The Law Society of Ireland has welcomed the Personal Injuries Commission’s report published on Tuesday 18 September 2018, including the recommendation for new judge-made guidelines for personal injuries damages.
The Law Society says that it welcomes any measures, which improve consistency in personal injury awards but stresses the need to preserve appropriate compensation for accident victims. “Improved clarity and consistency in personal injury damages is a positive prospect, and the Society agrees that judges are uniquely placed to develop strong guidelines for accident awards,” said Mr. Ken Murphy, Law Society of Ireland Director General.
However, the Society expressed concern that reducing damages may solely benefit the insurance industry and could do harm to those, who have suffered injury. Ken Murphy explained that there is no evidence that reducing the level of compensation awarded to personal injury victims will result in premiums going down. “We must avoid a situation where injury victims end up in a poorer position while insurance companies keep getting richer.”
“Simply reducing damages takes money away from those, who suffer injuries through no fault of their own and puts it in the pockets of the already very profitable insurance companies. It is critical that the judiciary maintains a balance between the rights of injury victims and appropriate compensation levels.”
Fallacy of reducing claims costs
Even in relation to claims costs, which comprise the various expenses associated with the processing and handling of insurance claims of which legal fees are just one element, Mr Murphy highlighted a common fallacy. “Reducing claims costs does not lead to a reduction in premiums. The cost of making a claim rose by around 2.7% per year between 2011 and 2016, as outlined in the May 2018 Cost of Insurance Working Group Report. This is against the 22% increase in insurance premiums in 2016 alone.”
“The reality is that premiums are calculated based on several different factors, and claims costs are just one of those factors. Bad underwriting, under-reserving, a volatile stock market and new capital requirements under the EU Solvency II Directive were far more influential on the massive premium increases than claims costs could possibly have been.”
“Now that most of those factors have been removed or improved upon, insurance companies seem to be doing very well and posting strong profits,” he added.
The Society also cautioned against placing too much emphasis on comparisons between the UK and Ireland in personal injury cases.
“The PIC’s benchmarking exercise against the UK highlights that Irish personal injury awards are a multiple of those in the UK. However, is there actually any good reason to align our personal injuries awards system with the UK?”
“If anything, the higher level of awards in Ireland may, in fact, serve as an indication that Irish society places a higher monetary value on the health and wellbeing of its citizens.”
Mr Murphy also points out that, “Recent decisions from the Court of Appeal show that judges are not afraid to reduce awards they consider to be too high, particularly in cases involving soft-tissue ‘whiplash’ injuries. This has already led to downward pressure on damages and settlements across the board.”