Car cover hikes: blame the legal eagles

Insurers have warned of another 25% increase in car cover in the next 12 months. That’s on top of 24% in last year, totting up to a total hike of 55%.

Insurers and the Injuries Board (IB) have had a bit of a spat over the reasons behind this quite shocking increase.

The IB was set up to rein in excessive compo claim costs, saving €1 billion in the decade since it was set up.

So when insurers recently blamed the huge rise in premiums on a surge in claims, that raised its hackles.

The board saw a 6% increase in claims in the first half of the year, which it attributes to “increased economic activity.” And it called for further clarity… on the precise cause of (premium) increases of this scale.”

In other words, the insurance industry should “put up or shut up.”

When I challenged Insurance Ireland about this, Micheal Horan, head of on-life insisted that claims were well up.

Award levels are at an all-time high, he said with the average High Court award in 2014 up 34% on 2013 and the average Circuit Court award up 14% on 2013.

He pointed out that a routine whiplash claim in Ireland costs €15,000 to settle as opposed to €5,000 in England. (In Germany, there is no compensation for whiplash apart from physio and medical expenses.)

Insurance Ireland pointed out that while the IB is supposed to be a lawyer-free zone, 90% of claimants use a solicitor.

And while every claimant has to go to the Injuries Board first, they can always reject the outcome and go to court. And that’s exactly what 40% do, because, according to Insurance Ireland, their lawyers encourage them down this road.

The truth about rising premiums is that claims are up – the IB figures even show that - but it’s not the whole story.

Insurers also racked up hundreds of millions in losses in 2013 and 2014 in a price war over market share. Now they – or rather we – must pay for that with higher premiums.

There’s not we can do about much about all of those things.

But a big chunk of car cover costs – nearly €100 per policy - is due to issues we can and maybe should do something about.

Around 100,000 cars are being driven around without insurance. That’s a very high number to consistently get away with one of the most easily detected crimes.

When they crash, a special fund, paid for from our policies, picks up the tab, adding €40 to the cost of cover.

Fraudsters add another €50. At least six organised gangs stage accidents in hotspots identified by Insurance Ireland as Cork, Galway, Swords, Tallaght, Ennis and the Border region.

Calls about fraudsters have trebled and the industry has set up a special grouping to tackle the issue.

But that’s not much use, unless backed up by police and judicial action. And to date few fraudsters, or would-be fraudsters, have paid a custodial price, even when caught out lying about claims.

Staged accidents target innocent lone drivers, particularly women, older people and those with nice cars that appear likely to be insured.

It’s frightenly easy to do and very hard to defend against in court.

It works like this: the car in front, which may have its brake lights disabled, will stop suddenly, often at night in a remote location with few witnesses.

You run into the back of it and are assumed to be in the wrong because you ‘rear-ended’ the other vehicle.

Drivers are advised not to make accusations in these fraught and dangerous situations. All you can do is leave plenty of room between you and cars in front, especially if they’re acting suspiciously and full of people.

Also recommended is the installation of a dash-cam camera. These are very popular in dodgy countries with lots of fraud and corruption and it’s a sad indictment of the law here that Ireland too is dragged down to that level.

The legal system is brilliant at extracting massive claims for whiplash. But the jury is still out on whether it’s any good at protecting innocent ones from fraudsters or rounding up uninsured drivers blatently flauting the law