Update: The former President of the Law Society says that fraudulent insurance claims are “the scourge” of the legal profession.
“Fraudulent claims are the scourge of the legal profession. The scourge of genuine claimants, the last thing any lawyer wants is to be involved in a fraudulent claim, they destroy the reputation, they're a waste of time and money and they ruin it for honest claims,” Stuart Gilhooly told RTE’s Today with Miriam.
He also rejected the contention by the insurance industry that lower awards would lead to lower insurance premiums.
“There is an assumption that lower awards will lead to lower premiums, there are comparisons with UK, but in the UK premiums are higher despite lower awards, from 2010 to 2015 UK premiums were 24% higher than they are in Ireland.”
However, Kevin Thompson, CEO of Insurance Ireland said that in 2016 the insurance industry paid out €2.1bn in claims.
“The majority of those claimants are honest, but there is a propensity for fraudulent activity out there, it's not being aided by the level of awards. Until we get to grips with that and decide as a society that we're willing to sustain the cost associated with the level of those awards, well then insurance costs will be as they are now.”
He said that Insurance Ireland has diagnosed what the problem is, which is the speed of reform. Recommendations from the Motor Industry Insurance Advisory Board in 2000 had seen “a natural reduction in premiums.
“Unfortunately at that time we saw the legal profession adopt 30 legal challenges to the reform that was there. When we see meaningful reforms put in place in the past, can see reductions in cost of insurance."
However, Mr Gilhooly said that the fact that premiums were down 22% from the peak shows that claims can't be the issue because damages haven't reduced significantly in that time.
Mr Thompson said that the insurance sector can control “only a few things, we have controlled our costs. What we cannot control is the cost of claims.
“The years leading up to 2016 on motor book alone the industry suffered an €800m loss, that's a vast amount of profit, slowly getting back into profit now," he said.
"All we want is to be in game that is viable and sustainable until volatility is taking out of it. Until we get the meaningful reforms around the cost of claims it's not going to happen, it's not for the insurance sector to decide on what the level of awards will be.
“Nothing will change – the majority of claimants are honest, unless you address the cost of claims you will not address the consequences.”
Peter Boland, Director of the Alliance for Insurance Reform said that the Government's response to the issue is very frustrating. He said there was €17m sitting in the accounts of the Personal Injuries Assessment Board which could be used to fund the proposed Garda Insurance Fraud Unit.
“It's Government policy to set up this unit, the whole squabble about funding is a side show, it's a distraction.
“The reality is that there's €17m sitting in the accounts of the Personal Injuries Assessment Board - that money came from policy holders who have had to defend cases, the Exchequer are about to get control of it, that money would fund the Garda Insurance Fraud Unit.
“What we want from the insurance industry – we haven't seen from them any sign of reductions we'll see from these reforms. That's absolutely essential if people are to get behind reforms. It’s moving at a snail’s pace, the political will is not there.
“If the insurance industry would give an idea of what kind of reductions we could see to our premiums then you’d see it would be much easier for Government to get behind it.”
Minister of State Michael D’Arcy says that funding of a Garda Insurance Fraud Unit by the insurance industry “won’t be happening.”
He told RTE’s Morning Ireland that he had met with Garda Commissioner Drew Harris to discuss the issue and he agreed with the Commissioner who was not prepared to accept the Garda Siochana being funded from outside the Exchequer.
Mr D’Arcy was responding to comments by the CEO of Insurance Ireland, Kevin Thompson, who expressed concern at delays and the “the lack of urgency” in delivering key reforms in the sector that are aimed at reducing claims costs.
Insurance Ireland says promised reform is incomplete and inaction is costing policy-holders.
Mr D’Arcy said that the delay in completing the Personal Injuries Assessment Board Bill and legislation to set-up a Judicial Council was because of filibustering which had taken up months of Oireachtas time.
“We had hoped that the Bill would have moved through the Oireachtas in 2018, but there has been filibustering – that’s a consequence – other pieces of legislation fall behind.”
In the meantime, he is hoping to reinstate an interim Judicial Council which would lead to the “recalibration of the Book of Quantum” (which determines awards).
He pointed out that there are 45 pieces of legislation in relation to Brexit that could have to be enacted in the next few weeks which would mean other Bills would not progress through the Oireachtas.
“That’s why I want to reinstate the Judicial Council. We have been working on this for two years.”
The CEO of Insurance Ireland has expressed “great concern” at the lack of urgency in the delivery of key reforms aimed at reducing claim costs.
Kevin Thompson told RTE’s Morning Ireland that the absence of a firm timeline for legislation to set-up a Judicial Council and the development of guidelines for the awarding of compensation meant that Ireland had awards 4.4 times that of the UK.
The slow passage of the Personal Injuries Assessment Board Bill was also a cause for concern, he said.
Mr Thompson said progress is too slow and Insurance Ireland has suggested that in the absence of a Judicial Council, a contingency mechanism to allow for the judiciary to complete new compensation guidelines should be put in place to help bring down costs.
He also warned that Ireland’s level of awards were an incentive for people to make fraudulent claims and this needs to be tackled urgently.
There needs to be more deterrents in the legal system, he said.
The proposed Garda Fraud Unit is one way to tackle this, added Mr Thompson. Insurance Ireland had examined such a system in London which worked well there.
The insurance industry in Ireland is happy to support and fund such a unit which would be totally independent and separate in terms of oversight, he said.