Dáil Éireann díospóireacht -
Friday, 28 Nov 2003

Vol. 575 No. 6

Personal Injuries Assessment Board Bill 2003 [ Seanad ] : Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Mr. M. Moynihan

I welcome the opportunity to speak on the Personal Injuries Assessment Board Bill 2003. In recent years, the cost of insurance has become a major issue of concern. It was realised that something had to be done, especially about the cost of motor insurance for young drivers and the rising cost of employers' liability and public liability insurance. The cost of insurance was one of the main issues raised during the last general election campaign. The Bill before the House is an attempt to deal with the matter.

In October 2002, the Tánaiste and Minister for Enterprise, Trade and Employment, Deputy Harney, announced a programme of fundamental insurance reform which reflected commitments given in An Agreed Programme for Government. The programme contained a comprehensive set of measures designed to reduce insurance costs and improve the functioning of the insurance market. A key measure of this reform was the establishment of the Personal Injuries Assessment Board on an interim basis, pending the preparation of the necessary legislation to put the PIAB on a statutory footing. I am delighted that the legislation is before the House today.

Our compensation culture, which encourages litigation for personal injury damages, has led to spiralling insurance costs. The system for delivering damages is too expensive. Both businesses and consumers are overburdened when insuring against potential claims.

Many issues have been raised in regard to insurance costs in the course of the debatel. Fraudulent claims have been mentioned frequently. I accept that many claims going before the courts are genuine. However, fraudulent claims have been a contributory factor to the high cost of insurance.

Rising premiums have had a negative effect on businesses and jobs. The cost of insurance tops the Small Firms Association's list of obstacles to business. Some 19% of respondents ranked it as their main problem and 83% considered it a business problem. Insurance costs increased by an average 52% to May 2003, but many companies have had increases in the region of 70%. Commercial liability insurance now costs an estimated €2 billion annually. Insurance fraud is estimated to cost over €100 million a year.

Litigation costs are estimated to increase insurance costs by more than one third. A newspaper report yesterday indicated that there had been a striking decline in the number of personal injuries cases initiated in the High Court and the Circuit Court. This was attributed to the effectiveness of the advertisement campaign focused on fraudulent claims. The campaign by the Irish Insurance Federation to root out fraudulent claims has been successful. The abolition of no foal, no fee advertising by solicitors has also been a contributory factor.

In 2001 just over 19,000 High Court writs were issued, of which 80% related to personal injuries cases. In 2002, this fell to 16,400. The number of High Court writs issued to date in 2003 is down to 12,253. A similar decline in new proceedings was also evident in the Circuit Court. Judges have also adopted a more balanced approach to the concept of duty of care. This involves the acts and omissions that are to be considered negligent, and who is liable to pay compensation.

Increased awareness on the part of employers in regard to health and safety has resulted in fewer employer liability claims. Since the introduction of the penalty points system fewer motor accidents have occurred and this has also contributed to a decrease in personal injuries claims.

The Personal Injuries Assessment Board is expected to have a strong consumer focus and also to bring a balance of expertise to bear on what has been a difficult aspect of the insurance market. Its primary focus will be on the development of a pragmatic and workable system for handling insurance claims for the benefit of claimants and policy holders in general. The interim board concentrated on building relationships with the industry and other proprietary work to enable the statutory board to begin its operations immediately the legislation was passed. The PIAB is not designed to reduce levels of compensation. Its function is to reduce the cost of delivering it.

The chairman of the Personal Injuries Assessment Board has estimated the board will operate under an annual budget of around €8 million. Once it has begun hearing cases, it will employ approximately 100 staff and will deal with 227,000 cases annually. The chairman of the PIAB told the Joint Committee on Enterprise and Small Business that 300 doctors had applied to act as independent medical assessors on behalf of the board. The Personal Injuries Assessment Board Bill will place the board on a statutory footing. The board's objective will be to assess compensation at current levels more expediently while eliminating the excessive litigation overhead.

This Bill is before the House because of the high cost of insurance over the years. In my own area I have heard many cases of people receiving €60,000, €80,000 or a couple of hundred thousand in compensation. When major awards are made, there is always a question of whether they are fraudulent. It is not before time to introduce this legislation. All the research which has been done since 1998 when the report on motor insurance was published has shown the legal profession in a particularly bad light. There are many questions to be asked about the contribution of medical professionals to the cost of claims. It behoves claimants and professionals acting on their behalf to ensure that the best possible standards apply.

The Personal Injuries Assessment Board will offer speedier assessment which will benefit genuine claimants. Research shows that Irish claimants wait six times longer than their UK counterparts for negotiations on claims to commence. One of the major provisions of this Bill relates to the book of quantum. A book outlining the average awards for specific personal injuries will be compiled and published as a guideline to general damages. It should help parties to reach reasonable negotiated settlements without recourse to either the board or the courts. If parties do not accept the outcome of the PIAB assessment, they may reject the award. The claimant will be issued with a release certificate to enable him or her to commence proceedings within six months if it is decided to pursue a case further.

Previous settlements in the form of insurance payments or any other form of compensation, will be taken into account when awards are made. The costs of the board will be covered by fees levied on respondents on a case-by-case basis reflective of the actual complexity and work involved. Claimants will pay a small, refundable fee which must accompany their application for assessment if they have not been able to secure a satisfactory settlement directly. Claims will initially be made in the usual way against the respondent.

A great deal of work has been done by various parties. We must commend the work which has been done by the Joint Committee on Enterprise and Small Business. It has made a notable contribution to the insurance debate. Under the chairmanship of Deputy Cassidy, the committee has published an interim report outlining the significant work it has performed in a very short space of time.

Sections 39 to 43 of the Bill make provisions in respect of the legal status of the PIAB's order to pay. An order to pay will have the same status as a court decree. Some of the people who have contacted me to discuss the Bill have asked if we are moving the issue of insurance compensation away from the courts. They have asked about the legal status of this Bill's provisions. The order to pay will have the same status as a court order. That payments will be made to a claimant on foot of the order to cover costs is very important.

To sell the legislation to the wider world, we must ensure that we are not merely establishing another body. We must ensure that when the board commences its operations we see a gradual reduction in insurance costs. The cost of insurance to young drivers, employers, etc., must be reflective of the cost of claims. Right up to 2003, many stories have been told about the excessive cost of insurance, particularly for young drivers whose premia were three times more expensive than the purchase price of their vehicles. The example of a sub-contractor in the building trade was outlined to me. In 2001, his insurance cost was £1,400 but in 2002 the least expensive quote he could find was €10,000. Today, the contractor's premium is in the region of €16,000 to €17,000. Many health and safety regulations have been introduced to deal with the building industry. There is less likelihood of an accident on any building site now than there was three or four years ago, but that has not been reflected in the levels of premia.

I commend the Bill to the House. It is my hope that through the Personal Injuries Assessment Board we will see a massive improvement in cover for every motorist, employer and self-employed business person. I commend the Minister for Enterprise, Trade and Employment for the work she has done on this issue. She has shown a great deal of commitment.

Ms O'Sullivan

I welcome the opportunity to contribute to this debate. While I welcome the publication of the Public Injuries Assessment Board Bill, I must ask the Minister for Enterprise, Trade and Employment why it has taken so long to get to this point. If one looks back at the history of this legislation, one will see that my party leader, Deputy Rabbitte, published a report as Minister of State in 1997. The report recommended the establishment of a board similar to the one which is the subject of the Bill before the House. The board was to be modelled on the Employment Appeals Tribunal. It was intended to deal with insurance claims which were uncontested and could therefore be addressed outside the courts system. Why have the Minister for Enterprise, Trade and Employment and the Government dragged their feet for so long in bringing us to the point at which we can discuss this Bill?

There has long been a great need to address the problem of the cost of insurance across society and the economy. I would have expected a greater sense of urgency in view of the extent to which insurance costs have affected other areas for which the Minister has responsibility. Industry is significantly affected in terms of underlying running costs. We have seen companies fold due to the cost of insurance. I am acquainted with the joint owner of a company which had to close its business about a year ago on account of the spiralling cost of insurance. Fortunately the person is now doing well in another area.

The cost of high insurance to the economy and society is huge. Many voluntary and community organisations cannot operate because of the cost of insurance. In places where a local national school might have been available to community organisations for activities some years ago, the organisations are now being refused permission to use the school because of the cost of insurance and the fear that somebody will make a claim.

Motor insurance, particularly the cost of insurance for young drivers, is an area which has been highlighted. The motor insurance advisory body, under Dorothea Dowling, published an interim report in March 2001 which illustrated that the claims of the insurance industry that young drivers were costly and should pay high premiums were false. For drivers of 23 years of age premiums exceeded claims by up to £255 per policy while female drivers aged 19 to 20 years delivered a profit of £730 each to insurance companies.

Will the Minister inform us whether this aspect has been addressed? Where insurance companies were clearly making considerable extra profits, is she satisfied that there is now real competition in the industry with respect to insurance paid by young drivers? Is the industry being properly monitored in terms of the kinds of profits insurance companies continue to make from insuring young drivers. It is evident that insurance companies still make huge profits.

Fraudulent claims are an issue about which I wish to make a point. The attitude of society is that if people can make a quick buck or euro, they should take the chance and do so. It is part of our "mé féin" culture which I suggest is probably driven by the policies of the Minister's party where the profit motive and the individual appear to be the core of what matters. People have lost their sense of solidarity. Many of them have given up on the belief that we are all in this together and should not cause other people's premiums to rise by making fraudulent claims. This attitude transfers to other areas also. People who win a lot of money invest their money abroad. People avoid tax because they do not feel they should contribute to the general pot to provide for schools, hospitals etc. We need to address the broad morality of this issue to return to the kind of social solidarity which appears to have been thrown out the window under the policies and ethos of the Government.

The Labour Party welcomes this legislation. My colleague, Deputy Howlin, addressed the issue yesterday and both he and Deputy Lynch have played an active part on the committee which has done a great deal of work in this area. I call on the Minister, as the political leader in the area, to bring a sense of urgency to this huge issue which is causing much distress across the country. Some 42% of compensation costs go to the legal profession. The legal free zone provided by this board will create an opportunity to remove some of those costs and this is welcome.

The establishment of the board seems to be a sensible and straightforward approach to the area of non-contested claims. The decisions will largely be made on the basis of paperwork and reports without the necessity for people to go in and argue their case. Where there is agreement among the parties on liability, it is only a matter of deciding on what the award should be. This is a sensible way to approach the issue. The sooner the board is up and running, the better.

It should be noted that the board will not be a major cost to the Exchequer. Cost of initial implementation is estimated at €2 million, a small amount of money considering the amount at stake in terms of the economic and social life of the country. That is all the more reason we must ask why this and other actions recommended by the MIAB have not been initiated – most of the large number of proposals made by it have not yet been addressed. Once the board is established it is intended that the fees levied on respondents will pay for the operation of the PIAB. This points further to the necessity to ask why it is taking so long.

The initial remit of the board will relate to employers' liability and will commence in January. This will be followed in 2004 by general liability and motor accident insurance. Will the Minister ensure that the board carries through with this timeframe? While employers' liability is a large part of the equation, and is of serious concern to the Department, general liability and motor accidents are of concern to the public. A growing number of motorists cannot afford insurance premiums and take the risk of driving without insurance. We condemn that because serious problems are caused for people involved in accidents with uninsured drivers.

One hope is that this measure, in bringing some motor accident cases under the auspices of the PIAB, will reduce premiums and costs. I hope we see reductions quickly. How will the Minister monitor insurance companies to ensure they do not absorb savings where cases are settled more cheaply under the PIAB? It is crucial that this money returns to those who pay premiums rather than into the pockets of the insurance companies.

As education spokesperson for my party, I wish to raise the specific issue of insurance for schools. All Deputies received a letter recently from George O'Callaghan on behalf of the joint managerial body of secondary schools, excepting vocational and community schools. Many of the schools are non-fee paying and have serious financial problems. The letter informed us that insurance costs for secondary schools have doubled in the past five years. The JMB made a pre-budget submission seeking an extra €50 in capitation grant per pupil to pay for insurance.

Information I got from the JMB gave an example of a school where in two years insurance increased by €100 per student. Insurance was based on the number of pupils in the school and the premium doubled to €60,000, which equated to €100 extra per student. Schools get a set capitation grant and have no other way of raising funds to pay insurance fees apart from fundraising through cake sales, sponsored walks etc. The point was made that this cost is beyond the control of schools. The only way they can raise the funds is through fundraising, but parents are already hard-pressed for contributions, particularly in the less well off schools.

I would not shed too many tears for the richer fee-paying schools, but I am concerned about ordinary secondary schools that are trying to find an extra €50 or €100 per pupil to meet their insurance costs. Will the Minister redouble her efforts in this urgent issue? I do not know whether many schools will be covered by the PIAB and therefore benefit from reduced costs. Schools believe they should contest some cases. A person may be injured at a school, for example, but there may be no evidence to suggest that the school was at fault. I presume that many cases will still have to go to the courts, but it is to be hoped that some problems will be addressed under the PIAB structure.

I have outlined my main concerns about the Bill. I stress the huge costs in this regard. I do not know if the Department of Enterprise, Trade and Employment has assessed the costs for industry and those who create and try to maintain jobs. Many small indigenous companies have problems with the cost of insurance because they have low turnovers. Such companies, which may be competing against industries in the Far East and other places where costs are lower, have great difficulties in maintaining their staffing levels. I do not know if insurance factors contributed to the difficulties at Dairygold in recent days, but they contributed to job losses in recent years at smaller firms in the Limerick region and elsewhere.

This is a small measure, but I welcome it nonetheless. I urge that the Bill be implemented as soon as possible. We should keep to the timetable, especially in respect of the plans for next year. Developments in this area should be monitored to ensure that insurance companies do not cream off the profits that accrue. The other MIAB recommendations should be implemented as soon as possible. The sense of urgency has been sadly lacking in this issue and many others the Government has faced.

Mr. Ellis

Like most other Members, I welcome the Bill. This legislation has been threatened for some time. The decision taken by the Government is to be welcomed by everybody affected by insurance costs, such as litigants or those who pay public liability insurance. All Deputies are aware that excess costs have been associated with small claims. Legal fees have outweighed the value of claims in many cases. We welcome the fact that, under the new system, the Personal Injuries Assessment Board will deal with small claims in which the question of liability does not arise.

All public representatives have received representations from the various legal societies and associations in our constituencies. It is natural that people who feel threatened should make representations to us. However, many of the fears expressed are not well-founded. I accept that some of the legal profession's concerns about the Personal Injuries Assessment Board may have some merit, but many of them are not shared by ordinary people.

Not long after it was elected in 1997, the previous Government decided that something had to be done to deal with insurance claims. We are aware of the sort of claims that have been made. The significant reduction in the past 12 months in the number of claims being made in the courts has resulted from the fact that spurious claims are being contested. The insurance companies have a great deal for which to answer because, over the years, they did not contest many claims made against them. An unfortunate policyholder who reports a claim may not hear anything about it until he or she opens the next renewal bill. Only then would he or she discover that his or her insurance costs had greatly increased. When one telephones the company in such circumstances, one may be told that the claim one made has been settled. It is terrible that one might not have been aware of the development until that point. Insurance companies find in many cases that it is easier to pay a claim rather than to contest it.

Private individuals who carry their own insurance and contest every case have proved that a level of abuse has taken place in respect of insurance claims, especially personal injuries claims. It is clear that many such claims are bogus, to put it mildly. On the other hand, some reasonably genuine cases may not have taken the same route as that being taken by professional litigants. The Department of Enterprise, Trade and Employment should try to put together a dossier of those who have been involved in claims in the past ten or 15 years. Such a system would quickly show the names of those who have made many similar claims in recent times.

Many personal injury claims never get to court. There are more settlements on the steps of the Four Courts and other courthouses than there are in court. When we examine the figures, we see that just 10% of cases are decided on by a judge. This proves to me that there is much scope for negotiation about the settlement of claims. The Bill will provide for such negotiation by establishing the PIAB to fill a vacuum that has existed for some time. It will help to bring about speedier settlement of small claims.

I have some concerns about the representation of those who will appear before the PIAB. We all accept that medical reports are fine as doctors will do their best to give a true account of a person's injuries, but there is a danger that some people may end up suffering at a later stage as a result of what was initially a minor injury. We cannot, however, deal with this problem in the context of this Bill. There needs to be a form of redress if a person's problems can be proved to have resulted from a small injury that may have occurred years previously.

I do not have a great problem with the time limitations provided for in the Bill. That people have such a long time to make a claim means that injured parties and those who may be negligent can be left in limbo for some time. This is not in the best interests of either party. I welcome the fact that claims must be made within a specified period. I hope payments will be made quickly and efficiently when cases are settled after everything has been considered. The public will reach a harsh judgment if payments are not made within a short time of agreement being reached. We know that the question of negligence does not arise under the provisions of this Bill. Cases that will be dealt with by the PIAB will be those in which liability has been accepted.

It is unclear who will be responsible for making claims. An injured party will be able to make a claim directly through the PIAB. Who will advise him or her about filling in the claim form and various other documents, however? I hope we will not see the emergence of a new type of unqualified consultant to advise those making claims to the PIAB. It might be easier if a set fee of, for example, €100 or €200, was paid to members of the legal profession in respect of claims to the PIAB because I am fearful that people might set themselves up as advisers in respect of PIAB claims. I would not like to see that happen and I am sure the Minister will see that it does not arise because it is not in the best interest of those making claims or those who want the PIAB to work.

It is open to people to have recourse to the courts if they are unhappy with the PIAB claim settlement. I am worried about this because solicitors may well send their clients to the PIAB and if the settlement is unsatisfactory, they will go to court with the result that costs will be carried forward since the judicial system will nearly always find in favour of the injured party. I am not saying a person should be penalised for not accepting his or her award from the PIAB by being awarded a smaller amount when he or she goes to court, but this aspect of the Bill needs to be clarified.

I hope something can be done to prevent this type of scenario arising. It might be better if people, rather than being allowed to go to the Circuit Court after their PIAB settlement offer, are sent to the District Court which has limited jurisdiction in regard to claims. The limit set for the PIAB is equal to that at Circuit Court level. This may make many people feel they are better off going to court and we will need to safeguard against that. We do not have the right to remove citizens' rights to seek redress through the courts but I hope some formula can be put in place to deal with this.

The delays in dealing with cases has caused tremendous annoyance to injured parties and those who are responsible and have accepted liability. It is wrong that it takes two or three years to settle agreed claims. I hope there will be a minimum time to have all cases settled from the moment papers are lodged with the PIAB and that respondents have a limited time in which to reply to all queries raised by the other party. In many cases, issues can be dragged out needlessly and people get less from their settlements than they expected.

Some system with a fixed cost needs to be put in place to enable applicants complete necessary documentation. A solicitor told me that his advice to clients would be to go to the PIAB and if they are unhappy with what they are offered, he would take the matter to the courts. The legal profession obviously sees an opportunity of shadowing claims to the PIAB and this must be looked at.

The limitation period of one year is a bit short, although we should not allow it to be too long. It is imperative that notice is given within two to three months of a pending claim. If someone fears there may be further injury as a result of the accident, he or she may be entitled to apply to have time before the claim is dealt with to see what the long-term effects of such injuries might be. This needs to be controlled, but common sense should prevail.

The representation in High Court cases dealing with compensation frequently runs to two senior and two junior counsel on each side as well as two solicitors, consultants, doctors and so on, meaning that the estimated cost of a day in the High Court between legal representation and expert witnesses is about €20,000. It is unreal that a doctor or a consultant has to spend a day in court when his or her written or sworn statement should be sufficient. I hope this can be examined by the legal profession and the court system in regard to High Court claims.

The number of claims over €38,000 is small, amounting to just 4% or 5% of the claims made each year. This underlines the fact that there is an opportunity to deal as quickly as possible with the other 95% of cases within the Circuit Court limit of €38,000. The PIAB will be seen as a starting place by some but it will be seen by reasonable people as a place to deal with their claims as quickly and effectively as possible.

The Bill will be judged on how effective the PIAB is when it is up and running. If it does not give an efficient, fast service, we will have major problems persuading people that is the road to take. There is no doubt that time limits should be placed on every stage in the processing of paperwork. If we do not, some people may drag out claims and others, who want to finalise them as quickly as possible, may find that the other side will decide to drag it out. No one wants to see that happen. With the PIAB, there is a move away from the old confrontational approach to claims. There is now an opportunity for personal injuries cases, in which liability has been admitted, to be dealt with in an efficient way. I hope this will be done as quickly as possible in regard to all litigation up to a certain level.

It is imperative we do something to cut the cost of litigation in personal injury claims. In many cases, the legal costs can be 40% to 50% of the award, on top of what the litigant receives. In some cases, the figure can be 100%. We have all heard the horror stories of cases in which people were granted awards but only received a fraction of them because legal agreements had been entered into before the claims were processed.

The future advancement of the PIAB method of settlement will be judged on how it works initially. If it works efficiently, other insurance claimants and litigants will be prepared to use a similar system. The Minister is being optimistic in regard to the number of personnel required to run the system. That system will prove far more cost-effective than that which is in place at present.

I hope that as a result of this progressive step, the cost of insurance will decrease. We have seen the change that has occurred in the area of motor insurance in the past 12 months. The Minister for Transport and the Government are to be complimented in respect of the penalty points system. When one considers the reductions in the number of road deaths, serious injuries and accidents and the improvement in the way people drive, one can see that where determination is brought to bear the problem of road carnage can be tackled quite effectively. The insurance companies have not, however, decided to pass on to ordinary motorists the savings they are making on claims, the number of which has decreased. I hope that a mechanism will be put in place which will ensure that savings made by insurance companies as a result of Government action and that of the general public will be passed on. The phone-in relating to spurious claims has made those involved in making such claims have second thoughts.

If members of the public do not see savings in their insurance premiums, be they for public liability, employers' liability, motor, or any other form of insurance, they will become disenchanted with the entire system. We have already seen the effect of insurance claims on employment. In certain industrial sectors, many companies were being forced out of business by rising insurance costs. We must continue to tackle the issue of such costs on a regular basis.

I welcome the report compiled by Deputy Cassidy and the committee of which he is Chairman. The recommendations contained in that and similar reports should be implemented as quickly as possible. We must ensure that this happens so we can rid ourselves of the compensation culture that had taken hold in Ireland. In implementing the recommendations, however, we must ensure that a balance is achieved and that a situation does not arise where people with genuine claims would be afraid to make them because of a fear they might fail. There could be a serious consequential loss to a person, and his or her family, who takes a genuine case which is subsequently thrown out or lost.

I welcome the Bill. I hope that some of the concerns I have expressed in respect of it will be addressed on Committee Stage.

Debate adjourned.