The publication of another report confirming that the volume and value of personal injury insurance claims is rapidly falling has led quickly to renewed calls for the savings to be passed on to customers in the form of lower premiums. They have fallen on deaf ears.
This week’s report from the Injuries Resolution Board confirms a trend that has been evident for several years now and is driven by a number of significant reforms, the most important being the adoption of judicial guidelines for personal injury awards in 2021. They dramatically reduced the size of awards in comparison to those made under the book of quantum that was previously used by the courts.
The IRB – a state agency that offers a lower cost alternative route to resolving injury claims – reported a 40 per cent reduction in the volume of claims between 2019 and 2023 and said the trend continued into 2024. The value of these claims is down 37 per cent on 2019.
However, the IRB is just one route by which claims are progressed, and it currently only accounts for around 20 per cent of claims that are settled. Almost half of motor insurance injury claims are settled directly with insurers, as this is often seen as the most expedient route.
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The balance are settled through litigation via the courts, which takes an average of 5 years. According to the Central Bank, there have not yet been enough injury actions settled through litigation to assess the impact of the new guidelines on cases that go through this channel.
A similar pattern is found for employers and public liability insurance claims. The guidelines have had a significant impact on the costs of claims settled directly with insurers or through the IRB. However, they have not yet had an impact on claims settled through litigation, according to the Central Bank.
The lack of definitive numbers in this regard gives the insurance industry wriggle room to engage in the sort of dissembling and prevarication on display this week. Their list of reasons for not passing on the savings to consumers is extensive and in part plausible.
But it stands to reason that the guidelines had or will have a similar impact on the volume and value of claims settled through the other channels as they did on cases going to the IRB. At a minimum the increasing number of cases going to the IRB should bring down the average cost of claims with positive consequences for premiums.
We should also not lose sight of the fact that the insurance industry as a whole was unambiguous in its commitment that premiums would come down if it got the sort of predictability and proportionality about personal injury awards that has come with the introduction of the the judicial guidelines. It is well past time for them to be held to this promise.