Tag: personal injury

Average personal injury awards did go up in 2014, not claims

What will this mean for Ireland Inc?
What will this mean for Ireland Inc?

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.

Advertisements

Insurers still spinning against the facts on personal injury claims

swear-to-spin-the-truth_resizeRarely a week goes by without more insurance industry spin on personal injury claims, particularly whiplash claims. The industry now takes any opportunity to blame personal injury claims for their woes, even in the face of facts which indicate other causes.

Inevitably, the Irish insurance industry is seeking reforms similar to those announced late last year in the UK, including a ban on claims for “minor” whiplash injuries.

AIG, a massive multinational insurer that was in recent years more often in the news for needing an initial $85 billion bailout from the American government, wants a ban to be considered here. Their general manager for Ireland, Declan O’Rourke, told the Irish Times:

Ireland should follow the UK’s lead in considering a ban on whiplash, to flush out fraudulent claims. The UK is considering a position whereby whiplash victims would have their medical expenses and loss of earnings compensated by insurers in a move that it believes could save the sector £1 billion a year and reduce premium costs.

Mr O’Rourke does not go into detail about why a whole category of claim should be banned to weed out the supposed problem of fraudulent claims, but the insurance industry often suggests that all whiplash claims are effectively fraudulent. This is in spite of long-standing medical evidence and opinion. A call for a ban on whiplash claim won’t go far in Ireland, where it would likely be unconstitutional, but other reforms will be demanded. Indeed, it appears AIG has a wishlist of things it would like an Irish government to do, quite a turn-around for a company that had to go cap in hand to the Federal Reserve in 2008 to avoid oblivion. More recently, its Irish operations benefitted from assistance from the Irish taxpayer. One might be inclined to wonder whether any losses or difficulties at AIG could have causes beyond the cost of claims.

Yesterday, Fiona Muldoon of FBD was a guest on Morning Ireland, taking another opportunity to bemoan the cost of claims and the legal system despite FBD’s results telling a different story. FBD has quite reasonably been described as “beleaguered” and has suffered from a range of difficulties which have nothing to do with personal injury claims.

The Times (Ireland edition) covered FBD’s latest results with the headline “Insurance sector too competitive, FBD says” [paywalled]. While the real problem for the industry is in the headline, the article nevertheless begins:

Over-inflated whiplash claims and too much competition between insurers were among the many factors to blame for FBD’s loss-making performance this year, its chief executive said.

The cost of allegedly “over-inflated” whiplash claims is a crutch that the industry repeatedly leans on when in difficulty, while the truth for FBD is that:

Most of last year’s losses stemmed from measures to bolster its capital reserves and €11 million in restructuring costs.

The article also points out that FBD experienced a 9% fall in premium volumes last year – ie. they lost customers. Ms Muldoon continues:

A number of factors had made the Irish insurance sector unprofitable between 2012 and 2014, including too much competition driving down premiums, Ms Muldoon said. “The market in Ireland is very fractured, which meant that companies were competing aggressively against each other and in hindsight they were not charging enough.”

So. Insurance companies have had financial difficulties because they have had to bolster reserves, lost customers and have not charged enough for years. But ask any spokesperson for the insurers about their problems and it’s not long before the cost of claims is front and centre.

This is a remarkable feature of articles on the insurance industry in Ireland over the past year: reports on financial results cover these internal difficulties and challenges faced by the industry which are obviously having a negative impact on premiums. Figures are available to explain the impact on insurers but not, it seems, to explain their complaints about the cost of claims and the legal system.

The reality is that the industry does not have any statistics or figures about personal injury claims that it is willing to make public. Even the Injuries Board, effectively a creature of the industry, has criticised the failure to support allegations about claims, as well as their failure to explain where there premium income is going. The number of personal injury court claims fell in 2014 and the Injuries Board has highlighted that there is a €1 billion difference between the premium income of Irish insurers and published awards.

It’s time for insurers to accept that, this time around, their losses are down to themselves and not due to paying out on claims (which is, of course, what they exist to do).

New site for the day job

IMG_3405You might be interested in visiting the new site of the firm I work in – PG McMahon Solicitors. The site includes a blog (under the Updates heading) which will have more of a legal updates focus than the comment one of this blog. Check it out, and consider liking our Facebook page and following our Twitter account to keep up to date with posts.