A new Central Bank report on Employers Liability, Public Liability and Commercial Property insurance shows that where claims go to litigation, the add-on legal costs are 16 times greater than those to use the Personal Injuries Assessment Board process.
Litigation also takes about two and a half years longer in this area of insurance, which affects businesses and sports and community groups.
The Central Bank of Ireland today published the second annual Employers' Liability, Public Liability and Commercial Property Insurance Report of the National Claims Information Database (NCID).
It shows that legal costs in 2020 were far higher in litigation than PIAB's independent service with the report showing costs of €20,300 per case in litigation compared to €1,270 costs per case through PIAB.
It reveals that for injury claim settlements where the total cost of settlement is less than €150,000 - which makes up 93% of claimants - the average compensation costs are relatively similar for claims settled through PIAB and litigation.
But the average legal fees for claims settled through litigation are significantly higher.
The report comes after two major court judgements have strongly underpinned the application of the Personal Injuries Guidelines which are applied by both PIAB and the Courts.
Following those cases, it is anticipated that greater numbers of claims will be resolved by PIAB.
The Central Bank said that injury claims represent the largest number of claims and costs for Employers' Liability and Public Liability insurance. Between 2015 and 2020, these claims represented 68% of claimants and 92% of settlement costs.
Today's report shows that litigation was the most common channel for settling Employers’ Liability and Public Liability injury claims, accounting for 58% of injury claimants and 81% of injury costs between 2015 and 2020.
This compares with 28% of claimants and 12% of costs for claims settled directly with the insurer, and 14% of claimants and 8% of costs for claims settled via the PIAB.
Today's report also shows that insurers' income and expenditure on Employers' Liability, Public Liability, and Commercial Property insurance shows an operating loss of 11% of total income in 2020.
This is mainly due to an operating loss of 30% on the commercial property line of business.
Mark Cassidy, Director of Economics and Statistics, said today's report provides information on a number of areas including costs, claims, and settlement channels.
Mr Cassidy said it includes data up to the end of the 2020 calendar year, and therefore provides some insights on the impact of the Covid-19 pandemic on these areas of insurance.
"We can see for example from the data that insurers made a significant operating loss on the Commercial Property line, which contributed to an overall operating loss on Employers' Liability, Public Liability, and Commercial Property lines," he said.
"The report also indicates that claims settled through litigation cost more and take longer to settle than those settled directly with the insurer or via the PIAB," he said.
He said that future reports will provide initial insights on the effect of the Personal Injury Guidelines.
"This will be a further important metric to add to the NCID’s role in bringing transparency to the insurance market and in informing the work of the Oireachtas and stakeholders," he added.
The Personal Injuries Assessment Board (PIAB) has welcomed today's report and said the figures clearly show the potential savings in costs and time through using the PIAB system.
PIAB chief executive Rosalind Carroll said the new report covering employer and public liability insurance provides evidence that confirms previous research showing the benefits to all parties and to society as a whole of its "fair and independent service".
"The report is very clear - PIAB resolves claims with a tiny fraction of the costs of litigation, while delivering similar awards for claimants, much faster. The figures are in line with Central Bank research showing savings in the motor liability area, so there is now strong evidence over a number of years for the savings which are possible in the PIAB process," Ms Carroll said.
"We are now in a different environment due to a very sharp fall in numbers of claims since 2020, and the very significant reductions in average awards as a result of the implementation of the Personal Injury Guidelines, which has seen average awards decrease by 42%," she said.
"We expect that the proportion of claims being resolved by PIAB will grow significantly as a result of the Guidelines and the recent Court judgements on their application by PIAB," she added.
Insurance groups welcome Central Bank report
The Alliance for Insurance Reform has welcomed today's report from the Central Bank.
Peter Boland, director of the Alliance, said the data the NCID publishes is "pivotal" to analysis of the Irish insurance market.
"Insurers cannot continue to delay delivering reduced premiums. Otherwise, all the benefits of the reforms currently being processed, and the recent High Court decisions, flow directly into their back pockets as profit," Mr Boland said.
"We expect substantial reductions to the cost of liability cover and further, proportionate reductions to motor insurance premiums immediately," he added.
Insurance Ireland also welcomed today's report, which it said provides useful and informative insights into the Irish employers' liability, public liability and commercial property insurance markets.
Moyagh Murdock, CEO of Insurance Ireland, said the report found that the EL, PL and CP markets have been operating at a combined loss over the reporting period, which is concerning and also confirms the challenge in some sectors in retaining existing providers and attracting new entrants into Ireland.
Ms Murdock said that the swift enactment of the recently proposed changes to the Occupiers' Liability Act on the duty of care in Ireland is vitally important.
"A rebalancing of the standard, implemented quickly, is crucial to ensure sustainable cover is available to SMEs and consumers into the future. We have called for these measures for many years, which should make the Irish insurance market more reasonable, practical and proportionate for claimants, businesses, sporting clubs and community groups alike," she said.
She said that at present, the balance of responsibility is tilted against the businesses and owners when it comes to commonplace injuries like slips, trips and falls.
"A common sense approach is lacking in too many instances with little onus on personal responsibility on the part of customers and members of the public. This is leading to insurers exiting the market and making Ireland an unattractive place to do business compared to many other jurisdictions," she stated.
