The Gazette 1987

APRIL 1987

GAZETTE

recent years indicates that early settlements which avoid high legal costs and the restructuring of in- surance premiums can result in substantial savings. (Mr. Kelly gave these as reasons for his ability to halve the losses of the PMPA from £27 million to £13 million in 1983.) Furthermore, the insurance in- dustry is on record as having said that it does nt have proper records or statistical data in relation to ac- cidents, settlements, etc. (see MacLiam Report, 1982, para. 11 and para. 12), a factor which if true, makes it difficult to under- stand how they do business at all. Of all the industries, surely the in- surance industry cannot conduct its business without an adequate statistical data bank. Finally, in looking at the in- surance companies' profits/losses in the motor business one must take into account the investment income generated by the premiums. Not to do so provides a false picture of what is happening in the industry. (c) The level of claims and awards It would be surprising if in a recessionary period insurance claims did not increase. I have no figures on this, but suspect that in recent years this indeed has been the case. The public are becoming more conscious of their legal rights and because of contracting legal business in other areas solicitors do not discourage litigation. The rules relating to liability are deficient and the method of handling such dis- putes in our legal system, is slow, inefficient and expensive. More- over, it is a system which does not necessarily bring justice in its wake. Under the present system to recover compensation for road traffic injuries the injured person must prove (i) that the defendant owed him a duty of care; (ii) that the defendant was in breach of this duty (i.e. acted unreasonably), (iii) that the plaintiff suffered damage and (iv) that the defendant's con- duct caused the injuries to the plaintiff. The system aims at pro- viding the plaintiff with full com- pensation if the defendant has been negligent. There are, however, from the in- jured person's point of view, many factors which militate against full recovery. First, normally speaking,

the plaintiff will only recover if he can prove fault. If he fails to do this he will get nothing. Second, his recovery will be reduced by the amount of his own fault if he has contributed to the injury. Third, in so far as physical or psychological injuries are involved, full appreci- ation in Court of his injuries is dependent on his ability to provide convincing medical evidence and prognoses. Fourth, immediate financial needs, uncertainty of out- come, inadequate advice, and fear of legal costs are all pressures which can suggest to the plaintiff that he should accept com- pensation well below that to which he might be objectively entitled; a bird in the hand being better than two in the bush. In other words, the system militates against full recovery. The pressures operating within the system are on the in- jured person to accept less than the system suggests he is entitled to. In practice, the lawyer advising will look upon each of these difficulties as a discounting factor. Difficulties in proof may suggest that the claim should be abated by 10%; weak medical evidence may also force a further 10% discount and so on. In the end the plaintiff may have to accept in settlement far less than that to which he is objectively entitled. The system is fraught with hazards and risks for both injured persons and for the insurance com- panies. There is a large gambling dimension in the process. With justification it has been termed " f o r ens ic l o t t e r y ". It is a dangerous jungle which at present requires a large legal input. It is estimated that between 16% —20% of motor insurance premiums are attributable to legal costs and it is clear that if these could be substantially modified insurance premiums might be pro- portionally reduced. An examin- ation of the legal basis for compensating victims of motor accidents is long overdue. It is suggested that a system which provided for strict liability or which adopted a no-fauit system would be cheaper and more efficient as well as being more just to all con- cerned. It would also reduce legal costs. Short of this kind of fundamental "rethink" minor adjustments in the system (e.-g. abolition of the jury

8 . Reduc t i on of t he I nsur ance P r emi ums High insurance premiums seem to be the principal reason why we have so many uninsured drivers in Ireland, and it would appear that unless a concentrated effort is made to reduce these premiums no real progress can be made in reduc- ing the number of uninsured drivers. In this connection the following points are relevant. The premium income required by in- surance companies reflects three cost factors: (a) the volume of accidents in' society; (b) the administration costs incurred and the profit margin required by insurance com- panies; and (c) the level of claims and awards. A further word should be said about each of these. (a) The volume of accidents in society To reduce the number of ac- cidents greater enforcement of traffic regulations would help. It appears that there has been a re- duction in the number of people killed on Irish roads in recent years although there may not have been a significant reduction in the total number of accidents. A more aggressive enforcement of traffic regulations by the Gardai, the intro- duction of the compulsory seat belt rule and an active T.V. campaign on the dangers of drinking and driving have all helped no doubt. Similar lines of action should be continued so as not just to reduce the number of fatal accidents but also to reduce the total number of accidents, for in this context it is worth mentioning that in our system a non-fatal accident may be more costly to an insurance company than a fatal accident. Ex- hortation and education, however, may be equally important instru- ments in any effort to reduce the amount of accidents in society. (b) Administrative costs and profit margins There is room for believing that the insurance industry itself could contribute to the reduction of the premiums by reducing its own costs. The experience of Mr. K. Kelly, Administrator of PMPA, in

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