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GAZETTE
SEPTEMBER 1987
underwriting difficulties in other
jurisdictions. Rates charged in
Ireland are invariably based on Irish
experience and consequently
overseas results do not have a
direct effect on Irish rates. The only
exception I can think of to this
general rule is professional
indemnity
insurance
which
traditionally has been placed in the
London market, and therefore has
been subject to the volatility, both
favourable and unfavourable, of
the world-wide results for this
business.
Why are insurance costs high in
Ireland?
In Ireland insurance costs are high
for four main reasons:
— the high number of accidents on
our roads and in the workplace;
— the high level of claims'
consciousness in this country;
— the excessive cost of settling
claims under our present legal
system;
— the high level of uninsured
driving in the case of motor
insurance.
The Irish Insurance Federation
(the IIF) accepts that the cost of
insurance in this country is too high
and is concerned that if immediate
steps are not taken to reduce both
the number and cost of claims,
then there is every likelihood that
more policyholders will be unable
or unwilling to pay the premium
levels required to fund the cost
of claims. It is for this reason that
the IIF recently made a detailed
submission to Government on the
steps that should be taken to
reduce the frequency and cost of
claims.
Our present legal system is in-
efficient, slow, cumbersome and in
need of urgent reform. Legal fees
and disbursements on average re-
present 25% of total claims costs.
A recent survey carried out by the
IIF shows that solicitors' costs and
outlay account for approximately
80% of insurance companies' legal
fees bill, and that 69% of total
solicitors' fees is profit costs and
11% is disbursements.
These figures do not include
solicitor and own client costs,
payable directly by the client,
which can, I understand, amount
to a sum up to 10% of the
damages awarded. Can such costs
be justified to the consumer in
present harsh economic circum-
stances?
The increased level of claims'
consciousness in recent years is a
further important factor which has
pushed up insurance premiums.
The substantial increase in the
number of claims for whip-lash
injuries over the last five years or
so is a good example of this
phenomenon. One wonders to
what extent the legal profession
and, perhaps also the medical
profession, has contributed to this
increased claims' consciousness,
which has also, I believe, led to an
increase in spurious actions. Indeed
Professor Bryan M. E. McMahon,
of UCC, in his article in the April
1987
Gazette
("Uninsured Drivers
— A Legal Submission") referred
to the problem and I quote what he
said because I feel it is very
important:
"It would be surprising if in a
recessionary period insurance
claims did not increase. I have
no figures on this but suggest
that in recent years this indeed
has been the case. The public
are becoming more conscious of
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242