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Cost of Insurance Working Group produce their emerging recommendations

Having been formed in July this year to look at the spiralling cost of motor insurance in the Republic of Ireland, the Cost of Insurance Working Group published their emerging recommendations on 21 November. The Group have identified nine areas that need to be addressed if insurance premiums are to fall. Amongst the recommendations, the Group have suggested a need to provide more transparency, both in respect of the way that premiums are calculated and on the costs of claims, including the provision of a claims database.

DWF Senior Associate, Geraldine Stack takes a look at some of the recommendations, which include the establishing of a ‘Personal Injuries Commission’ to look at personal injury awards and the creation of an integrated insurance fraud database to detect patterns of fraud in Ireland. The recommendations come less than a fortnight after the Group’s Chair, Minister for State Eoghan Murphy TD spoke at DWF’s fraud conference in Dublin. 

Background

Since January 2011, the cost of motor insurance has increased 66% according to the Central Statistics Office, well beyond EU trends and those increases have been as a result of a number of drivers, some well-known to the general public, some less so.

Against that background and with household budgets tight, the Cost of Insurance Working Group was established in July 2016 to look at the cost of insurance premiums, particularly the cost of motor insurance and is made up of representatives from the Departments of Finance, Jobs, Enterprise and Innovation, Justice and Equality, Transport, Tourism and Sport, together with the Central Bank and the Personal Injury Assessment Board. The Group have been tasked to identify and examine the key drivers for the cost of premiums and to recommend measures to address them.

Ireland Fraud Con

Led by Minister for State, Eoghan Murphy TD (pictured), the Group has met eight times since it was formed and has split into four sub-groups, each tasked to look at a particular issue, including the cost of claims, ”unlawful activity” in the insurance market and the need for improved data availability. Members of the Group have also met with various stakeholders.

The group published a list of their emerging recommendations on 21 November, which can be viewed on the Department for Finance’s website

The emerging recommendations

The Group’s emerging recommendations provide a good illustration of the wide and varied nature of the issues that need to be addressed if the cost of motor insurance is to be brought under control and they also highlight the scope of the review. There are a total of 41 recommendations in total, which fall into 9 distinct areas and which are:

  • Protecting the consumer

  • Providing transparency of the claims environment

  • Better understanding of the awarding for personal injuries claims

  • Reducing costs in the claims process

  • Maximising the Personal Injuries Assessment Board process

  • Strengthening the Book of Quantum

  • Reducing insurance fraud and uninsured driving

  • Promoting road safety and reducing collisions

  • Miscellaneous issues, including legislative review

As we mentioned earlier, many of the reasons why the cost of motor insurance has increased are well known to consumers. In addition, the collapse of Quinn Insurance led to a 2% levy on motor premiums and the failure of Setanta, could add €45 onto the cost of each policy if the MIBI’s appeal against the High Court’s decision to fix it with liability to meet the remaining claims is unsuccessful.

For some time now, there has been a well-publicised campaign to reduce the number of accidents on Ireland’s roads. Thankfully, the number of recorded fatalities and serious injuries fell in 2015, but the number of new vehicles on the road was 121,110, up 31.1% on the previous year, suggesting that Ireland’s roads are likely to be busier and tha those numbers may perhaps look different for 2016 and beyond.

Addressing the cost of claims

The level of injury awards in the Republic and particularly awards for whiplash are out of step with other jurisdictions. Whiplash awards here average around €15,000. To address this problem, the Group have suggested the formation of a “Personal Injuries Commission” which will look at how individuals are compensated for their injuries in other jurisdictions, including ‘care not cash’ compensation models and the preparation of medical reports in personal injury claims.  

A couple of weeks ago the UK government announced that it intended to ban compensation for ‘minor whiplash’ claims, where symptoms lasted less than 6 or 9 months. The government is also consulting on its proposal that it should introduce a ‘tariff’ based system for other whiplash injuries, where the symptoms last longer, which would lead to levels of compensation last seen over 10 years ago. Awards for whiplash in the UK are already far lower than they are in Ireland. Under the proposals put forward, those suffering symptoms for a year following a whiplash injury will only be entitled to recover £1,100 (roughly €1,300), whereas at the moment the average level of compensation for a year’s symptoms is £2,950 (roughly €3,500).

Given that the recently released updated Book of Quantum provides for an increase in awards, then it is likely that court awards are only going to continue to increase, unless the issue is addressed, perhaps with a recalibration of the level of some awards in a similar manner.

The costs that are recoverable in injury cases is also out of step with the level of costs that can be recovered for these claims when compared to other jurisdictions and it is good to see that the Group have recommended the question of costs also be looked into. Often insurers are dissuaded from defending a claim as they fear a high costs bill from Plaintiffs if they were to lose.

The disproportionate level of costs was something that was addressed in the UK in 2013, when recovery of success fees (which were often set at 100%) were banned and a regime of (much lower) fixed recoverable costs were introduced to all RTA, EL and PL claims under £25,000. 

The data problem

One of the key challenges facing insurers attempting to detect and fight increased fraud in Ireland is that there is a lack of claims data and a reluctance to share what data there is due to Data Protection Legislation. Both of these themes cropped up throughout the whole of our conference on 10 November.

The one database that the industry does have access to (the Insurance Link database), sadly lacks the depth of data needed for it to be an effective tool in the fight against fraud. In the UK, the CACHE database has been in existence for over 20 years and is now a rich, deep source of data, which provides the searcher with a number of different data fields that go beyond what the Insurance Link database provides. The Motor Insurers Anti-Fraud Theft Register (MIAFTR) has been in existence in the UK even longer than CACHE and searches against that database often supplement the initial enquiries that might be made if fraud is suspected and searches against CACHE.

It is to be welcomed then that the Working Group are recommending the establishing of:

  • A “National Claims Statistics Database or Claims Register” which will capture claims data on personal injury and property damage claims and which it would seem, will be accessible by Insurance Ireland members and non-members; and
  • A “fully functioning integrated fraud database” which should “detect patterns of fraud”

There can be no doubt these databases would be a useful tool in the fight against fraud, both to lawyers defending civil claims and the Gardaí and the idea that insurers will be compelled to upload to data is an interesting one (access to the CACHE database is granted on the basis that the user uploads data as well as searches against it). Until more is known, questions remain as to how the databases will work and the nature and extent of the data fields but it is hoped that it will resemble something along the lines of the CACHE database.

The sharing of data in fraud cases is seen as essential to tackling fraud. When he spoke at our conference on 10 November, Minister Murphy mentioned the need to address data sharing issues. There is no specific mention of this in the Group’s emerging recommendations and we wait to see the final report to see how the Group suggest that this issue can be addressed.

The sharing of data was also an issue highlighted by the Insurance Fraud Taskforce, set up by the UK government in 2014. The Taskforce concluded that there was sometimes a reluctance to share fraud data in the UK, often as a result of misunderstanding Data Protection legislation and the Taskforce recommended that data be more widely shared, between insurers and with other financial institutions and government bodies that are also fighting fraud.

A review of the use of section 26 of the Civil Liability and Courts Act 2004 is to be welcomed. Despite that legislation being in place for over 10 years, there is still a reluctance by the Court to apply section 26 and dismiss claims that are exaggerated.

Comment

We also await with interest the outcome of the MIBI’s appeal arising out of the liquidation of Setanta, which is outside the control of the Working Group but will have a significant effect on the insurance market in the Republic and the desire of some of the larger insurers to continue operating. The recommendations around claims transparency may go some way to alleviating concerns about the ability of new entrants to the market to remain solvent.

The Working Group have indicated that they will provide their final report in December and it will be interesting to see then which recommendations the government suggests should be adopted and how it proposes to take the work forward.

There is a need to quickly address the issues that have been prominent here for some time. The personal injury claims market in Ireland is seen as very attractive at the moment, particularly by those claimant lawyers in England and Wales who now seek new pastures following the UK government’s recent announcement that it intends to further reform the market there.

Through our involvement in shaping the claims environment in the UK, , including the giving of evidence by Motor and Fraud Partner and current FOIL president, Nigel Teasdale before the Transport Select Committee, we were invited to meet with Minister Murphy as part of the working group’s review. We were able to discuss with him some of the reforms that have been introduced in the UK to tackle the problems being faced in Ireland such as the implementation of the Jackson reforms, the work of the Insurance fraud taskforce, the creation of MedCo, which oversees the requisitioning of medical evidence in whiplash cases and of which Nigel is a Director, and the current proposed reforms to end recoverability of damages for minor whiplash. It is also right to recognise that there are a number of areas such as the Personal Injuries Assessment Board and s,26 of the Civil Liability and Courts Act 2004 where the system in the ROI is ahead of the UK and these need supporting and strengthening

Key to tackling fraud is a need to have a database that is fit for purpose, but to also release the free flow of data between insurers.

Contact

For further information, please contact Geraldine Stack by email on geraldine.stack@dwf.law, or by telephone +353 1790 9426, or contact Nigel Teasdale by email on nigel.teasdale@dwf.law, or by telephone +44 (0) 1772 554264.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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