Lies, Damned Lies & Statistics - How the insurance industry fooled the Irish public
Updated: Sep 16, 2019
Insurer liability and motor claims has barely changed in a decade despite suggestions that Ireland’s rampant ‘compensation culture’ has been behind the country’s recent insurance crisis. There is a growing feeling that the insurance companies are using the 'compensation culture' angle to their benefit. In the words of solicitor Peter McDonnell,
"Insurance Companies are lying to the Irish people and laughing all the way to the bank"
And over the past four years, official awards for personal injuries have fallen significantly – contradicting allegations that growing claim numbers and out-of-kilter payments for minor injuries have fed skyrocketing premiums.
An analysis of insurance and compensation data by Noteworthy, the investigative journalism platform from TheJournal.ie, has found:
Total awards for personal injury cases fell 28% between 2014 and 2018 in spite of rising premiums;The average award dropped 19% during the same period;Major insurers’ spending on motor and liability claims barely changed between 2017 and 2013, despite their premium income climbing 57% in the same four years;Much higher reinsurance spending – the price of insurers covering risks to their own businesses – rather than higher claim costs has been the largest single factor that has affected firms’ bottom lines in recent years.
Instead of suffering a recent explosion in spending on insurance claims, firms’ costs for motor and liability cases were greater in 2005 than in any year since.
Stuart Gilhooly, a former president of the Law Society of Ireland, said the narrative that Ireland had a compensation culture rife with high payouts and exaggerated claims was an attempt by insurers to drive down compensation claims to shore up their finances.
“They have very carefully ensured that any claim they see as being fraudulent or where the payout appears too high is emphasised in the media; they have used this as an excuse for why premiums are so high, but that isn’t borne out in reality,” he said.
We’re being fed this lie – and it is a lie – that damages are the main driver of premiums, when quite simply they aren’t.”
The makings of a crisis
After bottoming out in early 2008, motor insurance prices began their steady climb, almost doubling by mid-2016 before easing around one-third, according to figures from the CSO. Prices are still 48% higher now than at their lowest point just over a decade ago.
While there is no official data on costs for insurance in other areas – such as public or employer’s liability costs for businesses – indigenous firms have for years complained about the rising costs of insurance or, in some cases, difficulty in getting cover altogether.
The crunch in the insurance industry was exemplified recently with the withdrawal of Leisure Insure from the Irish market, leading to concerns that firms in the adventure sector would go to the wall due to higher premiums or their inability to get insurance.
Peter Boland from the Alliance for Insurance Reform, a group made up of various business and voluntary organisations, said it was clear to everyone with an interest in insurance that there was a crisis – but the absence of clear information meant that it was hard to diagnose the cause.
There is a growing fear among small business owners that the ever rising premium
But there is little evidence that more frequent or higher personal injury payouts are behind the huge increases in insurance costs in recent years – and, in fact, the available evidence points to the fact that overall claim payouts have already been trending down.
In 2013, some 8,131 personal injury awards were either accepted after a PIAB application or decided by the courts. Last year, this figure was up to 8,351, although both figures are lower than the 8,997 awards decided in 2014.
The total value of all these awards, when medical negligence cases are excluded, was €239 million in 2018, the lowest tally for any of the past six years and 28% below the equivalent figure for 2014.
The figures run counter to general trends in the country and economy, in which major gains in employment since the recession have led to more cars on the road, people in workplaces and other factors likely to result in increased insurance claims.
The insurance working group noted in its 2017 report that the available information showed claims had only a “moderate impact” on premiums between 2013 and 2015.
That was despite both the industry and other stakeholders repeatedly pointing to increased claim frequency and costs as the primary reasons for higher premiums, according to the same group.
The share of premiums paid by customers that were flowing out of insurers’ coffers again in claims peaked in 2013. That year, net motor and liability claims were worth about 82% of premiums taken in for the same sectors. In essence an operating profit of 18% for the insurer on these premiums.
By 2017, this ratio had dropped to only 53% – meaning the firms were paying out just 43 cents in claims against every euro paid for a premium.
The ratio of net claims to premiums in 2017 was the lowest for any year since 2007.
Back in the black
In recent years, insurers have returned to profit after posting combined losses through the late recession and on into the recovery period.
In 2017, Insurance Ireland members posted an estimated profit of €227 million, up from just €16 million in 2016 and a loss of €216 million a year earlier.
This has led to suggestions that profit-taking, not claims, was the main reason behind high insurance costs.
The bottom line for customers
Despite the data suggesting reducing whiplash awards and cracking down on fraud will have little overall impact on prices as these make up a relatively small component of total payouts, any cuts in awards should eventually feed into some premium reductions – as long as the savings are passed on to policyholders.
Boland, from the Alliance for Insurance Reform, said businesses believed both insurance awards and claim numbers, particularly for what he referred to as “paracetamol injuries”, were too high.
But he added there was no evidence of increases in these areas that justified the huge premium rises since 2014.
Financial Blueprint of a Medical Negligence Case
Medical Negligence and personal injury cases are often a topic of conversation in Ireland. A case is built on the strength of expert reports and testimony. The ancillary costs are driven up by lack of access to salient medical records and details. This further underlines the need for mandatory disclosure and the need for patients to have live access to their own updated medical records.
At Peter McDonnell & Associates we know from experience that the single greatest cause of worry for clients is the issue of legal fees and costs. People worry that before a case commences or at the end of their case, they will be presented with a large legal bill that will be impossible to pay.
You can speak to our expert medical negligence team by contacting us on 087 2285247 or firstname.lastname@example.org
*In contentious business, a solicitor may not calculate fees or other charges as a percentage or a proportion of any award or settlement.