In one sense, it appears that the whole thing is set in stone, in other words that it is an irrevocable course. I understand that the setting up of the PIAB has gone to the heads of Bill stage. This morning we met with the Minister and her PIAB committee. The heads of Bill have gone to the parliamentary draftsman to prepare the Bill proper.
We want to be logical and consistent in the way we have approached this and I think that you will see from what I have to say that this is the case. I hope that will come across. The committee has already received our written submission of 28 March. The key aspects of that were: the findings and recommendations of the cost benefit analysis of PIAB carried out by Peter Bacon and Associates for the Bar Council; the outcome of our researches on the cost of lawyers' fees in personal injuries cases and the impact of such fees on PIAB, and the Bar Council's proposals for the reform of the existing court-based litigation system.
I propose to review the Bar Council's position on the insurance issue generally and the establishment of PIAB, in particular, and to address the issue of barristers' costs in personal injuries litigation and make some concluding remarks. Members will have read the submission and I will not repeat what we stated in that.
It is clear that from the outset the debate about the high cost of insurance premiums has been an emotive one. With the publication of the MIAB report and the passage of time, however, the issues have become clearer and the reasons for the problem of high insurance more transparent. Initially, the high cost of awards and the legal costs associated with personal injuries litigation were advanced as the cause of all our woes. The simple answer proposed was to make the personal injuries litigation process a "lawyer free zone". We still find that we are pointed out by the insurance companies as being the cause of the problem. I think the committee will take a different view when it hears what I have to say in regard to some recent matters. On the basis of a cost-benefit analysis of PIAB carried out for the Bar Council and the statistical data forced from the Irish Insurance Federation, IIF, by MIAB, the real situation is beginning to emerge.
The findings of the Bacon report were that PIAB, if established, would introduce a new and unnecessary layer of bureaucracy at considerable cost to the State. Projected costs of between €l0 million and €30 million to establish PIAB have been suggested with an estimated ongoing cost of €7 - €8 million per annum and this is likely to escalate dramatically. Things are not generally reduced from the original estimate, particularly when it comes to this type of project. The die had been cast and, in the absence of their own cost-benefit analysis, the simplest approach for the policy makers was to plough ahead regardless. That, in effect, is what is happening at present. The logical analysis by Peter Bacon notwithstanding, the Government is relentlessly pursuing the establishment of PIAB. Apart from the cost factor, the system as proposed in the recently published draft heads of Bill highlight serious deficiencies in PIAB.
Statistics were published about legal costs in relation to personal injuries litigation. The Bar Council has consistently refuted the figures in relation to legal costs which had been put into the public arena by the IIF and were subsequently used by other interested groups. Early in the debate, grossly distorted statistics in relation to legal costs were issued by the IIF which has since admitted that the figures it gave were incorrect. The Irish Times of 3 October 2002 carried an article under the headline, “Insurance Federation paid less in legal costs than stated”. The first paragraph of that article stated: “The Irish Insurance Federation has admitted it paid far less in legal costs last year than the €440 million it declared to the Ta?naiste.” We have given a separate analysis of the falsity in regard to the publication of figures about costs so I will not go into that in detail now unless members particularly want me to do so. IBEC and even the Government have issued grossly exaggerated figures. The Bar Council’s memorandum on legal costs, which the committee has before it, sets out the position.
I note that at a recent meeting with the joint committee, the Small Firms Association called on the Government to cap or end the insurance levy which they say is currently generating €65 million for the Exchequer and thus adding to the cost of insurance. At the same meeting, ISME separately blamed the insurance industry for profiteering on the backs of the business community. The latter called on the Government to establish an independent committee to monitor the industry's pricing and ensure cost savings from reform and other favourable changes were passed to the customers. ISME also called for a root and branch investigation by the Competition Authority into all areas associated with the insurance industry. We would welcome such an investigation. If members look at it from our perspective, and I know we do not have all the friends in the world when we are arguing on this point, what has been put up against us by the Insurance Federation is nothing short of ridiculous in respect of its analysis of costs.
I will next deal with the problems of PIAB. Members will appreciate that we have already analysed this matter and given the detail of it to the committee. As far as we are concerned there are fundamental problems with it. It can operate successfully only if there are higher awards. Otherwise, it will not be attractive. Members will be aware that there is an optional system. In other words, when one makes the claim, one does so through PIAB automatically. It makes a decision and the parties have an option whether to accept it. If the awards are lower than those they are likely to receive in the courts, they will not accept them. Therefore, for the system to work, it seems that there should be a higher award available through the PIAB, thereby pushing up the cost of insurance premia. Alternatively, if the assessment board were to reduce the level of awards, appeals would be made to the court, thereby introducing a new layer of bureaucracy and increasing the expense of the litigation.
From whatever perspective, the introduction of the new, additional system will generate competing jurisdiction, to the detriment of reform. One of the issues that arose in the meeting we had this morning with the Minister and the relevant committee was that they were inclined to describe it as a parallel system. We believe that it will not work in parallel - the two systems will be working against each other. If this is the case it will have to be paid for, which begs the question as to who will do so.
Apart from cost considerations, the PIAB, as proposed in the draft Personal Injuries Assessment Board Bill, has other deficiencies. The system will be paper based. It is not clear from the heads of the Bill how PIAB will operate or provide a quality service across the country to those who have been injured. Will it have offices throughout the country to assist and advise members of the public who are making a valid claim?
The court system currently handles more than 30,000 claims per year. It flies in the face of good administration to replace the existing decentralised approach, to which members of the public have direct access and under which they are assured of having their rights protected. Contrast this with the centralised system, as proposed in respect of the PIAB, which has not yet been properly defined or costed.
The PIAB will undoubtedly require major investment in a large number of staff and other resources. The committee will be aware of the cost of a civil servant. The usual method of estimating this is to add his or her annual salary to approximately 50% of this salary for overheads and multiply the total by 40, which is the lifetime of a Civil Service career. This is one of the costs that should be taken into consideration.
Interestingly, provisions in the Bill in respect of superannuation are very much to the fore. One wonders about the real view on how much the PIAB will cost. Why is it necessary to look at superannuation if it will not cost anything? It is utter nonsense on the part of policy makers not to face up to the cost of setting up PIAB. It is difficult to understand why the Government, at a time of scarce resources, remains implacably against the undertaking of such a cost-benefit analysis. The absence of such an analysis is even more stark when one takes into account that the implementation group, in reporting on the PIAB, "could not predict with certainty the level of savings" and simply assumed savings approaching 50%.
Fraudulent and exaggerated claims can be tackled only in open court under investigation. The PIAB involves a paper based system with no investigative process and it will not achieve the outcome of the courts. In fact, it will operate as an incentive to increase litigation, with no vetting process in place. Fraud and exaggeration will go undetected, and this must not be permitted.
Another area of considerable concern is the presence of a member of the IIF on the board of PIAB, sitting in judgment on whether IIF companies pay out or save money. Surely it cannot be fair to operate the system in this way.
In Ireland, unlike other European countries with assessment boards, the personal injuries system is private sector based. This is one of the fundamentals and is dealt with in Bacon's report. It is based on insurance rather than on social security and public health care. It is based on the latter in other EU states. Thus, for the PIAB to operate like such boards do elsewhere, the social security system will require reform. Peter Bacon estimated that the cost of radical reform of the social security system required to facilitate the effective functioning of an assessment board such as PIAB would be in excess of €2.9 billion per annum, together with the expansion of the entitlements to public health care. Bacon concluded that, in the current financial climate, such an approach would be prohibitively expensive. This is not what is proposed by PIAB under the heads of the Bill. In fact, it borrows from a public based system, takes it over and includes it as an extra layer in our system, which is a private based system.
The Bar Council is absolutely and unequivocally in favour of reform. It has recognised that the present system, operated in the High and Circuit Courts in respect of actions for compensation for personal injuries, could and should be improved and it has advocated the reform of the system. In making the proposals for reform, the council hopes to achieve the following: to make the system work more efficiently, effectively at no extra cost; to reduce the cost of litigation; to help eliminate fraud or deliberately exaggerated claims; to have a degree of conformity in respect of the size of awards; to shorten the time between the inception and conclusion of a claim. In order to achieve the above objectives, the Bar Council has suggested changes, including the following: the amendment of the statutory limitations, new rules in relation to processing and personal injury claims, permitting each side in an action to address the court on quantum; the introduction of legislation to deal with fraudulent or deliberately exaggerated claims; and updating the law with regard to perjury. The proposals have been presented to the Ministers for Enterprise, Trade and Employment and Justice, Equality and Law Reform, the chairman of the committee on court practice and procedure and the chairman of the interim PIAB. They are publicly available and we are delighted to give them to people who are interested in them.
Our submission to the joint committee has already dealt with these proposals in turn and I do not intend to refer to them in detail. If any member has questions on them, we will certainly deal with them. Suffice it to say that the bulk of our proposals have now been reflected in the draft General Scheme of Civil Liability and Courts Bill, published very recently by the Minister for Justice, Equality and Law Reform. As has been our contention all along, the revision of court rules can be implemented at no cost to the State. Such reforms will undoubtedly lead to a much less costly method of handling personal injuries litigation, thus eliminating the need for PIAB.
Regarding personal injury claims, the following developments have taken place over the past six months. I can speak with some authority on this matter because, in order to be here, I came back from Galway, where personal injury cases are taking place over two weeks. It is of relevance in light of problems associated with the setting of levels of damages in euro at an equivalent level to what one would have expected in punts. The numbers have changed but the actual damages have, in real terms, decreased by approximately 27%.
