers of the cost of insurance and to recommend measures to address increasing insurance costs, taking into account the need to ensure a financially stable insurance sector.
The Report presents a detailed assessment of the various elements of the costs associated with motor insurance. It clearly identifies the hard fact that there is no “silver bullet” to stem or reverse recent premium increases. That said, it highlights 6 key themes, makes 33 recommendations and identifies 71 action points which it believes will lead to greater stability of the market in the short, medium and long terms.
Those action points are contained in a detailed Action Plan which identifies the responsible bodies and sets out the timelines for delivery of the recommendations.
The central themes of the Report are, as follows:-
- Protecting the consumer;
- Improving data availability;
- Improving the personal injuries claims environment;
- Reducing the costs of the claims process;
- Reducing insurance fraud and uninsured driving;
- Promoting road safety & reducing collisions.
Of the 33 separate recommendations, the following stand out:-
- Personal Injuries Commission
One of the key recommendations is the establishment of a new Personal Injuries Commission (“the Commission”) to be chaired by the former President of the High Court, Mr Justice Nicholas Kearns.
The Commission will start by reviewing the issues that feed directly into the cost of personal injuries claims. The first report is due at the end of this year.
From 2018, the Commission will start to benchmark international personal injury awards with those in Ireland and will report on alternative compensation and resolution models.
The Commission will also assess the potential for the establishment of a panel of medical experts for use in the Courts. This is something that has already been provided for (but never used) over a decade ago in Section 20 of The Civil Liability Act 2004. One can imagine that if we got to the stage where the Courts, (rather than the litigants) appoint medical experts, this could ultimately result in significant efficiencies and reductions in the cost of litigation – much like it has done in the UK. This theme also echos the provisions of S.I.254 of 2106 which allows for Court appointed experts in non-personal injury cases.
- National Claims Information Database
Another key recommendation involves the setting up of a National Claims Information Database to be operated by the Central Bank. This is to be done within 18 months.
The objective of the database is to allow for the identification of trends in claims including patterns of fraud and exaggerated claims. It is hoped that this will lead to greater transparency across the industry and facilitate the entry of new players into the market.
- Periodic Payment Orders
The Report explores a number of ways to reduce costs in the civil litigation claims process. One of those is the use of Periodic Payment Orders. Readers may be aware that separately, the Civil Liability (Amendment) Bill 2017 has just been published. That Bill provides for periodic payments and is currently before the Oireachtas. Further details of the provisions of Bill were outlined in our recent blog on this topic available here.
Interestingly, the Working Group did not find that legal costs were a major contributor to the recent increase in premiums although it did find that the proportion of legal costs and non-legal costs attributed to the overall claim settlement fund were “relevant”.
The Report methodically addresses the various elements of the costs associated with motor insurance. It leaves the reader in no doubt that the burden for reform of the motor insurance sector lies with the industry itself and it confirms that the Government’s role will be confined to overseeing that that reform is in the interests of the consumer.
There are a lot of useful initiatives in the report which, if properly implemented, could be very effective in providing the transparency that the public desire. Deadlines for implementing the 71 action points range from the Q1 2017 to Q4 2018. Whether or not the stated objective of reducing motor insurance premiums is achieved will remain to be seen.