Article Appeared in Irish Broker Jan 2011
If implemented the establishment of periodic compensation payments for serious injury claims, as recommended by Justice Quirke and his working group, will be one of the biggest forward steps taken by the Irish insurance market in recent years.
The motor insurance industry has already made significant improvements and affordable cover and excellent service are now the norm in the market.
Similarly progressive initiatives such as the establishment of the Injuries Board, the excellent ongoing work by the Irish Insurance Federation to tackle the blight of insurance fraud and overall improvements in road safety have also helped improve the performance of the market.
Should Justice Quirke’s recommendations around periodic compensation payments become reality, they will act as another jump forward for this fast moving sector.
Justice Quirke’s working group should also be congratulated for the impressive speed at which it has produced its report which includes draft legislation.
It is well documented by now that the current compensation model for seriously injured claimants is completely flawed. Simply put, there is no accurate way of determining the full value of compensation required for potential lifetime support.
This has driven Justice Quirke to recommend these changes that are beneficial to all stakeholders in the claims process.
Periodic compensation payments provide security to injured claimants for the rest of their lives. They improve the claimant’s quality of life and ensure that resources are available for them in the long-term.
They also make personal relationships easier to manage as Justice Quirke summed up when he commented: “You also see people in wheelchairs, seriously incapacitated, who receive an award of €3 to €4 million, being besieged by relatives offering advice on investing the money. Their misery is increased by the award.”(Irish Times November 16, 2010)
Ongoing periodic payments will help an individual’s ability to provide for the care and treatment they need on an ongoing basis.
The concept of periodic payments is not new, but it is the first time in Ireland that we will have legislation to allow courts to provide this model of compensation. I believe that court awards and out of court settlements managed through periodic payments is a very positive development.
Periodic payments for injury claims are enshrined in legislation in other countries such as New Zealand, Australia, South Africa and Canada. In these countries, injury claims are paid by a State organisation and the focus is the long term care of the injured citizen with the concept of multiple compensation payments in the same manner as proposed by Justice Quirke.
However, this does present a challenge to insurers to effectively monitor, control and dispense these weekly, monthly or annual payments to claimants. Systems for general insurers have traditionally been designed to make one single payment based on one single reserve value and introducing multiple payments, with indexation, audit trail and reserving will be a significant change to any claims operation.
Mostly this will have cost implications in two areas for insurance companies:
1. Managing long tail claims will ultimately increase the risk of payment leakage on the overall book of claims.
2. Administration cost of maintaining open claim cases for the rest of the claimants’ lives.
As well as the logistical challenge of making these multiple payments, insurers will also need to review cases and claimants’ rehabilitation progress.
For example, where the injury occurred when the claimant was a child, the legislation will give them the opportunity to go back to court at the age of 18 to seek compensation for loss of potential earning.
Therefore, it is in the best interest of insurance companies that the claimant enjoys, where possible, a quality of life that allows them to be independent and to work. This investment in treatment and care in the early years will save huge amounts of money in potential loss of earning payouts.
State agencies around the world such as Accident Compensation Corporation (New Zealand), Transport Accident Commission, Lifetime Care & Support Authority, Worksafe (Australia), Road Accident Fund (South Africa) and Manitoba Public Insurance, Saskatchewan Worker’s Compensation Board (Canada) have chosen FINEOS to provide the Claims Management software solution to manage just this type of claimant compensation.
As well a supporting the traditional single payment claims, FINEOS has been providing these organisations with the technology and expertise to manage regular and irregular periodic payments. Using the appropriate claims and payments technology delivers many financial savings for these organisations including:
1. Lower Administration Costs – long tail claims management carries a heavy administrative burden, which can be dramatically reduced by the technology
2. Reduced Claims Leakage – delivered by tighter controls and checks and proactive management processes driven by the system
3. Better Service to Claimants – all claimant information and content is stored in electronic files meaning better query management, case tracking, claim updates and developments and secure portal access to the claim file.
Justice Quirke’s working group and its report have rightly been universally accepted by all stakeholders in the claims process and we hope that the recommendations around periodic compensation payments become legislation as soon as possible in 2011.
Adopting these payments is not without its challenges, particularly for insurers who must alter their claims departments to now manage periodic payments as seamlessly as they do single payments.
However there is no doubt that this is the best way to proceed and given the advanced claims package solution technology available today, overcoming these challenges for an Insurance provider, should not be an issue.