Tag: road traffic law

Insurer spin on compensation working, despite evidence

"Claim? But what about our international reputation!"
“Claim? But what about our international reputation!”

The insurance industry is taking advantage of the current interregnum to step up its media campaign against paying compensation to injured parties. This is a concerted campaign with almost daily media reports of the damage allegedly high compensation levels and legal costs are doing to the insurance industry, the economy and even Ireland’s foreign direct investment. It appears to be working, despite all evidence suggesting that other factors are causing premiums to increase.

Today is the turn of the Small Firms Association, who claim that compensation “culture” is now “out of control”. According to the SFA:

Since 2011 insurance costs have risen by 30 per cent, the association said, with a large part of the jump occurring within the past 12 months.

What you won’t find anywhere, however, is evidence to suggest that this huge hike in premiums has been caused by compensation, or how “compensation culture” is “out of control”. On the contrary, all indications are that the main reasons for insurance increases have nothing to do with compensation. Industry spin is having the desired effect, however, with even Minister for Jobs, Enterprise and Innovation appearing recently to come around to the industry point of view.

I recently requested documents from the Department of Jobs, Enterprise and Innovation on representations by the insurance industry and in the documents released were records relating to two industry meetings where the Minister was lobbied on insurance costs.

The first meeting was with executives from Axa and was requested through Fine Gael Councillor Anthony Lavin, who is also a customer care manager with Axa. It took place on 8 October 2015. A further meeting took place with Insurance Ireland, the industry body, and was arranged through PR consultants.

The Minister’s briefing materials included a National Competitiveness Council report on insurance costs. Recent newspaper articles have referred to this report and its reference to legal costs supposedly being “sticky”, but generally do not point out other important aspects of the report.

  • The industry frequently says motor claim awards are too high but “64% of PIAB [Injuires Board] awards for motor injury claims are for <€20,000 … the cost of processing a claim through the PIAB is at historically low levels”.
  • The review of the book of quantum “could result in higher costs, and ultimately higher premiums.”
  • Legal costs “proved extremely sticky” apart from “a brief period in 2013”. The evidence for these comments is not referred to.

Minutes of the meeting record that the Minister made a number of counter arguments to Axa on compensation concerns, for example that medical negligence cases skewed comparisons of compensation payments and that the level of awards by PIAB was “fairly consistent” from 2010-2014, with the majority of awards being under €20,000. He said it would be helpful if the industry provided more information on “untracked cases”. These are mostly cases that are settled between claimants and insurers with the result that the State agencies do not learn what the outcome is.

Given that Axa and the industry are seeking a number of reforms that would require them to be given more statistical information by PIAB and the Courts Service, it is peculiar that the industry continues to be remarkably reticent on providing details on untracked cases. The note of this meeting states that Axa agreed to “work with Insurance Ireland with a view to supplying” this type of data.

Axa appeared to focus on what were effectively four case studies of recent court cases where the awards exceeded what the insurers had valued the cases at. Axa were not, in fact, the insurer in any of these cases. A limited number of court awards are not, of course, representative of most claims and indeed the note of the meeting between the Minister and Insurance Ireland on 6 November 2015 stats that about 20% of claims go to PIAB, of which about 40% are rejected and settled and “[a] small number of cases are finalised by the Courts.”

 

Axa, along with many other parties, has made submissions to DJEI on the operation and implementation of the PIAB legislation, which has been ongoing for some time. A significant suggestion is that the limitation period for personal injury claims be reduced to one year (at the moment the limitation period is two years). This proposal was already considered when the legislation was introduce to establish PIAB and the government decided against a one year limitation period.

It was felt at the time that such a short limitation period would exclude many valid claims or that it would drive people into dealing with lawyers and claims at a time when they might still be receiving treatment or in recovery. A one year limitation period would be extraordinarily restrictive, its only aim and affect being to reduce the liabilities of insurance companies by excluding valid, genuine claims.

A further surprising proposal is to allow PIAB to award “some form of Legal fees to lawyers that will allow for a higher acceptance rate of awards.” The insurance industry’s objective in having PIAB established was to drive a wedge between injured parties and solicitors, who might provide claimants with independent, expert advice. This was to be achieved by the law providing that no legal fees would be awarded by PIAB (except in limited situations, and even then in very small amounts). The industry repeatedly claims that, despite PIAB being intended to be a “lawyer free zone”, over 90% of claimants are represented by solicitors (again no evidence is publicly available to support this claim). Axa’s proposal appears to accept that the right of people to seek professional representation is still exercised in most cases, despite the cost implication at present.

The above documents and some others are available here on Scribd. They suggest that government departments and the National Competitive Council do not necessarily share the views of the industry and are aware of other factors affecting the insurance industry.

However, since the Minister’s meetings with the industry late last year, during which he did not appear to accept what was being said on compensation and PIAB at face value, he has since sought “judicial buy-in” for the as-yet incomplete revisions to the book of quantum and makes the same points on insurance costs put forward by industry representatives.

The bulk of media reporting and commentary on insurance premium hikes remains focused on and obsessed with compensation, with little being said or asked about Solvency II, RSA, FBD and other industry-specific issues.

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).

Perils of learner permits: make sure you observe the conditions

RSATraditionally people have referred to green driving licences as “provisional licences” but in 2006 they were rebranded as “learner permits”. The change in name is, no doubt, intended to suggest a key difference between a driving licence and a learner permit: the latter “has effect in accordance with its terms and conditions“. This simple statement is important and has continually raised a question: if the terms and conditions of a learner permit are not observed, is the driver unlicensed?

There are a number of specific offences which a learner driver can commit, such as not displaying L plates or driving unaccompanied. These offences are frequently committed and drivers are often prosecuted for them. However, there is also an offence which anyone can commit of driving without a driving licence. Just as people have traditionally referred to the “provisional licence”, it has traditionally been thought that if one holds a learner permit one is licensed, whether or not one observes the terms and conditions applicable to it.

Gardaí and solicitors have argued this point repeatedly but it has recently been clarified in the High Court: if you hold a learner permit and drive in breach of its terms and conditions it is temporarily ineffective and you are guilty of driving without a driving licence.

The penalties for driving without a licence are not overly severe, in that you do not face automatic disqualification from driving for example, but a follow-on issue arises: if your policy of insurance requires that you are a licensed driver, and you drive in breach of the terms and conditions attaching to a learner permit, are you still insured? A conviction for driving without insurance is more serious than one for driving without a licence and carries a disqualification.

This was the second element to the case and, fortunately for learner drivers, the outcome was that the fact that a learner permit might be temporarily ineffective does not necessarily invalidate the insurance policy. The wording of the policy, as ever, is crucial. In this case, the policy certificate provided that the defendant’s driving was covered “provided that [he] holds a licence to drive such a vehicle or, having held such a licence, is not disqualified from holding such a licence.” The terms and conditions apply to the learner permit, not the driver, and so he held a licence entitling him to drive the vehicle. The insurance “was not made conditional in its terms on the accused complying with the terms of a learner permit licence.”

This settles a question which has been arising quite frequently in District Courts over the past few years. It is also a reminder that drivers should familiarise themselves both with the terms and conditions of a learner permit and an insurance certificate before driving.

Road tax implications of horses in caravans

A caravan, to most of us, brings to mind cramped “holiday” accommodation in wet, seaside fields.

Motor caravans (including camper vans) are large vehicles, but benefit from reduced rates of road tax and reduced compliance obligations. They are used for leisure purposes (ie. tourism) which the State obviously has an interest in encouraging.

Pushing it.
Pushing it.

However, a “motor caravan”, as defined in Irish law, can be a much larger vehicle than the traditional caravan or camper van. For example, a commercial vehicle like a truck can be converted into a motor caravan and might have a large storage area which could be used to contain bicycles, or even animals. Once the vehicle meets the requirements of the Revenue Commissioners and is used for private purposes it can benefit from a special €95 rate of road tax. If its weight does not exceed 7.5 tonnes it does not require a tachograph machine.

Concessionary rate of road tax

The issue of road tax sometimes arises when the owner of a large motor caravan is accused of having paid the incorrect rate of tax. A vehicle must be taxed at the highest rate applicable to its use and, for example, commercial vehicles are taxed according to weight.

The definition of a “motor caravan”, for the purposes of road tax, is:

a vehicle which is shown to the satisfaction of the Commissioners to be designed, constructed or adapted to provide temporary living accommodation which has an interior height of not less than 1.8 metres when measured in such manner as may be approved by the Commissioners and, in respect of which vehicle, such design, construction or adaptation incorporates the following permanently fitted equipment—

(a) a sink unit,

(b) cooking equipment of not less than a hob with 2 rings or such other cooking equipment as may be prescribed, and

(c) any other equipment or fittings as may be prescribed

A special annual rate of tax for motor caravans has existed in Ireland since 1998, currently €95. By contrast, rates of road tax for commercial goods vehicles can reach almost €5,000 annually.

The fairness of the special rate for motor caravans was raised in the Dáil in 2012 by Sandra McLellan TD (SF; Cork East), who asked:

whether it is equitable that a large motor caravan only pays €95 road tax while it costs €307 for an 1108cc Fiat Panda

Phil Hogan TD (FG; Carlow-Kilkenny), Minister for the Environment, Community and Local Government explained the background to the rate.

I understand that the rationale behind the introduction of the concessionary rate was that, while motor caravans are generally less in use than many other categories of vehicle, rates of motor tax were relatively high … I understand it was also considered that a concessionary annual rate of tax for motor caravans would encourage tourism and tourist related activities, not least by facilitating more out-of-season use of motor caravans, where previously owners may have taxed and used the vehicle for only three months of the year due to cost.

Some motor caravans have attracted attention because they resemble commercial goods vehicles, having started out life as such and having been converted into motor caravans. The owner of such a vehicle might be stopped by An Garda Síochána and told that their €95 rate is insufficient and a higher rate, which could well exceed €1,500, is due.

I have successfully defended a number of such prosecutions. If the registration certificate says the vehicle is a motor caravan and it is being used for private and leisure purposes, the €95 rate applies. Prosecutions have arisen because the vehicles in question, while meeting Revenue requirements, included an open cabin area at the rear which might be used for the carriage of, for example, horses. The legislation does not say that this is permitted but neither does it prohibit it. Once the horses are not being carried for commercial purposes, the higher rates do not apply.

Tachographs

© National Library of Ireland
Simpler times.

Many vehicles require tachograph machines in the interests of road safety. It is often thought that motor caravans are exempt from that requirement, but that is not quite correct.

There are a range of exemptions available and though they have different legislative sources they are listed in the Road Safety Authority tachograph declaration form. The two most relevant to motor caravans relate to weight:

  • where gross vehicle weight does not exceed 3.5 tonnes; or
  • where the vehicle or combination of vehicles does not exceed 7.5 tonnes and is used for the non‐commercial carriage of goods.

Confusion sometimes arises because the law on tachographs is made primarily on a European Union level and implemented into Irish law. The Irish regulations do not specifically mention all the exemptions available but some of those referred to are similar to those not referred to. Which is less than helpful.

For example, regulation 5(1) of the Irish law exempts a range of vehicles from the requirement to have a tachograph fitted. Subsection (d) refers to combinations of vehicles not exceeding 7.5 tonnes, but only when used by a universal service provider or for carrying equipment for use in the course of the driver’s work. This is sometimes understood to be a qualification of the non-commercial 7.5 tonnes exemption referred to but in fact it is a different exemption. Regulation 5(1) does not contain the full list of exemptions: regulation 21(1) goes on to say that the Irish law does not apply to vehicles exempted by article 3 of Regulation 561/2006, which itself contains the non-commercial 7.5 tonnes exemption.

Therefore, for most caravan owners, if your vehicle is under 7.5 tonnes a tachograph machine is not required.

As with road tax, confusion sometimes arises because converted commercial vehicles might still contain the tachograph machine that was used in the vehicle’s former life. It might not be functioning any more, or the driver might re-use an old tachograph card when driving, each of which could ordinarily constitute offences. However, if a tachograph machine is not required in the vehicle to begin with it does not matter that the machine is not functioning or is not being used properly.