Anyone anticipating a major decrease in their insurance fees following the Supreme Court verdict last week should not hold their hopes high. This group includes Stuart Gilhooly, a solicitor and senior counsel, who represents the Law Society on the personal injuries commission, which led to the Personal Injuries Guidelines. These guidelines, acknowledged as constitutionally legal by the Supreme Court, were introduced in March 2021 and propose payouts far less than what was previously enabled through the book of quantum.
Gilhooly advocated for the insurance sector to lower premiums following the Court’s decision, stating that they no longer had an excuse not to. However, he might not have been aware of the statement issued by Moyagh Murdock, the CEO of Insurance Ireland, in response to the verdict.
The lobbying body for Irish insurance firms welcomed the verdict for the credibility it brought to the Personal Injuries Guidelines. They see the guidelines as an important part of the government’s agenda to reduce the cost of personal injury awards in Ireland. For Insurance Ireland, the aim of these guidelines is to decrease award size, not premiums, even though the two may seem linked, they are not identical.
Insurance firms fundamentally exist for the sole purpose of generating profits for their shareholders, they are not a public commodity. If the company’s profit margin increases significantly, these firms have no binding legal mandate to transfer these gains to their customers in the form of reduced premiums. Some may contend that it’s their responsibility to distribute as much of the unforeseen gains to their shareholders. Theoretically, competition could motivate them to reduce premiums if possible, but that is not always necessarily the case. Here, we expect government intervention.
Insurance Ireland has announced plans to closely review the repercussions of a recent judgement, acknowledging that it’s too soon in the process to ascertain the full implications of the decision. Essentially, they’re saying they need to determine another justification for why there won’t be a swift reduction in your insurance premiums. They probably won’t need to try too hard to find one.
Yearly, the Central Bank of Ireland, which oversees insurance firms, produces a couple of reports utilising its insurance claims database. One focuses on vehicle insurance, while the other covers employer’s liability, public liability, and commercial property insurance. Together, these reports encompass the vast majority of personal injury claims. The latest reports for 2022 are now available, and helpfully, they delve into the effects of the personal injury guidelines on claims expenses. There has been a notable decrease in the costs of resolving claims in accordance with these guidelines as compared to settlements reached prior to their introduction.
In terms of employer’s liability, the cost reductions varied from 17% to 33% based on the approach used to resolve the claim. Public liability saw similar decreases, ranging from 33% to 41%. There is a corresponding trend in motor insurance, with claims resolved through the guidelines costing between 32% and 47% less than claims resolved under the ‘book of quantum’.
However, it’s important to consider that these reductions only apply to cases that were finalised before, during, or after interacting with the Injuries Resolution Board (previously known as Piab). This board was established by the Government as a more cost-effective option for claim settlements, as opposed to pursuing court action.
Still, most cases proceed through the court system. The Central Bank has indicated that implementing these guidelines in court settlements will likely take some time due to their applicability only to cases initiated post-2021, and many ongoing cases predate their introduction.
On average, personal injury claims resolved in court take about five years, meaning that there may be an additional two to three years, if not longer, before cases that aren’t subject to the guidelines are completely removed from the system.
While the Personal Injuries Guidelines have indeed wielded a significant influence on claims settled both independently and through Piab, their effect on the overall cost of settling claims remains negligible, according to the central bank. It remains uncertain if the court ruling from the previous week alters this in any way.
There appears to be no valid justification as to why insurance firms cannot leverage the clarity provided by the judgement to commence the process of reducing premiums. The firms now have a fairly accurate understanding of the volume of outstanding claims set to be resolved under the guidelines and those to be dictated by the book of quantum in the coming several years. This should allow them to gradually adjust premiums to a point where almost all claims will be resolved under the guidelines, thus leading to significant cost reductions.
Yet, if not mandated, why would they choose to proceed in such a manner?