I AM glad that lawyer Jack Pappas has volunteered to break my arm and watch “”bear the pain and suffering like a man”, because it gives me a chance to revisit the third-party motor insurance debate.
For a change, I was basically supportive of the Law Society’s position that it would be a mistake to replace common-law damages with a capped, part-administrative scheme as in many states. Such schemes invariably are worse for the catastrophically injured, especially those on medium and high incomes with families to support (yes, they have rights, too).
Something has to give in the third-party equation. The reserves will be chewed up soon, so either premiums will have to rise, or benefits fall. Politicians, being politicians, will avoid inflicting broad-based pain like increased premiums when they can inflict pian on a disparate, nebulous group like those who might be injured in future car accidents.
For a long time, the third-party system has covered reasonably well those seriously injured though someone else’s fault. But in the past five years something has gone wrong. There has been a huge rise in claims for minor injuries. And that has coincided with lawyers being allowed to advertise and chase the minor-injury dollar. And now minor claims (under $25,000) to 75 per cent of claims which take 40 per cent of total payouts.
Something has to give.
In many ways I agree with Jack Papps that the rights of people to sue for personal injury should not be trampled over. However, given the choice, I think it is better to preserve the rights of those with major injuries over those with minor ones.
In an ideal world, my preference would be to increase and target third-party insurance premiums _ trebling them for first-time drivers and steadily reducing them for drivers who remain accident- and conviction-free.
My second preference would be to cut the damages for pain and suffering and loss of amenity of life for those with minor injuries (though they should be paid medical costs and loss of earnings).
My last preference would be to tamper with full damages for those with serious injuries.
But it is not an ideal world, and my guess is that the Goverment will do exactly the opposite: small rises in premiums, major cuts to damages for the seriously injured, and not bother at all to address two serious defects of the present system: those who suffer major injury through no-one’s fault or their own fault and the silly system of lum-sum payments.
Lump-sum payments involve guesswork about life-expectantcy and the stability of the injury.
If premiums are not targeted or increased, those with minor injuries are in a better position to bear the loss. Now 75 per cent of the claims and 40 per cent of the benefits are for minor injuries. A decade ago this was not the case. People did accept minor car-accident injuries; now they go for the money.
And the trouble is, the common law is too generous with minor injuries and not generous enough for catastrophic ones.
Further, the legal and administrative costs for minor-injury claims are higher because of the effects of economies of scale and the flag-fall nature of the costs of any legal action.
The third-party system is, rightly, a socially redistributive scheme. It compulsorily levies every driver and pays the injured. As a socially redistributive scheme its whole aim was to ensure that those badly injured on the roads who face long periods in hospital or off work are not left destitute.
The scheme was not devised to give generous pain-and-suffering payments to people with cuts and bruises, broken arms or knocked teeth. But that is what is happening. They comprise 75 per of claims; each claim with its own lawyer and own minimum start-up costs, making the minor-injury business more profitable than the major-injury business.
As with most universal-social-redistribution schemes, you will find some people socialising the losses and capitalising the profits.
We can expect the politicians to protect the premium payers, the lawyers to scream about the rights of those with minor injuries (who provide all that income), and it will be too bad for those who get major injuries.