The Irish Insurance Federation has admitted it paid far less in legal costs last year than the €440 million it declared to the Tánaiste.
In a consultation paper sent to the Tánaiste last July, and reported in The Irish Times last Monday, the IIF said: "The total cost of injury claims (compensation only) in 2001 was approximately €1.05 billion. An additional €440 million was spent on legal costs. Halving them would result in annual savings of €220 million." These figures represented a significant increase on the 2000 figures published in the report of the Motor Insurance Advisory Board earlier this year.
The 2000 figures were based on insurance industry returns (though incomplete) of actual money paid out for that and the preceding years. Adjusted to reflect full, rather than incomplete, returns, and converted into euros, this showed that around €611 million was paid in compensation in 2000, with €250 million paid in non-compensation, or legal-related, costs.
Asked to explain why the costs appeared to have almost doubled between 2000 and 2001, Mr Mike Kemp of the IIF said the figure of €1.05 billion in the consultation document was "incurred" costs, rather than money actually paid out. The €440 million figure was then arrived at by adding an additional 42 per cent of that, he said.
The MIAB report had concluded that for every €100 spent in actual compensation, €42 was spent in "non-compenstion" costs, made up of legal and court fees and the costs of experts.
"Incurred" costs for a given year are the costs calculated by the insurance company, made up of money paid out and adjustments to its reserves to take account of projected payouts based on claims made in that year. These reserve adjustments usually ran at about 40 per cent of the actual pay-out, Mr Kemp said. He agreed that the associated legal costs were not paid out in that year, but insisted that they were incurred in that year, and would have to be paid.
Meanwhile, Fine Gael has tabled a motion condemning the Government for its inaction on insurance costs, and calling for the implementation of the recommendations in the MIAB report.
"The MIAB report had some disturbing findings about the insurance companies, in terms of the absence of competition in the sector and their profitability," said the party's spokesman on trade, enterprise and employment, Mr Phil Hogan.