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Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach díospóireacht -
Tuesday, 13 Sep 2016

Rising Cost of Motor Insurance: Discussion (Resumed)

We will now resume our meeting in public session and deal with the rising cost of motor insurance with the representatives of the Irish Road Haulage Association, the Irish Taxi Drivers Federation, the Car Rental Council and the Freight Transport Association Ireland. I welcome all of the witnesses. Each will take five minutes to make an opening statement.

I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing ruling of the Chair to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

The running order for the opening statements will be Ms Murphy, Mr. Herron, Mr. Redmond and Mr. McDonnell.

Ms Verona Murphy

My name is Verona Murphy. I am president of the Irish Road Haulage Association. The Irish Road Haulage Association, as Ireland's largest Government-recognised licensed road transport representative body, is committed to tackling the issues affecting its industry head on. It seeks to build the future of the Irish road transport industry by developing and promoting industry standards, facilitating road transport operator education and training, educating end-users and securing an equitable business environment. As the Irish Road Haulage Association sees the rising cost of motor, fleet, employer and public liability insurance, it should be noted that over the past year insurance premiums have increased across the board by between 50% and 100% and in many cases even more. The following is a cost comparison with trucks in other member states: in Ireland a truck on a motor policy costs an average of €5,000 per truck; in the UK it is €3,000; in Belgium €2,500; France €2,500; Portugal €2,400; Bulgaria €2,500; Germany €2,500; Poland €2,000; and Romania €2,000.

We see several reasons for this increase. There is a uniform approach by all brokers and underwriters both of which blame the judicial awards in Irish courts and the book of quantum. The insured will pick up the tab for the Setanta debacle regardless of what the courts determine to be the case because neither the Government nor the insurance companies will absorb the cost; it will just be passed on to the consumer. The insured hauliers already operate in a very anti-competitive environment. Insurance companies are using high reserves to reduce claims bonuses and raise premiums. There is no competition in the market and those who are competitors are not competing, the insurance industry is very lax in fighting claims and there is a tendency to increase premiums as the preferred option. If there is no competition it is easier to hike the premium than fight the claim. The culture in Ireland is to claim as it is very easy to spend another person’s money.

There are several threats to the haulage sector. If an Irish haulier carries on operations it will become anti-competitive to the point of becoming a non-viable operation and go out of business. It can take the business abroad to another European country and set up an operation whereby it can obtain a new EU haulage licence and halve the insurance cost.

The foreign-registered Irish haulage operator is a loss of €250,000 per vehicle to the Exchequer and they are leaving in their droves. Northern Irish haulage operators accessing the market in Ireland already have a distinct competitive advantage as they can avail of the benefits of not having to pay the HGV levy in Ireland, while also having the scope to claim the diesel rebate in the South of the country. Such a competitive advantage is further enhanced as insurance premium increases are not being experienced to any similar degree as are being experienced in our indigenous haulage sector.

What follows are solutions to the problems and the way in which the Government can help. We ask the Government to make provision for road haulage operators to source their own insurance in a neighbouring member state. Can the Government change the operating field of the courts? For example, can they make a claimant accept compensation and encourage him or her not to go to court? On the issue of the claims culture in Ireland, can the Government fund a proper advertising campaign or even enact legislation that will result in imprisonment or fines for fraudulent claims and see that area policed? The collective road haulage industry must be permitted to access the European Single Market to ensure its fleet. There should be no difference in insuring trucks on continental territory, no matter where they are based, as long as they hold an EU registration plate.

Regarding the Government cap on reserves and the length of time reserves are being placed on incidents, insurers are using them to reduce claims bonuses and raise premiums. The Government must encourage new entrants into the insurance sector. There is no competition in the market. The insurance industry is very lax. Where there are enough competitors in what we see as a small market, they are not operating in a competitive fashion. We must discourage the practice of blocking the market and allowing only one broker to quote for one insurance company.

We ask the Government to support our IRHA-led initiative of the driver apprenticeship programme. We also ask for support for fleet and driver management. The Road Safety Authority's current approach is to pursue companies for road traffic offences as opposed to the drivers. The RSA feels that it cannot obtain a large enough financial fine from a driver and there are often repeat offenders appearing for different companies. It is the company that is fined and not the offender. We seek Government support for the IRHA HGV driver apprenticeship programme, which will commence in January 2017, with a view to counteracting the critical driver shortage that is imminent. All insurance providers should be encouraged to support haulage operators and the apprentices participating in this programme as it will ultimately mean proper training and should reduce insurance risk.

There are haulage operators formally based in Ireland who have had no choice but to open a transport office in a more competitive member state. The Irish haulage companies that remain based in Ireland cannot continue to operate under the exorbitant costs associated with holding a fleet policy. This will result in operators reflagging to alternative, more competitive jurisdictions, which will obviously result in job losses. Urgent action and support from the Government must be undertaken in order to stem the loss of road haulage operators and subsequent job losses arising out of the current operating environment created by the rising cost of fleet insurance.

I myself put a scenario to insurance brokers at an open forum recently by asking the following question. This is very important. If a haulage operator was based in Ireland but was termed to be a continental haulier that is primarily carrying imports and exports to and from Ireland, thereby spending 90% of its time abroad and giving it a 10% chance of an accident in Ireland, on what basis could it blame the Irish Judiciary, the book of quantum or even the Personal Injuries Assessment Board, PIAB? They were also asked what they believe is the basis for the increase on haulage operators that have no claims experience on the island of Ireland. Neither of these questions was answered and they remain unanswered to date.

It is the opinion of the IRHA that the legislation that stops an Irish-registered vehicle from being insured by an out-of-State broker no longer fits the criteria of the European Single Market. In essence, if an operator's licence can be obtained by an Irish citizen anywhere in the EU, it should follow that an Irish operator can obtain his or her insurance in any country in the EU.

I thank members for the opportunity to present on this very important matter for the road haulage sector in Ireland. I would welcome any relevant questions.

Mr. Joe Herron

I thank the committee for the invitation to speak. Taxi insurance has increased, on average, by 60% across the board. For those on the bottom level of premium, which was approximately €1,000, insurance rose to €1,600. That is excessive but the worst case is when somebody has an accident, because there is then no limit on the increase that can be put upon them. As a result of high insurance premiums a lot of drivers who were driving on their own licence have been forced to surrender that licence and drive for other people. They were previously able to get block insurance but that is no longer the case. Last year the cost for co-drivers, as they are known, went from €1,040 to a minimum of €3,000. In many cases, drivers just cannot afford this. A lot of them went into co-driving not just because of the cost of insurance but because the country's finances and bad economy meant they could not get finance for newer vehicles. In a large number of cases, the change to working for somebody else was not bad for them but with the latest increases in insurance the situation is now unbelievable.

There are three main insurance companies for taxi drivers and another company acted through a broker in Rathfarnham. The broker has now said it is no longer quoting for taxi insurance and has told its customers they will have to go elsewhere. In many cases, the drivers who did go elsewhere could not get a quote. When they get a refusal of a quote from three different insurance companies they can go to the insurance federation, who will get one of the companies to give them a quote. Some of these quotes, however, are absolutely outlandish and exorbitant.

My third point concerns the new wheelchair-accessible licences that are being granted. Some drivers just cannot get a quote unless they have three years' taxi driving experience. How they can get this without insurance is beyond me but this is what the companies want. One gentleman had driven a van for 23 years accident free but when he decided to go into taxi work, he got his grant for a wheelchair-accessible vehicle but the lowest quote he could get for insurance was €9,500. This does not make sense. If fares were to increase to cover the higher cost of insurance, that would reduce the amount of work drivers got.

The problem, as we see it, is that there are only three insurance companies which quote. Foreign insurance companies that could set up here will not do so because it appears the insurance companies will not divulge the full facts about what their costs and claims are. The vast majority of claims are settled without having to go to court, wherein lies a huge problem. Nobody knows what the figures are. Have taxi drivers suddenly become very dangerous animals on the road, necessitating the rise in insurance premiums?

One of our members has driven for 11 years on the same licence and for the same man. He has not had one accident but his insurance went from €1,040 last year to €3,000 this year.

It is just unbelievable. Our problem is that there are only three insurance companies and there appears to be no encouragement from the State to attract other insurance companies that would be willing to quote for taxi insurance. We would like to see the market much more open. The situation is that there are only three insurance companies in this country but in the European Union there is an untold number of companies. We would like to see some law introduced that would allow other companies to come in, see the figures for themselves, and to quote. I thank the Chairman for the opportunity to speak.

Mr. Paul Redmond

I represent the car rental industry in Ireland. I thank the committee for the opportunity to present the industry’s particular issues relating to motor insurance and to provide members with a tourism perspective on the subject.

Licensed franchisees of all the leading international companies operate in Ireland. There is also one subsidiary of an international car rental company. A very significant proportion of the car rental business is conducted at the three main airports - Dublin, Cork and Shannon. The industry is an important part of the tourism infrastructure and is critical to get tourists around the regions. There is no point in marketing the Wild Atlantic Way unless one has a transport infrastructure to support it.

I will give members an idea of the size of the industry. More than 626,000 rental agreements were concluded in 2015 at the major airports, and already in the first six months of this year, which has been another very good year for the industry, 323,000 rental agreements have been concluded. Much of the recent national debate has been about the rising costs of motor insurance premiums. The car rental industry has long lost the ability to procure insurance cover simply by the payment of an annual premium and therefore to a large extent operates on a self-insured basis. That means the settlement of personal injury claims is in large part a direct operating expense for the companies.

International car rental companies have identified Ireland as having the highest risk liability costs for car rental operations. One car rental company operating in Ireland, which is a direct subsidiary and not a franchised operation, has access to comparative data in other countries. The company has seen its third-party liability costs in Ireland treble in the past four years. Those costs are now three times higher than its operation in France and twice as high as in Germany, Spain and the UK. The company has had to increase its liability reserves by more than 200% to the point that its liability costs are now the biggest of any of its European operations. After people and cars, risk liability is now the company’s third biggest expense.

Car rental companies incur significant legal costs in trying to defend claims. Unfortunately, most of those involved in motor accidents in rented vehicles are visitors to this country and will have gone home by the time claims are processed. That makes processing claims and sourcing witness statements very time-consuming and costly and, to be honest, often very ineffective. If one is on holidays in Ireland and is involved in an accident, when one goes home, does one really want to get involved later on, perhaps nine months or a year later?

The car rental industry is also particularly vulnerable to fraudulent and criminal activity as unsuspecting tourists are often preyed upon. Criminals know the difficulty of securing evidence and the issues that arise relating to the presence of tourists in any ensuing court case. We carried out a recent survey of our member companies which revealed that more than 20% of all claims are suspected to be fraudulent. Many of the claims involve pure criminality, such as deliberately staged accidents where two cars crash into each other on an arranged basis, often with little damage done to either car, but usually resulting in multiple injury claims.

Such is the potential reward in Ireland for personal injuries car rental companies are suspicious that they are being targeted by criminals from other countries coming here to stage car crashes. The Minister referred on the previous occasion to perverse incentives; that is certainly one of them.

Even in cases where minor injuries are reported, these staged accidents will usually have multiple claims resulting in very high settlement costs, particularly when associated legal costs are factored in. A £5,000 award for a whiplash injury in another country can in Ireland start with a recommendation of €15,000 from the Injuries Board, be rejected and, following procrastination, finally yield a settlement or a court award of, say, €23,000. When legal fees on both sides are added, that punitive escalation can mean total costs can be close to €50,000 for each claimant, and there are usually four or five claimants involved. This type of incident, therefore, can cost significantly more than €100,000, which is a direct operating expense on a car rental company. One does not have to be a genius to work out that we cannot withstand too many of these in any year.

Industry representatives have met the Garda fraud squad and presented it with many examples. We requested that a national Garda operation focused on claims arising from accidents in the car rental industry be initiated. While we did receive helpful advice, the fact remains that there are very few prosecutions for making a fraudulent claim and, therefore, there is no real deterrent in this matter.

The chairman of the Council of the Bar of Ireland, refuting an insurance industry claim, admitted recently that while it may be that the level of damages awarded in respect of particular injuries in Ireland is greater than that in another jurisdiction, it was not so in respect of all claims. Unfortunately, these particular injuries - soft tissue, whiplash, etc. - are the very claims that predominate against the car rental industry, and from presentations already made to this committee, it would appear that 80% of claims are falling into that category.

While the various parties to the national debate argue over the extent of the increase in court awards, legal costs, effectiveness of the Injuries Board, etc., the bottom line is that the car rental industry can testify to a significant impact from the rising cost of risk liabilities. We understand that a review of the book of quantum is under way. As the book of quantum is not a recommendation for compensation levels but merely a reflection of prevailing levels, our industry does not have much confidence that this review will alleviate our problems unless it is prepared to benchmark personal injury awards to a European norm for these whiplash and soft tissue damage claims. We accept that anyone with a legitimate claim deserves an appropriate level of compensation. However, why should that level of compensation be twice or three times what people in France, Germany or the United Kingdom receive? A system that benchmarks personal injuries awards with other countries would help prevent fraudulent and spurious claims, reduce legal and other costs and help to maintain our tourism competitiveness.

Competitiveness will be key to continued growth in our tourism sector as, ultimately, tourists either pay for these exorbitant personal injury awards against car rental companies or, if the market does not allow the costs to be passed on, car rental companies do not survive.

In summary, the car rental industry needs a reduction in the level of personal injury awards for whiplash and similar injuries. We need a reform of the Injuries Board procedures that prevent certain categories of cases being referred to the courts. A reform of the Injuries Board procedures would seem to be the action that might provide the quickest win in this matter and, as suggested by the Chairman to the Minister on the previous occasion, we would welcome immediate action and urge all Oireachtas Members not to allow the legal profession to frustrate the necessary reforms in this very dysfunctional marketplace.

We need a reduction in legal costs and, in particular, in multiple legal fees in respect of single incidents. An accident can lead to four or five personal injury claims resulting in four or five separate levels of legal fees and, in most cases, all from the one firm of solicitors.

We need improved deterrents to reduce the level of fraudulent claims and to assist Garda authorities and the Director of Public Prosecutions, DPP, to secure prosecutions. Unfortunately, there is a wide gap between a car rental company believing a claim to be fraudulent and a successful court prosecution. It is, apparently, difficult to prove intent to defraud. Overall, we need a reduced cost environment for risk liabilities that helps and makes a contribution to sustaining a competitive tourism sector. I thank members for listening.

I thank Mr. Redmond and call on Mr. Neil McDonnell.

Mr. Neil McDonnell

The Freight Transport Association Ireland, FTAI, is grateful to the Chairman and members of the joint committee for the opportunity to speak to them about insurance costs. While we understand the substantive issue before the committee is private motor insurance, obviously we represent people who deal in large books of commercial vehicle motor insurance, public liability insurance, carrier insurance and property insurance. All have risen so substantially in the past two years that they represent a material threat to the viability of many distribution and passenger businesses. We have responsible companies and members such as Elsatrans Limited, which is represented here behind me, that on their own initiative and with our assistance have taken aggressive risk mitigation measures to lower the insured risks of their transport operations. Despite this, however, they have also been penalised because the insurance market in general is hardening. We believe that it is time to stop the national compensation culture that drives this excessive insurance cost and that it is absolutely necessary to address the ridiculous compensation payouts on the basis that they are victimless; they are not. While they impose a real excessive cost on employers, householders, businesses and motorists, it is possible to tackle excessive cost. For instance, we see no reason for whiplash injuries in Ireland, as many speakers have stated today, to result in the payment of multiples of the damages payable in the United Kingdom or on the Continent. We see no reason for serial claimants and fraudsters to be able to enjoy the freedom to falsify or exaggerate claims without the threat of prosecution for a codified offence of perjury, which we lack. There is no reason that insurers should not pay for rehabilitation of plaintiffs rather than paying them general damages and genuine claimants have nothing whatsoever to fear from this. Moreover, there is no reason why we should continue to accept a system that functions effectively as a social welfare system for unscrupulous lawyers and litigants.

The joint committee by now has heard from many players on how and why insurance costs have escalated so much in recent years. As we have stated, the escalation is not inevitable and our roadmap to lower insurance costs, which we provided to the joint committee, lists 52 recommendations on how we think it would be possible to so do. We have made recommendations for operators of transport, insurers, legislators, the legal profession and the Courts Service, as well as for the enforcement authorities. In addition, of a parochial interest to the transport industry is the need to provide for the insurance of young trainee and apprentice drivers, which is a particular issue at present. More than half of these 52 recommendations are in members' gift, as legislators, to deliver. We ask the joint committee not simply to take these legislative measures but to exercise leadership in calling out the compensation culture for what it is and stamping it out.

I thank Mr. McDonnell and will now turn to the members. I call Senator Kieran O'Donnell.

I welcome the witnesses and will turn first to Ms Murphy. If a road haulier is operating in Europe and a particular truck is spending most of its time in mainland Europe, can it be insured through an insurance company outside Ireland?

Ms Verona Murphy

The answer is "No". If that insurance company is registered here, one can insure an Irish plate. If the company has a brokerage here, essentially, as well as in the UK, then one can insure an Irish plate in the UK but if the company is not registered here, one cannot. I am one of those hauliers. I am a continental haulier. I spend 90% of my time outside the country and I have not got an answer as to how my risk is being assessed. I should be able to insure my truck anywhere in Europe.

Seemingly, we want to take the insurance as a single European market but, unfortunately, Irish operators are moving the whole operation and each truck is a loss to the Exchequer. Each vehicle of €250,000 is a loss to the Exchequer because there is no turnover, no PAYE, no road tax, no insurance and no employees' wages. The estimate is €250,000 per truck, and they are leaving in their droves. We estimate that 43% of Irish-owned trucks are being operated on foreign registered plates.

Is that in recent times?

Ms Verona Murphy

That has accumulated. We have been complaining about this since 2012 to the Department of Transport, Tourism and Sport. There is a report from the Department in 2012 that was never published. They complained at that time that increases were in the region of 30%. Increases now are at least 100%.

What year is Ms Murphy referring to?

Ms Verona Murphy

Over the past three years they have climbed to as much as 300%. It is not sustainable. I have a member whose premium went from €43,000 with 20 trucks on his motor policy to €164,000 with a claims experience of €25,000 spread across 20 vehicles.

Was that over a period of three years?

Ms Verona Murphy

No, that was one year. That is his claims experience. He has had claims to the value of €25,000. His insurance has risen from €43,000 to €164,000.

That is four times.

Ms Verona Murphy

It is 300%. What is happening here is that he is with one company and it was assessing five years. That is acceptable. We understand that is how they do it. However, we have competitors in this market. We have at least five underwriters, if not six or seven. They are not competing. His quote comes in at €164,000 from his current insurer and any other quote is upwards. That is not competition.

Does Ms Murphy believe they are operating a cartel?

Ms Verona Murphy

If that is what it is called; it is not competition anyway. If a haulier was operating below cost, as we are expected to believe was the case in the insurance sector, that it never charged enough, the operator would go out of business as a haulier. Such hauliers do not come back into the market and decide that they can charge what they like or they will not stay in business. They go out of business and that is it.

It is our belief that there is not competition in any sphere of the administration of claims. Claims are not being settled. A so-called "simple" whiplash claim, which, I accept, can be frustrated, should never enter the court. The book of quantum will only give a recommendation. If it is recommended to be €15,000 and it goes above 10% to 20%, it should not be in the courts. It should be settled. There is no aggressive management of claims as there was when we had other competitors in the market. We are suffering as consumers. As a commercial entity, if my insurance increases, I have no choice but to pass that back to the consumer. What one has here is motorists who are suffering an increase all of their own but my increase must be passed on to them as well, and the consumer loses here all the way. There is nothing competitive about the underwriters in this market and unless one brings in approximately another ten, that will not change.

I ask that, at the behest of this committee sooner rather than later, I am allowed to access my insurance in Europe. I have an EU haulage licence. It is granted by the EU. It is delivered to me by the Department of Transport, Tourism and Sport. I should not have to compete with an Irish haulier who is based in Bulgaria. We do not blame them for having to re-flag - they are left with no choice - but it will be detrimental.

If members of the IRHA were allowed to get insurance from an insurance group based in mainland Europe, would it bring down costs by providers in Ireland?

Ms Verona Murphy

We see this as predominantly just an Irish problem. We do not have a large market. We are probably one of the smaller markets in Europe. I have members who are dual operators. They have re-flagged on the basis of cabotage laws - different types of laws - but not because they want to leave Ireland.

The insurance on that Polish truck has increased by €200. Insurance in the UK has increased by 11%, which is nowhere near what is happening here. We have enough underwriters in this market to support the size of the sector. It is based on competition and how it is administered, but there is none.

A taxi driver has to get three quotes before he or she can go back to the Motor Insurers' Bureau. If, for instance, a taxi driver went to three companies, but only one quoted and let us say the quote was for €4,000, which is prohibitive, can the Irish Taxi Drivers' Federation go to the Motor Insurers' Bureau and say it is prohibitive and the federation wants the bureau to get it another quote?

Mr. Joe Herron

No, it will say: "We have done our duty. We have got you a quote." They can do nothing further. The problem really is that only three insurance companies are quoting. If one goes back two to three years, and certainly no more than that, they were offering special deals. If one moved from company A to company B, they would do it for less. Company B would do it for someone else for less than what I was paying, even though I had stayed loyal to them. It did not make sense to me, but they did that.

To call it straight, does Mr. Herron believe that the insurance companies have come together in Ireland in a quiet room and have said that they are going to operate as a unit here and that they are effectively changing the way they operate in Ireland, collectively as a group, to get a result for themselves?

Mr. Joe Herron

It is too far beyond belief to think that they came to the same conclusion at the same time and suddenly all increased by roughly the same margin. I just do not find that believable.

Okay. I wish to raise the issue of car rentals. Mr. Paul Redmond said that an insurance operator that provides motor insurance said a car rental company has seen its third-party liability costs in Ireland trebling in the past four years. How has that situation arisen in the past three years? Why are we suddenly seeing that since 2014 in Mr. Redmond's own business, as well as with ordinary motorists, road hauliers and taxi drivers? Is there a reason that has happened in the past three years? Can one just put it down to claims?

Mr. Paul Redmond

Yes, I think the situation is getting worse. It is progressively going from bad to worse. It is the level of claims, the awards and the settlement levels being reached. It is a dire situation which is getting worse.

What does Mr. Redmond think will resolve it? What is the bottom line issue for him?

Mr. Paul Redmond

Previous speakers spoke about taking these small whiplash claims and dealing with them in some way, probably through the Injuries Board, and letting them be forced to settle at that level. If one can contain it at that level, as Mr. Conor Faughnan said the other day, one will stop the legal profession literally hoovering money out of the system. It is not just about awards, but everything that goes around it.

Does Mr. Redmond believe that some of the rulings of the Injuries Board below a certain level, or in a particular type of accident, should be the final legal ruling on a matter?

Mr. Paul Redmond

Yes. I served on MIAB years ago with Dorothea Dowling. We have been through all this before. This is nothing new. We have had these problems for years. We have had a dysfunctional system and, lo and behold, the legislators of the time came up with the Personal Injuries Assessment Board legislation and we all believed that would solve the problem.

Within months, however, we had a Supreme Court ruling that the legal profession had to be involved and that people were entitled to legal representation. As such, that one great reform has not been effective in achieving the objectives set out under the MIAB recommendations. If we could go back to that level and get that put right, we would go a long way towards solving that problem. We still have a problem with where we are on the book of quantum. For some reason, we have managed to get ourselves into the stratosphere in terms of some of these awards. It is not going to be that easy to fix. How does one go back? That may be a longer-term project than reform of the procedures in the Injuries Board to curtail these whiplash and soft injuries claims. If we could ring-fence them and, in particular, those injuries involving tourists, it would be useful. We just do not have the facility to provide the same level of evidence as we do where a claim involves an Irish citizen.

What is the single item that would bring down the cost of insurance?

Mr. Neil McDonnell

If it was a single item, not that I would like the Senator to hold me to it, it would be to introduce rehabilitation rather than this concept of general damages. The reason, and we took just one example out of the book of quantum, is that there is no objective reasoning. It is a real figure from the book of quantum. If one breaks one's little toe on someone's premises, the book of quantum says one is entitled to between €11,300 and €16,100.

For one's small toe. What about a big toe?

Mr. Neil McDonnell

A big toe is substantially more because you require it for mobility. That is for a substantially recovered injury to one's little toe.

I do not mean to be flippant but that level of claim seems extraordinary.

Mr. Neil McDonnell

Despite that, 70% of the claims, as the committee heard last night, are settled outside the Injuries Board system while 20% are concluded by the Injuries Board and 10% in court. The reason is that even at that level, a solicitor will come to one and say "You have broken your little toe and I will trump €16,100". If the solicitor gets anything in excess of €16,100, he or she will recover costs.

Can Mr. McDonnell restate the last point because people might not be aware of that?

Mr. Neil McDonnell

These are the dark arts to which the committee heard Conor Faughnan refer last night. This is now happening off the books. Unlike the UK, we do not see any of the claims data behind this. The Injuries Board functions in a no-costs environment. If one breaks one's little toe and the Injuries Board assesses the award at €15,000, one gets €15,000 in cash and there are no costs. However, if one goes to one's solicitors and takes that on, 95 times out of a hundred, the claim will be settled out of court and there will be a cost element appended.

That is as long as the award is above €15,000.

Mr. Neil McDonnell

As long as it is above the original award. Assessing how much the claimant actually gets of that is not possible at the moment. It is not visible. We have said there should be a fixed moral hazard built into the system which defines how much in excess the award would have to be. As there are no costs in the Injuries Board award, there should be a hurdle one is required to beat.

Am I right to say it goes from a controlled environment in the Injuries Board into an uncontrolled environment outside?

Mr. Neil McDonnell

It is uncontrolled and invisible. We do not know what is going on.

Ms Verona Murphy

I would like to address that from our perspective. We are not in line with that train of thought as a short-term solution. One will have constitutional challenges to the type of model that is being aired there. It has been tried in England but is not yet in legislation. The proposal has been flagged that one would have payment for treatment as opposed to an award of costs. Our model is a solution that can happen in the morning.

Instead of me as a haulier having to operate out of the jurisdiction and reflag my whole business, why can I not simply obtain my insurance? That is not bringing the competitor to Ireland. It is allowing me to access the competition and then I can determine whether it is competitive or not. One knows the answer to the proverb, "If the mountain will not come to Muhammad". We should be allowed to access the Single Market as commercial entities.

Senator Kieran O’Donnell asked if this is a cartel. If it walks like a duck and quacks like a duck, then it is a duck. Brian Hayes, MEP, has called for the EU competition authority to investigate this. I cannot see why this cannot be allowed. A month ago, it was announced a cartel was deemed to exist in the truck manufacturing sector and the manufacturers have been fined €2.3 billion. We complained about it for seven years. It was 11 years before anything was carried out. I do not know why we would wait in the case of insurance. If we are even thinking it is a cartel, it should be investigated. I suggest that would cure the situation almost immediately.

Mr. Joe Herron

One problem costing insurance companies huge money is the fact that if one has a minor accident, with little or no damage to the vehicle, but somebody claims he or she hurt his or her knee, ankle or toe and claims €10,000, the insurance company will pay without question because it is cheaper than getting the lawyers involved. For that reason, the insurance companies do not bother fighting claims which they know are spurious rather than fraudulent. That is a significant problem for them.

I too thank the delegations for attending the committee today. The points they have made have been raised previously by others who have intervened. There is a common purpose there which is distilled down into a number of issues, namely, about access to proper data and ensuring an upgrading of the book of quantum.

An additional point was made today by the Irish Road Haulage Association, IRHA, and Ms Verona Murphy on access to the Single Market. I understand the cabotage issue and flagging in another country. Does the IRHA have an assessment as to where the political fault lines are in opening up the insurance market for hauliers? Up to 90% of our export goods are moved by road which means hauliers are absolutely vital to the economy. We introduced a set of measures to reduce the motor tax element in budget 2016. It seems now, however, that has been wiped out because of increased insurance costs.

I would like to get an idea as to how Irish hauliers are interfacing with European hauliers in opening up the market. For instance, Aviva is an international insurance house. If it can operate in the Irish market and other member states, I cannot see why there cannot be a greater degree of flexibility across boundaries, particularly as we have a Single Market and free movement of goods and services. What does the IRHA perceive to be the blockage to that?

The Minister has set up the cost of insurance working group. Has he invited the IRHA to discuss these issues which we are dealing with today? If so, have these points been made to him and the working group?

Ms Verona Murphy

We have tried every which way to define what the blockage is.

We know that insurance is governed by the Central Bank. It is within the remit of the Department of Finance, which we know has had a report since 2012 that was never published. It could have had this committee set up much sooner. All we know is that under the EU regulation and the conundrum that causes in Irish legislation, we are precluded from accessing insurance on an Irish registration plate anywhere outside this country, which means that the insurer, underwriter and brokerage must be regulated here by the Central Bank. As I said, this means that the operator has no choice but to move their operation. They cannot simply insure their truck abroad. They must move it to another jurisdiction to be able to operate in a competitive sphere. Currently, I am operating against my own colleagues at twice their cost base. They are operating at half of my cost base. We flagged this two years ago. Ultimately, as a sector, we will become foreign direct investment and that leaves the consumer wide open to me as a haulier coming into the market and charging what I like because an Irish competitive sector will no longer exist.

We are looking for a meeting with the Minister for Transport, Tourism and Sport. If we were based in Brazil, we would probably have got it quickly but I am not sure if we are going to have a meeting. We have some very serious issues. We work off a five-point plan that we presented to the Minister when he held a meeting with us at the eleventh hour - an eleventh hour meeting during which he managed to reduce 8% of our income with the stroke of a pen. He reduced our loading capacity from 42 tonnes back down to 40 and yet he expects us to absorb increases in excise duties on fuel, possible toll increases due to VAT and 300% increases in insurance. I could go on. This is a catastrophe for the transport sector.

I do not want to give Ms Murphy platitudes. I think we all appreciate the attendant costs that are being loaded on to the sector. Our purpose here is to try to drill down. My understanding is that there is a single European market for insurance. I want to get to the nub of the interaction between the witnesses and the working group. It appears that there has been no engagement so this committee could recommend that the people who have made presentations here today in respect of very specific points could carry forward and interact with the working group because this is vital.

In respect of the guidelines on injuries, I know we will use the big toe and little toe analogy. The Injuries Board is basically telling us that the average pay-out on claims between 2009 and 2015 was approximately €22,000 or €23,000. Mr. Redmond and Mr. McDonnell have touched on this issue. We have to find a solution somewhere. Notwithstanding the Supreme Court decision where there is the right to legal representation, and one takes that for what it is, it seems that if it has dealt with 100,000 awards since 2005 and the average pay-out is approximately €22,000 or €23,000, it appears that there is a multiple of that, which is not quantifiable at this point in time, where claims are paid out on the steps of the court. This is where the data and lack of transparency come in. This is where we will be engaging with the Law Society of Ireland in interrogating that dynamic as well as engaging with Insurance Ireland.

The issue of cartel-like behaviour does come into play. If Insurance Ireland has a finite membership composed of the bigger houses and if Zenith Insurance, which is exiting the market, is saying that it does not have access to data, it is clear that there is a blocking mechanism there by certain elements of the insurance sector to ensure there is incomplete access to information by either the Irish Brokers Association or some of the insurance players in the market. If we can tackle that element, we can introduce data sharing among insurance providers.

If data sharing was introduced it would sort out the taxi drivers that Mr. Herron is representing. To have a situation where there are only three insurance companies providing insurance for the Taxi Drivers' Federation seems to me to be a ludicrous scenario given the importance of taxis to how we operate. I want to get a sense of the witnesses' perspective on or perceptions of how Insurance Ireland and its members operate and whether they perceive there to be a blocking mechanism in relation to data. To return to the PIAB, if we could have transparency around the data from claims settled out of court, it would sort many of the people who are renting cars in this country. It would sort many of the problems for the providers in that sector.

I want to make one small point on the staging of accidents before I let the witnesses back in. Mr. Redmond touched on the issue of soft tissue injuries. He stated he had no confidence in the review unless it benchmarks against European Union norms. If we had a situation here, for instance, whereby small claims for minor injuries such as whiplash were dealt with by things like vouchers for access to medical services, it could then be monitored on an ongoing basis. Is that something that the witnesses' members would accept?

Mr. Neil McDonnell

That is why we suggested rehabilitation in the first place. If one looks at the French system for that, not alone do they have rehabilitation as part of their mechanism, but they also only permit diagnosis of whiplash from a confined field of specialists. It is not a free for all. I heard shock and horror from the legal profession last night that anyone would entertain the French system. In France, one cannot go to one's GP and get a diagnosis of whiplash for insurance purposes. One would go to a specialist. I do not want to disagree with the IRHA but most of the underwriters in Ireland at the moment are non-Irish; they are substantial houses. I will not mention any of the company names but one of our operators quoted her experience of going through the motor book. The only company that gave her a quote is the one insuring the company. It gave her a 35% increase on the previous year. All the rest, which are household names, either quoted an unrealistic quote, showed no interest in winning the business, declined, exited the market or declined to quote haulage. Ironically, the company that declined and will not quote haulage is insuring another member so I know they are quoting haulage. We are definitely dissatisfied with what is happening in the market as far as underwriters are concerned. Our services manager is an insurance professional and when we have spoken directly to underwriters, the message we are getting from some of the recently exited companies is that they recently entered the market and got burnt. They stated they got burnt because of lack of information on the 70% of what was going on. There is only visibility on the 30%.

Essentially, there is a point to be made on the issue of access or opening up the market to insurance on a pan-European basis or throughout the European Union. If I understood Mr. McDonnell correctly, what he is saying is that there is an inconsistency in what hauliers are being quoted by the same company. That is something the committee needs to take on board.

I will leave it there but before I conclude I would like to get the perspective of Mr. Redmond on the soft tissue injury issues and what seems to be a friction vis-à-vis the Law Society view.

Mr. Paul Redmond

I assume the Injuries Board settlement figure of €23,000 refers to the 20% of claims that it deals with.

To clarify that-----

Mr. Paul Redmond

It just proves the point that they are going outside that figure and the other 80% of claims are much higher. Not only that, the problem is that within that average, and averages are dangerous numbers, while they will say it is €15,000 or €16,000 for whiplash, this can be rejected and procrastinated on and delayed by the solicitors. As Conor Faughnan noted the other day, it becomes a roulette wheel. As I pointed out in my presentation, that €23,000 becomes €50,000 per individual and if there are two, three or four in the car who all have personal injury claims, it brings it to over €100,000. That is an operating expense for a car rental company to pick up. Anything we can do to get these cases contained and ring-fenced in some fashion, and to get a settlement, is positive. Even if it has to be €15,000, which I think is crazy, let us at least start and get that bit of reform in place as quickly as possible.

Has the Car Rental Council engaged with the cost of insurance working group set up by the Minister?

Mr. Paul Redmond

Yes, we have made written submissions to the Minister for Finance on it.

No, I meant the Minister of State, Deputy Eoghan Murphy, who is chairing a working group on this issue.

Mr. Paul Redmond

No. We will be contacting them to see whether we can make specific-----

Is the position the same for Mr. Herron and Mr. McDonnell?

Mr. Joe Herron

No, we have not made contact with the Minister of State.

Mr. Neil McDonnell

No.

I recommend that this committee endorse any approach by the four witnesses present and their organisations to engage with the working group further on this issue.

I will ask the members to agree that the opening statements from the witnesses would be sent on as well.

Mr. Joe Herron

That would be excellent.

Mr. Paul Redmond

Thank you.

Ms Verona Murphy mentioned in her opening statement that she made the point at a recent open forum that as hauliers spend 90% of their time abroad, there is only a 10% chance of an accident here. Did they not answer?

Ms Verona Murphy

They "sang dumb", as the saying goes. There was no answer. I have asked it of every broker and anybody I come in contact with. It is not being answered. It is as if they would just like me to go away and stop asking the question but it has to be answered. We keep repeating ourselves. Everybody here has heard it is due to the book of quantum, the Personal Injuries Assessment Board or the Judiciary. I have no claims history in Ireland. When I have had issues in Europe, they are not dealt with by the courts in Ireland, by the PIAB or by solicitors. They have to have an answer to the question of how they assess the risk of a haulier who spends 90% of the time outside the country, which, to me, would mean they are accessing data from the Single Market and basing it on another EU member model.

I have asked it and repeated it. As I said, our most substantial members are now inquiring as to why it is not being asked.

What about the 43% figure?

Ms Verona Murphy

That is current research we are doing in regard to the traffic coming into the ports of Ireland. I travelled this morning to Rosslare before I came to Dublin as a ship docked at 6.30 a.m. In my estimation, out of the 12 trucks that disembarked, seven were on foreign registered plates.

How many does that represent?

Ms Verona Murphy

We estimate that, currently, 43% of the road haulage sector - of the trucks travelling our roads - are on foreign registered plates.

How many is that?

Ms Verona Murphy

We are not sure how many would be Irish operators that have solely left the Irish market or are dual operators. We cannot collate the data because they are not all members of the IRHA. However, from a perusal of the foreign registered vehicles on the roads, we would have a fair idea of who the Irish operators are. We estimate that 30% of Irish operators are now based abroad. I am not sure how many vehicles are involved but what we do know is that just one vehicle represents €250,000 to the Irish market.

Ms Murphy mentioned a report of 2012 several times. Is that a report from the Department of Transport, Tourism and Sport?

Ms Verona Murphy

That is correct.

What is the title of that report?

Ms Verona Murphy

I do not know but I know it is there and it had-----

What does it deal with?

Ms Verona Murphy

It deals with the rising cost of insurance. While I am not sure of the full title, it has been there since 2012 and was never published.

Okay. The IRHA is seeking a meeting with the Minister.

Ms Verona Murphy

Yes.

Has that meeting taken place?

Ms Verona Murphy

We have not been given notice of the meeting yet, which has to do with his intentions regarding excise duties on fuel. We have a fuel rebates system in this country but it is not based on the European model so, fundamentally, any increases the Minister were to place on excise duties on fuel would directly affect us. It would be a direct increase. The rebate kicks in at €1 per litre, so we would not be eligible-----

Has the IRHA made a budget submission?

Ms Verona Murphy

Our budget submission is on Wednesday.

I ask all the witnesses, given everything they have said this morning, which we have the opportunity to put on record in the context of the work we are doing, whether they have confronted the insurance industry. The organisations represented today have many members and make representations on many issues.

Mr. Joe Herron

We have confronted them but got no answers from them.

No answers have been given.

Mr. Joe Herron

No answers.

Ms Verona Murphy

The IRHA's experience is identical. We make representations on a number of issues. For instance, we have made representations to the Road Safety Authority about hedge cutting, which we believe to be one of the most serious issues in the country. That would seem a primary concern but it has never been dealt with. County councils deal with it on different levels. If a truck loses its mirror, the driver cannot see. While the cost of the mirror is fundamental to our operations, the road safety aspect is most concerning. We have written to the insurance companies because we want them to endorse the fact that hedge cutting has to become a primary road safety issue. It should be a primary, fundamental issue of road safety for the RSA, especially in rural areas. It is not even taken up. Again, we have made representations on the issue to the Minister for Regional Development, Rural Affairs, Arts and the Gaeltacht, Deputy Heather Humphreys, and we expect to have a meeting with her. We are in the height of the hedge-cutting season. People do not even regard it as a road safety issue but it is fundamental to road safety, especially, as I said, regarding insurance claims.

I thank the witnesses for their presentations. We had already heard much of what was said in the past week from other contributors, but there are some very useful things in there. I will start with hedge cutting. If any members or witnesses have travelled the R312 from Mayo, they certainly know about the dangers of not having hedges cut, particularly in the context of high vehicles and the dangers that can arise. We have met with hauliers in Mayo to discuss that very issue and to try to get it addressed. It is a huge problem. Obviously, the austerity faced by the local authorities, all of the financial burdens that have been put on them and the way the local government fund has been eroded over the years have a direct impact. The solution is, therefore, that when the local authorities are preparing their budgets for this year, there should be a proper line in their submissions that would allow them to cut the hedges in such a way that vehicles, and the people travelling in them, will be safe on the roads. That is one matter I will again take up with Mayo County Council.

The key point, which we came across last week as well and which seems to be building all the time, relates to the uniform approach. We called it a cartel last year. I am interested in what Ms Murphy is saying and I completely agree with her assertion that if there is even a sniff of a cartel, the matter should be investigated. It appears that the data is available. Who controls that data? Where is it? Is the Government not strong enough to be able to take that data and then have the actuarial resources that are needed to be able to analyse it in order to get to the truth behind what we, as a committee, are trying to do? Again, that is something we will take away with us.

Regarding the European Single Market, again, I completely agree with Ms Murphy. I would like to discover exactly who is stopping it and where are the blockages to which one of my colleagues referred. Ms Murphy has outlined the big picture really well and the absolute threat to the economy that is being posed. We made insurance compulsory and we mandated the private sector to provide it, but it is failing to do so. It is also telling that brokers had no reply to Ms Murphy's questions about re-flagging. The insurance industry and brokers seem content to shrug off the cyclical nature of this while we just need to wait it out. Ms Murphy pointed out that the latter is not an option. It is certainly not an option for this committee. Her evidence is a reminder that it may be cyclical for the insurance industry but it is not cyclical for the rest of us.

I would like to discover the exact position regarding the 30% of operators and to establish how many of them have actually moved their operations abroad for legal or accounting purposes.

Is this being seriously looked at? The European financial services integration action plan explicitly states that an integrated financial services market should generate significant economic benefit by promoting growth and employment in conformity with the goals approved by the EU Heads of State in Lisbon in 2000. We are absolutely contravening this. Five out of the big nine insurance providers in the country are based in Gibraltar. There is a role for the Single Market in examining models to calculate the solvency of these companies. How do we know how many more will go bust in the near future? How will it leave us exposed as consumers? My insurance has increased, but I could save almost €200 if I paid it all now as opposed to running it over ten months. This makes me wonder whether the insurance company will still be here in ten months' time. Why is this €200 included as an extra cost to people who can little afford it? Those who can afford it can pay the amount up front, but why should those who cannot do so and who must spread the cost be penalised by paying an extra €200?

Has an assessment been done on the impact of Brexit? What are the main issues we need to consider? I thank Ms Murphy for her presentation, which contained much detail and very good recommendations which we can implement. I will come back in with questions for the other witnesses.

Ms Verona Murphy

As did everybody else, we awaited the Brexit result and we are gathering data on how it will affect us. The predominant issues are the Border and immigration. As hauliers across Europe, we are best placed to tell the committee what the roads, byways and landlocked countries entail. We are concerned that we are not being included and we will write to An Taoiseach to ask him to bring us into the consultation group. Our drivers and hauliers and anybody who takes goods from Ireland across Europe will be the most affected. We have a big concern about how North versus South will operate, particularly with regard to the competition we face against Northern operators. They do not have to pay a road toll here such as the £10 we must pay to access ten miles of the A5. They can access our fuel rebate scheme by buying diesel in the South, which gives a double competitive advantage. They get diesel cheaper than we do and have the advantage of the fluctuation in sterling. Our closest neighbours operate with a big advantage over us.

The Government gave us a reduction in road tax, which brought us in line with Northern Ireland but gave us no competitive advantage. We thought it would make us sustainable but unfortunately insurance has trebled so we have had no commercial benefit. It was badly needed and if we had not got it many of us would have gone under or, probably, reflagged.

No matter what is put forward with regard to Brexit, we will be the most affected group. We face the same regulation throughout the EU as all other member states, but we are an island nation off another island, and the effect of the tachograph regulation will mean that Irish goods are brought to market differently from what would be the case if Brexit had not occurred. If the EU decides to introduce new regulations governing tachographs we will have severe problems. We already have a severe problem in Calais, particularly regarding traffic coming to Ireland, and this will not go away. They can build the wall of China or the Berlin Wall but it will not help with this problem. It is a problem that is spread throughout the EU.

It is amplified in Calais, but we urge vigilance among all of our members regarding migrants.

Anything that will affect the operation of the tachograph regulation will be detrimental to Irish products accessing mainland Europe in the same way as other countries do. It is incumbent on the Government to remember that we are an island off an island. There should be a favourable consideration of this in the operation of the tachograph regulation, as it no longer fits the model following Brexit. It is an EU regulation and everyone must adhere to it, but we do not know what Brexit will entail. The operation may have to be remodelled, as it will be fundamental in getting our goods to market. Our travel time could take as much as 12 hours longer than it does now. This would affect our growth.

I do not want to get into a detailed exchange about Brexit.

Okay, but it is important to raise it while the witnesses are present. I thank Ms Murphy.

I am alarmed about the three main insurers that Mr. Herron mentioned. Coming from a rural community, I identify with the rural transport initiative. If taxi drivers are unable to get insurance, it is a major problem. There is no point in introducing a rural transport initiative that allows for rural communities to increase or introduce taxi provision in areas where there has only been some or none previously only to find out that drivers cannot get insurance quotes.

Mr. Joe Herron

Yes. A problem in that regard is that if a local hackney operator in a small, isolated rural area must pay €3,500 or €4,000 in insurance, the number of jobs that he or she would take would not cover that cost.

Taxis were never more needed in rural areas for hospital appointments and accessing other vital services. Heretofore, the HSE or other agencies had some kind of a transport system in place. They no longer do, making the taxi even more important.

Mr. Joe Herron

Yes.

The committee should include this issue in our rural proofing.

Mr. Joe Herron

There is another problem. If an operator in Limerick wants to work in another area, the vehicle is licensed to do so, but the operator is not. It can present problems.

That is something that I had not considered.

Of the airports that Mr. Redmond has cited, Ireland West Airport Knock is obviously the most important.

Mr. Paul Redmond

Sorry. Of course.

It is more important to those of us in the west. Mr. Redmond referred to the Wild Atlantic Way.

Mr. Paul Redmond

We just do not get the numbers.

Not yet, but it is improving. What Mr. Redmond stated was interesting. When people arrive at an airport such as Knock - or any airport - they need car rentals, particularly if one wants to open up the Wild Atlantic Way. It is all connected, similar to the connection with the wider economy mentioned by Ms Murphy. Not only visitors are affected, as it is also a penalty on our returning diaspora, those whom we drove out of the country because they could not get jobs. We are penalising them through extortionate insurance rates.

The whiplash situation was mentioned. The number of 15,000 is interesting compared with some other countries, but what of Finland, which has a proper public health system? Is our situation connected with how much people would have to pay for private treatment, or have the witnesses examined this matter?

Under the proposal, certain injuries could be referred to the courts.

That may not work as intended as people ultimately have the right to go to court. If the Injuries Board was working in the way it was intended to work, we would not have that. In the area we can see how to get the Injuries Board working better to take up a higher percentage of this. The witness is absolutely correct that greater Garda enforcement and data collection is required. We have the PULSE system for that and there is exchange of information, so we should have the data there.

On the assertion that there are currently fraud rings operating, fraud is now treated as a theft offence. Is there a need for a specific offence in legislation around that? Should I ask the couple of other questions I need to ask?

Yes, if you wish.

Mr. Paul Redmond

On the benchmarking issue, it cannot be beyond us to benchmark properly. I can understand there is difficulty because in places like Finland, some of the costs may be socialised and therefore there may not be a direct comparison. It cannot be beyond us to do benchmarking. All we are asking is for somebody to do a proper benchmarking exercise so we can consider if we are considering the £5,000 in the UK and €15,000 here as like for like. If the exercise is done and it comes out we are no different from anybody else, so be it. At least, let it be done so we can all understand the data behind some of these awards.

Mr. Neil McDonnell

It is a fine point of detail but the following important issue should also be noted. The book of quantum and general damages has nothing to do with the cost of medical treatment. They are special damages and loss of earnings, etc. is handled separately. It only relates to pain and suffering. It is being paid for. It should be normalised across Europe because it has nothing to do with the cost of delivery of the health care system.

I thank the witness for the clarification as it is an important point. It is clear Mr. McDonnell has put much thought into the presentation and Freight Transport Association Ireland has given us 52 recommendations, some of which are common sense and can be done, although I might have a slight issue with others. However, even if all 52 were implemented tomorrow, as long as the insurance companies look at the model where their profitability is reliant on returns from bonds that give a 0% return, prices will continue to go up and nothing will be changed.

I particularly welcome the call for the Central Statistics Office, CSO, to take on a role of collating settlement data. My party, Sinn Féin, has written to the CSO suggesting it takes on this role. It is also included in the amendment to the Dáil motion that was passed. Is there a sense that commercial vehicle owners are subsidising private users or are increases in line with private market or more pronounced? There are issues with legal services and I will be teasing those out later with the Law Society and Bar Council representatives. I take it from the delegation's comments they are not convinced that the book of quantum is something where a solution can be found. We will be looking at that again, taking on board what was said today and last week about the book of quantum being a reflection of what has happened rather than anything we need going into the future. Will the delegation address a couple of those issues?

Mr. Neil McDonnell

The book of quantum is effectively market research among judges and insurance companies, such as what was paid for a broken toe. That produces a maximum and minimum, and there is no science, logic or objective reasoning behind that whatever. It is important when we hear that members of the Judiciary have said the book of quantum is out of date. It relates to nothing other than what the Judiciary and their colleagues are awarding. It is sort of a meaningless statement, to be blunt.

Commercial vehicle motor insurance works totally differently from those of other motorists. I understand how a motorist might have no history of claims over ten or 15 years and the premium goes up, which seems very unfair, as the risk is pooled. We do not necessarily agree with that either. Commercial operators have multiple vehicles on the road.

Unfortunately, one of the insurers said to us that 30% of the vehicles on the road will be involved in some type of accident during their period of insurance, from minor to major. They tend to look at the risk of the individual operator rather than the market risk per vehicle, so they look at it slightly differently.

Mr. Paul Redmond

On the point about the right of the individual to have a case heard in court, at some point in time we will have to face up to this issue and resolve it in some way. We must resolve the right of the individual versus the common good. It is a classic old debate. The way our system is working is highly dysfunctional, but we must find a way of balancing the rights of the individual and the common good in regard to giving us a market insurance that will work.

I thank the witnesses for their opening statements and their interaction to date, which has been very helpful. I did not disagree with any of our milder members on the various points they put across to the witnesses. All of the witnesses come from a relatively specialised or narrow part of the economy and they are equally important in their different ways. Everybody uses taxis, we are all very interested in tourism, we all buy goods that are brought into the country and we see goods being exported. Many of us have family and friends working in companies that are producing goods for export, and their competitiveness is affected by the cost base being created by the insurance industry. Ms Verona Murphy mentioned the figure of 300%. Is that in one year or over a period of years?

Ms Verona Murphy

That is in one year for one haulier.

I believe this is our fifth session of hearing from the various people we have invited to appear before the committee, and we have heard from many people. During the hearings we have heard about averages of 35%, 40% and 45% in the wider motor insurance industry. It is clear that Ms Murphy's industry is being targeted far more, by tenfold multiples. She is saying that somebody who was paying €3,000 is now paying €9,000 or something similar.

Ms Verona Murphy

It is that kind of thing. He was paying €43,000 and his quote from his current insurer - so it is based on one year with claims of €25,000 - is €164,000.

The 300% is in one case. Does Ms Murphy have any figures on the industry average?

Ms Verona Murphy

No, there is no industry average.

The association's members have not compiled one.

Ms Verona Murphy

It is not possible, because of the variance in the size of operations versus the subjective nature of claims. One member complained to us last week. He is based on a fleet policy, which is a minimum of five trucks. His quote went from €10,000 for the motor section to €28,000. At the 11th hour his broker was telling him that he could not get him another quote. He did not have specific claims in the motor fleet, but he did have some in the employer's liability, EL, and public liability, PL, areas. They were not major, just two claims, but the same underwriter had all of his insurance so when it came to his motor insurance the significant increase was €18,000 on what he was paying.

He told his broker to insure each truck individually. That meant opening five new policies but five was not allowed because that is a fleet, so he had to take one vehicle off the road for a period of time and insure the other four vehicles individually. This was at his behest. He was not informed by the broker that this was an action he could take. He saved €10,000. That means there was a reduction for the administration of four separate insurance policies versus that of one fleet policy and his insurance was reduced by €10,000. There is nothing to be gathered here, unfortunately. None of it makes any sense. The administration costs are fourfold, yet the insurance went down. He can put the fifth truck back on as an insurable vehicle within six weeks and next year he will probably have to take the same action, so it will not be a fleet policy. It is just ridiculous.

Is there an understanding in the industry that there has been an increase in accidents, claims or events that cause insurance companies' costs to rise? It has become evident from our deliberations up to now that everybody feels our vehicles are getting older and that we, as drivers, are getting older and more experienced, yet all our premiums are increasing. There is no change in the driving culture. The roads and motorways have not deteriorated to such an extent that far more claims are being made. The witnesses are of the view that insurance companies are operating - in the words of other members, with which Ms Murphy agreed - in a cartel-like manner. They are basically saying they are going to get together and hike their charges and customers will have to suck it up or else, in Ms Murphy's industry's case, possibly go abroad. To tease out that point a little, Ms Murphy is saying that we lose €250,000 for every truck that leaves the jurisdiction. Is she saying that if a company relocates to Bulgaria or Poland, it hires Bulgarian people at Bulgarian wages and they drive to Ireland, rather than the other way around, so that all the jobs in Ireland are lost or is it the payroll taxes that are lost? How does that work?

Ms Verona Murphy

It is more than the payroll taxes are lost. That is because they are based on a Bulgarian contract. They are not necessarily Bulgarian rates of pay, but the taxes would be transferred to the other jurisdictions. I do not like to single out one country, but it is predominantly eastern European countries. The operation has moved and that would mean employee contracts also move.

I do not think we can blame the country for being competitive-----

Ms Verona Murphy

Certainly not. However, we must ask how it can be so easy to access a European licence in another jurisdiction if one cannot obtain insurance. There is a fundamental flaw in this regard. If one is eligible for an EU haulage licence in any member state, it would follow that one should be eligible for insurance in any EU member state.

Ms Murphy's point is very well made and we had not heard it until today, which is good. We heard from ISME, IBEC and the Small Firms Association last week, as well as the AA, the young drivers and Age Action, but nobody was talking about that. We saw how deregulation in the airline industry worked. It was very much driven by Europe back in the 1990s. It has not happened here at all and Ms Murphy is saying she is precluded from getting insurance for Irish-registered vehicles outside Ireland.

Ms Verona Murphy

To go back, before we lose the point, my colleague, Mr. Eoin Gavin, who is sitting beside me, has serious experience in respect of his own renewal. His claims history, which was being presented so that his risk could be assessed, involved, let us say, 11 incidents. The renewal involved an increase of almost 300%. When Mr. Gavin investigated, as many as five or six of the 11 claims had already been settled and should no longer have been on the claims history. There is exploitation by the insurers in the case of hauliers who are not adept at perusing a renewal, like the broker or the underwriter should be. If they do not know about these things, there is no transparency. It took Mr. Gavin to point out these claims, but we do not get enough information about claims either. I have had incidents where my own trucks have been cited in areas where they were not and claims have been paid. That is the opportunist, fraudulent behaviour that goes on in Ireland and across Europe. One is cited and one must defend oneself, but because it is so costly to defend and the nature of the claim is generally kept small, it is just paid.

My next question was going to be whether Ms Murphy feels - I will be asking the question of all the witnesses - insurance companies are soft on claims-----

Ms Verona Murphy

Yes.

-----and easy on settling.

Ms Verona Murphy

We did have an aggressive culture in the management of insurance some years ago. That was seen as something that was detrimental to the insurance market. I do not agree with that. The aggressive nature of that operator, which is no longer in the market, served the consumer best. If a haulier is undercutting his rate, he will go out of business. In this instance, however, we are being put out of business. We are not entitled to come back into the market like these companies are because the undercutting haulier, as they would see it, is gone. They can charge what they like and survive but put us out of business in the meantime.

I thank Ms Murphy. Mr. Redmond referred in his submission to the "self-insured". Is the industry basically dealing with claims itself or does it have insurance companies dealing with them on its behalf? How does that work?

Mr. Paul Redmond

They are processed through insurance companies but essentially because the levels of excess are so high, the claims settled by the insurers tend to be very serious, involving death, for example.

The excess for a car rental company could be -----

Mr. Paul Redmond

It could be €500,000, so all of these things -----

So they are getting stuck with an awful lot.

Mr. Paul Redmond

Yes, all of these things fall into the category of operating expenses for car rental companies.

Clearly, as Mr. Redmond outlined earlier, the car rental sector is a very important part of the economy in terms of visitor numbers and the fact that there were over 300,000 individual transactions in the first six months of this year. In his submission, Mr. Redmond referred to foreign criminals coming into Ireland. Are they coming here, renting cars and then crashing them or are they crashing into the cars rented by customers of the car rental companies?

Mr. Paul Redmond

We have sent a dossier to the fraud squad on this issue. I do not want to point to any particular foreign nationals or any country but the people in question have collaborators here. They come in, rent a car and an accident is staged.

Mr. Redmond also referred to multiple-injury claims. Is he saying that they put five people in the car and then, at a slow speed, crash it into a wall?

Mr. Paul Redmond

Yes. When incidents like that happen, there is never just one person in the car. That would defeat the purpose of it.

Is that happening on a wide scale? Are there hundreds or thousands of such cases per year?

Mr. Paul Redmond

Once again, we are bereft of data in this regard. One company, for example, dealt with 130 or 140 personal injury claims in a year and, of that, the company reckoned 20% were spurious or fraudulent in some shape or form. That is an indication of the size of the problem. In this example, there were around 50 people involved in such claims and if each claim was settled for approximately €50,000, the potential cost for companies could run into millions of euro.

If the witnesses were sitting on this side of the room, as committee members, what questions would they put to the representatives of Insurance Ireland when they appear before this committee? The data sharing issue is one that has been raised over and over again. Many witnesses have spoken about the lack of transparency and visibility. We have been told that 70% of claims are being settled out of court, with no visibility. The Injuries Board is dealing with approximately 20% of claims, while only 10% are going to court. We were told last week that insurance companies are settling up to 70% of claims out of court because they are not sure which judge will be presiding, what the claims might be and what the payouts might amount to. I ask the witnesses to give their thoughts on that and to outline what they would ask representatives of Insurance Ireland.

Mr. Paul Redmond

In some ways, because of the level of self-insurance, we are almost an insurer ourselves. We have already requested that insurers would share data with us on people who have been involved in fraud but there are data protection issues involved. The industry is looking at this and trying to determine if it can customise something specifically for the car rental industry that would give us an ability to detect potential problems. If this committee could ask the insurance industry -----

Are they co-operating so far?

Mr. Paul Redmond

Yes indeed, they are endeavouring to deal with the issue. As the committee heard last week, efforts are being made to get a database up and running.

Mr. Redmond said that he was a member of the Motor Insurance Advisory Board, MIAB, in the past. It seems to me that we have done all of this before, multiple times and are now back to square one. We have implemented over 50 of the 67 recommendations in the last report and yet we still have very significant claims being paid out constantly.

We have anecdotal stories of people going down to court when one judge is supposed to be on, but all of a sudden he is not on and a different judge is on, so all of the figures have to be analysed again because the new judge pays out multiples of what the other judge normally pays out. It is very frustrating from our point of view, before we have written any reports, to hear that all of this stuff is being looked at and it is all coming back on us again. Are there any points that Ms Murphy would like us to put to Insurance Ireland if she were in our position?

Before Ms Murphy responds, I ask Senator Horkan to move his mobile phone from beside his microphone because the constant interference means that no one can hear what is going on.

Ms Verona Murphy

I wish to respond to what the Senator said about the Judiciary. Five of the ten appeals that have been put before the new appeals court to date have been halved on appeal. If insurance companies are doing what they say they are doing, they must now be taking cognisance of the fact that awards are being halved on appeal. Therefore, they should be basing their awards on half of what they thought they were paying out. That is not happening. Rather than recognising that appeals are being halved, they keep speaking about exorbitant claims. It is incumbent on Insurance Ireland to collate data in the interests of transparency regarding how brokerages are paid by insurers and consumers. I have no idea how much commission my broker receives from the insurance company by way of commission. I know that when my motor insurance needed to be renewed this year, RSA quoted a price of €12,900 to me. When I went to the market, a quote of €7,900 came back from a different company. My initial broker told me that he would match it and he would not place it with RSA. When I agreed to this and signed my insurance policy, my premium was placed with RSA. This is about transparency and competition, of which there is none. There is just nothing there.

I am not sure that Insurance Ireland can deal with any of this. I refer to the manner in which brokers and underwriters are operating. Insurance Ireland deals predominantly with regulation. It is like obtaining a haulage licence. If one wishes to obtain a haulage licence, one deals with the Department of Transport, Tourism and Sport and the Road Safety Authority. If one fits the criteria, one's licence will not come up for renewal for five years. I am sure Insurance Ireland fulfils a similar function. It does not do anything in between. It does not seem to reprimand anybody. I return to the fundamental fact that companies that are supposed to be competitors are acting in an anti-competitive fashion. How are they being allowed to do so? How are they back in a market that they say they did not charge enough for? Once they sustain that, they can charge what they like.

Would Ms Murphy support an investigation by the Competition and Consumer Protection Commission here or the EU Commissioner for Competition-----

Ms Verona Murphy

Both.

-----to look at the Irish motor insurance industry?

Ms Verona Murphy

I would support an investigation by the most effective authority. We need an effective investigation today and not in five years' time, when many people will have suffered and probably gone under as a result of the current position.

I thank Ms Murphy. I would like to pick up on Mr. Herron's observation that taxi drivers cannot get insurance without experience and cannot get experience because they cannot get insurance in the first place. I presume that will lead over time to a reduction in the number of taxi drivers, as people get older and retire. Mr. Herron mentioned earlier that there are almost no new entrants coming in as taxi drivers. Is that the case?

Mr. Joe Herron

The number is very small. What is happening now is that instead of individuals getting taxi licences, companies are buying them. People are forming companies to buy taxi licences and put them out with drivers. While that is happening, I certainly do not feel that there is competition as I would know or interpret it to be. There is nothing to stop insurance companies from showing us how much has been paid out in claims on taxis alone. They will not do that, but there is nothing preventing them from doing so if they wish. It would be very simple for them to separate the figures for taxis from the figures for everybody else, but they will not do so.

Does Mr. Herron think that claims are increasing, either because passengers who say there was an incident are claiming off taxi drivers' policies or because taxi drivers are incurring greater levels of incidents and claims than before?

Mr. Joe Herron

I would not think so. Based on the numbers, the answer is "No". I would say that the percentage of claims by fleet is probably much the same over the past number of years.

I do not want to put words in his mouth but would Mr. Herron's members feel that the insurance industry is soft on settling claims?

Mr. Joe Herron

Absolutely. The point is that the insurance companies will pay claims. They would pay one without question if it was a small enough claim. Even if they were aware it was a fraudulent claim, they would not care and they would pay it without question if it was small enough because it would save them money. That is the way they feel about it.

I thank Mr. Herron. They just do not feel like fighting it at all.

Mr. Joe Herron

No, they do not feel like fighting small claims at all.

I thank Mr. McDonnell very much for his very detailed submission. I believe there were 52 recommendations, of which 26 are applicable to the Dáil and the Seanad as both Houses would deal with them. There are many recommendations there, some of which look relatively straightforward while others look more complicated. I do not want Mr. McDonnell to pick just one but can he suggest three, four or five that he would say are the quickest fixes, the ones that could be implemented by Christmas or by next June? What are the things the Freight Transport Association would like to see done?

I am quite concerned about the talk about the book of quantum because if it is only going to reflect the prevailing scenario, one could end up with a book of quantum that actually raises the figures. Equally, judges still do not have to pay attention to it. What would be the FTA's two or three recommendations?

Mr. Neil McDonnell

That is why we had a difficulty as some of these would overrule each other. Obviously, if one went to a rehabilitation model, one would not technically have a book of quantum at all because it only deals with general damages. From the legislators' point of view, one of the first things they would want to get from insurers is the data. There is only visibility of 30% of the problem and the industry is telling us that there is a huge problem somewhere else, in a big dark pool of 70%. The provision of that information is on a statutory footing in the UK and there is no reason that should not also be the case in Ireland. We have made eight specific recommendations for insurers, one of which reflects their remuneration model. The bizarre thing is that if one takes Ms Murphy's example of the quote increase of 300%, the broker gets 30% of that. We have a remuneration model that encourages people into-----

Higher premiums.

Mr. Neil McDonnell

Yes, so there is a total disconnect between the interests of the insured and the interests of the underwriter.

I thank Mr. McDonnell and all of the witnesses. I believe the last point made by Mr. McDonnell is one we have not heard before - that brokers are paid based on the premiums and not on the history or the claims record of the person.

Ms Verona Murphy

With regard to the programme on insurance, which was aired last night, it stated that statistically there is no increase in claims. That comes from the Personal Injuries Assessment Board. We must go through the Personal Injuries Assessment Board in the first instance, before any claim goes to court. The records of the PIAB state there is no increase in claims. This is very important. That is the only true figure we can take as a given on the basis that one has to go to the PIAB in the first instance.

With the permission of members, I will ask Senator Horkan to chair the meeting. In view of what has been said in relation to cartel-like behaviour, and I tend to agree with all that was said about that this morning, I will ask that the transcripts of this meeting, or at least notification of what was said, be referred to the Central Bank and to the Competition and Consumer Protection Commission to make them aware of the comments and what transpired here this morning. I would even extend this to the European Commission, so we can take this up in further detail. I believe it is a very serious situation. Given the threat to our economy, it is important that it would go beyond this meeting to a forum that should be dealing with it. The Central Bank will appear before the committee. We will flag the issue for it and ensure we take it up directly with it and inform the three different authorities.

Senator Gerry Horkan took the Chair.

I thank members for agreeing to my chairing the remainder of the session. I call Senator Paddy Burke.

The Chairman asked many of the questions that I had intended to ask. I fully support his recommendation that the transcripts should be sent to the Central Bank and the various other bodies.

Will Ms Murphy recap on some of the issues? Is more competition the answer? Ms Murphy is saying that a cartel is in operation. Is she also saying there is more competition in all other European countries? Is that the case, as the Irish Road Haulage Association sees it?

Ms Verona Murphy

That is the case. In the case of any operator that has re-flagged, most likely it is not underwritten by any of the five main underwriters here. The eastern European jurisdictions would probably host a series of underwriters as a result of their markets being different. I suppose they are not as developed as we are. Certainly, a host of underwriters do not see the Irish market as one that is able to be penetrated.

Is that the case even though all the insurance companies that operate in Ireland also operate elsewhere?

Ms Verona Murphy

I do not know of any Irish underwriter. They are Canadian, American, Australian or United Kingdom based. They are not coming to Ireland on the basis that they maintain the market is not lucrative or competitive and there is no money in it for them. Clearly, as we see it, that is not the case. The suggestion is to bring in competition, but there is no point in doing so if they are not going to act competitively. What I am saying is that the arrangements should allow us to access the competition in order that we can deem whether they are competitive. Obviously, if we are able to access a far wider market, it is of benefit. If a market player can access ten trucks rather than one, then she will get a far better rate.

There is a report with the Department. Did the IRHA make a submission to the process relating to the compilation of that report?

Ms Verona Murphy

No, we did not. We would have voiced our dismay at what was happening within the insurance sector. At the time we were not facing increases anything like what we are getting now. They would have been in the region of 10% to 20%, but for a big commercial operation that is quite a substantial figure. That is why, at the time, they would have been deemed to be 20% or 30%. Again, the blame is placed on the Judiciary, the courts or the Injuries Board. It is the same spiel over and over again. However, the report was never issued. That was under the reign of the then Minister for Transport, Tourism and Sport, Deputy Donohoe. I know it is there and it has been deemed to be there by the Department, although it was never published.

The IRHA was never consulted. Is that correct?

Ms Verona Murphy

Not that I am aware of. I am not in my tenure over 18 months but I do not recall that we were ever consulted. We would raise our concerns to the Department based on the fact that insurance is within the remit of the Department of Transport, Tourism and Sport.

In respect of the legal aspects Ms Murphy is suggesting the claims levels and legal fees are adding to the cost of insurance. Does she believe that is part of the problem as well?

Ms Verona Murphy

I do. I believe there is no aggression in the market as there had been in the past. This is seen predominantly by people who are paying for it now. I do not believe that is the issue. I believe the operation and administration of the insurance companies and underwriters is failing and is not as adept as it should be, in the same vein as if an operator did not operate her transport company competitively, she would simply go out of business. Unfortunately, the operator that has left the market had a particular way of dealing with claims that did not lead to us being in the courts. While I do not mean to take issue with any of the concerns of the Freight Transport Association Ireland, I wish to highlight that we have the Constitution, as Senator Conway-Walsh pointed out, and it entitles us to go to court. If we are going to consider a model that holds that a person has to have treatment as opposed to a payout, we already have a serious problem with the health in this country. I do not imagine such a model would be fitting as a solution in the context of what we are here to discuss today. This is a feasibility issue, a competition issue. Yet, some new model can be looked at in the long term but we need a short-term survival solution to this problem.

Does the IRHA subscribe to Mr. McDonnell's recommendation that the Government fully implement the overhaul to the legal profession required under the EU-IMF programme by establishing an independent regulator for the profession and implementing the recommendations of the legal costs working group, and the outstanding Competition Authority recommendations to reduce legal costs?

Ms Verona Murphy

I do not disagree with it but the insurance underwriters and brokers have a lot of work to do in order that they would never get to the courts. They need to examine the model of what they bring to the courts. For example, as my colleagues have said, they should never entertain bringing a whiplash injury to court. Everybody has a right to go to court but if the person knows that, according to the book of quantum, which is only a guideline, it is worth €15,000 and the insurance company offers €25,000, that should keep it from the court. There would be no legal fees. Equally, the bar can be raised at the Injuries Board, IB. Everybody has to go to the IB first. I worked in a legal environment for several years and there the IB is seen as a step to be got over. That culture has to change and whether that is due to the legal profession or the claimant I cannot say. Many of the claimants are adept and have no intention of settling their claims. Solicitors have no intention of letting them settle their claims because there is nothing in that for them. This has to be considered on the basis of the IB’s remit. It was set up approximately ten years ago and maybe the bar should be raised.

Apart from blaming the legal costs do they blame the lack of infrastructure, such as the quality of the roads? For example, we have spoken about hedge cutting which can be a problem and is one for the refuse lorries too.

Ms Verona Murphy

Those are all significant factors in respect of motor accidents. Everything to do with road safety should be implemented to the nth degree. All vision, for motorcyclists and drivers alike, is dependent on mirrors. A driver is only as good as his vehicle. If he is coming from Mayo and loses a mirror because there is a tree with a branch sticking out that has not been cut, he may not be able to stop and get his mirror replaced. That is not the inclination. The inclination is to deliver the load because there is a timeline or he faces a late delivery claim. Then he gets the mirror replaced. It is better if that is not an issue. The roads and hedges must be looked after. In the same way that a driver does not pull in on the hard shoulder of a motorway, there are guidelines to be followed and we should start with the simplest, which is hedge cutting.

Was the reduction in weight from 42 tonnes to 40 tonnes introduced for more safety?

Ms Verona Murphy

We do not know on what basis it was introduced because the report that was collated in the Department of Transport, Tourism and Sport came, I believe, from the Road Safety Authority, RSA. We were not given sight of it. We have asked for it numerous times but have not received it. If the taxpayer is paying for reports, they should be public knowledge.

All we can say is that it takes 8% of our income. The alternative combination, however, still stands. A driver can carry 42 tonnes on a three-axle tractor unit and a two-axle trailer but not on a two-axle tractor unit and triaxle trailer, which would be the predominant vehicle on Irish roads. Across Europe that five-axle combination can carry 44 tonnes. The roads in France are not much different from the roads in Ireland apart from there being four times more kilometres there.

This is not really a motor insurance issue, although I take the point. It has been covered.

Perhaps but it is not within the remit of this committee. It may be an issue for the Department of Transport, Tourism and Sport or the committee on Transport, Tourism and Sport. There is no suggestion that this is to do with road safety. It is a regulatory issue that has come through the Department of Transport, Tourism and Sport.

Ms Verona Murphy

In essence the Department’s aim in doing this was to remove vehicles on the presumption that we would buy bigger vehicles.

That is not what is happening. What is happening is that there are more vehicles on the road carrying less. I think that is where Senator Burke is coming from on the basis that it is about road safety and it means that there are more vehicles. Ultimately, that causes a higher risk.

Of course, if they are carrying less weight, the cost of the insurance should be less.

Ms Verona Murphy

Yes.

That is the point that I was trying to make as well.

There is the issue of the tachograph. Can the witness explain to us how it works in regard to the cost for drivers, their set-down time and their time off? I am sure that is a factor as well.

Ms Verona Murphy

The tachograph is the recording device of drivers' hours. We are heavily regulated throughout the EU and it is readily policed in both Ireland and across the EU. If one is involved in an incident, the first thing one is asked for is one's tachograph record. Our main concern is that if Brexit takes effect in the way in which we envisage it with borders, migration and passport control, that regulation will no longer be fit for purpose because it will put our members in jeopardy of trying to make deadlines that had previously been realistic but going forward, due to Brexit, will no longer be so. There is a risk that they will still try to make those deadlines. That is the problem.

If I am correct, the witness is suggesting that if these rules and the Brexit effect are not taken account of, drivers will potentially drive more dangerously. Is that it?

Ms Verona Murphy

Not necessarily.

And therefore ultimately drive up claims and premiums.

Ms Verona Murphy

Not necessarily more dangerously. However, on the basis that the regulation no longer fits, it would leave them in a precarious situation regarding where they are able to park and other issues. The regulation will no longer fit if Brexit comes into play.

That would affect motor insurance in the future as opposed to the historic impact of insurance that we are looking at so far.

Ms Verona Murphy

Yes, I suppose so.

I wish to ask all of the witnesses whether they think that everybody should have insurance.

Ms Verona Murphy

From my perspective, they are supposed to-----

Is it something that the witnesses have discussed? If everybody had insurance, it would be in their own interest that the cost of the insurance be kept down.

May I just interject to point out that, as far as I am aware, motor insurance is a legal requirement and one must have it.

I mean the individual.

Are you saying that the individual driver should have it rather than the fleet?

The individual person. If every individual had insurance, it would be in his or her own interest to keep the insurance down.

Perhaps the Senator could tease that point out a little bit. When he says the "individual", does he mean passengers?

If one is out walking, one has one's own personal insurance.

Separate from motor insurance.

Yes. Separate from motor insurance.

I think that might be slightly outside the remit of this committee.

Yes, it probably is.

If it is okay with the Senator, we will continue with Deputy Fitzmaurice.

I thank the witnesses for their presentations. Hedge-cutting was referred to earlier on by Ms Murphy. It is causing major problems around the country. Ideas must be brought in. Basically, there is no point in talking about it because we have been talking about it for years and nothing has been done. I believe we need to create a system in which farmers or community groups are given €50 per kilometre to do it because it is not being done.

With regard to insurance, there are many people, or "hackers" as we would call them, in the haulage industry. Yesterday, I visited Westport meeting large companies. They have a system to set up their own insurance. They had it underwritten by foreign companies. Has the IRHA looked at doing anything like that?

Ms Verona Murphy

Yes, we have. We have investigated the possibility but we do not believe that the model would fit. I do not believe the risk assessment would be any different. The captive insurance market is something else. We are hauliers. The FBD model is almost broken as we know it. That was set up by the farmers. FBD is more or less pulling out of our market.

It is incumbent on the Government to provide for us. I do not think we need to enter that market because if the people already in that market are not competing, how will it be any different for us if we are depending on an underwriter?

I firmly believe there is a cartel in Ireland so why not take the pitch away from this group? We are talking about the most expensive vehicles, rather than cars, so if we took away as many as possible from them, it would be a sore blow. Have we tried to get a foreign company to do the underwriting?

Ms Verona Murphy

All underwriters are foreign but we have not done that to any great extent. We do not have enough expertise or anyone in the market we could employ to set up such an option. The cost would be at least €20 million and that kind of money is just not there, either as money we could raise from our members or capital from anybody else prepared to take the risk. Many of us can hardly manage to sustain the level of increases as they are, never mind invest in something like that. If the Government wants to invest and set it up, we would look at that option but otherwise we do not have the capabilities as an association. With the right help, it would not be beyond us but I am not sure the model would survive.

Ms Murphy spoke about competition and the idea of an inquiry. That is great but, realistically speaking, these inquiries take time and it would be two to five years before it was completed and even then it would not solve the problem. Four or five years ago, insurance levels were okay for everybody but then they started rising. Does she agree that rules brought in by Europe and the Central Bank, requiring us to have enough as a back-up for doomsday, are a factor? When the recession hit, many people got on the gravy train and made numerous claims for whiplash. There is a tendency now to claim for every knock. Does Ms Murphy agree that there are three or four different factors at play? The existence of a cartel is certainly one but many people are making claims because we underwent a recession. This is something we always see and it is a trend seen in other countries when people get into tight spots. Does Ms Murphy think that, as well as fraud, regulatory measures introduced in the context of doomsday scenarios - as they were in respect of marts and credit unions - when everything would crash and companies would need to be bailed out, are also a factor?

Ms Verona Murphy

Yes, that has certainly added to the situation. However, it comes back to the same thing. If a haulage operator does not charge enough for the work it is doing it will go out of business. Regardless of whether we are in a recession, competitors in the market, who previously said they did not charge enough because to have done so would have meant they could not compete, are now making hay while the sun shines. Nobody appears to be doing anything about it. We will go out of business all over the place before we have a decision from the EU competition authority, which could be five years down the road. I do not think the investigation should stop but we need to take evasive action to deal with this in the short term. The short-term solution is to conclude that if Mohammad will not come to the mountain, the mountain must be brought to Mohammad. In other words, we are now citizens of the EU so we should be allowed to obtain our insurance as we see fit. I do not see any other short-term solutions.

I agree 100% with Ms Murphy on that.

Ms Verona Murphy

If that happens in the next six months and if there is a cartel in Ireland, then it will collapse because the companies here would be operating in a competitive sphere.

If the mountain did come to Muhammad, given the amount of money paid out in claims, whether we like it or not we must cut to the chase on one thing, namely, that the book of quantum must be tackled. In England, a whiplash claim is worth £5,000 and it is worth €15,000 in this country. It was said that claims have not gone up but the problem is that only a certain amount of data are available. Most claims are settled without the amounts being made known. I have seen cheques myself.

Ms Verona Murphy

I do not disagree with the Deputy that the data are unavailable, but according to existing data, claims have not increased. What has increased is the number of motorists and other traffic on the roads. Since the recession, that has increased by 25%. That brings a significant increase in revenue to the underwriters. While they maintain there is an increase in claims, that is not the case, but there is a significant increase in premiums based on more traffic on the road. There is no correlation with what they have garnered since the recession through the increase in traffic. We know the economy has improved and commercial traffic has increased but none of that is being correlated. The revenue of insurance companies is increasing by the day because of an increase in traffic and a resulting increase in premiums, but that has not been mentioned. There is a 25% increase on the premium base but there has not been an increase in claims and that is the only significant data on which we can rely.

Those are the data Ms Murphy has but-----

Ms Verona Murphy

Those data are official because, in the first instance, any personal injury claim of any description must go through PIAB and it must be signed off before it goes to court.

What is happening at the moment is that a person who suffers from whiplash or other injury does a deal before the case goes to court or through any other process. A lot of that is going on. I have no problem with what Ms Murphy is saying but we must nail down every angle to which we are exposed. It may be the case that politicians must legislate on a book of quantum in terms of setting out criteria for what is paid out to people by the courts. We must do something because everybody is afraid of having an accident or that something will go wrong. The reality is that if it is a small tip, one would pay the money out of one’s own pocket. The result is that we will lose jobs.

Ms Verona Murphy

Under the terms and conditions, regardless of whether one pays it out of one’s own pocket, one is supposed to report the incident.

Mr. Neil McDonnell

The significant issue is at the lower end of the book of quantum. If one is talking about a catastrophic injury or death, the claims process becomes a little bit clearer and a decision is made either to fight or concede. At the lower end the difficulty is that if a claim for up to €10,000 comes into any operator, there is no fiscal incentive for insurers to fight it when they can just pay €7,000 or €8,000 and add it to the operator’s insurance in the same year. It is at the lower end that the disconnect is evident and that is where the book of quantum is poisoning the well.

Since last Wednesday we have heard that 71% of claims are being settled without recourse to either PIAB or the courts and we do not have any visibility as to whether they are bigger or smaller amounts than would be paid out by the courts. They could be twice what the courts would pay or half. Various members of the Judiciary might have different histories in terms of claim awards. Insurance companies are making rational commercial decisions but there is no visibility. What is happening in other jurisdictions where they are compelled to share data or to allow the state see the data, anonymised or otherwise, would be of huge benefit in assessing whether insurance companies are profiteering or if the situation is that the claims are not sustainable in terms of what is being paid out versus what they are taking in.

I do not think members have any other questions and if contributors do not have anything further to say, we will bring the meeting to a conclusion. We have had a good discussion. On behalf of the joint committee I thank all the witnesses for their co-operation – Ms Murphy, Mr. Herron, Mr. Redmond, Mr. McDonnell and all the members who were present and participated in the debate, in particular Deputy Fitzmaurice who is present at a meeting of this committee for the first time.

Sitting suspended at 1.30 p.m. and resumed at 2.35 p.m.

I welcome everyone to session B on the rising cost of motor insurance. We are joined by Mr. Ken Murphy and Mr. Stuart Gilhooly of the Law Society of Ireland and Mr. Paul McGarry SC and Ms Sara Moorhead of the Bar Council. I welcome them as well as the members and other visitors who are attending.

The format of the meeting will be that the witnesses will make opening statements which will be followed by a questions and answers session with the members. Generally, we aim to have a fairly fluid interaction between the members and the witnesses who are participating.

I am required to read out a privilege notice. I wish to advise the witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

I invite Mr. Murphy and Mr. McGarry to make their opening statements.

Mr. Ken Murphy

With the concurrence of the Chair, I will defer to my colleague, the senior vice president of the Law Society of Ireland, Mr. Stuart Gilhooly. He is a very experienced practitioner in personal injury litigation and he has been practising in this field almost exclusively for more than 20 years. He has lectured and written extensively on it. He will give the opening remarks on behalf of the society, with the Chair's permission.

I am happy with that. Is that agreed? Agreed.

Mr. Stuart Gilhooly

I thank the committee for the invitation to address it. The question on the minds of members and everybody else is simply what has caused this extraordinary, shocking and excruciating increase in motor insurance premiums in Ireland which we believe is over 38% per annum. We say the answer lies within the closely guarded books of the insurance industry which each insurer seems remarkably reluctant to open to anybody outside of their own company. For years all insurers engaged in a price war which saw them quote unsustainably low premiums while insuring bad risks. The inevitable upshot has been an increase in premiums to restore profits and thereby compensate for these poor business decisions. It is also common knowledge, although rarely admitted by the industry, that much of the profits emanate from the investment of the premium income. It is abundantly clear to us that these returns have not been at remotely the same levels that would have been experienced in the past given the recent volatility of global markets.

While studiously ignoring these obviously significant factors in the manner of how it has conducted its business, the industry has conducted a long-running and widespread public relations campaign in which it has sought to blame everybody but itself. Part of this has been a campaign of snide innuendo about the bona fides of personal injuries victims while reserving particular ire for the easy target of the courts and the lawyers who seek to obtain compensation for the innocent victim.

The campaign has included a number of stock phrases and pseudo facts which are either completely untrue or greatly embellished and which appear to have gone largely unchallenged. What we seek to do today is to try to explain some of those pseudo facts that have been put forward and why they are not correct. One thing that is said is that lawyers have found a way of bypassing the Injuries Board. This simply is not true. All cases must go to the Injuries Board. In fact, it is only an insurer who can decide whether a case goes through the courts or not. The vast majority of insurers want the case to go to the board and the acceptance rate has not changed in any way in the 12 years of operation of the Injuries Board.

There is an idea that lawyers have infiltrated the system. Again, this is simply not correct.

Almost since the beginning of the Injuries Board, over 90% of claimants have been represented by a solicitor, at their own cost. They choose to do so at their own cost. This figure has not changed in any way since the operation of the Injuries Board and given the fact that it is the claimant who pays for the involvement of a solicitor, it clearly can have no effect on the level of premiums.

There is a suggestion that claimants wilfully do not show up for medical examinations. Again, there is no evidence of this. There is nothing whatsoever to back this up. The Law Society meets with the Injuries Board twice a year. We discuss matters of mutual interest on these occasions and at no stage has that issue been brought up with us. Over eight years ago, we wrote a practice direction in our industry magazine, The Law Society Gazette, in which we urged all solicitors - lest there be any doubt - to persuade their claimants to go to medical examinations. As we understand it, that is what happens.

There is a suggestion that lawyers are persuading claimants to turn down awards and that there is no penalty if they get less in court. This is absolutely not true. Of course there are occasions on which awards will be turned down, but there is a penalty if one gets less. One simply cannot get costs if one gets less for an award in court and one may have costs awarded against one. There is no incentive to turn down awards unless the person is going to get considerably more.

The suggestion that damages are going up and the judges ignore the book of quantum has been put out there on a regular basis. Damages have not gone up. The only manner in which they have gone up is in respect of what we see as the very large medical negligence awards for tragic birth injuries. These do not relate to motor insurance premiums. In fact, if one takes them out of the equation, one will find the awards have actually gone down marginally. Judges are required to have regard to the book of quantum, under section 22 of the Civil Liability and Court Act 2004 and they do. They are obliged to do so. If they do not, the Court of Appeal is there to deal with any mistake a judge may make. Of course, judges are human and they will occasionally get it wrong, but the Court of Appeal on a regular basis over the last nine months has overturned awards.

The one unheard voice in this debate is the most vulnerable and least represented, that is, the victims of road traffic accidents. They have no representative organisations; there is nobody there to be their voice. That is where the solicitor comes into it. The impression is given that there are a large number of claims that are fraudulent and that whiplash claims are exaggerated. No evidence has been produced to support these assertions and the reality is starkly different. The provisions of the 2004 Act ensure that any exaggerated or fraudulent claims must be dismissed and provide for a mechanism for prosecuting claims by anyone who has exaggerated or fraudulently brought a claim. While the Judiciary has dismissed claims in these circumstances and does so on a relatively frequent basis, there have been practically no prosecutions and we do not know why. Are the insurers not pursuing it? Is the Garda not pursuing it? Whether or not that is the case, we know there are relatively few, if any, prosecutions for fraudulent claims.

The truth is that personal injury claimants suffer genuine and often very debilitating injuries and have only one voice, that is, their own solicitor or barrister. The pejorative term "whiplash" that is used to dismiss the significance of neck and back injuries is very insulting to the many citizens of this country who have had their lives damaged and sometimes ruined by such injuries, caused by the negligence of others. What is to be done? We believe we must uncover the truth. The Law Society calls for a new task force, along the lines of the Motor Insurance Advisory Board, to establish the real reasons premiums are rising at an unsustainable rate and to make recommendations to deal with the problem. Real and accurate data are key. The insurance industry's black box must be prised open in the interests of everyone.

Mr. Paul McGarry

I thank the Acting Chairman and the members of the committee for allowing us this opportunity to come before them today. We provided a written submission, which I commend to the committee. I will start by focusing on some key points arising from that material. First, I will identify the facts as we know them. There has been no significant increase in the number of claims that have been processed through the Injuries Board in recent times. A 6% increase in 2015 might be seen as reflecting increased economic and social activity and higher traffic volumes. That mirrors the views of the Central Bank in its Bodily Injury Thematic Review in November 2015. The levels of award by the board are also consistent with a modest 1% increase in 2015. Second, the board has, in effect, succeeded in removing two thirds of personal injuries cases from unnecessary litigation.

There has been no significant increase in the number of claims going to court. The High Court saw an increase of 2% in 2015 and the Circuit Court saw an 8% increase, which was expected given the increase in the jurisdiction. This does not reflect the explosion of claims that has been alleged to have occurred by the insurance industry. In 2015, there was an increase of 8% in the total amount awarded in the High Court and a 20% increase in the total amount awarded in the Circuit Court. Again, that is not unexpected, given the jurisdictional increase in the latter court. These figures do not reflect the allegations of soaring awards.

It should also be noted that there has been a major increase in medical negligence claims over the past few years. During the period 2008 to 2013, the number of High Court medical negligence cases increased from 481 to 942, an increase of 96%, with further increases again in 2014 and 2015. This has no bearing on motor insurance whatsoever and there is no comparison with the levels in motor insurance cases.

A person who sustains genuine personal injuries is entitled to be properly compensated for those injuries and the concept of reasonableness and proportionality is inherent in the exercise undertaken by a court in assessing the appropriate level of damages in each case. Judges are independent and do not have any vested interest in the outcome of proceedings. Contrary to popular belief, barristers' fees have fallen significantly in the last few years. Published figures from the various State agencies show that professional fees fell by between 26% and 50% during the period 2006 to 2013 and these reductions are mirrored in other areas of private work. We know that the Legal Services Regulation Act introduces a new costs regime that will ensure greater clarity around the principles to be applied by costs adjudicators in assessing costs. That is a replacement for the existing taxation of costs system and we see no reason that provision should not be commenced as soon as possible. That is within the capacity of the Minister for Justice and Equality to do at any time. It is a provision of that Act which has been welcomed by all interested parties.

What is to be done about the insurance issues with which this committee is concerned? We agree with the cacophony of calls for greater transparency and data sharing. Data relating to settlements entered into by insurance companies are vital to provide greater clarity and to enhance our understanding of the claims environment and the factors contributing to rising motor insurance costs. In 2014, for example, 71% of cases were settled privately by insurers and there is no information or figures available at all on the particulars of any of these settlements. That is more than two thirds of all claims settled privately by insurers, with no information provided. The book of quantum, which has been referred to quite a lot, provides a guideline of injuries and value ranges of damages appropriate to particular injuries. It is not a recommendation for compensation levels but a reflection of the prevailing level of awards made by the courts, the Injuries Board, the State Claims Agency and the settlements entered into by insurance companies. Obviously, however, the absence of the data relating to the private settlements entered into by the insurance companies greatly hinders this process.

We also think that the business models operated by insurance companies warrant close scrutiny. There is a €1 billion discrepancy between the premium income of Irish insurers and the published awards. This must warrant some form of investigation. It has also recently been reported in the United Kingdom that insurance companies are overcharging motorists for cover despite certain measures, including the Government crackdown on the no-win, no-fee industry which has led to a significant drop in what are described as "whiplash" claims and which has helped the industry to save £500 million in the past three years. Despite this, the cost of premiums has gone up. If the overall cost to the industry of such claims has dropped, then why have motor insurance prices in the UK continued to rise? It is likely that insurance companies are trying to recover losses incurred from a period of imprudent pricing or bad management. If this is the case and policy holders are being asked to pay extra to increase solvency in the financial services markets, then that needs to explained clearly.

I thank the witnesses for their presentations. I agree with a lot of their analysis, particularly the clearing up of the so-called facts that have had too much influence on this debate to date. That is not to say that, as part of the system which includes politicians, insurers and others, there is no role for legal practitioner to play in reducing premiums.

That is not to say that, as part of the system, there is no role for the legal system and legal practitioners in reducing premiums, as there is for politicians and insurers. For some time now, including this morning, we have heard calls for whiplash to be singled out as a special case and for a special regime to be put in place for compensation for whiplash. It has been suggested to me not only that this would be unfair, but also that it may well be unconstitutional. As has been said, it was made clear in a recent Court of Appeal judgment that it is important that when compensation is awarded by the court in respect of pain and suffering, it should be reasonable and proportionate in all circumstances. The court further stated that damages awarded for pain and suffering must be reasonable, having regard to the injuries sustained, and must also be proportionate to the awards commonly made to victims in respect of injuries which are of significantly greater or lesser import. That would seem to imply that any sort of British-style care-not-cash system would be legally difficult to implement. Do the witnesses have a view on whether such a scheme would be compatible with Irish law, or with the Constitution? Likewise, this committee has heard calls for certain injuries or cases to be excluded from the courts. Can the witnesses confirm that ultimately, each person has the right to seek damages in a court, regardless of the Injuries Board process?

I believe the main reason we are seeing increases is the insurance industry's investment policies. No amount of spin can change that. If there are other things we can do - things that should be happening in any event - we need to look to them. For example, greater competition within the legal sector might help to bring down legal costs. It is my understanding that the EU has cited the Law Society's current regulations regarding advertising by solicitors as being in contravention of the services directive. Do the witnesses believe the advertising guidelines are fit for the modern world of smartphones and rapid transport? I do not think anybody would agree that an American-style ambulance-chasing system would be an appropriate solution. Given that there is always the likelihood of a judge awarding costs against an alleged victim, however, the "no win, no pay" line will not work here. The EU believes the current system is illegal. The Competition and Consumer Protection Commission has reported on this wider issue, which is relevant to today's discussion. The new Legal Services Regulatory Authority has the power to update these regulations. In the opinion of the witnesses, will that help to reduce legal costs for people seeking insurance claims? There has been a great deal of expectation regarding the revised book of quantum. As we know, it is due soon. Given that time has passed, it is likely the revised book it will show an increase in most awards, rather than a reduction that would be consistent with what we are trying to do here. We have discussed the lack of transparency on the industry side. Would it be possible to have an accurate updated book of quantum, given that the industry does not seem to be fully disclosing all of its data? I appreciate that the witnesses do not speak for the Judiciary, but I would like to know whether they believe there is an appetite within the courts for a newer book of quantum. In their opinion, will the judges use it in the way it is intended to be used?

Mr. Stuart Gilhooly

I will deal with a couple of the matters raised by the Senator. Perhaps Mr. Murphy will come in on some of the other matters. I will begin by responding to the Senator's questions about damages and the book of quantum. It is fair to say that her analysis of the jurisprudence of the court of appeal - I think that is what she was reading from earlier - is a sign of a recalibration of how the courts are looking at damages. I think she will find that in the past nine or 12 months, the courts have taken the view that damages must be in line with what society expects from its citizens. In the past nine months, there have been at least five cases in which damages have been halved. I think the courts are taking it on themselves to deal with this issue. I think they would welcome a new book of quantum. In recent years, many people have commented that the current book is out of date. I do not doubt that it is out of date.

It remains to be seen what is in it. From what we have heard in the media and from those who have seen it - I have not seen it - my understanding is that at the lower levels, strangely, it appears as though they are a little bit higher but at the higher levels, they are going to be lower. Overall the damages would be a little bit lower in the book of quantum but I believe the courts are taking it on themselves to treat this matter very seriously. We should place our trust in the Judiciary which, in fairness, under the Constitution has been appointed to award damages in the State.

We talk about "care not cash" which is a very specific plan that has been suggested in the UK. It has not come into play there yet and is not due to be introduced there until April 2017. It is almost impossible to see how it could work in Ireland because, first, we have a Constitution and the UK does not. In terms of the practicality of how it might work, I cannot see any way in which it could work. I am not sure how one would distinguish between the injuries to which it would apply and the injuries to which it would not. It would also pose a severe danger of real injustice being done to victims who simply would not be able to understand the difference. I do not think there is any prospect of that plan being successful in this country. I do not believe it will even be successful in England. Even if it does come about in England and Wales, it remains to be seen as to whether it will result in any reduction in insurance premiums. We have seen that no matter what happens and what reductions there are in claims costs, premiums seem to go up. They have been going up for the last two years and it is perfectly clear to everyone here that claims costs have not been. I hope that I have answered the questions. My colleague, Mr. Murphy, will deal with the advertising aspect of things.

Mr. Ken Murphy

I thank the Chairman. I entirely agree that the answers to the members' questions are very much inherent in the questions. With regard to care not cash, I understand the political sponsor of the idea, Mr. Osborne, the former Chancellor of the Exchequer, is no longer in office, so it remains to be seen whether it will happen. It is not in place yet so nobody can say what the effect of it will be. It seems to us to be deeply troubling and a disturbing proposition from the point of view of the compensation of victims of injuries. With the greatest of respect to this committee, which is clearly striving to hear all voices, and I absolutely accept the bona fides of the committee seeking to hear all voices on this issue, I wonder if it is hearing the voices of accident victims. No organised lobby, or no powerful industry lobby, is prepared to appear before the committee to talk on behalf of the people who have suffered sometimes life-altering injuries and certainly pain and suffering, the consequences of accidents caused by the negligence of others. They have no voice and it seems to us that they are vulnerable individuals with no corporate or collective clout. Their solicitor becomes their voice and their guide through the process.

The Law Society of Ireland has a concern. I was present in the RTE studio last night when Ms Dorothea Dowling, who is something of a guru in this area, raised the question as to whether the insurance industry should be dictating the solutions to this problem. In any case, it seems to us that the insurance industry has caused this problem. The changes that have occurred and resulted in the enormous increases in premiums over the last couple of years originate with matters internal to the insurance industry, not internal to the courts, the Injuries Board or the compensation system.

A perfectly reasonable question regarding the European Commission's expression of concern about advertising regulations for the legal profession in Ireland was raised. I was rather taken aback when I first heard about that because the Law Society of Ireland has not been in any way notified about this. This seems to be in play - to use a loose phrase - between the Department of Justice and Equality, the State and the European Commission. The Law Society of Ireland has not been put on any notice of this and we do not know any detail on it. I can say from general knowledge of advertising regimes in the EU generally that the one in Ireland is quite liberal and quite permissive. The changes to restrict advertising in respect of personal injuries were put in place to reflect the will of the Oireachtas in the Solicitors (Amendment) 2002 Act.

At the time or up to then it was considered that legal advertising was, in fact, encouraging the bringing of personal injury litigation and that this was contrary to public policy. That may be the issue between the State and the European Commission, but I can genuinely tell the committee that those of us in the Law Society of Ireland do not know. We have seen no documentation on the matter.

Does the uniformity in the approach from insurance companies in premiums cause Mr. Murphy concern? This is of concern to people and we need to bring it down to people because, at the end of the day, people are our main concern. This is relevant for those people who are injured and those whose premiums are increasing. That includes those who are injured, and the way they are being treated. There is no doubt that solicitors will advocate for them but the problem arises when the amount they are compensated equates to the amount the solicitor charges them. That is going to cause concern.

Mr. Ken Murphy

All the questions from Senator Conway-Walsh are perfectly legitimate. Will she remind me of the first question again, please?

It related to the uniformity of approach. Is Mr. Murphy concerned about that? Does he believe it is worth investigating or that it warrants investigation?

Mr. Ken Murphy

My background is in this area. For years I was a practitioner in Irish and European competition law. I spent a number of years in Brussels as well as in Dublin practising in this field. I was struck by the insightful remark from Dorothea Dowling on last night's television programme. She referred to the prediction, apparently coming from the insurance industry, of premium increases next year of in the region of 40%. Any competition lawyer or regulator would immediately recoil and recognise that this is what is known as signalling to the market. It should not happen. It should not be the case that the insurance industry is telling the market and, therefore, each of the other providers, what they intend to charge in premiums next year. This seems to be a dubious practice.

The overall pattern over many years seems to have been a vast amount of under-pricing and under-reserving and, as a result, driving competitors out of the market. As a consequence we have seen the removal of Quinn, Royal Sun Alliance, Setanta, and the most recent firm to leave, Enterprise Insurance. All of these firms have now left the market. Inevitably, the level of competition in the market has been greatly reduced and as a consequence we are seeing extraordinary increases in premiums. That in itself should be of interest to the competition regulator. There is a notorious absence of adequate competition in the motor insurance market in Ireland.

The answer overall, it seems to the Law Society of Ireland, is to bring in more competition. More competitors should come in from abroad. That will not happen, it seems, until there is a greater release of data, the cards that are being held close to the chest of the current insurers. The implicit question Senator Conway-Walsh asked was whether I have a concern about an absence of competition. I do and market behaviour is reflective of an absence of competition.

The other question related to costs. I am concerned about the view coming from Mr. Murphy to the effect that there is nothing the legal profession can do about the rising costs of insurance companies. We do not believe that to be the case in the context of reduction of legal costs and the competitiveness of the sector.

Mr. Ken Murphy

I will address the issue of competitiveness. The point seems to us to have been accepted by the Competition Authority in its report in 2006, although it was critical of other aspects. We were not wholly fans of that report in terms of its rigour, depth or reliability. However, it recognised a considerable degree of competition. All the characteristics of a highly competitive market exist in respect of solicitors' practices in Ireland. Let us contrast the sector with insurers: we are not talking about four or five "competitors". I gather we have 2,228 solicitors' firms in this jurisdiction. They are all competing with each other for clients. They are in different segments of the market but there is intense white-hot competition in the market.

Personal injury litigation is an intensely competitive area as well. People choose their representatives. Ultimately, in most cases we are talking about cases that either go through the Injuries Board, and are determined on a recommendation of the Injuries Board, or those settled by some other form of negotiation with insurers. Most involve no payment of solicitors' fees at all, formally speaking.

These matters are agreed between the individual client and his or her individual solicitor in a highly competitive market. There are no set fees, scale fees or Law Society-recommended fees. These are matters for individual negotiation and agreement in a market in which if any client is unhappy with the fee quoted in advance - he or she is obliged to be quoted in advance - he or she can go to a solicitor next door and find someone with whom he or she can reach an agreement.

As long as there is not uniformity there.

Mr. Ken Murphy

There is not.

Mr. Stuart Gilhooly

As a practising solicitor, I can tell the Senator that there is not. The reality is that legal costs play a very small role in this whole process because it seems to be common case at this stage that only 10% of cases actually go to court; the rest of the time, as Mr. Murphy has said, one is dealing with situations in which the costs are being paid directly by the client, so it is effectively a zero-sum game. Bear in mind also, as the Bar said in its presentation, that the Legal Services Regulation Act is now in place. We are simply waiting for the commencement of the relevant section. Once the section has been commenced, we are looking at an entirely new cost regime. We are looking at a costs adjudicator regime which will be very different from the one which we have seen up to now. I expect that will make a difference. It is impossible to tell at this stage the extent of that difference but I am quite confident that it will make one. There are therefore measures in place to deal with legal costs and they have been recently passed by this very place.

I thank the witnesses for their presentations. They are a bit of fresh air in terms of some of the discussion we have heard. I agree with the analysis that there is quite an extensive propaganda war going on by the insurance industry. It has actually been quite successful and is reflected in some of the contributions we have had from people who are also victims. The two buzzwords used to explain the biggest causes of the massive hike in premiums we are seeing are "fraud" and "whiplash", which are interrelated terms and obviously serve the interests of the insurance companies. The most important thing that we, as a committee, and the Government need to decide on are what the key causes of the increase in premiums are. Then we can devise a solution. For example, the care not cash model fits into the narrative of fraud and whiplash as opposed to the narrative of massive profits. That is the point: it reinforces that narrative.

The most important question I would ask the Bar Council and the Law Society is whether they think it is fair to say on the basis of the limited information that they have - I know it is limited; that is part of the point - that the primary reason for the significant increase in costs to drivers that we have seen is an attempt by the insurance companies to restore profits.

Mr. Ken Murphy

Yes. That is our view in a word.

Mr. Stuart Gilhooly

It is very much our view. As we have said in the past, and as we made clear in both presentations, there has been no real change in claims costs over the course of the last seven or eight years. If it is indeed claims costs that are driving up premiums, why were they not driven up two, three or four years ago? That just does not make any sense. There therefore must be other factors. I think Dorothea Dowling said on "Claire Byrne Live" last night that it was her feeling that the Solvency II Directive was driving the increase, that there was an unpreparedness for the Solvency II Directive that was driving insurance companies to build up their capital reserves. As Mr. Murphy has correctly pointed out, there is a suggestion that they have already decided that next year will see a further 40% increase. They do not even know what the claims market will be like next year, so I think this is a red herring.

Ms Sara Moorhead

The briefing document prepared for the then Minister for Transport, Tourism and Sport, Deputy Paschal Donohue, which, as members know, was obtained by Mark Hilliard of The Sunday Times under the Freedom of Information Act, made interesting reading and corresponded with the type of research we had found ourselves. It reads: "It appears motor insurers are now imposing higher premium rates to return themselves to profitability or to boost profitability after a number of years of insurers competing for market share with prices driven down accordingly and possible underwriting losses in some cases." The anonymous civil servant who penned the document goes on to add an intriguing caveat: "The question does arise for motor insurers - if motor insurance is so unprofitable, why does anybody do it?". That of course comes back to the exercise in which Dorothea Dowling has engaged over time which shows that the discrepancy between the premium income that has come in and the actual payment out on awards - all awards, not just motor claims - is €1 billion.

That is the discrepancy. We absolutely accept that the committee wants to come up with solutions. It is going to be hidebound until it gets the information.

When we saw these headlines in March of this year, we immediately formed a sub-committee to find out why this was being said. Anecdotally, as someone who practises in personal injuries, I had not noticed any dramatic sea-change in awards. In fact, I would have said it was the other way around, because the Court of Appeal has been quite stringent in reducing awards. I certainly had not noticed the costs I was getting going up. I had not noticed more cases coming to court as opposed to being settled by the Injuries Board. We went back to primary sources, so we went to the accounts of the insurance companies, to see if we could get any information from that as to what they were settling, but de nada. We went to the insurance companies themselves to try to get information - we did a search of the Companies Registration Office - but we found nothing. Every time it is put to him, Kevin Thompson of Insurance Ireland does not deal with it and, frankly, the media let him go on unchallenged.

The Courts Service reports are available. They are not controversial; they are based on fact. There is the Central Bank report, which is based on fact, and the Injuries Board, which is based on fact. There are no major changes arising from any of those entities, none of whom are particularly lawyer-friendly, as they would say themselves. We have an excellent relationship with the Injuries Board in the sense that we have dialogue with it, but its role is to make sure people accept awards, do not go to the courts and minimise costs. Its representatives will say that to the committee tomorrow. Three separate entities cannot see any sea-change in the regime, yet we are told last year the premiums went up by 38%. We all know as drivers, that premiums are rising for no reason. I am the classic profile - middle-aged woman with a full no-claims bonus and no penalty points - and my motor premium went up by 25% last year. It does not make sense, but they will not answer the questions, and until they answer the questions and give the data, I do not know where one moves to in terms of solutions. What is really worrying at this stage is that they are already flagging that they will increase the motor premium again next year. How could they know what the claims history is for this year at present?

Deputy Paul Murphy also referred to the question of fraud. There is fraud in the system but the whole point of the 2004 Act was to introduce a system that dealt seriously with fraud. It is not just about fraud, it is also about exaggeration. One can have a case in which a person exaggerates a portion of what is actually a legitimate claim. For example, there is a reported case, heard by Mr. Justice Quirke, of a man who lost a portion of an arm in a very bad machinery accident. There was no doubt that he lost it and that there was negligence involved, but he exaggerated when it came to his earnings, what he was doing and what he could not do. As a result, he got nothing. He did not get a proportion because he was entitled to it, he got zero.

I agree with Mr. Gilhooly in that we do not know why insurance companies, even as a matter of sending out a message, do not go to the Director of Public Prosecutions and say it wants the case prosecuted. We see this sort of incident every day in the paper, where a case is dismissed on the basis that the claimant was dancing around on Facebook when they said they could do nothing. We all know that if a message went out from an insurer saying that this is wrong, it would have a significant effect. We do not want to be dealing with fraudulent claims and we certainly do not want to be representing fraudulent people. I dread seeing Facebook coming towards me in any court case, because one never knows what is going to be there. One thing one learns is how indiscreet people are on Facebook. Insurers have that power and they have had that power since 2004.

Senator Conway-Walsh referred to the book of quantum and what view the judges hold. They are keenly aware, despite the myth that they are out of touch, of concerns in respect of the quantum of damages. While we can always be troubled that we are perceived at the lower end of the scale to have quite generous awards but one must bear in mind that at the higher end of the scale we have very low awards. When one tells people that the limit on general damages for a person who is catastrophically injured, who is never going to be able to work or do anything again, is €450,000, the public is horrified. Time and again, the Supreme Court has said that must remain, for public policy reasons, as the cap on general damages. The Court of Appeal has said recently that one must now work backwards from that in respect of all other claims. That has had quite a significant effect in terms of general damages. Judges should be trusted in regard to that. This can never be resolved until we have the information, which we do not have.

Mr. Conor Faughnan of the AA said that about 10% of the claims are resolved in court, 20% go through the Injuries Board and the rest of them are out-of-court private settlements. That is all in the black box Mr. Gilhooly mentioned. How does one go about getting that? Is there any legal difficulty with passing a law that provides for these things to be published because they are in the public interest? Is any work being done on that?

Mr. Ken Murphy

Not specifically, but reports, including ones from the same Mr. Faughnan, indicate that these data are available in the UK, which is probably the only really comparable jurisdiction because all the other civil law jurisdictions are really apples and oranges. If data are available 90 miles up the road, why should they not be available here?

Mr. Stuart Gilhooly

Operating off basic principles, I cannot see why a law cannot be passed that would do so. I have heard nobody express a view that it could not be.

Ms Sara Moorhead

There is also the murkiness with the updated book of quantum. There is no reality to having an updated book of quantum unless it is based on the overall claims experience. The overall claims experience is that 70% of them are settled privately by the insurers who choose to contact the plaintiffs' solicitors and settle them. We do not know whether they have co-operated in terms of the up-to-date book of quantum and given detailed information to the Injuries Board to enable it to update the book of quantum because there would be no reality to it if they have not. It is one of the murky areas where we are simply not aware of what they are doing. It should be readily available and if it is, it gives them far better information on the claims picture. There is no point in having a book of quantum based on 30% of what is going on; we need a book of quantum based on 100%.

We must remember they have the choice. A plaintiff does not have a choice but to go to the Injuries Board. Frequently, a plaintiff is in the Injuries Board and someone from the insurance company picks up the phone to him or her and says, "Forget about the Injuries Board. Come down and we will meet you and we will pay you." However, we do not have the data.

How does that happen in reality? In an average case at what stage does it leave the formal process? Is it at that point before the Injuries Board or is it between the Injuries Board and the court?

Ms Sara Moorhead

It depends. There are obviously time limits for lodging with the Injuries Board. Mr. Gilhooly can speak more about it because he is involved earlier in the process. Sometimes it will have gone into the Injuries Board and they will be contacted. Sometimes it will not have gone as far as the Injuries Board and they will be contacted. The reality is that no claim gets cheaper the longer it goes on. It is in the interest of the insurance companies to settle them as soon as possible. It varies. Mr. Gilhooly would have most dealings with that.

Mr. Stuart Gilhooly

I will explain how that works. There is no real set way. As we probably all know now, different insurance companies operate in different ways. There will often be correspondence early in a case making an offer which is frequently not acceptable. It tends to work that way as Ms Moorhead has said. Insurance companies will try to settle a case at a lower level early on; that makes sense for them. It can and often does make sense for the claimant, and often the case is settled at an early stage. However, there are many cases in which it is just not appropriate to do so.

I have come across increasingly bizarre behaviour by insurance companies regarding the Injuries Board. Occasionally, I will get what I regard as a very straightforward case, for example, a rear-end collision in which clearly liability is not an issue, and the case is rejected by the insurance company even to go through the Injuries Board. I often have to say to clients: "I have no idea why this has happened. Is there something I'm missing here? Did this accident happen the way you said it happened?" They just look at me. Then two months later, having issued court proceedings - as I have to - I get a phone call from an insurance company asking if I want to settle. I am left wondering what happened there and why the insurance company did not let the case go through the Injuries Board. I usually get a blank response with an indication that something happened there. There is increasingly strange behaviour by the insurance companies in how they deal with the Injuries Board. They would probably tell the committee that themselves.

A case can be settled at any point. It is very simple: if the offer is right, all of us, solicitors and barristers, will advise the claimant to take the money. It does not matter at what stage in the process - pre the PIAB, during it or on the steps of the court - if the money is right, it must be accepted. We have a professional obligation to do so and that is what we do.

It is inevitable that there must be some fraud. However, fraud is often spoken about as if it is the factor driving premiums up and there is an absence of facts to accompany any of that.

Can the witnesses give us facts on how many fraud prosecutions take place in a year? How many cases are dealt with in that way that it is exaggerated-----

Mr. Stuart Gilhooly

It is interesting that the Deputy mentions the exaggerated ones. I only know this from having listened to Ms Dorothea Dowling last night. She did an analysis of what we call the section 26 cases. They are the cases Ms Moorhead mentioned earlier where, if one exaggerates slightly, the case gets kicked out. Apparently 32 such cases have been run in the courts, of which 19 have been dismissed. In terms of what we call section 26-----

"Dismissed" as in their claim was dismissed?

Mr. Stuart Gilhooly

As in absolutely dismissed with no money at all and costs awarded against them. I am aware of a number of cases in which judges have referred the papers to the DPP. What happens after that is a mystery to us; we do not know what happens then. It is certainly in every solicitor's and barrister's interest that absolute fraud be treated and prosecuted in the most serious manner. It is of no use to us and it destroys our reputation to even have such a case.

Mr. Paul McGarry

By the same token, one would imagine that if there were prosecutions on a regular basis or even one prosecution that was well known, the insurance companies would be all over it. Some of them spend a lot of money advertising on the radio about things like this. Therefore, one would have thought that there cannot be very many of them.

Mr. Ken Murphy

Given the powerful machine the insurance industry has, which strangely enough advertises on national radio in this way on these policy issues, one would have thought that if there were any instance of it, we would hear about it repeatedly. Advertisements claiming "Fraud is money taken out of your pocket. It's no joke," have been running constantly since 2004, as far as we can see. They continuously seek to taint the legitimacy and bona fides of people who have been injured in accidents, so much so that we know anecdotally that many people will not bring a claim because it is seen to be somehow suspect or dodgy. That is the purpose of the propaganda. If they had an actual case of somebody doing this, would we not be hearing about it all day, every day?

I am sorry that I missed the witnesses' opening statements, which I have glanced through. However, from listening to the replies they have given to the members, it would appear they are hell-bent on blaming the insurance industry itself. They seem very concerned about the legitimate claims; I admire that part of it.

What can the witnesses' organisations do to reduce the costs?

Ms Sara Moorhead

In fairness, I do not think we are hell-bent on blaming the insurance companies.

The witnesses spent the last while dumping on the insurance companies. By the way, I am not defending the insurance companies; I have my own view on that. However, I was expecting to hear some more constructive commentary from the witnesses as to how the legal process works and how that might be organised in a better way to give better value for money.

Ms Sara Moorhead

We are saying the causes of the problems are not the causes the insurance companies have identified. Until they come and show those are the causes, we will not be in a position to provide huge solutions. However, we have some solutions. We have one solution which we are surprised has not happened. The new Legal Services Regulation Act provides for a legal costs adjudicator. That Act has been in place for a significant period but has not actually commenced. There is an establishment date of 1 October. That section of the Act is free-standing. It has always been welcomed by all of the legal profession as a much more transparent system for everybody regarding legal costs. Therefore, if there are issues about our legal costs - whether they are solicitors' legal costs or barristers' legal costs - that should be dealt with speedily by the insurers and the plaintiffs. That is one practical solution. If the insurers are right that legal costs have greatly increased, the introduction of the legal costs adjudicator, properly financed - it is supposed to be self-financing, in fact - would be a very significant improvement to the whole thing. That is one constructive thing we have come up with.

We have also welcomed - if it is properly done - a revised book of quantum. There is no point in putting something into statute, as happened in 2004, and then leaving it for 12 years without regularly reviewing it.

If the book of quantum is properly done and revised, that should assuage some of the insurance companies' concerns about valuations of awards and whether awards are increasing. These are two constructive ways to move forward with the insurers.

There is an absence of information from insurers. It is why we cannot be as constructive as we would like until they give us the information. If they give us more, we may be in a position to be more constructive in terms of what the future holds. As consumers and representatives of consumers, we are concerned about the level of increase in premiums.

Will the witnesses comment on the Injuries Board process?

Mr. Stuart Gilhooly

I dealt with some of that when answering Deputy Murphy's questions and explaining the somewhat bizarre behaviour of insurance companies through that process. I will explain and perhaps-----

Explain the legal process.

Mr. Stuart Gilhooly

I am happy to explain how it works, if that is what the Chairman is asking. Would he like me to talk him through it?

Just the legal process when one is represented by a solicitor before the Injuries Board.

Mr. Stuart Gilhooly

I will run the Chairman through a typical claim. Where a car accident occurs, for example, the claimant will normally attend a solicitor's office and, once a medical report is obtained from the client's treating doctor, what is called a form A is filled out. With the medical report and fee, that form is sent to the Injuries Board. The Injuries Board would then write to the respondent, that is, the insurance company, and ask it whether it wanted to go through that process. From my own experience, approximately 70% or 80% will go through the Injuries Board process. The ones that do not go through are those in which liability is clearly an issue or where, bizarrely and for reasons that are not clear to me, they just do not because insurance companies have got ideas about them.

People go through the process and stay with the solicitors.

Mr. Stuart Gilhooly

They will go through the process. Assuming someone's case does go through the process and is not rejected for court proceedings, he or she will be examined by the Injuries Board's doctor. There may be more than one doctor depending on whether there are multiple injuries. People will then ask for what we call special damages, those being loss of earnings, medical expenses and any material damage that has been suffered. Having got the medical reports from the Injuries Board's own panel of doctors, the Injuries Board will then make an award. The award will be a figure for general damages, which the Injuries Board will use by reference to the book of quantum, and any special damages such as loss of earnings and medical expenses. That award will then be sent to the claimant and the respondent, which is the insurance company. Both will get to decide whether they accept it. If both do, the case is closed. If one turns it down, the matter presumably proceeds to court.

The claimant pays the solicitor.

Mr. Stuart Gilhooly

Correct. Out of his or her own damages.

If the solicitor was paid separately, would that encourage more cases to be settled before the Injuries Board?

Mr. Stuart Gilhooly

It may, but I am not entirely convinced that it would. Very few cases are turned down because the award is slightly out of kilter. They are almost always turned down because they are way off. For the sake of argument, let us say that there is an award of €15,000. If my client told me that he or she would like to take it, I might say that, although the case was worth €16,000 or €17,000, he or she would be much better off taking the award than taking a chance in court. Let us say that my fee is €1,000. In such a situation, there is no way that the extra €1,000 would make any difference to whether the person turned down the award. Most of my colleagues are like me, in that I would only ever advise a claimant to turn down an award where I felt that the case was either worth considerably more or was not ready to be settled at that stage.

Has anyone a figure for the number of cases that go from the Injuries Board to court?

Mr. Stuart Gilhooly

In what respect?

Where an award has been offered and for some reason is considered not to be enough.

Mr. Stuart Gilhooly

We know from the Injuries Board that 40% of awards are rejected and approximately 60% are accepted, if that is what the Chairman means.

Does Mr. Gilhooly consider 40% to be a high figure?

Mr. Stuart Gilhooly

I consider-----

Could more be done by the Injuries Board, the solicitors or whoever? Could a better structure be applied to the Injuries Board so as to ensure that a greater number of cases are settled at that level?

Mr. Stuart Gilhooly

In the end, we are really only discussing 4,000 cases.

Some 33,000 cases went to the PIAB in 2015 and 11,000 went to award. Therefore, 40% of that is approximately 4,000 or 4,500 cases. Out of the 33,000 cases that went to the PIAB, we are only talking about 4,500 cases, around 13%, that are affected by going on towards the court. That is the figure we know about.

Could there be fewer cases going through the courts? Yes, I am sure there could but I am not entirely sure how that could improve. The PIAB, or the Injuries Board, was established to deal with cases quickly and fairly. If one has a situation where the PIAB cannot deal with the cases quickly, then part of its remit is completely gone. We do not want a situation where claimants have to wait forever for their compensation. If, for instance, cases were longer in the PIAB process, people might still find they were unhappy with the award and might still want to go on to the courts to get their legal and constitutional right to a hearing of their case by a judge. I do not believe that 40% is off the wall. I believe it has been the same figure the whole way through and if one asks the PIAB, it will say that it is pretty much what it expected.

I thank Mr. Gilhooly and Mr. McGarry for their opening statements, in advance and this afternoon. The Law Society of Ireland and the Council of the Bar of Ireland are the 14th and 15th, or thereabouts, organisations that the committee has heard since last Wednesday, including the Minister of State at the start. I will not go back over all those sessions. There has been some insurance company bashing but it is fair to say that there has also been legal system bashing, of the courts, the Judiciary and individuals, either solicitors or barristers, on the issue legal costs taking up a large chunk of the costs involved in the injuries claims process. Reference was also made to the so-called care not cash system and how that might just move costs from the legal system to the medical system , although I am not sure whether that would be true. I take the witnesses' points on the constitutionality of the plan, the potential for complications, if it could happen and so on.

The witnesses appear to be in touch with all the volumes, figures etc. Will they indicate how many motor insurance legal cases are taken per year? A figure of 40,000 was mentioned.

Mr. Stuart Gilhooly

The answer to that question is that we do not know. We know that the PIAB dealt with 33,000 cases in 2015. It is my understanding that around 70% of those were motor insurance claims. That would give a figure of 20,000 to 22,000 motor insurance claims with the PIAB. However, part of the problem is that we do not know what claims do not go to the PIAB because some of them may be settled before they get there.

The committee has been told, and it has been fairly consistent from all the witnesses the committee has heard, that around 10% of cases are going to the courts and that 19% or 20% are going to the PIAB. Will the witnesses clarify where the figure of 70%, 71% or thereabouts is coming from? Is it anecdotal or is it insurance industry propaganda? Is it one person's word or someone else's word?

Mr. Stuart Gilhooly

In fairness, I have drilled down into this because I asked myself the same question yesterday about where the figure came from. It does fit in and I believe it comes from the PIAB's figures for 2015. Some 33,000 claims went to the PIAB. We know it made awards in 11,000 cases, which is around 35% of cases. We know that around 40% of those were rejected. That leaves 10% going to court, 20% settling with the PIAB and, presumably the rest-----

Settling in advance?

Mr. Stuart Gilhooly

-----in the ether somewhere.

Ms Sara Moorhead

It is in page one of our submission. As Mr. Gilhooly has said, it has to be our calculations but for 2014 we know 31,576 injury claims were registered, of which only 9,000 went to court or were finalised by the PIAB. Therefore, there is no transparency on 22,000, or 71%. That is not to say those are all the figures. As Mr. Gilhooly has said, there may be other cases that were never seen by the PIAB at all. The most we can tell the committee is that of the cases registered, they are the figures that were dealt with, and there is 71% of them. We seem to be absent data in relation to-----

Let us return to the issue of liability when somebody has a crash. Let us say a person is driving down the road and somebody drives into the back of his or her car. That person knows it is the other person's fault and the liability is fairly clear, even though we all have insurance discs that say never to admit liability, even if one is in the wrong. That is standard information from the insurance industry. Maybe legal people would say never to admit liability either, even though it may be blatantly obvious that one person was at fault rather than another.

Mr. Stuart Gilhooly

I do not think admitting liability has ever been a problem.

One might be going down the road and somebody goes into the back of the vehicle. The person might be a bit sore and a bit frustrated the boot of the car is gone, etc. I presume the client has to find a solicitor. We do not have that kind of ambulance-chasing.

Mr. Stuart Gilhooly

We do not.

I am not saying we do; we do not. The witness does not need to refute it. The person finds a solicitor who says that, by and large, for somebody running into the back of a vehicle, one would get this or that. We have heard over all the sessions that whiplash in Ireland gets €15,000, whiplash in the United Kingdom gets £5,000 and whiplash in the rest of Europe does not exist. Are there any thoughts or views as to why that is the case, if it is the case?

Mr. Stuart Gilhooly

Allow me go back approximately two sentences. The Senator was correct to that point in that a client finds a solicitor and they can then sit down. My experience is the clients practically never ask what the case is worth. If they did, my answer would be that I have no idea. I can tell a client what could happen. He or she could recover in a month, six months or never recover. Those amount to completely different figures and scenarios. We do not just say a whiplash is X and a broken arm is Y. It does not work that way.

Perhaps the committee will not mind me telling a brief story that can show how things change. I had the case of a very unfortunate lady approximately seven or eight years ago who broke her arm. It was a fairly standard broken arm. It was probably worth, on the face of it, somewhere between €20,000 and €30,000. What happened to the lady was horrific. Her broken arm developed into chronic pain syndrome and dystonia to the point where she lost power in one arm, then the other and eventually the power in her legs. It was bizarre but it happened. The doctor who reviewed her said he had never seen anything like it in his time. It went from what seemed on the face of it to be a simple injury to being a catastrophic and life-changing injury that was worth seven figures. One can never tell what a case is worth exactly.

I do not accept the whole argument that whiplash is this or that. What even is whiplash?

I am only asking the question.

Mr. Stuart Gilhooly

I am sorry. I am not being critical.

We are all totally sympathetic to anybody dealing with a serious injury. We heard from the car rental association this morning a suggestion that people are coming from other jurisdictions and faking crashes here in rental cars. It was suggested to us this morning that it is like insurance fraud tourism. We are trying to tease out everything we are hearing from all the different sides. Mr. Murphy makes a good point about the victims in that maybe we should try to hear from them if there is a way of getting to people who are involved. We are trying to find out why the average payout for whiplash is €15,000 - if that is the case - in this jurisdiction versus £5,000 in the UK, while it is almost non-existent in the rest of Europe. That is what this committee was told in earlier sessions. Has the witness any thoughts as to why we seem to have much greater payouts for whiplash in this country in comparison to other countries, if that is the case?

Mr. Stuart Gilhooly

I am not entirely sure there is necessarily any specific evidence as to what the average whiplash payout is in any country. People are looking at the book of quantum in both England and Ireland and making comparisons. However, I come back to the point of what is whiplash? It could be a two-month neck injury or a lifetime neck and back injury. There is a world of difference between those two concepts. I do not necessarily think one can simply say it is X here and Y there.

No. The witness is answering in the same way as he dealt with a question I asked a few minutes ago. Have the witnesses any idea why the average payout we have been told time and again in the past few days is what it is? There is an argument that people are looking at one book of quantum indicating €15,000 and another indicates £5,000. Is there any other reason the sums could be different? Do the witnesses know?

Mr. Stuart Gilhooly

Ultimately, it is a matter for the Judiciary to decide. We have a Constitution in this country.

I know that. We have heard the constitutional arguments and I know the Judiciary. I am not questioning the Judiciary. I just wonder whether the witnesses have any thoughts themselves. The witnesses are far more familiar with the process as they are involved in it day in and day out. I am just trying to discover whether they have any ideas as to why we have, allegedly, much greater payouts in respect of whiplash than is the case anywhere else.

Mr. Ken Murphy

I wish to make a point on the comparison with the rest of Europe, which echoes a point I made earlier. The civil law system in continental Europe, Scandinavia and, really, the rest of the EU outside of the United Kingdom and Ireland is very different in its approach. It does not really have the fault-based approach, what lawyers call tort, whereby a person's negligence caused the injury to someone else and therefore creates an obligation to compensate the injured person. Strangely, negligence is not even a concept in civil law. It is a different system in continental Europe where these things are socialised and it becomes an issue for the health system and social support system not a system based on the person causing the compensation to be paid. It is not a valid comparison with the rest of Europe. I accept that the common law system in the United Kingdom and Ireland is very similar and hardly distinguishable at all. Again, there may be social or historical reasons why certain things are viewed differently in compensation terms. I do not know whether it is true or not, but it was said to me some years ago that perhaps the experience in the United Kingdom of huge numbers of people being injured in the First World War and the Second World War gives them socially a greater tolerance for people being injured and putting up with it than was the case here. It is a theory, but the fact is that the system in Ireland, and the Judiciary operating the principles - based on Irish law - of what is fair and reasonable, have produced certain results and it seems to us that is with the support of the Irish people. Interestingly, I do not think one will find it criticised by the victims, the question is whether in fact we should be interfering with this for the benefit of the profits of insurance companies.

Ms Sara Moorhead

Another factor to bear in mind in terms of the system in the United Kingdom and Ireland - I appreciate that this does not happen so much with the lower awards - is that we work on a system whereby we pay for nothing for the injured person so one of the issues is that anybody who gets money here loses money in another way. In the UK, everything other than the general damages is covered to a large extent. There is the NHS, much as it is now maligned, and care costs. One of the particularly problematic issues here is that in the bigger claims – I know we are not dealing with the bigger claims – the reason they are at such a level is because it would not be inconceivable that one would spend €300,000 a year on nursing care for a catastrophically injured person who has a fairly normal life expectancy. That is the reason settlements of up to €10 million can be reached. I know we are not dealing with such payments today but there is a periodic payments provision which it seems to us is a far fairer system for everybody.

Another factor is that people lose their disability payments if they get money. For example, if they get €100,000 they lose their disability payments so they now put in a claim for the loss of disability payment as an actuarialised out-of-pocket expense. That leads one to the area of societal choices as to whether in those circumstances the insurance company or the taxpayer should pay. It is a complex issue for that reason.

We are teasing out quite a lot this afternoon. We have been comparing the cost of insurance in Ireland with that in Bulgaria and Poland and it is clear that if the system of payouts is totally different then it is quite likely that the system of insurance is quite different.

Mr. Murphy made reference to the profits of insurance companies. We keep being told that the competition is leaving the market. Surely if the industry were that profitable all the companies would be clamouring to get in here. Is it Mr. Murphy’s belief that companies are making profits in the motor insurance divisions? There are not that many players. We were told by one person that there are five players left in the market and then we were told there are 24 players in the market, of which 11 are registered in Gibraltar. We have got conflicting data. Then we were told there are only five major players and the rest of them are only small and they are online and are here or there or coming and going. Does Mr. Murphy think insurance companies are making profits on motor insurance in this country?

Mr. Ken Murphy

It was certainly suggested in the statement by the Central Bank that the current extraordinary surge in premiums was driven by a profit motive. The members of the committee will be glad to know that I have been following their deliberations online over recent days. There was an interesting exchange with Mr. Faughnan of AA Roadwatch. Senator Horkan began probing with questions about the extent to which these extraordinary and amazing increases of up to 70% over two years were to restore losses on balance sheets or in reserves, and whether they represented a prudent approach taken by an insurer or represented super-profits, and to what extent. Of course Mr. Faughnan replied that he did not know. This a perfect example of the extent to which data, insight and information can inform debate. We could actually know how much of the increase is super-profits and how much is completely justifiable, to what extent there is paranoia or excessive prudence being displayed now and whether the pendulum has swung to the other side. It is thematic in light of what we have being saying. It seems there is an absence of the level of insight that appears to exist in other jurisdictions and which could be, therefore, legitimately available. It seems to us that the Legislature could prise open what we call the black box, but unless that is opened it is questionable whether we could have the opportunity for more potential insurers. There are numerous other insurers in Europe that are not in this market. In those circumstances they may be able to see to what extent this is profitable work and determine whether they should come in and join the market.

Are the companies in the market acting in cartel-like behaviour?

Mr. Ken Murphy

Again, it goes back to what I was saying earlier. There seem to be certain behaviours that are characteristic of collusion, but I have no knowledge and I cannot therefore say. I am sure you would lecture me on privilege, Chairman, if I were to say that I know of evidence of actual cartel-like behaviour. Anyway, as a competition lawyer, I know that cartel-like behaviour is extremely difficult to prove.

We have heard of withholding of information or a failure to make information available. We heard this morning from the Irish Road Haulage Association of insurers not answering that organisation in an open forum on issues relating to insurance and so on. If we had the information our work might be far easier, or we might not be here now. Does that smack of an arrangement between the companies? Does it smack of anti-competitive behaviour?

Mr. Ken Murphy

If it is being done individually by each individual decision maker in each individual company, it is not illegal. If it is being done collusively in any way, then it is illegal. That is the question: is it being done collusively or individually? It is always desperately difficult to prove. Perhaps the committee will not have to worry about that if it sets out to open this up using a legislative mechanism.

Do you think there is a data protection issue?

Mr. Ken Murphy

It does not seem to be the case 90 miles north of here.

Mr. Paul McGarry

I think if the committee asked firms, they would probably say the data is commercially sensitive information or it is information that, if it were released, would give competitors information about the market and their behaviour in the market. That is a little hollow in light of the other information they are putting out, not to mention the purpose for which the committee is seeking the information from them - that is, to see whether they are acting in that way.

Mr. Stuart Gilhooly

Let us consider the experience Zenith had. The committee will be aware of the Zenith situation. Zenith, an insurance company, looked to come into this market. It sought data on what was going on here and did not get it. That was the express reason the firm said it would not join the market. There is a theory and we keep hearing stories about it. The line is that it is such a bad place to come and that the incumbent firms do not want anyone else to join the market. That probably makes sense. If a given firm was in a market, it would not want anyone else to join the market. That is the theory behind it. I will offer another example.

That means the firms in the market have to make a collective effort.

Mr. Stuart Gilhooly

They do not necessarily have to get together to do it. They may simply work it out themselves - I do not know. Obviously I am not privy to that. However, I can offer another example of one of the absolute untruths relating to Setanta - we have not touched on it today. The case of Setanta is consistently used as a reason why premiums have gone up.

That is absolutely not true. Setanta is a one-off, unless one includes Enterprise Insurance, which is a very small aspect of the total picture. Setanta is a €90 million claim at maximum, which, in the grand scheme of things, is very small. Once the Setanta case is over - and that will be very soon because it is being heard in the Supreme Court at the end of next month - I will wager any money that a new motor insurance bureau agreement will be signed in which it is made perfectly clear, in black and white, that any insolvent insurer will not be bailed out by the MIBI. That will be the end of that. The idea that companies are not coming here because they are afraid they will have to pay for other insolvent insurers is simply not right or, if it is right, it is the fault of the MIBI and the Minister for Transport, Tourism and Sport, who has it within his power to negotiate a new agreement. With the stroke of a pen they could solve the Setanta problem. They have chosen not to, presumably because there is ongoing litigation, but as soon as that litigation is over it will be done. Members may be certain of that.

It might be done between the two parties.

Mr. Ken Murphy

Between the State and the MIBI.

Mr. Stuart Gilhooly

The Chairman can be certain it will be done between the Minister for Transport, Tourism and Sport and the MIBI. It would be utterly foolish not to.

The book of quantum is there to reflect prevailing claims rather than to give guidance. Is that right? It is more a statistical, historical record of what is actually happening as opposed to what should be happening. The Judiciary has to have regard to it but need not stick to it. Is that correct?

Mr. Stuart Gilhooly

I am sorry to return to the Constitution on this but, unfortunately, that is the answer.

That is fine. I just wanted to confirm it.

Mr. Stuart Gilhooly

The answer is "Yes".

It is a statistical back-up as to what judges might do if they feel like it, though they do not have to.

Mr. Stuart Gilhooly

No, it is more than that. It is based on what judges have done in the past, but it is there to provide guidance to those judges who are not familiar with this work. People are appointed on a regular basis and may not have experience in that area.

Mr. Stuart Gilhooly

It is there to help them to make sure awards are uniform. They are not obliged to apply it absolutely across the board and they are entitled to take other factors into account. This is for constitutional reasons.

Is there any statistical information about how often awards are way out of kilter in relation to the book of quantum? Is there any statistical analysis that shows that, for example, in 95% of cases the awards were within 10% of the average?

Ms Sara Moorhead

No. One of the problems with the original book of quantum is that it is very non-specific. There may be an entry showing awards for a broken leg of between €30,000 and €80,000. The Injuries Board has 12 years of experience and this will allow it to produce a system similar to that in the UK, which is a much more refined and detailed system. The UK system has indices of injuries into which one can shoehorn more specific amounts awarded by the courts. It may give details of a person who has had a hip replacement, for example, who has had three years of difficulties and will require ongoing treatment but made a good recovery. There may be five factors in total and it is more specific. One of the problems with the current book of quantum is the wide range within it. The other problem with the book of quantum, although the Injuries Board has been dealing with this in recent years, is that it was not originally intended to assess psychological or psychiatric injury at all. People have mentioned whiplash injuries, but a significant part of what people go through with injuries is the trauma associated with them, and this often feeds into the award. The book of quantum is quite defective in that respect. It is to be hoped that when the new book of quantum comes out it will be a useful tool. If it is a useful tool there is no reason judges will not use it. It is in judges' interests to be reasonably uniform in their approach too, as they do not want the cases to be appealed.

That is quite helpful. I thank Ms Moorhead. It was said that 70% of claims were settled. Are most of them settled before going to the Injuries Board or afterwards?

Mr. Stuart Gilhooly

We do not have the data so we do not know.

It all goes back again to data sharing. This has been the case in every session we have had. Does Mr. Gilhooly have any idea of the proportion of legal costs as a percentage of the total cost of motor insurance claims?

Mr. Stuart Gilhooly

I do not think there are any statistics that relate to that. What we do know and what seems to be accepted is that only 10% of cases go to court. Therefore, presumably only 10% of cases are attracting legal costs.

People who go to the Injuries Board incur costs with the legal profession, as do people who settle, which is presumably a part of the overall payout figure.

Mr. Stuart Gilhooly

Anyone who incurs legal costs with their own solicitor is, of course, technically incurring a legal cost. I accept that. However, it is not an extra legal cost as such. It is still part of the same claim.

Is it paid out of the claim?

Mr. Stuart Gilhooly

It is paid out of the claim. The claimant has chosen to pay to lawyer. The claimant could not engage the lawyer if he or she chose not to.

It reduces their compensation.

Mr. Stuart Gilhooly

It reduces their compensation. It is a zero sum game. However, when a case goes to court there is a separate award of costs.

It is a zero sum game if the claimant only received the figure he or she would have received in any event. If he or she managed to get a better figure because he or she engaged with the legal system, that is his or her right. Nobody is saying it is not. However, if he or she is going to settle with an insurance company for €4,000 but goes off to the solicitor and is told he or she can get €40,000, he or she can get that sum and give the solicitor €4,000, €6,000, €8,000, or 50% of it for all I know-----

Mr. Stuart Gilhooly

They do not.

I am not saying they do, I am not saying they do not. I do not know. However, there is an issue there in that it is a settlement that has not gone to court, yet it involves a potentially significant amount of legal costs and we do not have any data on that either.

Mr. Stuart Gilhooly

We do not, that is correct.

I move on to my last question, which I have asked of everybody else at this stage. Mr. Murphy might have seen me asking two previous witnesses. If the witnesses were sitting here in the committee when Insurance Ireland come before us, as I think they are to do on Thursday-----

Mr. Ken Murphy

Can we?

You can sit in the Visitors Gallery but you probably cannot sit here. What questions would you like the committee to ask Insurance Ireland? We have probably covered them already.

Mr. Ken Murphy

We probably have. There is a theme that we have not considered here but I believe we are all in agreement on it. We have heard how technology can improve and reduce the incidence of uninsured driving, which is clearly a serious factor here, but that is uncontroversial. The insurance industry is hardly likely to admit it if it was involved in an agreement, decision or concerted practice which had the object to effect a prevention, restriction or distortion of competition in the EU or if it was involved in anything anti-competitive.

It could not admit that even if it was.

Mr. Ken Murphy

Its lawyers would tell it not to. The committee has all the questions. How has this situation come about? Let us hear the answers. The committee is in a position to really probe the answers in a way some quarters in the media have not done.

Thank you. I have the same question for Mr. McGarry on behalf of the Bar Council.

Mr. Paul McGarry

No. I was struck by one comment that the Senator made earlier in regard to people who had been before the committee this morning talking about fraud claim tourism. We dealt with that earlier on. It strikes me that if people have information about that type of activity they cannot simply assert that this is going on without knowing more and having facts at their disposal. Why is that not being prosecuted? Why are they not taking those cases? It does not make any sense to us.

These are things that we heard this morning. I had not been familiar with that concept until this morning and I am sure many others were not. Perhaps it only ever happened once. Certainly, it was asserted that it was-----

Mr. Paul McGarry

Commonplace.

The assertion was made this morning and the committee needs to tease it out.

Mr. Paul McGarry

I do not want to add anything to what was said.

I thank the witnesses for their contributions.

The book of quantum is a kind of history book of settlements that were made by judges. Is that right?

Mr. Stuart Gilhooly

Essentially, it is. It is based on a trawl through the awards made prior to the setting up of the Injuries Board-----

There is no mystery about it.

Mr. Stuart Gilhooly

I would not have thought so, no.

The book of quantum that is being prepared now is based on 2014.

Mr. Stuart Gilhooly

Yes, as we understand it.

Ms Sara Moorhead

It would be a useful question to ask the Injuries Board. We think it may be engaging with the insurance companies in about 70% of those cases. If it is getting the information it is a much more realistic picture because it does not only involve judges' awards, which are quite a small number because only 10% of cases go to court. However, we do not know and we never received confirmation as to whether the insurance companies are giving the Injuries Board all the information on the cases they are settling. If they are, that will be a useful tool.

Is it okay to have it up as far as 2014?

Mr. Stuart Gilhooly

Does the Chair mean that it should be closer to now?

Yes, is that information timely?

Mr. Stuart Gilhooly

I would certainly take the view that it probably should be a bit more recent. As we said earlier, the awards have dropped at a certain level.

Mr. Stuart Gilhooly

They have dropped over the past nine to 12 months. The answer to the Chair's question is "No, it is not okay". I think it should probably be more recent. We do not know that it is not. I am not privy to what they are doing.

The reason I ask is that many comments have been made about the book of quantum. Even though everything is sort of reliant on the book of quantum, according to what we hear, it is only going to reflect claims up to 2014. Changes have taken place from 2014 up to now.

Mr. Stuart Gilhooly

I think the Chair is right about that. If it is the case that it is only up to 2014 - I do not know whether that is the case - I think that is probably a flaw in it.

It goes back to how the position here can be similar to that in the UK, where there is more information and so on in it. I hope that might be the case here.

Mr. Stuart Gilhooly

I understand they intend to update it every three years from here on in. That is what I have been told, but I do not know whether that is actually correct. If that is the case, it will certainly be more useful.

I want to return to a question I asked earlier. Senator Horkan touched on this issue as well. When one goes through the Injuries Board process, one gets to the point at which a figure is suggested. It might be €10,000 or whatever. The claimant has to pay his or her solicitor from that amount. At that point, the possibility must be considered that he or she might get a large amount if he or she goes to court with a barrister. There is a gig in it for the barrister as well. They all end up in court. I refer to the barrister, the solicitor, the claimant and so on. How attractive is that, or how often does it happen?

Mr. Stuart Gilhooly

Maybe if I could explain-----

Is that where the real legal fees arise?

Mr. Stuart Gilhooly

No. I am not sure whether the Chair was here earlier when I said that if there is one question that solicitors have to consider, it is whether an offer is the right one. It does not matter if it is the first offer or the tenth offer. It is a question of whether it is the right offer. The right offer might come after two months or six years. My professional obligation is to make that call. The question of whether a barrister is getting a gig, as the Chair put it, is neither here nor there. The only question that arises is whether I think an award represents the right sum of money for the claimant in the context of the injury suffered by him or her. If the right sum of money happens to be an Injuries Board award, I will advise him or her to take the money all day long. If I think the proposed award is inappropriate in the context of the injury he or she has suffered - if I think it does not represent proper compensation - I will advise him or her not to take it. Clients do not always take my advice, by the way. Sometimes they take the money anyway. Sometimes I advise them to take the money but they decide not to do so. That is just the way it is. I cannot make them do it either way. All I do is advise. It is not about a gig. It is all about the work we do. It does not make any difference to me when the case is settled. In a way, I prefer to get it settled quickly. If I have a settled case, that means I have a happy client and a closed file and I will be paid. There is nothing in it for me to go further. If I have to go further, I will have to do more work, for which I will hope to be paid.

Mr. Gilhooly will be paid for it.

Mr. Stuart Gilhooly

That is correct. I agree. If I still have to do the work, that means I am not doing work on another file. It is not a question of making big money. The Taxing Master regime we have in this country, and which we will continue to have under the new legislation, ensures one gets paid only for the work one does. If I am working on a file, I am not working on another file. I am happy if my client walks out the door with compensation at an early stage, without having had to pay much for it, and is able to say, "Stuart Gilhooly is a good solicitor, you should go to him if you have an accident". That is what I want.

Mr. Gilhooly got some advertising there anyway. He cannot do that.

Mr. Stuart Gilhooly

Clients do not like going to court. They hate it. They really do not like it. They much prefer to settle and settle early.

Is it not the case that solicitors and barristers like going to court?

Ms Sara Moorhead

Not necessarily.

Mr. Stuart Gilhooly

We are not that mad about it. We prefer to settle as well.

Ms Sara Moorhead

I can tell the Chairman that the common theme he will hear from solicitors who work for insurance companies at the moment is that they are told they have failed if they cross the bridge at the Four Courts to negotiate these cases. For the past two or three years, insurance companies have been firmly intent on not using barristers until the last minute.

Someone can often get a telephone call the day before asking them to take on a case. They are cutting back on the use of them even for plaintiffs. I am afraid that barristers getting a gig is becoming a diminishing position for plaintiffs and defence. In fairness to Mr. Gilhooly, if he gets a good offer for his client early on, he does not need a barrister to tell him it is a good offer and, therefore, he does not retain a barrister. Therefore, the barrister does not get anything out of it. I do not think the question of whether the barrister is going to get a gig is something with which solicitors are going to concern themselves, nor should they.

Mr. Stuart Gilhooly

We just do not.

And you believe that?

Mr. Stuart Gilhooly

Sure.

Our job here is to try to find a solution to reduce the costs of insurance. Ms Moorhead mentioned two areas that would be a start. They are the appointment of a legal costs adjudicator and a revised book of quantum. Whose job is it to revise the book of quantum?

Ms Sara Moorhead

The Injuries Board is carrying out the task but the level of information it is going to have available to it is a little opaque at the moment. Perhaps the committee might ask representatives from the board about that when they appear before it. We understand that not only will the board have available to it the judicial awards, which is not a full picture by any means, it will also have available to it the data from the insurance companies concerning the cases they are settling. The board should then be in a position to particularise the injuries in a more detailed fashion and set out narrower parameters than the ones it has had to date so that when lawyers and judges are dealing with it, there can be a realistic shoehorning of the injury into the parameters of those awards. We thought it was going to be this term but by January 2017, it is hoping to have the new book of quantum in place. If it is a realistic document in terms of the day-to-day approach, there is no reason it will not be used by the lawyers, the litigant and the judges.

Was a book of quantum in place before the Injuries Board was established?

Ms Sara Moorhead

No, it is a creature of the 2004 Act.

Whose is responsible for the legal costs adjudicator?

Ms Sara Moorhead

That is a matter for the Minister. It is a matter about which we are very concerned. There has been a considerable hiatus in the taxation of costs, which I will not go into here. We are surprised that there has not been more of an impetus to get that portion of the Legal Services Regulation Act up and running because it is a very detailed provision in respect of legal costs. It is very transparent and is supposed to be self-financing. It has been welcomed by all the representative bodies and there seems to be no reason there is a delay in it. There are significant backlogs relating to the awarding of costs. Again, this is not an issue for today but it is a real issue, particularly for plaintiffs' solicitors who are funding litigation on an ongoing basis such as catastrophic injuries cases where they are simply not getting their costs dealt with. There is no reason the costs provision should not be up and running and it will be good for everyone if it is.

It is only a question of the Minister for Justice and Equality making the order.

Ms Sara Moorhead

Exactly.

Mr. Ken Murphy

The Law Society of Ireland's position is that the sooner that happens, the better because the current system is in deep trouble and the uncertainties around it need to be resolved by the activation of the new legislative provisions.

On 20 April, the Minister for Finance identified a range of possible factors that contributed to the increase in the costs of motor insurance in Ireland in the past 12 months. Among the reasons noted by the Minister were the frequency and scale of claims, the cost of claims and the operation of the insurance market. The Minister noted an increase in the frequency of claims over the past year, which he advised was associated with improving economic conditions, and also referred to an increase in the number of large claims. Reference was also made to the increase in the jurisdiction of the Circuit Court since February 2014, which the Minister said may possibly lead to increased legal costs. The Minister for Finance, who has all of the information available to him from the Central Bank and so forth, said quite clearly on 20 April that an increase in legal costs could be the cause of the increase in the cost of motor insurance.

Mr. Stuart Gilhooly

With all due respect to the Minister, the comments he made sound fairly wide-ranging. There are a couple of things there with which we need to deal. The suggestion that there has been a widespread increase in claims is not borne out by the statistics.

In fact, there has, as we understand it from the Injuries Board, been a 6% increase in claims. The board tells us - and it is independent - that this is in line with what is to be expected in the economy, which is improving so there are more people on the roads, going to work, etc. It is fully to be expected that there would be an increase in the number of accidents and claims as a result.

The reference to the jurisdiction change is interesting. The jurisdiction change was carried out by the previous Minister for Justice and Equality, Deputy Shatter, almost three years ago, in February 2014. In almost unique circumstances, that I can recall, the insurance industry and the legal profession were in complete agreement that it should not happen. Dorothea Dowling was very clear it should not happen. As far as I am aware, there was only one person in the entire country who thought it should happen, and that was the then Minister. He changed those jurisdictions. I think that was a mistake. I do not think it should have been done but that was a decision made by Government and not at the behest of anybody else. It could be changed back, although I doubt it will be. Even when considered logically, let us just assume - as it has happened - that if there are more cases now in the Circuit Court, presumably there are fewer in the High Court, which means the legal costs should be lower because Circuit Court costs are generally lower than High Court costs. There are fewer barristers and the fees tend to be lower. That does not make any sense. The argument is that damages are a little higher in the Circuit Court, and they are because the jurisdiction went up. That is inevitable. I am not sure, however, that it makes any sense about legal costs. I am not sure where the Minister is coming from in his point about the legal costs. There are many general comments in there but I am not sure there is anything specific.

Is Mr. Gilhooly saying that the Minister's information is not accurate?

Mr. Stuart Gilhooly

I am not saying that at all. I am simply saying there are no specifics.

Ms Sara Moorhead

One of the issues the Senator must remember is that the Minister talks about very large awards and to a large extent they are not motor insurance awards. They are generally catastrophic injury awards, such as birth defects. There has been a substantial increase in the number of medical negligence cases, which has doubled since 2009, and in the value of the awards relating to them. One of the reasons for this, and it is a matter for politicians rather than lawyers, is that the real rate of return on investments has been adjudicated by the High Court and the Court of Appeal to be only 1%. This means that if a person is buying in care for a catastrophically injured individual the value has gone up hugely. The answer to that, which has been advocated by all representative bodies, is to bring in periodic payments. That means paying on an annual basis only what it is required to pay. If the plaintiff dies ten years later that is the end of the settlement but if the plaintiff lasts to 90 years of age that continues. That is included in the assessment of the overall matter by the Minister for Finance.

In our submission, however, we make clear that there is no evidence of significant increases by the Injuries Board or by the Central Bank because when it did its thematic review it also made the point that the only increases it expected to see were in the order of 8%, based on the improvement in the economy rather than any massive escalation in awards or legal costs. Premiums have gone up 38% in a year and 70% in the past three years. There is no evidence of a statistical increase of that magnitude in awards, claims or costs. This is not coming from us. It is not insurance bashing. This is coming from the Central Bank, from the briefing document to the Minister for Transport, Tourism and Sport and from the Injuries Board, all lawyer-free zones.

The Minister set up a working group. Did the Bar Council make any submission to it?

Ms Sara Moorhead

We did. We asked to be represented on it. I think the Law Society did the same. It has been indicated that we will be represented on it. Part of the reason for today’s discussion is that we would be here and co-operate with the committee on that.

Mr. Ken Murphy

Is this the working group under the Minister of State, Deputy Eoghan Murphy?

The Minister for Finance, Deputy Noonan, set up a working group.

Mr. Stuart Gilhooly

I think it is the Minister of State, Deputy Eoghan Murphy’s group.

It is the Department of Finance, yes.

Mr. Stuart Gilhooly

We are attending there on Thursday.

Mr. Ken Murphy

Thursday afternoon.

Mr. Stuart Gilhooly

We made an application to be represented and, in fairness, we were accommodated immediately. We are very pleased to go in and assist the Minister of State.

In its submission today the Law Society calls for a new task force along the lines of the Motor Insurance Advisory Board, MIAB. Is there a difference between the task force and the review committee set up by the Department of Finance or the Minister for Finance?

Mr. Stuart Gilhooly

Yes, we would see a task force like the MIAB one that existed in the past where there is a collection of experts who have experience in the insurance industry who would be able to drill down to the problems that exist and find a way to obtain the missing data.

We would love to be represented on that because we have the expertise. We are involved in the system. In the past we were never involved in any task force. We know the system. That is what we do. What is required is people with expertise sitting down and saying how can this be fixed.

Is Mr. Gilhooly saying that would be a better way forward than just having a working group?

Mr. Stuart Gilhooly

Yes. That is what we are saying.

We have now come to the end of today's session. I thank all the witnesses for attending. I appreciate their submissions. We will draw the meeting to a close until tomorrow morning at 11 a.m.

The joint committee adjourned at 4.17 p.m. until 11 a.m. on Wednesday, 14 September 2016.
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