Justice minister Charlie Flanagan has today (10 June) launched a consultation seeking views on the manner in which the discount rate in personal injuries cases should be set.

The Cost of Insurance Working Group (CIWG) was established in 2016 to analyse the high costs imposed by insurance companies to determine what actions the Government might take to address any issues that might be contributing to these costs.

The group has undertaken two main research projects – an examination of the motor-insurance sector, and an examination of the employer-liability and public-liability insurance sectors. 

Rate

In its report on the cost of motor insurance, the CIWG recommended that an examination of the setting of the discount rate be undertaken, to be followed by a public consultation.

Minister Flanagan said: “The discount rate, also known as the real rate of return, is used by courts to determine the size of an award necessary to compensate a person for damages for future loss. 

“At present, the rate is determined by case law, although the minister has the power under the Civil Liability and Courts Act 2004 to set the rate by order.”

Views

The minister is requesting views on two key issues as they relate to the discount rate:

1. in determining the discount rate, should it be up to the judiciary to decide on the appropriate rate on a case-by-case basis, or,
2. should the existing section 24 of the Civil Liability and Courts Act 2004 be amended by introducing principles and policies to allow the Minister for Justice and Equality to determine the rate, and review at intervals thereafter?

As has happened in Britain, is there a need to update the investment strategy that a plaintiff is assumed to take in determining the discount rate (currently very risk averse)?

Questions

Minister Flanagan said: “In engaging in this consultation, my intention is not to change the fundamental principle that a claimant should be fully compensated, but to ask a series of questions about what, if anything, needs to be done in order to update the current system of setting the discount rate.

“In particular, I am calling on academics and practitioners, with a particular interest or expertise in this area of insurance law, to provide their input and help us to develop a system that will ensure consistency.” 

Submissions to the consultation must be made to discountrateconsultation@justice.ie by 5 August 2020.

Progress 

According to the latest update from the CIWG, there has been significant progress in the implementation of the recommendations contained in the reports on motor insurance, and employer and public liability, such as: 

• The establishment of the Personal Injuries Commission, and its subsequent recommendations relating to addressing award levels for soft-tissue injuries,
• The establishment of the Judicial Council and its Personal Injuries Guidelines Committee, which is due to prepare new draft guidelines for personal injuries awards later this year,
• The establishment of the National Claims Information Database in the Central Bank to increase transparency around the future cost of private motor insurance; the Central Bank is to commence work on expanding its scope to cover employer and private-liability insurance this year,
• Reforms to the Personal Injuries Assessment Board through the Personal Injuries Assessment Board (Amendment) Act 2019,
• Amendments to sections 8 and 14 of the Civil Liability and Courts Act 2004, to make it easier for businesses and insurers to challenge cases where fraud or exaggeration is suspected,
• The reform of the Insurance Compensation Fund to provide certainty to policyholders and insurers,
• Various reforms of how fraud is reported to, and dealt with, by An Garda Síochána, including increased co-ordination with the insurance industry, as well as the recent commitment by the Garda Commissioner to investigate insurance fraud at a divisional level, which will be guided by the Garda National Economic Crime Bureau (GNECB), which will also train gardaí all over the country on investigating insurance fraud; and the recent success under Operation Coatee, which targets insurance-related criminality, and
• The work currently underway by the Law Reform Commission (LRC) to undertake a detailed analysis of the possibility of developing constitutionally sound legislation to delimit or cap the amounts of damages that a court may award in respect of some or all categories of personal injuries.

The department says that these reforms are having a significant impact on the cost of private motor insurance.

CSO figures from April 2020 show that the price of motor insurance is now 29.2% lower than the July 2016 peak.