'You can have high court awards or cheap insurance – not both'

FBD chief executive Fiona Muldoon has never been afraid to speak her mind and usually cuts to the chase.

"You can either have high High Court awards or cheap insurance – you can't have both," she told The Irish Times last week, following the publication of FBD's half-year results that showed a €3.6 million loss for the period, having hiked premiums by an average of 7 per cent.

Muldoon expects to put through a 9 per cent average rise in motor premiums over the next year to meet the cost of increased claims, rising court awards and having to pay its share of the likely €90 million the industry will have to cough up for the collapse of Setanta Insurance in 2014.

As a first step, Muldoon has called for changes to legislation around how the Personal Injuries Assessment Board works. She wants PIAB to be put on a stronger footing, forcing claimants to go to the board before heading to court.

Muldoon says this would help to reduce the need for expensive lawyers and medical experts, at a time when 70 per cent of bodily injury cases are soft tissue injuries – whiplash, bruising and the like – and 50 to 60 per cent of costs associated with court awards are paid to lawyers.

Her call echoes that of Insurance Ireland, the sector’s representative group. In July 2014, Insurance Ireland made a four-page submission to the Department of Jobs and Enterprise, which had launched a public consultation on the PIAB acts earlier that year.

Medical checks

Among other things, Insurance Ireland argued that claimants should have to attend medicals arranged by PIAB. Those who refuse should not be entitled to legal costs in any subsequent litigation, it said.

It also wanted an amendment whereby a claimant who is found to have deliberately made unsustainable claims in their application to the board should not be entitled to any order for legal costs in litigation.

Insurance Ireland also recommended that the limitation period for submission of the application to the board be cut to one year and that “where an authorisation is issued, that proceedings must issue within three months of same or two years from the date of the accident, whichever is the later”.

At present, the limitation period is two years, with the clock stopped during the PIAB process. A claimant is then allowed six more months from the date the claim is released by the board.

More than two years on from that consultation process nothing has happened. The Fine Gael-led minority Government has established an inter-departmental group to look at the issues around the cost of motor insurance and to make recommendations.

It is due to hold its next meeting in the first week of September and is effectively reporting to Eoghan Murphy, the Minister of State for Financial Services.

Murphy is keen to get things done while he is in office. Insurance is a punter-friendly topic so we can probably expect some movement on this issue on his watch.

Insurance costs up 38%

The pressure is on for action,as the latest CSO figures showed that motor insurance costs rose by more than 38 per cent in the year to July and many radio and television programmes – as well as column inches – have been devoted to the topic of the rising cost of premiums.

Not that it is all down to the Government. The sector itself has to change the way it operates. For too long, the biggest players chased market share by reducing the cost of their premiums to unsustainable levels. They relied on income from investments to bail them out.

The sharp reduction in investment returns left them badly exposed at a time when court awards were also ticking up and the number of claims was rising as the economy emerged from recession and more drivers took to the roads.

It could also be argued that insurers paid too little attention to combatting fraudulent claims and that they unwittingly helped to stoke the compensation culture with generous out-of-court settlements designed to avoid the costs of going to court.

Muldoon, a former Central Bank executive, would accept these points and she has significantly restructured the way FBD does its business, exiting a number of segments in which it was losing money.

There are lots of moving parts when it comes to the rising cost of motor insurance here and it will require a multi-faceted solution. There will be no quick fix to this thorny issue.

But Muldoon is probably right in suggesting that changes to the PIAB legislation are the “easiest place to start”.

Over to you, Minister.