Most injury insurance claims are settled through litigation as opposed to the State's Injuries Resolution Board, a new report by the Central Bank has found.
The National Claims Information Database report said 68% of settlements were made through litigation in 2023.
It found legal costs were significantly higher for cases involving litigation.
It said the average personal liability injury settlement costs for claims of less than €150,000 was €23,000 for both cases involving litigation and those handled by the Injuries Board between 2015 and 2023.
However, if the cases were taken through the Injuries Board, the legal costs were €1,000 but if they involved litigation the legal costs were €23,000.
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The Alliance for Insurance Reform said the high litigation costs and the large volume of claimants settling via the litigation route continued to "adversely affect" the cost of insurance overheads businesses.
Grocery store owner and Alliance Board member Flora Crowe said: "This report makes clear that too few cases are being disposed of at the Injuries Board and too many are unnecessarily pursuing the more expensive litigation channel."
Chief Executive of Insurance Ireland Moyagh Murdock said: "The true impact of the Personal Injury guidelines is still to be realised due to the low number of claims settled under the guidelines."
She added that the outlook was uncertain due to the potential increase in award levels due to a recommendation of the Judicial Council to increase awards by 16.7%.
The report says insurers providing public liability, employers liability and personal injury coverage had an operating profit of 13% of total income in 2023.
It indicates there has been a significant improvement in profitability recently because over the period 2009 to 2023, operating profit was 2.1% of total income.
The report found the average cost of public liability claims rose by almost 40% between 2019 and 2023.
The report records a 37% increase over those four years while the average cost of employer’s liability claims rose by 31% in that time span.
However, the report says the number of claims has been volatile over the past 15 years.
It is estimated the total cost of claims for employer’s liability, public liability and commercial property insurance in 2023 was €630 million, arising from almost 31,500 claims.
That number is significantly higher than in 2022, but almost €40m lower than 2009 when there were 50,600 claims made.
Too many cases still being settled through litigation
The Manager of Regulation and Policy Development at Insurance Ireland said increases in litigation costs are an ongoing concern and the costs are ultimately borne by policy holders.
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Michael Horan said too many cases are still being settled through litigation, even though compensation levels reached through the Injuries Resolution Board are on par with those reached through the courts.
"We still are in a situation where too many claims are being litigated. When you have 70% of injury claimants going through litigation, and that's accounting for 89% of injury costs, that's just too much and it's adding costs to the system," he said.
Speaking to RTÉ's Morning Ireland, Mr Horan said the point of the Injuries Resolution Board is to take legal costs out of the system, adding that while it has done a good job of this over the years, too many cases are still being litigated.
He said claimants are guided by legal advisors and this is why more people tend to end up in the litigation channel.
"Almost 70% of injury claimants and 89% of injury costs were settled through litigation in 2023 so I think we need to be vigilant about that," he said.
"We don't want to end up in a situation where a reduction in personal injury awards is neutralised by an increase in litigation costs."
Mr Horan said it takes six years for a litigated claims to settle but just two years through the Injuries Resolution Board, meaning legal costs are being built up over this time.
He said Insurance Ireland does not think a judicial council recommendation to increase awards by 17% is warranted and urged the Oireachtas to think carefully before approving it.
He said personal injury guidelines were only introduced in 2021 and it is too soon to judge the true impact of them.
Responding to the report, Robert Troy, Minister of State with responsibility for insurance said today's data shows that the insurance market was profitable again in 2023.
He said it's "regrettable" that insurers have been slow to pass on savings to customers, despite Government reforms in the sector.
"With the reforms beginning to embed, insurers must begin prioritising accountability, transparency and fairness, ensuring customers are paying a fair price for their insurance premiums," he added.
Mr Troy said he met with Insurance Ireland and the major insurers over the last number of weeks.
"I have pressed upon them that I fully expect savings from the reform agenda to be passed on to customers in the form of reduced premiums and expanded risk appetite," he said.
