Paschal Donohoe has put judges tasked with reducing insurance pay-outs on notice that the current trends are unsustainable.
The Finance Minister fired a shot across the bow of the new Personal Injuries Guidelines Committee as he revealed settlements by the Government’s preferred route of the Personal Injuries Assessment Board (PIAB) have decreased starkly from €57,571,408 in 2015 to €49,727,849 in 2018 while the number of cases settled in court went up.
The PIAB is preferred by the Government because it is swifter and cheaper than the court route.
On average, legal costs under PIAB were €750 while in court cases the average was €14,500, with individual settlements achieved under both systems being roughly the same.
However, when it comes to litigation, the total sum – including legal costs and awards – has increased from €273,661,656 to €345,373,062 over the same period.
The amount of direct settlements has also increased from €97,871,471 to €108,678,313.
Minister Donohoe expressed his serious concern over the scenario in which ‘the cost of injury claims settled by PIAB decreased by 13.6% [and] the cost of injury claims settled through litigation increased by 26.2%’.
He warned: ‘It can be stated that the pursuit of litigation in court is contributing significantly to overall settlement costs, and that the cost of claims settled by litigation has increased significantly since 2015.’
Mr Donohoe was responding to questions by Fianna Fáil’s Michael McGrath on the number of motor insurance premiums paid by policyholders, the number of claims paid out by the different settlement channels and the total amount paid out on claims.
The figures were confirmed by further Central Bank research into claims below €100,000.
This would include the most common claims such as those for soft tissue injuries such as whiplash.
These reveal that claims settled by the consensual PIAB route have decreased from €51,428,853 to €39,964,059.
By contrast, the cost of claims taken via the legal route have ballooned from €125,075,099 in 2015 to €143,107,394 in 2018.
The amount settled directly has increased from €86,443,551 in 2015 to €92,465,509 in 2018.
Mr Donohoe said that the figures reinforced the point about the impact that litigation was having on the cost of settlements.
The figures reveal that ‘the average settlement for litigated cases under €100,000 is just over €23,000 while the accompanying average legal costs are just over €14,500.’
Minister Donohoe added: ‘When this is compared with the average PIAB award of just over €22,500, and its average legal costs of €753, it raises questions about how the differential in legal costs can be justified.’
Mr Donohoe said: ‘In addition, the length of time to settle these claims is nearly two years longer than in PIAB, which drives up the cost of insurance.’
In a stark warning Mr Donohoe said: ‘I do not believe these differentials are sustainable.’
Richardson Insurance Solutions DAC is regulated by the Central Bank of Ireland.