Injury compensation in Ireland is not 4.4 times English awards as the insurance industry would have us believe – capping awards may not be the answer

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Injury compensation in Ireland is not 4.4 times English awards as the insurance industry would have us believe – capping awards may not be the answer

13th September 2019.

Martin Kenneally recently published an article in which he demonstartes that Irish injury (PI) awards are around 1.55 (not 4.4) times British awards, and this is almost entirely due to the higher injury severity of Irish accidents compared with Britain.

He makes other interesting observations :-

PI awards make up circa 70% of insurance expenditure, so if non-award PI costs (for example, service delivery, commission, MIBI, etc) are the same in Ireland and Britain, then the total Irish cost per claim is 1.39 times the total British cost.

The Cost of Insurance Working Group reports that the Irish claims rate per vehicle year is 80.61% of the British rate (8,494/10,537). This implies that the total cost per vehicle year in Ireland is 1.12 (that is, 1.33 x 0.8061) times the British cost.

Casualty rate

The garda-reported overall casualty rate per licensed vehicle in Ireland is around 57% of the British rate, and implies that the total cost per licensed vehicle in Ireland is 79% (that is, 1.39 x 0.57) of the British rate. Some licensed vehicles are uninsured but, nonetheless, contribute to Irish motor insurer costs via insurers MIBI (Motor Insurance Bureau of Ireland) contributions.

The actual motor insurance premiums set out in Table 2 give far greater support to the claim that Irish PI awards are 1.55 times the British PI award than to the PIC2 claim that Irish whiplash awards are 4.4 times the British whiplash award.

Insurers’ costs

Also, insurers’ costs show that big (non-whiplash) claims settling above €100,000 increased its share of total Irish claims costs from 11% to 17% between 2010 and 2015, and its share of total claims from 0.2% to 0.4%. These awards are underpinned by higher serious and severe road accidents in Ireland, and they require targeted policy measures to address them.

The key policy implication arising from this analysis is that insurance costs and motor premiums are best reduced by reducing accident frequency, especially the frequency of serious and severe road accidents on Irish roads. Ireland has proportionately fewer reported road casualties than Britain, but has a greater preponderance of serious accidents and fatalities.

Preventing a road accident prevents the full cost it would otherwise entail – and that cost is considerable for serious and severe accidents.

Capping

Capping awards shifts some of the cost burden from the insurer to the insured, but does nothing directly to prevent the accident or to mitigate its cost.

Of course, other factors contribute to Irish insurance costs – uninsured driving, late settlement, higher Irish VAT/VRT rates (50%/60% compared with 20%/30% in Britain) – but it is important to get the policy priorities right. Some Irish costs are deliberately set higher than in Britain – for example, bereavement grants are €13,686 in Britain but have a maximum of €35,000 in Ireland.