Mr. Kevin Thompson:

I will take the questions one at a time. Reference was made to an increase in insurance premiums for a particular business. In some ways, the explanation is quite simple. The average level of awards, even according to the Courts Service's own publication from 2016, has increased by 48% and that ultimately feeds through to premiums. In addition, we have also seen inconsistency within those awards and I will explain how that affects insurance premiums. If, for example, 100 claims are notified to an insurer within a year, the insurer will not settle all of those claims on day one. In the first year, the insurer may only settle 20% of those claims and will make payments based on prevailing award levels. The insurer posts a reserve or capital for the remaining claims based on its best estimate. If awards are increasing and there is volatility in the level of awards for whiplash, for example, this can cause difficulties. If the insurer has reserved X amount but a decision in court results in an award of X plus Y, the insurer then has to go back to the back book and make an additional provision which has to be accommodated in the current pricing, that is, in the current premiums. Unfortunately, we have seen the level of awards increase and the volatility around those awards increase which has fed through to premiums.

On the positive side, we do have a framework now, through the cost of insurance working group report published by the Minister in January, which makes some key recommendations. The first is one touched on by Senator Reilly, namely the inconsistency between the level of awards in the UK and here. The establishment of the personal injuries commission and the bench marking exercise should bring forward clear recommendations to address that issue on behalf of all consumers. In terms of driving costs out of the claims settlement process, the reinforcement of the powers of the PIAB is a key recommendation. We know that legislation-----