AT ITS HEART the insurance industry is built around events that lack certainty with consumers willing, and sometimes obligated, to take out policies to ensure they are compensated if some undesired incident ever comes to pass.
However, the one issue on which most stakeholders are currently not in any doubt about is that the insurance industry in Ireland isn’t working properly with many policy holders struggling to finance the rising cost of premiums.
The justification for high insurance costs is the subject of much debate and controversy together with the suggestion – mainly from the insurance industry itself – of a “compensation culture”. That suggestion was thoroughly dissected and found wanting in this Noteworthy exclusive from Peter Bodkin yesterday.
Today, we zone in on those personal injuries cases that do look at whether the situation in Ireland is replicated across the industry worldwide.
An analysis of claims costs and awards for damages between different jurisdictions is notoriously difficult and leaves many attempts at such research open to charges of not comparing like with like.
Efforts to assess which country’s system is more efficient can be problematic due to different definitions, the lack of detailed data and the nature of personal injuries systems in particular countries as well as approaches to the onus or burden of proof on a claimant.
Such difficulties at trying to benchmark the number and size of compensation claims of different countries without the risk of comparing apples with oranges means there is a dearth of forensic research on the relative strengths and weaknesses of different systems – a scenario that may not unduly trouble the insurance industry.
The recent report by the Personal Injuries Commission, which was chaired by former President of the High Court, Mr Justice Nicholas Kearns, highlighted how general damages for whiplash injuries in the Republic are 4.4 times more expensive than in England and Wales at €19,862 compared to €3,798.
That said, our Noteworthy investigation yesterday found that total awards for personal injury cases fell 28% between 2014 and 2018; and that the average award dropped 19% during the same period.
The main source of data available in Europe in relation to awards for whiplash injuries is sourced from the insurance industry including its EU-wide representative body, Insurance Europe.
However, much of its current data which allows for some level of comparison has no relevant data for Ireland. It showed that the average cost of claims ranged between €1,123 in Malta and €5,856 in France.
In addition, most EU countries apart from the Republic and the UK operate civil law systems which limits the value of any comparisons that could be drawn.
The scale of the industry across Europe is impressive with motor insurance premiums worth €135.3bn in 2016 with total claims in the same year costing €103.5bn.
The first major cross-border study on whiplash-related injuries by Insurance Europe’s predecessor, the Comité Éuropéen des Assurances, in 2004 established that whiplash injuries represented from 3% of all personal injury claims in France to 76% in Britain. At the time average claims for whiplash awards ranged from €1,500 in Finland to €35,000 in Switzerland.
Although Ireland was not included in that landmark report, the Personal Injuries Assessment Board has estimated that on average whiplash claims account for almost half of all personal injuries cases in the Republic.
How the UK makes the claims process more efficient for everyone
As our closest neighbour with a similar legal system, the much lower average compensation payouts in England and Wales warrant closer scrutiny for the purpose of trying to replicate measures in Ireland which would lead to more cost-efficient process for the processing and evaluating of claims.
The system in the UK revolves around the Claims Portal, a not-for-profit facilitator of claims established in 2013 to minimise the need for uncontested cases to proceed to court and through which all applications for compensation must be made.
Any claim related to soft tissue injuries is required to obtain a medical report from an accredited expert through MedCo, another portal system established in 2015 to facilitate the sourcing of fixed cost medical reports in whiplash injury claims.
MedCo, a non-profit organisation funded by the Association of British Insurers, provides accreditation for medical experts who have undergone a mandatory minimum level of training and ensures the quality of medical legal reports.
All commissioners of medical reports, such as solicitor firms, must also register with MedCo as part of a measure designed to prevent any financial link between the expert and the person commissioning a report.
In response to a request for a medical report, MedCo provides a random but fair shortlist of medical experts from which a solicitor must make a selection.
MedCo said its purpose is “to improve the quality and consistency of medical reports and to remove potential conflicts of interest by ensuring there are no financial links between law firms and the medical experts who provide advice.”
Why do we not have it here?
However, the PIC has ruled out introducing a similar initiative in Ireland as legal advice received from the Attorney General and a number of Government departments said a mandatory panel of expert witnesses would represent an impermissible interference with a claimant’s constitutional rights in taking a case before the Irish courts.
The MedCo medical report forms part of a “settlement pack” issued to the defendant, who can accept the suggested level of award or make a counter-offer.
When the parties fail to agree the compensation level via the Claims Portal, a case can be transferred for a court hearing.
While mirroring the role carried out by PIAB in Ireland, the Claims Portal is different in that awards are based on discussions between the parties and on a medical report not sourced from either claimant or defendant.
The Association of British Insurers claims the highly competitive market in the UK (there are almost 250 firms providing motor insurance) combined with legislative reform are keeping the cost of motor insurance down.
The Civil Liability Act 2018 which was passed in December and introduces a tariff scheme for soft tissue injury claims seen as a major attempt by the UK government to address the rising cost of motor insurance.
Although not expected to come fully into force before April 2020, the tariffs will apply to all whiplash injuries to the neck, back and shoulders lasting up to two years with an additional sum awarded where a psychological injury is involved.
The legislation contains a provision banning the settlement of whiplash claims before a medical report has been obtained.
It also provides for the Treasury – the British equivalent of the Department of Finance – to make regulations requiring insurers to report to a financial watchdog about savings made as a result of the reforms.
Introducing the legislation in the House of Commons last year, the Lord Chancellor and Secretary of State for Justice, David Gauke, said it aimed to make the personal injury compensation system “fairer, more certain and more sustainable for claimants, defendants, the taxpayer and motorists.”
Mr Gauke said the legislation was prompted by the fact that almost 200,000 more personal injury claims were made in 2017-2018 than in 2005-2006, even though the actual number of reported motor accidents over the same period had fallen by 55,000.
“Of those claims, we estimate that around 85% were for whiplash-related injuries. That is higher than in any other European jurisdiction,” said Mr Gauke.
He also expressed concern that it had become “culturally acceptable” to make claims for very low-level injuries.
Promise to pass on the savings
The legislation has been welcomed by the insurance industry in the UK with several firms including Aviva promising to pass on 100% of savings to their customers.
Although the PIC also recommended the establishment of a specialist fraud investigation bureau within An Garda Síochána that would be modelled on the UK’s Insurance Fraud Enforcement Department, the proposal has been rejected by the Garda Commissioner Drew Harris who voiced his preference for the problem to be tackled on a divisional basis rather than through a centralised unit.
While the UK tariff has yet to be determined it was proposed that damages would range from £225 to £3,725 – a rate significantly lower than the current level of common law damages.
To date the UK’s Judicial College has published guidelines for the assessment of general damages which sets out financial ranges for common types of injury.
They are designed to set out a clear and logical framework and be used as “a starting point” for the assessment of damages while also allowing judges unfettered discretion to the specific facts of individual cases into account.
The guidelines are reviewed every two years and are recalibrated based on actual awards made by courts.
Typically the recommended ranges of awards are categorised as minor, moderate and severe – not dissimilar to the Book of Quantum used in Ireland by the PIAB.
Guidelines published since 2013 allowed for a 10% increase recommended by a report on civil litigation costs together with inflation-linked increases.
Another element of the UK system is a scheme that allows the NHS to recover money for the treatment provided to an injured party who subsequently successfully claims compensation.
The whiplash scale in Canada
Another country that has been to the forefront in pioneering efforts to reduce compensation awards in personal injury cases is Canada.
The Whiplash Associated Disorder scale, devised by a task force in Quebec, was one of the first attempts at classifying the severity of symptoms of soft tissue injuries and has formed the basis for claims assessment in other jurisdictions including Australia and the US. It has also been endorsed by the PIC in Ireland.
Although Canadian provinces and territories have their own individual legal system, most have some form of “no fault” insurance where a claimant deals directly with their own insurance firm regardless of who is at fault for their injuries.
Some also allow the person who is faultless to sue the party who caused the injuries, although there can be limits or thresholds about what is permissible.
In Ontario, limits have been imposed since 1990 which only allows claims for compensation if the pain and suffering meet a certain level of severity.
Legal action is only permitted in cases of fatality or where the injured party suffers permanent and serious physical, mental or psychological injury or disfigurement.
At the same time a “statutory deductible” amount, which represents a type of excess that must be paid by the claimant out of their own pocket, was applied to all cases meeting the severity threshold. It currently stands at CAD$30,000 (€20,217).
Amid concern that Ontario still had comparatively high level of awards within Canada, the provincial government subsequently imposed a cap on the amounts that could be charged for independent medical assessments.
In 2010 the Minor Injury Guideline, which covers common traffic injuries including whiplash, was introduced on a statutory basis for the purpose of limiting compensation for such injuries to CAD$3,500 (€2,360).
Other initiatives to nip cost in the bud
Following a further review of its claims system in 2017, the Ontario government is now implementing several other initiatives including a “standard treatment plan” to ensure people with the most common injuries from traffic collisions receive timely, appropriate and effective treatment.
The measure is seen as switching the focus to appropriate care for victims rather than cash payouts which it is hoped will further lower costs.
The author of the 2017 review, David Marshall, a health and safety expert, stressed that soft tissue injures should not normally develop into permanent impairments “if they are treated properly to begin with”.
He expressed concern that the level of injuries associated with motor insurance claims was “a warning sign that medical care is not being properly handled”.
While seeing the merits in setting thresholds for certain claims like in Ontario, the PIC said there was a counterargument that they could set a “target” to beat and could act as an incentive for exaggerated injuries to ensure claimants obtained compensation.
As the PIC concluded there is a myriad of approaches to personal injury compensation worldwide but no one jurisdiction has a system which should be directly mirrored in Ireland.