Legal expenses add €42,000 to cost of settling a €100,000 motor injury award
LAWYERS are making large amounts of money out of our compensation system.
New figures from the Department of Finance show that legal and other costs add up to 42pc to the cost of injury awards.
This means that on a €100,000 payout there is another €42,000 in legal costs, the new report compiled by the department shows.
Although legal and others costs, such as medical reports, have remained relatively flat since 2013, they still add massively to the cost of compensation, one of the key reasons motor premium rates have ballooned.
The report states: “Legal and other costs for all closed personal injury claims can typically represent over 42pc of the actual compensation amount paid to claimants.
“This has consistently averaged 24.9pc for claimant legal and other costs and 17.5pc for insurer (defendant) legal and other costs.”
According to the report, if there is an injury compensation payment of €100,000, there will be an average of another €24,900 to cover claimant legal and other costs. Then there will also be €17,200 to pay for the insurer’s legal and other costs.
This would result in total payments by the insurer of €142,400, of which the claimant would receive €100,000.
The department’s report also shows that motor insurers have increased premiums far more than it is costing them to settle claims. It says insurers have now returned to profitability after massive hikes in premium rates.
The cost of compensation payouts to motorists injured in accidents rose by 15pc between 2013 and last year.
But over the same period premiums have been jacked up by 70pc, the department’s figures shows.
This raises questions about whether insurers have overdone premium hikes.
Fianna Fáil’s Michael McGrath said the figures contradicted assertions by the insurance industry that spiralling premiums could be put down to the increasing cost and frequency of claims.
Insurance companies insisted that when legal and other expenses were included in the cost of settling claims, there has been a jump of 23pc in compensation claims costs.
The department’s report shows that premium rates fell this year, down by 8.5pc in May when compared with a year ago.
But the report states: “This followed almost three years of price increases which accumulated to approximately 70pc.”
The report is based on figures submitted to the department as part of initiative under the Government’s Working Group on Cost of Insurance action plan.
The report looked at a sample of compensation award payouts.
“Total compensation paid for settled private motor personal injury claims for the companies sampled has increased from €178.8m in 2013 to €205.5m in 2016, an increase of almost 15pc.”
Insurance Ireland chief executive Kevin Thompson said the Central Bank and Department of Finance reports, along with the 2016 annual report for the Injuries Board, all show a rise in the cost of motor claims.
“The defining issue in motor insurance is the rising cost of claims, which is the level of awards and the costs associated with settling them.”
A separate Central Bank report shows the average motor premium increased in 2015 as the amount of claims fell and the cost of payouts rose.