One year on - what impact has the new Personal Injury Guidelines had on our claims landscape?

As the first anniversary of the new personal injury guidelines approaches, it is timely to reflect on and consider how successful they have been in meeting the objectives set. Following a prolonged period of lobbying government by the insurance industry, business representatives and other interest groups, a great deal of hope and expectation was
created on 24 April 2021 when the new guidelines agreed by the Judicial Council on 6 March were transferred into law.

Our shared hope was that we finally had a fair and transparent means of assessing damages for personal injury claims. The expectation was that the new guidelines would deliver proportionality and consistency in personal injury awards by PIAB and the courts, which had previously averaged over four times the amount of compensation for similar injuries in neighbouring jurisdictions. One year on, it is time to assess if that hope and expectation was justified.

The good news is that progress has been made. In a report published last October, PIAB noted an average reduction of 40% on 2,649 claims assessed under the new guidelines. However, it’s not all good news as PIAB also reported that 60% of these assessments were rejected by claimants who, either on their own or with the advice of a solicitor, decided to refer the case to the courts for adjudication. This equated to an increase of 10% on pre-guidelines rejection rates, with more claims now being routed through the courts and the lengthy and costly litigation process.

The reduction in PIAB awards has been the subject of much media and political commentary, most of which is incorrect. Much of the public commentary assumes that ALL injury awards have reduced by the 40% quoted, resulting in very significant reductions in overall claims costs. This analysis ignores the fact that injury awards are made up of two elements: general damages – for pain and suffering, which is where the award guidelines come into play and special damages, covering the cost of medical care etc, the cost of which remains unchanged. While general damages make up the bulk of the award for minor injuries, the proportion of an award relating to general damages falls dramatically for larger claims. This is because significant money needs to be allocated to meet medical and other care costs arising from severe injuries. As a result, the reduction in the value of these large claims will be significantly less than the 40% seen in the cases assessed to date. Indeed, in some instances, the guidelines do not show any reduction for severe injury. These large claims, while small in number, make up a significant part of an insurance company’s reserves, hence the overall impact of the guidelines on an insurance company’s cost base is diluted. These large claims also incur significant legal costs, from a sector that has not yet seen reform despite evidence of increases of up to 20% in legal fees over the past few years.

There has been a distinct lack of commentary in the media on the fall in acceptance rate by claimants. In its October report, PIAB commented that the shift in values “may impact acceptance rates in the short term, where the reduction in award levels may differ from what a party might have expected”. This statement is undoubtedly correct, but it would be naïve of us to imagine that it is the only factor at play. The lack of decisions from the courts combined with the high percentage of judges (37.5%) who voted against the guidelines, must leave some hope in the minds of claimants and their legal advisors that rejecting PIAB will lead to a higher award in court. This seems unlikely given the mandatory obligation on judges to take account of the guidelines but even a marginal increase in the PIAB award in the courts would result in significantly higher legal costs that must be borne by the insurance industry. The Central Bank of Ireland’s NCID reports consistently point to the fact that, while the average legal costs incurred through the PIAB process is €600, this increases to €15,000 when the case is adjudicated via the courts.

We will have to see several court judgments to better understand if and how the new guidelines are being applied. Equally, where judges choose to depart from the guidelines, their rationale for doing so will be vital as, if a lottery system were to remain, it could undo any progress made.

Another factor is the capacity of the courts to handle these cases. Apart from the increased volume, the reduction in average value means that the distribution of that volume between the various courts has shifted with the majority of post-guidelines cases now falling within the District Court where the jurisdictional value of a claim is €15,000 or less. Similarly, the Circuit Court will have to deal with cases that would previously have exceeded the High Court threshold of €60,000 for personal injury awards. The capacity of both courts to deal with this volume has been called into question by the judiciary themselves. Unless more judges are appointed, delays will persist for years to come frustrating claimants and increasing costs for all.

We are also awaiting the outcome of the various judicial review actions against PIAB and others. It is hoped that decisions on these cases will be expedited to avoid backlogs and delays pending confirmation that the guidelines are constitutional.

Ultimately, there is an onus on us the insurers to continue to support insurance reform, the guidelines and PIAB in its application of them. Where we accept a PIAB award because it represented the correct application of the guidelines, we should endorse the award and fast track any litigation to hearing without delay, in so far as possible for the defendant, and to have the issue of quantum determined.

The Central Bank of Ireland’s NCID reports consistently point to the fact that, while the average legal costs incurred through the PIAB process is €600, this increases to €15,000 when the case is adjudicated via the courts.

Brian O’Connor, Chief Claims Officer, Aviva Insurance Ireland DAC

While progress in insurance reform has been made, it is undoubtedly a shared view that proportionality and consistency of injury values in PIAB and the courts is important. Despite the huge amount of uncertainty that remains, we eagerly await the outcome of the judicial review proceedings and of course, post-guidelines court awards. It is positive that further reform of PIAB has been proposed to increase its remit, which is welcomed by the industry. However, more is needed, particularly in the area of legal costs if we are to see a material impact in the costs of personal injury claims.

At the end of year one, we remain hopeful that the promise of the new guidelines to reduce the overall level of awards and other reforms will lead to a fairer, faster, and more equitable process and outcomes for all involved. It will however take some time before the expectations created on the 24 April 2021 are realised.