The legal costs in personal injuries claims that are taken to court are nearly 20 times higher than those created when cases are dealt with by the Personal Injuries Assessment Board (PIAB) .
The higher costs exist “even though the final award is only marginally higher than the settlement as assessed by PIAB”, according to the final report of the Government’s Cost of Insurance Working Group.
“This would indicate that the legal fees in litigated cases for claims under €100,000 are contributing to the costs insurers pay in settling such claims,” said the report.
A body set up to monitor legal charges, the Office of Legal Costs Adjudicators, came into operation 12 months ago, but it will be another year before it will have enough data “to commence a meaningful review”.
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Meanwhile, plans to set up a fraud database have run into trouble following warning from the Data Protection Commissioner (DPC) that it could breach privacy rights.
The proposal under discussion would see Insurance Ireland’s existing Insurance Link database expanded to include new criteria to improve detection of fraudulent claim patterns handled by an independent third party.
Following meetings between the Department of Justice, the DPC offered “some preliminary views”, but warned that a full ruling on the GDPR implications was not possible until the plan was more advanced.
However, the Cost of Insurance Working Group said the DPC’s warning that “a much stronger justification” would be needed before extra information categories could be added to the database raised question marks.
“It appears it will be difficult to expand out the scope of the existing Insurance Link to make it more useful in detecting fraudulent patterns of claims,” the report says.
The benefits offered by a more detailed database “ may not be sufficient to justify the impact upon the privacy of those third parties who may be drawn within the scope of the database”, it went on.
The Cost of Insurance Working Group, which was established in 2016 to help tackle rising insurance costs, now says that are four outstanding actions that could be taken to reduce high costs.
Database
That includes a “fully functioning” insurance fraud database”, along with more work on the impact of legal fees on personal injury awards, and actions to cut down on the numbers of cases that end up in court.
Minister of State for Finance Sean Fleming said there was "still much work to do", particularly on the cost and availability of insurance for small businesses, and voluntary and community groups.
He said the single most essential challenge which must be overcome if insurance charges are to fall is to bring the levels of personal injury damages awarded in the State more in line with those elsewhere.
Mr Fleming added that the Law Reform Commission recently published a report on the possibility of developing constitutionally-sound legislation to cap personal injury payments.
