Mr Noel Treacy, Minister for Science, Technology and Commerce, recently announced the Government's intention to establish a Personal Injuries Assessment Board (PIAB). This development arises from a report containing the recommendations of the Special Working Group on Personal Injury Compensation.
The proposals present positive challenges to the insurance industry, the legal profession and the Government, and are a welcome step to improving efficiency and reducing legal costs associated with the current claims settlement system.
In essence, the PIAB will decide on compensation for injured parties quickly and in an un-intimidating environment. The intention is not to reduce the amount of awards to injured parties but to obtain savings in the costs, particularly the legal costs, and time involved in resolving claims. At present, legal proceedings issue quite quickly and solicitors employ counsel at an early stage. This requires insurers to employ solicitors to handle the legal proceedings. In my company's experience, few solicitors are prepared to enter settlement negotiations on their own. The norm is to engage counsel to negotiate on their behalf due, in part, to concerns of professional negligence claims. The special working group's report found that counsel were engaged in more than 75 per cent of cases in the Republic but less than 3 per cent in Britain. Coupled with the much higher awards in this State, one can appreciate why insurance premiums are higher in the Irish market.
The report also highlighted the high level of costs involved in delivering personal injury compensation - current rates are between 25 per cent and 40 per cent of the compensation figure. Our experience in Royal & SunAlliance confirms these figures. The majority of claims, typically those with awards of up to £30,000 (€38,100), incur the higher ratio of 40 per cent and only the very large claims produce a ratio of 25 per cent.
It is likely that injured parties will still engage solicitors. However, there should be less work involved in submitting a case to the PIAB and the engagement of counsel may not be necessary. With the PIAB, the injured party will be required to formulate his/her claim at an earlier stage, leading to a greater degree of certainty and facilitating an earlier settlement.
Within many insurance companies, the expertise exists to make submissions directly to the PIAB, thereby eliminating defence costs in such cases. Also, quicker settlements will reduce the work to be done, saving on administration costs.
The PIAB will decide only on quantum and not on liability. The working group report recommends that the board should not consider issues where liability is totally rejected by the defendant. However, the board would not be precluded from taking into account contributory negligence. I believe this is a key element if it is hoped to maximise the number of cases handled by the PIAB. To be successful, it will be important that the use of the PIAB is widespread and that the levels of awards are similar to those available by the litigation route: this has been promised. Obviously, if an injured party is dissatisfied with an award from the PIAB, then the traditional litigation route is available. However, to avoid the board being perceived as a layer of bureaucracy and costs, the PIAB award would need to be treated by the courts in the same way as a lodgement or tender. By this method, if the court does not increase the PIAB award, the defendant should not suffer additional costs because of unreal expectations by the injured party.
The PIAB also promises to introduce a greater degree of consistency in award levels and this should result in faster turn around times - even before referral to the board. At first, the PIAB will only consider employers' liability claims and the aim is to have this operational early in 2002. It is likely that consideration of motor injury claims will follow fairly quickly.
I believe the board will be an important component of a claims settlement philosophy that focuses on the rehabilitation of claimants. The PIAB, however, cannot exist in a vacuum. Social, legislative and cultural changes must be fostered so that the full benefits of these proposals can be realised.
The initiative should be viewed in a positive light, particularly at a time when insurance premiums are under pressure to increase. Tangible opportunities to control and reverse this trend are welcome and I wish Government well in its endeavour.
Eamon Hurley is director of Insurance Operations at Royal & SunAlliance Insurance
