I thank the joint committee for the invitation to provide an update on where we are four years on. It is a privilege to speak on behalf of my back office and some of my team that are present. It has been a good and productive four years. We feel there has been a cultural change in society in regard to the way personal injuries claims are now resolved. Most people thought that every time one had an accident there would be a row and that there were legal matters involved. Of course, that is not always the case. We now realise that in the vast majority of cases one does not have to have a row or seek legal recourse. We are well able to get on with our lives without resorting to consultants and third parties. In fact, if one puts Mrs. Duffy and Mr. Smith in contact with one another, in most instances they are reasonable and want to get on with their lives. That is what we are all about.
I wish to fill members in on the background for those who may not know the detailed running of the organisation. I will respond to the committee's invitation to focus on the annual report and perhaps bring members up to date with some case studies and information on the year to date.
We were set up as a result of deliberations within the House on the soaring cost of insurance. Four to five years ago we saw on RTE news and in our newspapers that businesses were closing down. As we know the productivity of the country, no more so then than now, is built on small and medium enterprises, but the cost of insurance was ridiculous and was closing down businesses. We were set a task to administer personal injury claims. We are personal injury claims administrators with the remit to reduce the cost of delivering the claims compensation from A to B. In other words, we are the delivery truck that goes from A to B and we reduced the time it takes to bring that truck along the line and give the same compensation to the injured party. We were never asked to change the level of compensation but in eradicating inordinate costs in that journey and in that timeline we thereby reduced the cost of insurance. The results have proved that has happened.
I wish to outline a few key facts about the past. A total of 90% of injuries cases ultimately were resolved under €38,000. When we look at the statistics historically and when we look at them today after four years trading, the vast majority of claims are bone and soft tissue injuries or a combination of both. In the country at that time 30,000 writs and court summonses were issued every year as a matter of course. Once a claim was made following an accident two parties entered into dispute. There was always a perceived need for a dispute and a perceived need for legal proceedings to assist everyone back to good health. Fewer than 10% of those writs ever entered a court room and only 6% of the 10% were successfully defended. That waste was identified and that is what we were set up to tackle.
What we asked the staff of the PIAB to do was to look at the timeline and the delivery cost and nothing else in terms of tackling costs and to make sure people got the same level of money they got under the old system. A total of 90% of cases were resolved on the steps of the courts under the old system and that took, on average, three years. A total of €1 billion was paid out and it cost €450 million to get that €1 billion into the hands of Mr. Smith from Mrs. Duffy. The new model is now fully operational. We can say that with confidence. We were before the committee when we were still building and we offered promises and sought the confidence of the committee, but we can say that has been achieved and we feel we have delivered. The results are tangible, most importantly to the consumers, which is what we were set up to do as a State agency. That is our role as agents of the State.
There has been refinement in the legislation, and we have encountered throughout and continue to encounter, some stakeholder practices that are to say the least unsavoury.
The process is straightforward because it is purely one of administration. We need the application form which includes a medical report from the treating doctor, not a new doctor appointed to mount a claim, but the doctor who was asked to heal the person.
One third of the cases that come through our doors are not for us. Either they do not fit within our remit as set out in the legislation or they are disputed cases such as where Mrs. Duffy stated that Mr. Smith ran into her car when he was not even in the country on the day concerned. Such disputed cases are clearly for the courts system and we were never asked to deal with them. We were asked to release those cases to the courts and we do so.
We were tasked at the beginning to release that one third of cases, but we were also tasked to take the other two thirds of the 30,000 writs out of the system because they were straightforward, and that is what we have done. We have now reduced the delivery cost of getting that compensation to the claimants in a nine-month statutory timeline. As our staff take on board every day, that is not a service level but a statutory obligation.
Let us look at the annual report in a little more detail. We are delivering claims, resolutions and awards within nine months, in accordance with the statutory timeline. We are now delivering them at a cost which is less than 10%. I am proud to state that we keep that at 7% currently, despite taking on additional costs during the course of our four-year period. That is because we are committed to continuous improvement and efficiency drives. That is part of our business. Terms like "cost-benefit analysis", "modelling" and "value for money" are just part and parcel of the daily operation.
We were privileged to be a greenfield operation, and clearly it is easier for us to have started like that and continue to follow through on that basis. We are a paperless office and highly driven by technology where it is appropriate. However, clearly where we are dealing with human beings and their injuries, we deal with them by telephone and in correspondence, and look after them in a caring way.
The same level of awards continues. As I mentioned, 91% of claims are resolved under €38,000. We awarded €181 million in 2007. Two thirds of cases have been removed from litigation. Awards range from €1,000 to €620,000.
In terms of acid test results with the insurance industry, premiums have gone down in real terms to 1996 levels. The Financial Regulator's recent report pointed out that between 2002 and 2006, premiums have gone down by 40%.
The amending legislation to deal with some of the practices found to be interfering with the operation of the board was enacted in July 2007. As I stated, we have evolved our policies over the years in accordance with the experiences with our customers, the victims of personal injury accidents.
Our chairperson, Ms Dorothea Dowling, has mentioned that we are a self-funding agency. We are not a lean on the Exchequer. We set our costs against those responding to claims, predominantly the insurance industry, but there is the self-insurance sector which pays a fee on a case-by-case basis. It is good value for money because whether it is a €1,000 case, a €620,000 case or a €1 million case, we charge a flat fee because the administration on a €1,000 case is not any different in most cases than on a €620,000 case. The reason for this is that it involves a medical report or two, and the loss of wages calculation — the factor pumping in higher figures — but this does not necessarily make it any more complex. In fact, a small nerve injury to a finger could be a much more chronic case and require much more detailed consideration.
Some 97% of our fees are levied on those responding to claims. Delivery costs were 46% before we started up, they are now down to 7% and we are confident that we can keep them below a steady 10%.
We have a service centre for customers which is open between 8 a.m. and 8 p.m. six days a week. We have now enhanced our services by offering on-line functionality in terms of processing claims and gaining information. We have, as I mentioned, an ongoing efficiency programme and to ensure that people know how to access the service now that we have something to offer — now that we have built a service — this year we have notified people about access to the service in the form of a limited brand awareness campaign.
We also dealt with some judicial reviews along the way. We are just waiting for determination on an appeal to the Supreme Court. That case was resolved and we have the determination since the autumn of our first year of trading in 2005, and we have continued to deliver despite that determination.
On case studies, the committee will see in stark terms on the slide in the presentation an award of €63,000 which was delivered in nine months and where the delivery cost was a flat fee of €1,500. In another case, involving a motor accident, an award of €230,000 was also delivered in nine months at a fee of €2,000. The variation in the fee is due to the cost of the medical report where a specialty report was required.
The board thanks the Houses for the support we have received. It has been critical and essential throughout the building of this reforming model. We are committed to continued resolution times exceeding past practice and lower delivery costs. We are saving €100 million per annum and we have, I suppose, delivered in terms of the acid test in that the cost of insurance has come down and stayed down. I thank the committee.