Legal costs to settle insurance claims rising despite reductions in compensation

Employers’ and public liability insurance fees are going up despite fewer claims and award amounts falling

Junior minister for insurance Jennifer Carroll MacNeill encouraged people to settle claims through the Personal Injuries Assessment Board as it is quicker and keeps costs down. Photo:Gareth Chaney/Collins

Legal costs associated with settling employers’ and public liability insurance claims are rising despite reductions in the number of claims and amount of compensation being awarded, new analysis from the Central Bank shows.

In its latest National Claims Information Database analysis, published on Thursday, the Central Bank compared the average injury claim cost between 2015 and 2019 with the average injury cost claim for the first six months of 2022. It found a 25% reduction in the total number of claims and a 12% reduction in the total cost of those claims. 

According to the Central Bank, 71% of injury claims were settled by litigation during the first half of 2022. While the average compensation awarded from these claims dropped only marginally - €51,804 pre-pandemic to €51,078 in 2022 - the average legal costs increased from €28,882 to €31,735.

Lobby group, the Alliance for Insurance Reform noted that legal fees now account for almost 38% of total litigated personal injury settlements which is a cost that “goes directly to the cost of insurance”.

Michael Magner, board member of the Alliance, called on the Justice Minister Helen McEntee to “expedite the ongoing review of legal fees”.

Personal Injuries Assessment Board

This trend is also seen in settlements reached through direct negotiations with the insurance company as well as settlements through the Personal Injuries Assessment Board (PIAB).

Compensation awarded via direct settlements with insurance companies dropped from €20,126 to €18,671 while legal costs increased from €2,656 to €4,171. Compensation awarded through PIAB dropped from €30,772 to €23,464 while legal costs increased from €1,232 to €1,439.

In total, claims settling directly with the insurer cost on average 1% less while those settling via PIAB were 20% less.

Junior minister with responsibility for insurance Jennifer Carroll MacNeill said that additional litigation costs are “inevitably passed on in the form of increased premium prices” as she encouraged people to make more use of the PIAB".

Using the PIAB, as opposed to litigation, means that we can achieve quicker outcomes for anyone with an injury, but with a much lower cost overall.

According to the analysis, on average direct settlements with insurance companies takes 1.9 years to resolve, while it takes PIAB 2.4 years, and litigation 5.2 years.

In total 22% of all injury claims settled during the first six months of 2022 were settled under the Personal Injuries Guidelines, which came into effect in April 2021, while 78% had compensation amounts determined using the Book of Quantum.

For claims that settled under guidelines, the average cost was 37% lower for claims that settled directly before engaging with PIAB, 54% lower for claims settling directly after PIAB, and 35% lower for claims settling through PIAB.

The analysis said only 3% of litigation claims were settled using the guidelines. It said it will likely take time for the guidelines to impact these settlements due to how long the claims usually take to resolve.