A report prepared by economic consultant Dr Peter Bacon has concluded that the centrepiece of the Tánaiste's proposals for reducing insurance costs will end up increasing them.
In a report commissioned by the Bar Council, Dr Bacon has claimed that the introduction of a Personal Injuries Assessment Board into the system which operates in Ireland "risks making the situation considerably worse".
Last week Ms Harney announced that she would set up a Personal Injuries Assessment Board on an interim basis from next month.
The setting up of such a board was part of the Programme for Government and has been widely promoted as a way of reducing the legal costs component in insurance claims.
The insurance industry has blamed legal costs for escalating premiums, which in turn have been blamed for loss of competitiveness by bodies representing Irish industry.
The assessment board proposed by the Tánaiste would assess the level of awards payable to people who suffered injuries as a result of accidents. However, every claimant would have the right to go to court if dissatisfied with the assessment. The courts would also decide on liability, where this was disputed.
Dr Bacon challenges the assumption that an assessment board would divert a significant number of cases out of the legal process and argues that it would actually increase the level of awards.
This, combined with the cost of setting up the board and equipping it with the machinery to assess claims, would add to the overall cost of compensation, without doing anything to tackle problems like fraud, he says.
At a more fundamental level, Dr Bacon argues that such a board is inappropriate to the whole Irish system of injury compensation. It works best in countries with an extensive social security system already offering all necessary medical care and income protection to the victims of accidents, he says.
Irish policy towards compensation for injuries has evolved on the basis of private provision through private insurance, with access to compensation mediated by the courts. The social security system here is designed to offer a safety net, not protection.
"We're taking a mechanism from a system we don't have and trying to graft it on to the one we do," he told The Irish Times yesterday. "It is unfair to take this mechanism, plonk it on to the Irish system, and say 'here it is'."
It would cost €2.9 billion to bring our social security system up to European standards, according to Dr Bacon. Apart from the fact that such an assessment board works best in the context of a comprehensive social security system, he says our system of constitutional and legal rights would make it difficult for it to operate effectively.
In countries where it is linked to the social security system, there are usually restrictions on claimants' rights to go to court in pursuit of personal injury claims.
In Ireland, the right of access to the courts is a central constitutional right and part of our legal culture. This means that there can be no penalties attached to a refusal to go to the assessment board; there can only be incentives to do so.
It appears obvious the only incentive which would attract applicants is the certainty that they would do at least as well, and possibly better, by going to the board than taking a court case. This means the board's awards are likely to be pegged slightly higher than those expected in court.
This would then set a new "floor" for awards.
This would lead to an inflation in awards and therefore in insurance costs, according to Dr Bacon. Legal costs will still be incurred in appeals from decisions of the board, unless they are all eliminated by its high levels of awards, and in disputes on liability.
Dr Bacon's proposals include measures to encourage early settlement of cases, to penalise those who cause delays, to force disclosure of all potentially relevant information concerning claimants, and to eliminate fraud.