THE GOVERNMENT IS two-thirds of the way there when it comes the action it needs to take to bring down the cost of insurance, according to Minister of State at the Department of Finance Michael D’Arcy.
In an interview with TheJournal.ie, the minister defended progress made by the government to date in making necessary reforms in insurance but admitted that progress has been slower in some areas than expected.
His comments to us came before a tumultuous few weeks for the government over insurance, with Minister for Children Katherine Zappone announcing a one-off payment of €1,500 for creches struggling to meet the cost of insurance.
Also this month, a Central Bank report revealed that motor insurance in Ireland has risen by 42% in the last decade despite a 2.5% reduction in the average cost of individual claims over the same period.
Despite this, one of those key areas of reform when it comes to insurance is lowering the injury payouts issued in insurance claims, according to the minister.
Highlighting a specific area of the Personal Injuries Assessment Board’s Book of Quantum – which gives an approximate level of damages for injuries – D’Arcy said that being awarded €19,000 for a sprained finger was a “ridiculous figure”.
He also said that another area that must be tackled is the “easy-money mindset” from insurance.
For every fraudulent claim, there are “dozens and dozens of exaggerated claims” that are driving premiums up, the minister suggested.
D’Arcy also said his own car insurance premium has fallen in the past year, and said he has heard anecdotally that others have had theirs fall too.
Progress to date
By the time Fine Gael formed a government again in 2016, it was clear that the cost of insurance had spiralled to such an extent that action must be taken.
After bottoming out in early 2008, motor insurance prices began a steady climb which eventually saw premiums doubling by mid-2016, according to official CSO stats.
There are no official statistics on other areas of insurance, such as public liability for businesses, but business groups and bodies have said for years that insurance has become far too high.
Another example that hit the headlines recently was that of Galway Community Circus, who said last month they had been hit with an almost €20,000 increase to their premium in the last few years. In August, a leisure centre and swimming pool in Kildare said it was forced to shut down due to an insurance quote that was four times what it had been paying previously.
In May, an outdoor adventure centre in Dublin was forced to remove some of its equipment after an insurance hike. Adventure centres in Meath faced closure over “ridiculous hikes”.
The Cost of Insurance Working Group was set up by the government in 2016 to come up with a plan to tackle these high costs. Their first report in January 2017 came with 71 suggested actions that could help to do this.
Fast forward almost three years and, while many feel that not enough has been done and people still face unacceptably high premiums, the minister who has responsibility for insurance thinks that significant progress has been made.
D’Arcy told TheJournal.ie: “I suppose we’re two thirds of the way there. The biggest issue we have are the levels of awards.
I know everyone wants to talk about fraud, and the really dodgy fraudulent claims where people stage an accident. But for every one of those we have dozens and dozens of exaggerated claims where people have been impacted through no fault of their own and they have exaggerated their claim.
The minister was clear what he believes the biggest problem is in terms of high awards, and insurance companies have consistently pointed to the high number of awards decided by courts as a key contributor to insurance premiums.
However, a recent investigation by TheJournal.ie‘s investigative platform Noteworthy found that the total awards for personal injury cases and the average award fell significantly between 2014 and 2018 while premiums were rising at the same time.
Similarly, that significant report by the Central Bank earlier this month revealed that the cost of car insurance has risen 42% in the last decade, despite an overall reduction in the number of claims. Micheál Martin told the Dáil that a “greedy” insurance industry had “spun a false narrative to maximise profits”.
In meetings with Minister D’Arcy, the legal profession refuted claims that it had played a role in rising premiums by bringing spurious claims forward. According to a note made of a meeting between the minister and the Law Society in April, the latter’s “main issue today was that it believed that the focus of reform should be on insurance premiums and not on the level of damages paid”.
Businesses then bear the brunt as they face higher premiums even though they may not have even had a claim made against him. As the specific examples above highlight, that climate has been made much harder with the departure of insurers particularly in the leisure and now childcare industries.
The minister has continued to liaise with the insurance industry, the legal industry, businesses and the gardaí as he tries to ensure premiums come down.
He said that he has to try “bring them all along” with him in the reforms.
“So you know, I might get annoyed one day with insurance companies,” he said. “Other days, I get annoyed with lawyers or I might get annoyed with judges but in the main I just have to plough on and make sure we have a good sector.”
‘Nobody said stop’
D’Arcy said that reforms have been brought in in a number of areas, but he firmly believes that payouts need to come down before premiums can in a way that benefits a large number of individuals and businesses.
“My role is there to try to protect the sector so that if somebody is injured in a claim, or in an accident and there’s a damage against them to no fault of their own and it’s serious – I want to make sure we have a properly functioning sector, so that person is correctly compensated,” he said.
I don’t want to see people getting a large amount of money for a very small injury. I want that to end.
He said that in cases when someone has a legitimate injury, the level of award is often disproportionate.
D’Arcy said it’s “ridiculous” that someone could get €19,000 for a sprained finger.
“If we get those types of awards down, we deal with the whiplash issue, and the soft tissue issue, I think we will have a much better, stronger, structure,” he said.
The latest step towards that is the creation of the Personal Injuries Guidelines Committee of the Judicial Council. Made up of seven judges who were appointed last month, it will compile a report and publish new guidelines on payouts in such cases.
Before this, it was at the court’s discretion on how much to award depending on the cases that came before it. This approach aims at delivering new guidelines underpinned by legislation and senior judges.
The minister spoke positively about the potential for this council to provide the guidelines that will help reduce payouts in the future.
D’Arcy admitted that this wasn’t set up as quickly as he’d have liked, and faced a rebuke from Chief Justice Frank Clarke in a statement last month who said there “could be no basis in fact” for suggestions the work of this committee would see payouts drop by more than 15-20%.
“We’re all here to help in terms of what’s to be done,” the minister said. “But the challenge and the chief justice did highlight this challenge is that there is potential there if somebody wants to challenge it legally.”
And if that doesn’t achieve its goal of reducing payouts and ultimately premiums, Taoiseach Leo Varadkar has said the possibility exists for a referendum to be held on capping insurance payouts. “We should not rule out a referendum down the line if the existing reforms that are planned do not work,” he told the Dáil in October.
D’Arcy admitted that it’s not a direction he wants to go in and described it as a matter of “last resort”.
But how did it get this bad in the first place?
The minister said: “I have no idea. I’m not being glib on this point. But nobody said stop.
So we’re going to do all this work to try and improve the sector. But it does evolve pretty rapidly… There will always be people who will want to try and get easy money out of insurance. I have to say ‘stop’. And I want to eradicate the easy money mindset from insurance.
Before the government gets to that point, however, hundreds more companies and organisations will be put at risk in the face of higher premiums. They need premiums – as well as payouts – to come down sooner rather than later.
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