Fraudsters must be prosecuted for false car claims: ex-judge

FRAUDSTERS making false car insurance claims are getting away with it because they are not being prosecuted, a leading judicial figure said.

Former High Court president Nicholas Kearns warned Ireland has a huge problem with fraudulent motor claims, and there appeared to be no punishment for lying in court.

Meanwhile, insurers have been accused of creative accounting to justify their soaring premiums.

Mr Kearns said there were few deterrents for fraudsters.

“There is a significant amount of fraud permeating the motor claims scenario,” he said.

The insurance industry estimates that fraud costs around €200m a year.

But the former High Court president said the true figure was a multiple of this as that figure only represented the levels of fraud that were detected. And it did not account for exaggerated claims.

There were three reasons for the high level of fraud, he told ‘Today With Sean O’Rourke’ on RTÉ Radio.

He said settlements for claims were large in this country, which encouraged fake claims; there was also very little chance of detection for those making false claims; and the other factor encouraging fraudulent claims was that few fraudsters were ever prosecuted for perjury.

Mr Kearns said the chances of a fraudster being charged with perjury were “infinitesimal”.

But he praised the fact that judges have “rumbled” a number of fraudulent claimants lately.

Mr Kearns now heads up the Government’s Personal Injuries Commission, which is looking at levels of award in this country and comparing them to those in other states.

Asked about solicitors taking cases they know to be questionable, he said: “I know the Law Society is very anxious to stamp it out as it does not reflect well on them.”

His comments come as a leading critic of the insurance industry accused it of engaging in creative accounting to justify spiraling premiums.

Premiums

Dorothea Dowling, who is former chairwoman of the Motor Insurance Advisory Board, questioned the justification for premiums rising by 70pc in the past three years.

Ms Dowling said an official insurance report showed the cost of claims only rose by 3pc between 2013 and 2015.

Her comments came a year after the Government’s Cost of Insurance Working Group, set up by Minister Eoghan Murphy, recommended a range of reforms to cut the cost of cover.

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Are insurers to be allowed to get away with saying whatever they want?

PEOPLE who exaggerate their personal injury claims face severe penalties of up to 10 years in jail plus a fine of €100,000 if a judge says they have been setting out to be deliberately misleading. Those are the provisions of the Civil Liability and Courts Act 2004. But proportionality demands honesty on both sides of the equation.

We are now a year on from the first, and excellent, report of the Cost of Insurance Working Group. However, we seem to be no closer to solving the riddle of why motor insurance prices increased by 70pc over a three-year period. What we do know is there was such consumer uproar from 2015 that a Joint Oireachtas Committee started an investigation and called in witnesses during September 2016. It was only when that process started that insurance rates began to ease off.

What we also know is that figures trotted out by insurers do not stack up. Take for example the motor injury claims settled between 2013 and 2015 for which the values are in chart three on page 93 of the Working Group report. The average value increased by 2pc for claims finalised by the Personal Injuries Assessment Board (PIAB) and by 1.4pc for claims settled outside the PIAB including all the costs involved in litigation cases that proceeded to court. Those increases do not justify the price rises. On page 95 of its report, the Working Group stated that “latest data from the Central Bank of Ireland Insurance Statistics shows claims paid gross in 2015 (per Table 22) are up 2.8pc from 2014, whereas claims incurred have increased by 19pc to €1,293m”. The term ‘claims incurred’ basically means what insurers have estimated they might have to pay out in the future. Those movements in payments and estimated future liabilities do not justify the price increases either.

Take another example. On September 15, 2015, a press release on behalf of insurers asserted that the average High Court award had increased by 34pc in 2014. However, when one secures the raw data (and excludes the four claims of more than €5m which were medical negligence) the median value reduced by 2.5pc. In fact, the ultimate values were lower because from November 2015 the Court of Appeal halved a number of the awards previously made by the High Court for soft tissue injuries.

As a final example, on July 26, 2017, another press release on behalf of insurers asserted that the average Circuit Court award had increased by 48pc between 2013 and 2016. The problem with that messaging is that back in 2013 the Circuit Court had a much lower limit at €38,000. In 2016 it was dealing with cases up to €60,000 and was no longer dealing with claims up to €15,000 which are in the District Court since 2014. Rather than the ‘apples and oranges’ approach of insurers, the comparable data reflects an increase in 2016 of 5pc on 2015.

One might ask the question, are insurers to be allowed to get away with saying whatever they want? If the answer is ‘Yes’, that would imply there is no regulator in Ireland charged with the responsibility of protecting the legitimate interests of policyholders by monitoring misleading information and preventing further exaggeration by insurers which seems not to be within the remit of the Central Bank.

None of the above is to deny there are many issues which need to be addressed in our compensation environment. Media reports indicate insurers are now fighting more claims rather than just settling for ‘nuisance value’ and passing the cost on to hard-pressed motorists and businesses. However, as the Finance Minister says about the banking sector, a change in culture seems to be too slow in coming. Perhaps Government might be wise to halt plans for auto-enrolment into private pension schemes which will be run by an industry that refuses to be transparent and which nobody seems to be able to hold to account.

 

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