18.05.2023

Impacts of the new Personal Injury Guidelines in Ireland

Why are insurers now paying out less to injured parties in Ireland? In the last year or so, there have been some big changes introduced to how personal injury claims in Ireland are being assessed. Claims will continue to pass through the Personal Injuries Assessment Board (PIAB), but the claim amounts may be significantly different (in most cases less) than for similar claims in recent years.

These changes come from the introduction of the new Personal Injury Guidelines (the Guidelines), which have replaced the Book of Quantum; which was previously used to value award amounts for personal injury claims.

In this article, we will explore how these changes have affected and might continue to affect the Irish GI market under the following headings:

The Personal Injuries Assessment Board
The reasoning behind the changes
The effect of changes made
Interpreting the data
Considerations for the future

The Personal Injuries Assessment Board

In Ireland, all personal injury claims must pass through the PIAB – an independent State body – unless the claim is settled early by both parties. The PIAB propose a claim award value, which may be contested by either party through a litigation process. This compensation amount has previously been calculated using the Book of Quantum, which was introduced in 2004, but since April 24^th 2021, the new Personal Injury Guidelines (the Guidelines) will be used instead. The PIAB provides assessment of personal injury claims for motor liability (ML), personal liability (PL), and employer liability (EL) lines.

Why Should You Utilise the PIAB

The PIAB offers a cheap and fast service for handling personal injury claims. This section outlines the key differences between how a claim may be handled through a PIAB application versus through a litigation process. Examining past reports, from before the Guidelines were introduced, we can fairly compare claim awards emerging from both PIAB applications and litigation processes.

In November 2021, the Centra Bank of Ireland (CBI) published the Private Motor Insurance Report 3[1]. This report includes data on claims totalling less than €100,000 from the period of 2015-2020. Note that the claims under this threshold make up 94% of claims that occurred in this time period. The report includes an analysis of duration of claim settlement, average claim amounts, and legal costs associated with different settlement channels. It should also be noted that this report includes only private motor insurance, which is not the only channel that the PIAB covers, but does account for 68% of claims by award value in the most recent report.

From the CBI report, we can see that the average compensation amounts were very similar, with figures of roughly €21.8k and €23.5k for PIAB settled and Litigation settled claims respectively. However, legal costs associated with making a claim through the PIAB were found to average €665, whereas litigation fees often vary wildly, with the average being roughly €15,235 – or over 20 times more expensive! It was also found that, for the claims included in the analysis, settling through litigation took nearly 4 years on average, whereas a PIAB settlement took only 2. The graph below highlights the scale of the difference in compensation and legal costs for these two methods of settlement.

Clearly, making a claim through the PIAB is both quicker and cheaper than litigating. However, with the Guidelines now being in , it may seem less appealing to people to claim through the PIAB as claim awards are being reduced across the board. It should be noted as well that the Guidelines will be used to calculate claim awards in court, except under special circumstances which must be explained by the courts. This is explained in the following extract from PIAB: “Both PIAB and the Courts must have regard to the new Guidelines in determining awards, and where the Guidelines are not used to determine an award, they will need to give the reasons for doing so.”[2]

The Reasoning Behind the Changes

Obviously, one of the key factors in pricing insurance is the expected claim amounts associated with each policy. Introducing the Guidelines, and thus reducing the expected claim amounts should result in a drop in price and an increase in availability of insurance in Ireland. Motor insurance prices in Ireland have risen significantly over the last 10 years, by nearly 50%[3 ]. This rise comes from an increase of 62% from 2013-2018 and then a drop since 2018 until 2020. There has also been a rise in both Employer’s and Public Liability premiums, 44% and 25% respectively from 2013 to 2020.[4] By reducing the claim award values, we should see a drop in insurance prices in the coming years, which will benefit consumers who were previously unable to afford these products. The PIAB also say that the Guidelines are more in line with guidelines existing in other countries.

Another of the objectives of the Guidelines was to increase certainty, transparency, and consistency to award values for personal injury claims in Ireland. The aim of this is to reduce the number of claims going through litigation processes. As mentioned earlier, claims that go through the courts must still be priced according to the Guidelines – save for some exceptions – and the average awards from court proceedings in the past have been roughly in-line with those that have come through the PIAB. It is hoped that the increased granularity and clearer guidance in calculating awards will mean fewer claimants proceed with litigating. As all claims must pass through the PIAB (so long as they are not settled directly), claimants will receive a PIAB award value before having the option to go through the courts. With greater consistency in these awards, it should discourage claimants from declining this and deciding to go into a litigation process, which is much more costly and time consuming. Not only will this benefit the claimant, but it will also reduce legal costs for insurance companies, which could in turn lead to further reductions in premiums. On top of this, reduced legal costs for insurers could entice more insurers to join the Irish insurance market. This increased competition could lead to, yet again, further reductions in premiums for Irish consumers.

The Effect of Changes Made

The Guidelines, as effective from April 24^th 2021, are used instead of the Book of Quantum to value awards for personal injury claims. The Guidelines affect only the General Damages awarded – the amounts awarded for pain and suffering resulting from injuries sustained in an accident[5]. They have no impact on the value of Special Damages awarded – the costs directly related to expenses incurred as a result of an accident, such as loss of earnings, medical fees etc.

The values set out by the Guidelines are broadly less than the values previously given by the Book of Quantum, which has been the standard since 2004. Although the award levels for some categories have increased, most injury types have seen a rather large decrease in awards. From 2016 – 2020, average award values were very consistent year on year, From the date of introduction of the Guidelines until year end 2021, the average award value was only €13,825 – a decrease of 42%! This decrease is made up of decreases in each of the three categories dealt with by the PIAB – Motor, Personal, and Employers Liability – each seeing a drop in average award values equal to 42%.

The range of awards given has also changed drastically since the Guidelines were introduced. In 2020, 44% of awards were over €20k – this has reduced to only 17%. Previously, only 12% of claims were under €10k, but since April 24^th 2021, 20% of cases were under €5k, and a further 29% were between €5k and €10k. This accounts for nearly half of all cases!

This has obviously led to some discontent from the public as they as a result of the Guidelines. This can be seen by the reduction in the acceptance rates of claims since the Guidelines have come into effect. Roughly 90% of past award values were accepted by the respondent/insurer, and this has increased to 94% since the Guidelines were introduced. To contrast this, the overall claimant acceptance rate has dropped over the same period. In 2020, the overall combined acceptance rate (that is award values which were accepted by both parties) was 51%, or just over half of all claims. Since the introduction of the Guidelines, this figure has dropped to 37%.[6 ]

Interpreting the Data

With any analysis of data, there are a number of considerations which must be taken into account before analysing the statistics. I will discuss a selection of these limitations and considerations below.

Firstly, Covid-19 has had an impact on the data. Although we would like to think Covid is far behind us, the reality is that because of delays in reporting and other factors, most of the awards mentioned are from claims which occurred during the pandemic and government lockdowns. The PIAB reports that claims are typically made on average 12 months after an accident. This is made clear from the big decrease in total claim volumes. There were just over 31,000 PIAB applications received in 2019, this dropped to 26,000 the following year and continued down to 21,400 in 2021 – a total drop of 31%.

It is quite interesting to note that there was a spike of claims made just before the Guidelines came into effect. Generally, the PIAB note that claims come in throughout the year at a steady rate. However, between February and April 24^th 2021, over 9000 applications were submitted[7], and this made up 42% of the claims made in the whole year. After this the remainder of the claims were quite consistent. While it may not be a huge revelation that people realised getting their claims in before the Guidelines came in would benefit them, I think it is quite funny to note! . In total, the report only analyses less than 5,000 claims. This is the first report of its type as the Guidelines are new, and the PIAB intend to continue publishing these reports as more data comes out. It will be interesting to see the next report as it may shed more light on trends caused by the Guidelines.

Another thing to consider is how the split of claims has been affected – i.e., have there been more motor claims than usual. The proportion of claims that each class (ML, PL, EL) makes up remained consistent from 2020 to 2021, with only a 2-percentage point increase in PL and a corresponding decrease in ML. Motor Liability claims still made up the vast majority of cases at 68%. While this isn’t a material difference in this report, it is something to consider as some classes (EL in particular) tend to have higher claim awards and could skew the data if there were a large number of this claim type in one year.

What is more difficult to consider is whether the severity of cases would have been affected by the pandemic or any government restrictions, but it is not unreasonable to think this may be the case. Because of this, we might not be able to take all the changes mentioned above at face value but will instead have to wait until more data becomes available.

Considerations for the Future

Inflation is a hot topic right now, and with good reason. Inflation in Ireland (and much of the world) is at historically high levels. As mentioned earlier, there has been a 42% decrease in average claim awards since the introduction of the Guidelines. However, if we look closer at the data supplied by the PIAB, we see that this decrease is coming from a 47% drop in general damages and a 10% increase in special damages[8]. I think this raises some important questions; how will inflation affect future award values, and how will the consumer be affected? As Special Damages are directly linked to financial costs incurred by the claimant, they are naturally inflation-linked. These costs directly cover any medical fees etc, so the nominal value is irrelevant. However, the Guidelines pay no mention to inflation. This means that General Damages will remain the same for two injuries which may occur years apart. The Book of Quantum was brought in to affect in 2004, and there were no updates to this with respect to inflation. Seeing how high inflation currently is, this could be a major issue with the Guidelines, as the award amounts have been slashed and will continue to erode with inflation into the future.

Another unfortunate effect the delay of claims has on data is that most claims currently in the courts will have been assessed initially before April 24^th 2021, so must still be awarded based on the Book of Quantum. This could cause some issues in people’s acceptance of awards from the PIAB as the litigation process will now seem to result in over 40% extra compensation. This is not the case, but because of this lag there could be some confusion, especially in reports from the CBI which compare PIAB and Courts average awards. Since the average time for claims to be paid through the courts is nearly 4 years, this issue may persist for some time.

One of the main objectives of the Guidelines was to reduce the number of claims passing through the courts. However, it seems that initially there has been the opposite effect. We saw initially that overall acceptance rates dropped from 51% to 37%. I think it might be possible that we see a further reduction in acceptance rates in the future as the courts will seem to be paying out more. While the Guidelines may have a long-term positive impact, I do think that the short-term consequences should be considered and properly accounted for by the relevant stakeholders.

Conclusion

To wrap up the article, here are some of the key points mentioned throughout.

The Guidelines which came into effect on April 24^th 2021 have significantly decreased claim awards amounts for the majority of injury types. Both claims going through the PIAB and the courts will be assessed according to the same book.

The PIAB have several expectations from introducing these changes:

Lower claim awards will reduce premiums immediately.
The increased level of consistency and transparency in award values will reduce the number of claims going through the courts and thus speed up payments.
Fewer claims going through the courts will also reduce legal costs for insurance companies, and thus lead to lower premiums for consumers.

However, there are also a few issues which may crop up soon.

The decrease in award values has had the immediate impact of reducing the acceptance rate by claimants. This has caused an increase in claims going through the courts, instead of the anticipated decrease.
General Damage amounts awarded have dropped significantly, although special damages have risen. As inflation continues to be at record high levels, will the currently levels set for General Damages be sufficient?
Because of the delays in the courts, many cases being settled now are still being assessed using the old Book of Quantum, which may cause some over-inflated award figures appearing in any reports using data from this time.

Because of Covid-19, there may be some issues with data reliability, but unfortunately only time will tell if this is the case.