7 October Re: Themed Inspection into Third Party Personal Injury Claims. Dear

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1 7 Octber 2011 Re: Themed Inspectin int Third Party Persnal Injury Claims Dear During 2011 the Central Bank f Ireland ( Central Bank ) undertk a themed inspectin prject in relatin t the prcessing f third party persnal injury claims by nn-life insurance cmpanies. The purpse f this letter is t prvide yu with feedback in relatin t the findings f the themed inspectin. We hpe that it will be f assistance t yu in develping and ensuring yur wn firm s cmpliance. It is imprtant that yu cnsider the issues set ut belw and their relevance t yur firm. Initially, 25 insurers were identified fr participatin in the Third Party Persnal Injury Claims theme and each f these insurers was requested t submit infrmatin t the Central Bank regarding claims that were clsed in the perid 1 April - 30 June Of the 25 insurers wh were cntacted, 18 were able t prvide infrmatin, whilst the remaining 7 insurers indicated that n third party persnal injury claims had been clsed by them in the defined time perid. We wuld like t take this pprtunity t thank yu fr yur c-peratin in relatin t this wrk. Desk Tp Analysis - Findings An analysis f the data prvided by the 18 insurers that had clsed third party persnal injury claims during the perid 1 April - 30 June 2010 revealed the fllwing findings: A ttal f 6,672 third party persnal injury claims where a settlement was made were clsed in the defined perid. Of the 6,672 third party persnal injury claims that were clsed:

2 39% were settled withut referral t the Injuries Bard. 9% which were referred t the Injuries Bard settled during the interim perid prir t an assessment being cmpleted by the Injuries Bard. 15% were assessed by the InjuriesBard.ie and the assessment award was accepted by bth insurers and claimants. 7% were settled after rejectin f the InjuriesBard.ie assessment but befre the initiatin f litigatin. 22% were settled fllwing initiatin f legal prceedings. 6% were settled n the steps f the curt. 2% were settled fllwing a curt award. 24% f the ttal cst f all third party persnal injury claims clsed in the defined perid was attributed t legal csts. 42% f the third party persnal injuries claim settlements were clsed within 12 mnths f the claim ntificatin date. 20% f claims were clsed within 3 mnths. Whilst the Central Bank is aware that sme claims maybe mre straightfrward than thers the Central Bank wuld expect all insurers t make every effrt t establish the prgnsis f an injury befre making any settlement ffer. The Central Bank is nt making public any f the insurer specific claims data previusly prvided. Hwever the abve industry wide statistics will be made public. On-site Claim File Review - Findings

3 During the curse f the themed inspectin 11 n-site inspectins were undertaken during May, June and July 2011 at which a ttal f 418 third party persnal injury claim files, which included Mtr, Emplyer and Public Liability claims, were reviewed. The inspectin indicated that insurers were, in general, prcessing claims in accrdance with the Cnsumer Prtectin Cde, hwever a small number f areas f cncern are being fllwed up with the relevant insurance firms. The findings f the review are as fllws: A sample f third party persnal injury claim files were selected fr review and assessed against the InjuriesBard.ie Bk f Quantum and the Cnsumer Prtectin Cde. The files reviewed indicated that settlement payments made by insurers varied accrding t injury type and level f seriusness f injury, but were spread acrss the apprpriate settlement ranges as set ut in the Bk f Quantum. Fr claimants wh chse t refer their claim t the InjuriesBard.ie and accepted their assessment it was nted that the assessment award was higher than insurers last recrded ffer. Claims that were settled fllwing assessment by the InjuriesBard.ie tk n average 20 mnths frm the date f ntificatin t the insurer t the date f claim payment. Fr claims assessments that were made by the InjuriesBard.ie and subsequently rejected, it was nted that the ultimate settlement was higher than the InjuriesBard.ie assessment. It was nted that claims which were settled fllwing litigatin tk between 12 and 60 mnths frm the date f ntificatin t the insurer t the date f claim payment. The varying differentials between the insurers last recrded ffer and the InjuriesBard.ie assessment award was mainly attributed by the insurers t the InjuriesBard.ie having access t mre up t date and reliable medical infrmatin. Hwever, ne insurer infrmed the Central Bank that their differential was in part due t an issue n their claims handling system. In a small number f instances, it was nted that sme insurers had nt effected payment f the settlement amunt within 10 business days f the settlement agreement being reached.

4 The Central Bank wuld remind all insurers f Prvisin 23 t the Claims Prcessing sectin in Chapter 5 f the Cnsumer Prtectin Cde which requires insurers t pay all claims t the claimant within 10 business days nce cnditins, as utlined in the Cde, have been satisfied. It was nted that sme insurers are in the practice f issuing a settlement cheque at the same time as infrming the claimant f the terms f the settlement ffer. The Central Bank wuld advise insurers that the revised Cnsumer Prtectin Cde, which will be published later this mnth, includes requirements that the terms f a settlement ffer must be made in writing t the claimant and that the claimant must be allwed at least 10 business days t cnsider the terms f a settlement ffer and t cmmunicate acceptance r rejectin f the ffer. It was nted that ne insurer was unable t prvide cmplete claim file recrds fr a small number f third party persnal injury claims that were requested by the Authrised Officers. The Central Bank wuld remind all insurers f Prvisin 49 t the Cnsumer Recrds sectin in Chapter 2 f the Cnsumer Prtectin Cde which requires insurers t maintain cnsumer recrds. It was nted that a number f insurers utsurce aspects f claim prcessing t an utsurce agent, i.e. slicitrs, nce a claim is invlved in litigatin, fr example in negtiatins and the discharge f resulting payment cheques. The Central Bank wuld remind insurers wh use such utsurce agents f the bligatin t cmply with Prvisin 10 t the General Principles in Chapter 1 f the Cnsumer Prtectin Cde which requires a regulated entity in all its dealings with custmers and within the cntext f its authrisatin t ensure that any utsurced activity cmplies with the requirements f this Cde. It was nted that certain data prvided initially by a number f insurers was either incmplete r nt in the frmat requested by the Central Bank. Furthermre, it is apparent that sme

5 insurers are nt capturing r retaining claims data in a frmat that is readily accessible. It is a cncern t the Central Bank that sme insurers were als unable t segregate claims data detail by claimant in instances where there were multiple claimants, examples f which include the gruping f the third party and insurer s legal csts, third party settlements and prperty damage etc. The Central Bank wuld advise insurers that further themed inspectins in this area will be undertaken in the future and that requests fr infrmatin will be made accrdingly. As a guide, the type f infrmatin that may be requested is identified in the Appendix t this letter. It is appreciated that nt all f the issues referred t in this letter may be applicable t yur institutin. These findings shuld be brught t the attentin f yur Cmpliance Officers and we wuld expect that they are incrprated int the review f yur institutin s cmpliance with the Cnsumer Prtectin Cde. Shuld yu have any queries in relatin t the cntents f this letter, please cntact Je Mrley at je.mrley@centralbank.ie r (01) Yurs sincerely Adrian O Brien Deputy Head Cnsumer Prtectin Cdes Divisin Insurance, Investments & Intermediaries Divisin

6 Appendix The Plicy / Claim Number The date that the injury ccurred The date f claim ntificatin A descriptin f the injury i.e. whiplash t the neck/ shulder/ back, fractured arm / leg etc. Details f wh has made the claim i.e. the claimant, slicitr r ther An indicatin as t whether medical evidence was prvided by the claimant Details f all settlement ffers that are made t a claimant and the date f such ffers Details f hw claim settlements were made i.e. direct with the claimant, after referral t the Injuries Bard but withut an assessment award being finalised, fllwing acceptance f the Injuries Bard assessment award, fllwing rejectin f the Injuries Bard assessment award, fllwing the cmmencement f litigatin, fllwing a curt settlement etc. Details f the general damages i.e. the settlement amunt paid fr the injury element nly Details f a third party s legal csts, if settled by the insurer in the settlement f a claim Details f the insurer s wn legal csts incurred in the settlement f a claim Details f all special damages e.g. lss f earnings, medicatin, cunselling etc. Details f any fees e.g. Injuries Bard applicatin fee, medical fees etc. The date that a claim settlement was reached and ntified t the claimant in writing The date that a claim settlement payment was made Where applicable, cnfirmatin that the plicyhlder has been made aware in writing that a claim has been paid and the impact it may have n future insurances f a similar type This is nt an exhaustive list but is intended t prvide insurers with an indicatin f the type f infrmatin that the Central Bank may well request n future themed inspectin.