Written answers

Wednesday, 23 January 2013

Department of Public Expenditure and Reform

State Indemnity

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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To ask the Minister for Public Expenditure and Reform the extent to which he has identified various forms of insurance cover affecting the State and or its institutions as a means of achieving savings to the Exchequer; the extent to which group insurance policies can be utilised for this purpose; and if he will make a statement on the matter. [3304/13]

Photo of Brendan HowlinBrendan Howlin (Wexford, Labour)
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Normal State policy, as advised in the Public Financial Procedures, is that the State is its own insurer and as such covers its own costs. State indemnity for personal injury and third party property damage was legislated for in the National Treasury Management Agency (Amendment) Act, 2000 where the management of personal injury and third party property damage claims against certain State authorities, and underlying risks, was delegated to the National Treasury Management Agency (NTMA). When performing these functions, the NTMA is known as the State Claims Agency (SCA).

Under the general rule of State indemnity enacted through the statutory provisions above, certain State bodies are indemnified by the Minister for Finance for the following:

- Personal injury to employees of the State;

- Personal injury to third parties (the public) – this includes injury resulting from medical negligence;

- Third party property damage – this includes claims arising from road traffic collisions (RTC’s);

Since 2001 the remit of the SCA has been expanded through various delegation orders based on a value for money analysis. More recently in 2010 the management of Health Service Executive (HSE) personal injury (non-clinical) and third party property damage claims was delegated to the State Claims Agency (SCA) under the National Treasury Management Agency (State Authority) Order 2009. 13 other State authorities claims associated with these risks were also delegated to the SCA in 2011.

Additionally, the following additional classes of claims were delegated to the State Claims Agency with effect from 7th February 2011:

- Bullying/harassment claims by state employees, which allege personal injury.

- Claims by members of the Defence Forces alleging personal injury whilst serving abroad – includes stand alone PTSD cases.

- In-cell sanitation claims by current and former prisoners

The National Treasury Management Agency (Delegation of Claims Management Function) (Amendment) Order 2012 formally delegated management of Thalidomide and Nimesulide (Aulin) claims to the State Claims Agency on 3rd April 2012.

In conjunction with the State, the SCA has a strong track record in reducing the cost of managing claims under its remit. For example, during 2012 the SCA achieved significant savings on claims and related legal costs associated with the management of the Clinical Indemnity Scheme (CIS). An independent actuarial assessment projected that €127.5 million would be required to satisfy CIS claims and related costs in 2011. The outturn for the year was €84 million, representing a saving of €43.5 million.

Prior to the delegation of the management of Employers Liability/Public Liability/Property Damage claims to the SCA, the HSE and 13 other State Authorities were paying in excess of €22 million in insurance premia per annum. Only approximately €2 million has been expended to date in the management of such claims since 2010, yielding a cash flow saving of approximately €64 million. Based on the current outstanding estimated liability associated with these delegated claims since 1st January 2010, a long term saving of at least €26 million will be achieved for the State by managing these claims on the “pay as you go” basis operated by the SCA.

Where Agencies have been dealing with their own insurance in many cases, it has been policy to encourage them to delegate the management of the risks and the processing of claims to the State Claims Agency. Analysis and experience has shown that the cost to the State of dealing with these risks and claims directly, through State indemnity managed by the SCA, is significantly lower than the premium cost of insuring these risks. My Department are currently preparing a delegation order and have been in correspondence over the last few months with Departments on this.

In addition, a State Legal Costs Unit is being set up in the SCA to deal with legal costs – initially to deal with Tribunal claims but with the intention of expanding this remit. Heads of a Bill have been cleared by Government with a view to the publication of legislation to underpin the SCA’s remit.

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