Mr. Gerry Hassett:

I thank the Chairman and members of the committee for the opportunity to make this address. I am joined by Mr. Michael Horan, who is our non-life manager; and by Mr. Declan Jackson, who is our director of Government affairs. Insurance Ireland represents the general insurance, health insurance, life assurance, international, reinsurance and captive management sector. We represent 140 companies. Our membership is split approximately 50:50 between companies that write insurance for the domestic market and companies that sell to the international market from Ireland. Insurance Ireland members export insurance cover to 110 countries throughout the world. We have more than 25 million policy holders. Our members pay out €13 billion in claims and benefits annually and contribute more than €1.6 billion to the Exchequer each year. Total industry employment is 28,000, both direct and indirect. One in four jobs in financial services in Ireland is in insurance.

It is important to provide some context before we discuss the practical aspects of the Irish legal system. Legal costs and processes must be seen in the context of the urgent need to reform our cost of claims. We know that the average personal injury award in the most frequent category, that of soft tissue whiplash, is 4.4 times greater than in the UK. This very stark fact cannot continue to be ignored. The cost of compensation awards is the defining issue in the Irish non-life market. This has been established by the Personal Injuries Commission and in the policy approach that led to the establishment of the Judicial Council. The need to reform ancillary costs such as legal fees is equally pressing. The recommended reforms which were set out clearly in the report of the cost of insurance working group must be completed as a matter of urgency. Therefore, the consideration of legal costs by this committee must be cognisant of the wider impacts of legal fees and the need for urgent reform of costs.

We are seeking to provide a perspective from the insurance sector, which is a heavy user of, and highly dependent on, the Irish legal system. In our evidence before the committee, we will concentrate on the civil justice system, with which our members interact on a daily basis. On behalf of policy holders and customers, insurers are seeking four essential qualities when we interact with the legal system. First, we want it to be consistent, which means that predicted outcomes can be repeated in similar settings on numerous occasions. Second, we want it to be efficient, which means that no party to the proceedings should spend more than necessary in terms of time and resources to get to the outcome. Third, we want it to be independently reviewed, which means the actions and expectations of all participants in the system should be reviewed to ensure the legal system is delivering against policy goals. Fourth, we want it to be fair, which means that the system gives a fair outcome to policy holders and those who have suffered through no fault of their own.

On consistency, insurance companies are supporters of the model as operated by the Personal Injuries Assessment Board, PIAB. We support it because it is consistent with the award levels in the book of quantum and there is stability in terms of delivery costs, which were 6.1% in 2018 with an average processing time of 7.2 months. Traditionally, insurers accept the determination of PIAB in approximately 90% of the cases where such a determination is made. PIAB is consistent in terms of amounts awarded as well as time to deliver and cost of delivery. It should be noted that PIAB put through more cases in 2018 than it did in 2010, although this increase stabilised from 2014 onwards.

In contrast, litigated cases are adjudicated subject to the facts as presented before the judge on the day the case runs. The variables in such a situation may be as elementary as the relative skill and experience of the legal teams on either side. The justice system is suffering from increased demands on capacity. In 2014, 17,763 personal injury cases were filed across the District, Circuit and High Courts. In 2018, 22,049 such cases were filed across the three court. For valid reasons, there is inconsistency in the amounts awarded in litigated cases, as illustrated by the figures for each court.

On how the legal system can become more consistent, the establishment of the Judicial Council is to be welcomed. The operation of the personal insurance committee of the council will be vital in reviewing and striking a just quantum for Irish personal injury awards. We believe it was an error not to give the book of quantum to the Judiciary when it was first introduced in 2004. Judicial peer review of decisions, in conjunction with training and collective judge-led learning, will assist in further generating consistency in awards. Much of the legislative basis for this is contained in the Judicial Council Act 2019, under which the book of quantum will be replaced by statutory guidelines on personal injuries awards. These guidelines will result in a system similar to that in operation in England, Wales and Northern Ireland.

In advocating for efficiency, we are striving for a situation whereby no party to proceedings spends more time or resources than is necessary to get to the appropriate outcome. The Irish legal system does not perform well in respect of time to decision. According to the World Bank, the average time from filing a proceeding in Ireland to enforcement of justice is 650 days. The OECD average is 578 days, while only two other EU 27 Countries, namely, Poland and Italy, take longer than Ireland. Irish insurers typically reserve on the basis that judgment in litigated personal injury cases will be delivered between four and six years after the date of an incident. In the UK, insurers typically reserve on the basis that judgment will be delivered between two and four years after the date of an incident. Time to settle is a key indicator of efficiency in litigated cases as the settlement offered is based on prevailing injury award levels at the time of judicial decision rather than the date of the incident. This can involve considerable inflation. There was considerable inflation in the size of awards contained in the second edition of the book of quantum published in 2016 compared to the first edition, published in 2004.

Costs for delivery are also considerable as a direct result of the time to deliver. In this regard, I will rely on two Government reports, namely, the National Competitiveness Council, NCC, legal costs bulletin 2016 and the Department of Finance motor insurance key information report 2017. The NCC bulletin indicates that, based on CSO data, legal services prices did not fall for a prolonged period between 2007 and 2015. To illustrate the point, the NCC contrasted this with the fall in the price of accounting services. The Department of Finance report found that legal and other costs in closed personal injury claims typically accounted for 42% of the compensation amount paid to claimants. In 2016, the average personal injury payment to those involved in a motor accident was €23,600, which aligns with the average PIAB motor award of €22,454 for that year.

On how the legal system can become more efficient, there should be more active case management to ensure that cases, once entered, are heard as quickly as possible. There is a suspicion that the seeking of leave to adjourn is often used as a lever in negotiation. There should be agreement on independent medical experts and methodologies of assessment which would decrease the time taken to reach a judicial determination. The Judicial Council Act which passed through the Houses of the Oireachtas in July 2019 and was commenced yesterday evening by the Minister for Justice and Equality, Deputy Flanagan, is of importance. Effort should be made to extend the pre-action protocol model from medical negligence cases to personal injury cases.

On an independent review process, given the nature of litigation, a very narrow understanding of review is often applied. In the past, this has been confined to appeals of judicial decisions. It is for this reason that Insurance Ireland supports the role of the Legal Services Regulatory Authority, LSRA. Specifically, we believe the authority will be vital in protecting and promoting the interests of consumers and promoting competition in the provision of legal services in the State. The principle of independent investigation of complaints is to be welcomed. There is no national aggregate collection of costs as they apply to litigation and this lack of insight makes it difficult to undertake effective analysis of legal costs. In turn, public policy is often fragmented and without a frame of reference.

I refer to how to review the performance of the legal system and the associated costs. The establishment of the LSRA is welcome but the length of time for it to become fully operational illustrates the complexity of the task it faces. It should be actively supported to be self-funded and fulfil its mandate as a matter of priority. Once fully operational, it should be given a mandate to conduct proactive and own initiative thematic reviews, rather than merely investigate complaints. In so doing, the authority would be acting in line with best international supervisory practice. We would like to see a national aggregated collection of legal costs as a ratio to compensation payments in civil disputes. In time, such an agreed data source would provide the necessary raw data to evaluate the success or otherwise of public policy in this area.

On fairness, the balancing of rights and responsibilities between claimant and policyholder is difficult and can lead to the generation of considerable costs. We would support a system which may separate the issues of damages and liability. In such a system there may be an increased role for PIAB in determining damages and, prior to moving to litigation, a form of arbitration to establish where liability rests. Ideally the arbitration should take place quickly and allow for a speedier conclusion of the matter. This may be fairer and avoid full litigation. Such a system has been successful in the commercial courts and would mean that only cases involving irreconcilable differences between the parties would come before a judge for a full hearing.

I thank the committee for the opportunity to come before it this morning. We look forward to answering members' questions.