For over a year now the Irish insurance industry has been spinning dramatic price hikes in car insurance as being the result of claims – those awful people injured in car accidents who dared to claim against insurance are the fault, along of course with their lawyers.
It is quite obvious that there are multiple factors at play in the car insurance market. New regulatory rules, bad investments, bad management and years of overly-aggressive competition are clearly the major factors now biting the industry. But it is far easier to blame lawyers, demonise claimants and pretend whiplash is an imaginary injury.
But two things have taken the wind out of the insurance industry spin: the Injuries Board using actual research and statistics to counter the allegations and the dramatic intervention of the Competition and Consumer Protection Commission.
One spin in particular, though, will not die: the suggestion that there was a huge jump in court injury awards from 2013 – 2015. On RTÉ’s Nine News last night (5 October 2016, from 1:43) Kevin Thompson, CEO of Insurance Ireland, made the claim again:
We’ve also seen a 33% increase in the level of awards in the Circuit Court from 2013 – 2015.
This is amazing. Injury awards suddenly up by one third! But this claim, often made by insurance industry spokespeople, raises two obvious questions: (1) why did this happen in the Circuit Court?; and (2) what happened between 2013 and 2015?
The answer is simple. In 2013, the Courts and Civil Law (Miscellaneous Provisions) Act 2013 was introduced. It, among other things, raised the jurisdiction of the Circuit Court, so that court could deal with some higher-value claims. So yes, average awards went up.
The District and Circuit Courts have upper limits on the compensation they can award and until 2014, when the law took effect, the maximum the Circuit Court could award was €38,092.14. That odd figure is £30,000 in old money, hinting that the limit had not been changed in a very long time. In fact, since the late 1990s many argued for an increase in jurisdiction for the District and Circuit Courts to address inflation and the changing nature of litigation. In 2010 I wrote that such a change was long overdue and would help to reduce legal costs. The government had introduced a law in 2002 to allow them to change jurisdiction limits but failed to do so, partly due to insurance industry lobbying.
Increasing the jurisdiction of the lower courts allows them to hear a range of cases that they are more than capable of dealing with, at a lower cost. So, increasing court jurisdiction limits should reduce legal costs.
The increase in Circuit Court jurisdiction in 2014 raised maximum personal injury awards by that court by €21,907.86 – around 57%. This is a significant increase and one which has an immediate impact on statistics, particularly average awards. There is no reason that a Circuit Court judge would award more than a High Court judge in a particular case, so there should be no award inflation. But the average Circuit Court injuries award will naturally increase. Likewise, at High Court level, the average award increases because the lower value awards up to €60,000 are taken out.
So, it is not at all surprising that there was an increase in Circuit Court compensation levels from 2013 to 2015 – the jurisdiction level increased 57% but the average award only 33%. Average award levels limited to one court jurisdiction are of little use in considering the overall levels of compensation awarded or general claims activity.
What the insurance industry does not say, and cannot say, is that this 33% was a result of overall compensation inflation.