At last – reduction in motor insurance costs from June after landmark injury awards ruling

:: ‘Most insurers were prepared to cut premiums’, said minister

Junior Finance Minister, Seán Fleming.

Charlie Weston Twitter Email

April 12 2021 02:30 AM

Motor insurers are to reduce premiums from the second half of this year after judges voted in a landmark move to approve guidelines that are expected to lead to cuts to injury awards.

Junior Finance Minister Seán Fleming has been meeting with insurers to press home the need for reductions and said that most were prepared to lower premiums from June onwards.

Last month, the Judicial Council approved guidelines that will mean pay-outs for whiplash will be more than halved and many other awards for less serious and middling injuries will be reducedeven further.

Minor injury claims make up most of the cost of compensation, with insurers long arguing that lower claims costs will lead to lower premiums.

However, when the judges approved the reductions in guidelines for award levels, insurers initially poured cold water on the prospect of any immediate significant reductions in insurance premiums.

Now Minister for State Mr Fleming says the feedback he is getting from his discussions with insurers is that the new guidelines will lead to lower premiums from June onwards.

He is half-way through a series of meetings with the chief executives of the leading insurers in this market.

“Most are saying there will be premium reductions this year,” he told the Irish Independent.

He said much will depend on the acceptance level of settlement offers made to claimants to the Personal Injuries Assessment Board (PIAB) under the new lower guidelines.

Thousands of insurance cases currently before the PIAB will be assessed under the new personal injury guidelines.

Insurers are now watching to see if fewer settlements are rejected by claimants.

Rejected claims end up before the courts, something which multiplies the cost and length of time it takes to settle cases.

“If fewer cases end up in court, then that will be a key issue for the insurers,” Mr Fleming said.

He said a number of insurers he has spoken to are assuming the new personal injury guidelines will lead to fewer cases going to court and an overall lowering in the cost of compensation.

This will lead to insurers offering lower premiums “as an upfront” measure, he said.

Lower levels of compensation will mean that insurance companies will have to put less in reserves aside, which should lead directly to a lowering of premiums.

Insurers have also been helped by lower traffic volumes in the last year, and an overall drop in claims as a result of this.

Around a third of minor injuries claims are litigated.

A Central Bank report found that the amounts awarded for claims under €100,000 were similar for those awarded by the PIAB and for those cases that are litigated.

But Central Bank researchers found that on average the legal costs associated with settling claims through litigation were 67pc of the actual compensation amount.

This means the total average claim cost for cases that are litigated is more than €40,000.

Legal costs under PIAB are less than 4pc of the compensation amount, bringing the total average claim cost to less than €24,000.

The difference is more than €16,000 per claim, a cost which is passed on to motorists in higher premiums.

The new guidelines on injury awards were adopted by the 166-member Judicial Council at the beginning of March and are due to come into effect this month.