Dáil debates

Thursday, 25 March 2021

Civil Liability and Courts (Amendment) Bill 2021: Second Stage [Private Members]


6:15 pm

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats) | Oireachtas source

I welcome the opportunity to speak on this Bill. We all agree that affordable insurance is fundamental to the well-being and interests of the country. The sky-high premiums that are being charged add significantly to the cost base of our economy and are a substantial financial burden for individual households. We all know that insurance costs in this country are high by international standards. Despite falls in the average costs of claims over the past ten years, premiums continue to rise.

To be clear, there is no argument against the fact that there are exaggerated claims and insurance fraud. There is no doubt that fraud happens; it is to the question of the degree to which it happens that we need to apply our attention. We must take greater steps to reduce fraud, such as the introduction of a dedicated Garda insurance fraud unit to bring prosecutions against those who exaggerate or make outright false claims. People who purposely mislead the courts should expect to face consequences. We all pay a price for not ensuring that happens and it is short-sighted to fail to invest in enforcement.

Fraudulent insurance claims are already criminalised under section 25 of the Civil Liability and Courts Act 2004. It is an offence under that Act to give false or misleading evidence in regard to personal injury actions. The existing penalties are significant, involving a €3,000 fine, imprisonment for up to 12 months, or both. However, the number of prosecutions brought under this section has been minuscule. Whether this is the result of a lack of cases or a lack of Garda resources to pursue such matters is not entirely clear and warrants further investigation. This Bill would increase the financial penalty for fraudulent claims by raising the fine to €5,000 plus the legal costs of the defendant. However, if there are very few cases brought to the Garda and very few prosecutions, it is not obvious how increasing the penalty will make a significant difference. There certainly is a discussion to be had on strengthening our laws in this regard.

In driving up penalties for such claims, we must be careful not to initiate a chilling effect on people who have legitimate claims.

Not every legitimate case before the courts will have airtight evidence in its favour. Insurance companies will contest legitimate cases as well. If increasing the financial penalty for a small number of guilty individuals will make it more difficult for innocent people with a legitimate claim and where they are rightly due damages, we must be careful.

The explanatory memorandum mentions the perception of fraud and exaggerated claims. We must go beyond that as the official data on fraudulent and exaggerated claims are limited. Data on insurance costs in general are thin on the ground and I have not found any data indicating significant increases in insurance fraud in recent years. It is important to separate the facts on insurance fraud from the insurance industry's continuous narrative that there is an epidemic of insurance fraud responsible for driving up costs. The argument that soaring premium costs can be attributed to criminal acts of a few individuals is a narrative that is quite definitely promoted by the industry for very good reasons. We must be very careful. There is no doubt there is a concern but we must ensure we get to the source of the problem.

Insurance companies have put the rate of fraudulent and exaggerated claims at 20% but those figures are, of course, largely inflated. Insurance companies report only approximately 1% of claims to gardaí as fraudulent, so as the rates of fraud are exaggerated, it stands to reason that the effect on premiums is also exaggerated. Mr. Justice Kevin Cross is the High Court judge currently in charge of the personal injuries list and he has shared his view, stating it is fundamentally dishonest to blame supposedly fraudulent claims for the cost of insurance. In its 2017 report, the cost of insurance working group stated that fraud was not one of the main reasons for increasing motor insurance costs and a follow-up report noted there were no official data to indicate that insurance fraud was widespread.

The reality is we are lacking official data on liability insurance, which makes it very difficult to pinpoint cases for high premiums and the areas in which we must strengthen legislation. The data we have indicate that public liability insurance premiums have jumped by 15% to 20% over the past three years, as reported by the CCPC. The sharp increase in cases and the exit of a number of overseas providers from the market has been devastating for so many community groups, sports clubs, childcare facilities, etc. The CCPC report highlights the lack of independent public data on the insurance market as a barrier for new entrants to the market. We must pay very serious attention to that. Businesses and community groups must be supported by the State so they can engage with the market and lower risk profiles where possible.

A recent Central Bank report on motor insurance claims indicates people were not benefitting from settling personal injury claims through litigation and they often ended up waiting twice as long for a settlement almost similar in size. The report indicates the litigation costs accounted for approximately 67% of compensation awarded, bringing average claim costs to €40,000. In comparison, legal costs under the PIAB account for less than 4% of compensation awarded and the total for average claims is less than €24,000, which is a difference of €16,000 per claim. There is also a significant difference in the time taken to settle a claim. Claims involving litigation take an average of 4.7 years, whereas the PIAB took 2.9 years on average. The benefits of the board's process are clear and there is great benefit to expanding the role of this board. There are areas like mediation of settlements where this should happen.

We must examine evidence and we need more data. We are not opposed to this legislation but more information is needed. Perhaps it does not get to the crux of what will resolve this matter.


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