I am pleased to have the opportunity to address the House on the report of the Motor Insurance Advisory Board. As the Taoiseach said here last week, this report is the product of more than three years' hard work and it is important that the issues it raises are debated in the Dáil. These are matters which are of major significance to the motorist and to the general public through the knock on effects which high insurance costs can have on the community.
This report is, by any standards, atour de force in terms of the data it presents and the comprehensive nature of its analysis. It gives the reader new insights into the workings of the insurance market in Ireland and presents information which was not previously available to the public. Significantly also, it points us towards the action we need to take to alleviate the unacceptably high burden which the insured motorist is asked to bear. Little wonder then that it has aroused such extensive public interest in the past week and it is appropriate that this debate is taking place here today.
The Government, for its part, has responded with the utmost speed to the publication of this report. At our meeting on 10 April, we approved the establishment of a high level implementation group representative of the relevant Departments, the Consumer Association of Ireland and IBEC together with the chairperson of the Motor Insurance Advisory Board to immediately progress the recommendations and to report to Government not later than three months' time. The group held its first meeting this morning. Therefore, there is no question of the report being left to lie around with no action taken on its recommendations. On the contrary, these recommendations will be examined in the relevant Departments to see in what way it might be appropriate to give effect to them.
Of the 67 recommendations made by the MIAB, some 16 might be said to be of relevance to my Department and I now turn to those. As it happens, some of these recommendations have been overtaken to an extent by recent events.
One example of this is recommendation No. 42 which is to the effect that the legislation on accrual of 8% interest on legal costs from date of trial should be revised in a manner consistent with the Prompt Payment of Accounts Act with a significantly reduced rate of interest and a reasonable period allowed from the date of bill presentation for payment or the resolution of legitimate queries. Section 30 of the Courts and Court Officers Act, 2002, responds to this recommendation in that it provides for changes in the manner in which the interest on costs associated with judgment debts is calculated. In particular, it provides for the application of a rate of 2% per annum from the date a judgment is given to the date when the parties agree costs as between themselves, or the date a certificate of taxation issues, which is appropriate. Thereafter, the interest applicable to judgment debts, 8%, will apply to the outstanding costs until that amount of costs is paid.
I am aware of the view of the MIAB, expressed in its report, that no interest should be payable until a reasonable period has expired after presentation of the solicitor's bill but it must also be acknowledged that the changes made by the Courts and Court Officers Act, which are already in force and which apply even where the proceedings in question were instituted before the Act was passed, represent a considerable improvement on the position up to now. As regards the continued application of an 8% interest rate to legal costs after they are agreed by the parties or determined either by the taxing master or the county registrar, while this rate may appear high by reference to interest rates generally, it must be borne in mind that the charging of interest has the purpose of encouraging prompt payment by the liable party. When that is an insurance company, I see little justification for delays in paying the sums due either to the plaintiff in the form of damages or to his or her legal representatives in respect of their costs.
A further recommendation which has been responded to in part is No. 43 to the effect that the draft legislation on advertising by solicitors should be progressed. This legislation, the Solicitors (Amendment) Act, 2002, was enacted on 13 April. The provisions on advertising require a commencement order to be brought into force and this order will be made when regulations to fill out the detail of what is provided for in the Act are prepared by the Law Society. Commencement of these provisions is a priority as far as I am concerned.
This recommendation, and recommendation No. 44, propose a requirement that all advertisements by solicitors quote a summary of section 68 of the Solicitors (Amendment) Act, 1994, which provides that solicitors are prohibited from calculating their charges as a percentage of any damages that become payable. I am of the view that it would be of benefit to draw the attention of the public to this important rule, as its existence may not be widely known, and I will consult the Law Society to see if regulations could be made to implement this proposal.
Recommendation No. 57 is to the effect that the Courts Bill should be amended so as not to increase the civil jurisdictions of the Circuit and District courts beyond expressing the existing figures in convenient euro amounts. This Bill is now an Act, the Courts and Court Officers Act, 2002, but requires a commencement order to raise the jurisdiction limit of the Circuit Court from £30,000 to €100,000 and that of the District Court from £5,000 to €20,000.
While by no means dismissing the view of the MIAB that increasing the jurisdiction limits will increase awards and settlements, it is reasonable to suggest that it is somewhat speculative. I am not sure that decisions as to the courts in which cases shall be taken – whether District, Circuit or High – are not matters in which clients have no say. Clients will know that, as a general rule, the lower the court, the lower the costs and they will also know, certainly from this report, that legal costs represent a sizeable proportion of the overall cost of road accident associated damages. I do not believe increased jurisdiction limits mean increased claims and increased damages awards. There can certainly be no justification for leaving the limits completely unchanged, apart from translating them into euros. Consumer prices have risen by about 30% since the limits were previously set in 1991.
Inasmuch as damages compensate for such elements as loss of earnings, more expensive vehicles etc. which reflect rapid real economic growth, it could be argued that consumer price inflation does not fully mirror the increase in damages during this period. This means that leaving jurisdiction limits unchanged would have the effect over time of pushing cases of a given level of seriousness into higher courts with higher costs and negative implications for access to justice. For example, I do not consider that a case involving a claim for the equivalent of just more than £30,000 should be dealt with in the highest court of first instance in the land. The increased jurisdictions will also enhance access to justice in the sense that District and Circuit courts are courts of local jurisdiction located conveniently to those members of the public who need to have recourse to them. I must, therefore, reluctantly beg to differ with the board on this issue.
In considering the jurisdiction levels of these courts, I met representatives of IBEC and the Irish Insurance Federation. I noted their concerns about the possible effects of the proposed increases in the jurisdictions but stressed to them the need to have regard to the interests of all court users and my anxiety to ensure people have access to court at the lowest possible cost. Courts are there to serve the public. It is important that the public has the cheapest possible access to the courts. In this regard increasing the jurisdictions of the District and Circuit courts can only serve to assist the public.
The general jurisdiction provisions in the Act will not come into force until I make a commencement order to that effect. Consideration of the establishment of the Personal Injuries Assessment Board, which should have a significant impact on the number of cases that go to court, is well advanced under the aegis of the Minister of State, Deputy Treacy. I informed the representatives of IBEC and the Irish Insurance Federation that consideration will be given to co-ordinating the commencement of the jurisdiction provisions with the coming into operation of the Personal Injuries Assessment Board.
There are a number of recommendations in the report which require consideration by the Courts Service. In this regard, I understand the board of the Courts Service has decided to table consideration of the report of the Motor Insurance Advisory Board at its next meeting.
I will be interested to have the views of the Courts Service board on such matters as specialist judges, an extended role for the small claims court and the introduction of a book of quantum. I am prepared to act quickly on any recommendations I get from the board for legislative amendment as necessary.
The MIAB makes a range of other recommendations affecting my area of ministerial responsibility. Of those, I will briefly refer to a few. As Deputies will observe, these proposals would require legislation and, for that reason alone, they require careful consideration before any Bill is brought before the House. This consideration will commence with the work of the implementation group established by the Government.
In recommendation number 47, the MIAB proposes that stringent measures should be introduced to tackle fraudulent and exaggerated claims for the loss of all compensation entitlements and appropriate criminal sanctions should be imposed. I caution that any measures to deal with exaggerated claims would have to be proportional to the wrong one seeks to rectify.
In recommendation number 50, the MIAB proposes that the system of lump sum compensation payments should be reviewed on the basis that long-term needs of the seriously injured may be better served by guaranteed annual payments. Recommendation number 51 proposes that a system should be introduced to facilitate pre-trial interim payments to the seriously injured in cases where liability is not a substantial issue but there is a financial need to replace lost earnings or seek medical treatment. Recommendation number 52 proposes the introduction of awards of provisional damages where there is a substantial risk that the injured party's medical condition may deteriorate in the future.
The latter three recommendations concern issues which have been the subject of a 1996 report of the Law Reform Commission, the recommendations of which have not been addressed by my Department to date due to the substantial programme of legislation in which we were in engaged over the past number of years. The Law Reform Commission proposed that there should be a system of structured settlements to replace the award of damages in the form of lump sums and that there should be provision for interim and provisional awards in certain conditions. Significantly, however, the commission recommended no change in the way awards of damages are calculated by the courts. In other words, these changes would perhaps deliver compensation in a more appropriate way while being neutral in their effect on the aggregate amount of compensation paid in the long-term.
Much comment has been made before and after the publication of this report on the role of the legal profession in relation to litigation and insurance costs. It is of significance that the Government, as part of its response to a report by the OECD on regulatory reform in Ireland which was published in April 2001, asked the Competition Authority to undertake a study of professional services. Among the professions being studied by the authority is the legal profession and I await, with interest, that report.
There has also been media comment about the attitude of the Law Society to the work of the MIAB, as described in the report. This is a matter for the society, but it is a cause of regret when any important regulatory and representative body does not lend its assistance to a committee which is mandated by the Government or a Minister to investigate a matter of major public concern. Most people will not, however, consider it a major cause of surprise that the body, which has the task of representing the interests of solicitors, should be cautious and find itself drawn in different directions when it comes to the scrutiny of matters that bear directly on its members' interests. Rather than focus on the approach adopted by the Law Society in this instance, it is more important to confirm that the Government is determined to act on this report.
The reform of the law on personal injuries is being kept under review in my Department in consultation with other Departments, particularly having regard to the perceived growth of a compensation culture in our society. The report of the MIAB provides further impetus to the consideration of the law in this area, as if affects claims arising from motor accidents and the recommendations in the report give us guidance on the most useful avenues to explore in our quest for a better system. I caution, however, that persons who are the victims of the negligence of others are entitled to have their rights vindicated by the payment of appropriate compensation and this principle must be respected in any reforms we introduce. We must at the same time endeavour to ensure that compensation is delivered to those who are entitled to it in the most efficient way possible.