Legal costs associated with settling employers’ and public liability insurance claims in Ireland are increasing, despite a decrease in the number of claims and the amount of compensation being awarded. This is according to a new analysis from the Central Bank, which compared data from 2015 to 2019 with the first six months of 2022. The analysis revealed a 25% reduction in the total number of claims and a 12% reduction in the total cost of those claims. However, the average legal costs associated with settling these claims have risen.
During the first half of 2022, 71% of injury claims were settled through litigation. The average compensation awarded from these claims saw a marginal drop, from €51,804 pre-pandemic to €51,078 in 2022. However, the average legal costs increased from €28,882 to €31,735. The Alliance for Insurance Reform, a lobby group, highlighted that legal fees now account for nearly 38% of total litigated personal injury settlements, directly impacting insurance costs. The group called on the Justice Minister Helen McEntee to expedite the review of legal fees.
The trend of rising legal costs is also observed in settlements reached through direct negotiations with insurance companies and settlements through the Personal Injuries Assessment Board (PIAB). Compensation awarded through direct settlements with insurers decreased from €20,126 to €18,671, while legal costs increased from €2,656 to €4,171. Compensation awarded through PIAB decreased from €30,772 to €23,464, while legal costs increased from €1,232 to €1,439. In total, claims settled directly with insurers cost on average 1% less, while those settled via PIAB were 20% less expensive.
Junior minister with responsibility for insurance Jennifer Carroll MacNeill emphasized that additional litigation costs are inevitably passed on to consumers in the form of increased premium prices. She encouraged people to make greater use of PIAB, stating that it offers quicker outcomes with lower overall costs. The analysis showed that, on average, direct settlements with insurance companies take 1.9 years to resolve, while PIAB takes 2.4 years and litigation takes 5.2 years.
The analysis also revealed that 22% of all injury claims settled during the first six months of 2022 were settled under the Personal Injuries Guidelines, which came into effect in April 2021. The remaining 78% had compensation amounts determined using the Book of Quantum. Claims settled under the guidelines had an average cost that was 37% lower for claims settled directly before engaging with PIAB, 54% lower for claims settling directly after PIAB, and 35% lower for claims settling through PIAB. Only 3% of litigation claims were settled using the guidelines, with the analysis suggesting that it will take time for the guidelines to have an impact on these settlements, given the length of time it usually takes for claims to be resolved.