Dáil Éireann debate -
Tuesday, 16 Feb 1999

Vol. 500 No. 4

Written Answers. - Insurance Costs.

John Bruton

Question:

90 Mr. J. Bruton asked the Tánaiste and Minister for Enterprise, Trade and Employment the reason the reply to Parliamentary Question No. 33 of 19 November 1998 on reducing the cost of public liability and employer's liability insurance made no reference to reducing the size of awards or the lump sum tax-free character of awards as matters that might be addressed to reduce insurance costs. [1048/99]

Minister of State at the Department of Enterprise, Trade and Employment (Mr. Treacy)

The Deputy will be aware that Question No. 33 of 19 November 1998 specifically referred to the cost of public and employers liability insurance for small and micro business and was responded to by me in that context. A similar question has been asked by Deputy Hogan on today's Order of Business and I have provided a separate detailed reply to the House.

With regard to the general question of reducing the size of awards for damages in public liability and employers liability claims, I would point out that this issue was examined in the Deloitte & Touche consultancy report on An Economic Evaluation of Insurance Costs in Ireland. In their study, the consultants undertook an analysis of general damages awards by the High Court over a three year period in relation to the most numerous categories of personal injury claims and found that the High Court awards were consistently significantly below the maximum awards in each category and clustered around twice the average male industrial earnings. Deloitte & Touche also found that 85 per cent of High Court awards fell within the UK "Guidelines for the Assessment of Damages in Personal Injury Cases" prepared and published by the Judicial Studies Board.

In the light of its comparative analysis, the Deloitte & Touche report found that there was no valid case for introducing a capping regime in Ireland to limit the size of personal injury awards and pointed out that there would be no guarantee that the introduction of such a capping regime would lead to reductions in insurance premiums. To ensure greater consistency in awards, the consultants recommended that the Judiciary should establish a specialist panel, with its participation and under its direction and control, to draw up guidelines for general damages awards in personal injury cases.

The Deloitte & Touche report did not deal with the issue of lump sum awards and related taxation issues. The Law Reform Commission, in its 1997 report on "Personal Injuries: Periodic Payments and Structured Settlements", recommended that provision should be made for the use of structured settlements in relation to the element of court awards made in respect of future loss and pain and suffering in serious injury cases where awards are large. Such settlements, as an alternative to lump sum awards, would be at the option of the plaintiff and, as an incentive in this regard, the commission recommended that section 5 of the 1990 Finance Act, which provides that the income from the investment of a lump sum in total incapacity cases is tax free, should be extended to structured awards. The recommendation for introducing the option of structured settlement awards was viewed by the commission, not as a means of reducing the size of awards but as offering more secure arrangements for guaranteeing the seriously injured plaintiff an inflation-proofed, tax-free income for the rest of his/her life or for a minimum period of years.

The Deloitte & Touche report found that the two major factors driving up the cost of personal injury settlements in Ireland were medical inflation and the high transactions cost of claims, particularly legal costs, including the cost of expert witnesses. A Special Working Group, established under the aegis of our Department, is currently undertaking a research-based study of personal injury compensation systems in operation in other countries with a view to establishing if these provide a more cost-effective basis for delivering personal injury compensation.