A Look at the Government’s Action Plan for Insurance Reform
At the heart of the Government’s Action Plan for Insurance Reform is to reduce the cost of claims in the market for the benefit of policyholders. A formal working group chaired by the Tánaiste was established in September 2020 to deal urgently with Insurance Reform.
The Action Plan highlights a number of principal actions. The most welcomed is the recognition of the Personal Injuries Guidelines Committed under the Judicial Council. The Judicial Council is to adopt and publish Personal Injuries Guidelines to replace the Book of Quantum by July 2021. The commencement of Sections 98 and 99 of the Judicial Council Act 2019 will provide that: (a) the Personal Injuries Assessment Board (PIAB) will no longer be responsible for preparing a Book of Quantum, and (b) the court shall, in assessing damages in a personal injuries action, have regard to the Personal Injuries Guidelines and, where it departs from those Guidelines, state the reasons for such departure in giving its decision. The extent to which the new guidelines will reduce personal injuries awards remain to be seen, but they will undoubtedly result in more consistency in the assessment of damages for personal injuries claims in the future.
The strengthening of PIAB will deliver better value for consumers in the long run. PIAB would see a strengthening of their ability to settle cases so that less claims go to the courts, where the legal costs add so much to the overall cost of settling claims. For the majority of cases, that go through the legal route after PIAB, the average compensation is only marginally higher than the amount for a case that was dealt with through PIAB. This is where the claim becomes expensive for the insurance company and the knock-on effect is felt by the policyholders.
Another corner stone in the Action Plan is Government’s commitment to review the duty of care laws. The balance of duty of care applied to policyholder has been skewed in favour of the claimant and long overdue rebalancing is essential for the reform to work.
Another welcome action is the commitment to tackle insurance fraud. The high levels of compensation awards have recently proven profitable for fraudsters. The Plan contains provisions to prosecute perjury and fraudulent claims to be forwarded to the Director of Public Prosecution. This would act as deterrent for people who tell lies in court and exaggerate an injury. There would be consequences where there are none now.
A new office will be set up to increase competition in the insurance sector. This will be an enormous benefit to consumers and for economic recovery after Covid-19. The Central Bank of Ireland is to review and publish a report of differential pricing practices which in turn will provide transparency for the consumers. Other actions include expanding the National Claims Information Database and enhance powers of the CCPC. The Action Plan has the ingredients to produce a stronger, more stable insurance sector for consumers and insurers alike.
This Reform has the potential to reduce the high and inconsistent cost of claims. The Action Plan might seem another well intentioned Reform on paper, except this time it is different, as it has whole-of-government approach.