Michael Clifford: Delay in personal injury payouts reform costs us all

Despite clear evidence of the need to reform the hefty payouts in courts, there is no sense of urgency among the Oireachtas or the judiciary to resolve the issue of personal injury payments
Michael Clifford: Delay in personal injury payouts reform costs us all

Sinn Féin finance spokesman Pearse Doherty at the launch of the Insurance (Restriction of Differential Pricing and Profiling) Bill 2020, which aims to ban dual pricing from the insurance market. Picture: Gareth Chaney

Vested interests were having a rare old time of it at the expense of the compliant public this week. In the Dáil, a private member’s bill from Pearse Doherty on dual pricing in the insurance industry was shot down. Doherty has been on a crusade against insurance rip-offs for a few years now.

In 2019, he complained to the Central Bank about dual pricing, the practice in which insurance companies charge more to particular categories of customers based on factors other than risk. Those who don’t shop around, or are not clued into the market, face hikes even when they’ve been loyal to a company for years.

The practice is about to be banned in the UK and has been illegal in the US for two decades. There was a pledge in the programme for government to ban it.

Last December, the Central Bank reported that dual pricing was widespread here. Long-term customers were paying more for house and car insurance than new and recent entrants to the market. The bank found that loyalty could be costing the typical home insurance customer an extra €161 a year.

So Doherty introduced a bill to ban the practice. And the Government said, 'No, we must wait another nine months until the Central Bank issues its final report on the matter.'

It appears the Government didn’t want Doherty to get the political credit for his private member’s bill. So the public, motorists, home owners, and businesspeople must continue to put up with this carry-on for God knows how long in the name of political expediency.

That Central Bank report was one of a number in recent years that demonstrated how vested interests are mugging premium holders.

Last October, the final report of the Cost of Insurance Working Group found that the legal costs in personal injuries claims taken to court are nearly 20 times higher than those at the Personal Injuries Assessment Board. This pertains “even though the final award (in the courts) is only marginally higher that the settlement as assessed by PIAB". 

So who are the big winners there?

In 2019, a study of patients with whiplash attending the Mater Hospital in Dublin found that 90% “failed to return for additional treatment once their legal action was complete". 

Did the award from the court have a miraculous effect on the physical imposition of whiplash?

In 2018, the personal injuries commission found that the average payout for whiplash in this jurisdiction was 4.4 times what was awarded in the UK. The commission was chaired by Nicholas Kearns, former president of the High Court.

So let’s see: We have price gouging, jam for the legal business, and the divine healing powers of very generous court awards. Footing the bill for all the fun and games are the mugs with premiums in a captive market.

Whiplash is a painful injury. Those who have been wronged are perfectly entitled to be compensated. But the burden on premium holders suggests that the whole area badly requires reform.

One element of reform being pursued by this Government and its predecessor is the introduction of new guidelines for the judiciary in personal injuries awards. This is designed to reduce the general level of awards, particularly in relatively minor soft tissue injuries. Many believed that such a measure made sense and would be well received by judges. It turns out that was a misplaced belief.

This week, as Doherty’s bill was getting kicked down the road, word emerged about displeasure among around half of the State’s judges to the proposed guidelines. Chief Justice Frank Clarke had to adjourn the initial meeting convened to vote on the guidelines on February 5 because of the divide. He had pencilled in today to reconvene, but now that has been delayed again.

So what’s eating the beaks? One major stumbling block is judicial independence. Judges are very reluctant to be dictated to by the executive or Oireachtas on matters they feel are the preserve of their independent office.

This vital concept in a democracy is taken very seriously, and rightly so, on the bench.

For example, in recent decades there was much trouble over the failure of judges to apply what the Oireachtas believed should be mandatory minimum sentences in relation to drug offences. The judges felt the minimum tariff was contrary to natural justice, and a product of political rhetoric rather than evidence based. 

The policy, as it was, had been tried in the US and was seen to be a disaster. So the judges invoked their constitutional duty to independence and took political and media flak for it.

The personal injuries guideline stuff is of a different order. There is evidence that awards are overly generous. There is evidence that going to court ramps up the cost of claims exponentially and consequently impacts on policyholders. There is evidence that the benefits of going to court accrue completely disproportionately to the law business rather than litigants. 

Surely recalibrating the size of awards, particularly at the low end of the injury scale, is in the public interest?

Unfortunately, there is a case to be made that the judiciary, in this instance, has skin in the game beyond any fidelity to constitutional duty. Many among them, before ascending to the bench, enjoyed thick layers of jam from personal injuries. 

Arguably, they may be captive to a belief that the legal costs associated with the sector are value for money. Such a belief would be on shaky foundations if awards were reduced.

There is also another issue, raised this week by Neil McDonnell, chief executive of the small firms group Isme. How many of the judges have family who are practising in either arm of the law business? McDonnell said that judges with family members in the business should not cast a vote on cutting the size of awards.

Whether such a measure is required is a moot question. But one way or the other, judges who are crucial to reform in this sector cannot claim to be dispassionate observers, incapable of unconscious bias.

Right now, they would be well advised to get cracking. Once the legal business is someway reformed in this respect, the insurance companies will no longer be able to point accusatory fingers at the courts. The industry will have nowhere else to hide if the price gouging continues.

The week that was in it, however, gives little reason for optimism. Vested interests, in both the legal and insurance businesses, are not done yet when it comes to enjoying the benefits of wielding power over the public.

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