Has the Time Arrived for Universal No Fault Personal Injuries Insurance?

By James O'Mahony 

Judge Seamus Hughes of Longford District Court recently said that he will no longer send young people to jail for driving without insurance.  He said the “huge increase” in uninsured young drivers had become a national problem, blaming the rising cost of insurance premiums on “excessive claims” being awarded.  The Judge said that new premiums were so excessive, that they were preventing young people from getting to work.  He suggested that Ireland adopt the English approach.

Well, let’s adopt the New Zealand approach instead.  

In New Zealand, everybody pays a portion of their income into a universal no fault personal injuries fund to cover them for personal injuries.  This eliminates the need for public liability, employee liability and medical negligence insurance.  It renders car insurance optional where third party property damage insurance is included in the price of fuel.  In fact, car insurance is only purchased where someone has borrowed money to buy a car.  

It could even be argued that universal no fault personal injuries insurance saves the environment because the average age of cars on New Zealand’s roads is 14 years old. It could be argued that this is because newer vehicles would require the purchase of car insurance to protect one's investment.  While older vehicles produce more greenhouse gasses, the production of new vehicles also generates a significant amount of greenhouse gas.  So older vehicles may actually be better for the environment than brand new electric vehicles.

The fact that Kiwis don’t import new vehicles like the Irish do, may also have a positive effect on the economy in that money that would be spent on importing new vehicles in Ireland, and generating employment abroad, is spent elsewhere in the New Zealand economy and generating employment in New Zealand rather than abroad.  Older vehicles need more maintenance than newer vehicles so even more jobs are generated.  This is comes under the heading of the “Circular Economy” which  is a concept whereby resource input, waste emission and energy leakage are minimised by slowing, closing, and narrowing material and energy loops. This can be achieved through long-lasting design, maintenance, repair, reuse, remanufacturing, refurbishing, and recycling.

Because our environment is in such a precarious state, the circular economy will be huge, and generate thousands of jobs in the coming decades.  Sweden, with this in mind, have introduced a tax credit to fund the repair of household appliances instead of throwing them away.  They have also designed the Gripen E and F fighter jets around the idea of the circular economy.  Finland is also to devise a circular economy strategy but I doubt if an Irish politician has ever heard of the concept.  

Of course, Insurance companies in Ireland are dead against the idea of circular economics because they prefer to insure vehicles that are no more than seven years old.  One company will not insure vehicles over nine years old.  Others won’t accept vehicles over ten years old while most companies will be reluctant to take on vehicles over 14 and 15 years old.  In the not too distant future, the Irish government may be obliged by the EU to adopt circular economic policies, not only because of what has been outlined above, but also increased automation and robotics will take more and more jobs.  

How should universal no fault personal injuries insurance work in Ireland?

First of all, there will have to be a root and branch reform of the tax system so that it is much flatter and broader than the existing tax system, to ensure that as many people as possible contribute to the no fault personal injuries fund.  It must also be accompanied by a universal health insurance system. The charges for these two funds must take the form of a two percent universal no fault personal injuries levy and a 12% public health insurance levy and they must be paid into funds that cannot be touched by politicians.   If a person wants, he should be entitled to opt out of these levies by buying approved private products.  This is necessary because sole traders and the members of a partnership, if they make a lot of money, may end up paying an inordinate amount of money for health and personal injuries insurance.  Even though only one percent of us will end up in a nursing home, a two percent nursing care tax should be payable by everyone to fund home help and nursing home care in the event of incapacity.

While health insurance should be used to pay for the delivery of normal everyday healthcare in addition to treatment for personal injuries, the personal injuries insurance, rather than a lump sum, should be used to fund an income of 85% of the claimant’s work income for the duration of the incapacity.  It should also be used to fund home reconfigurations, vehicle reconfigurations etc., in the event that a person becomes wheelchair bound. Where a person is not working, 85% of the typical (as opposed to the average) full working week income should be payable.  Claims for whiplash should be disallowed unless it is obvious from the state of the vehicle that it was travelling at speed. When the claimant dies, and assuming that his responsibilities have “died” too, i.e., children have left school/college and spouse has died or remarried, then the payments should cease.  

Unlike the existing system, where an assailant may not always have the funds to pay compensation, claims for injuries sustained from an assault would also be allowed, and police officers who are currently not covered for injuries caused by a person suffering from a mental illness will be covered under this system.

To make a claim, report the incident to the police, who will approve your claim once they are satisfied that it is a genuine claim.  Then, it will just be a matter of sending it on to the Personal Injuries Assessment Board, which is already in existence.  A claimant if he wants to, is entitled to challenge the award handed down by the Personal Injuries Assessment Board in the High Court.

Foreigners travelling to Ireland should be warned to have their own personal injuries insurance as the system should only cover people who are resident in Ireland and who are injured in Ireland.

But how should we fund third party property damage?

Instead of fixed penalty fines for driving offences, which can often be small change to wealthier members of society, how about charging a week’s, a couple of week’s, a month’s or even several month’s income for an offence, and use this revenue to partly fund third party property damage. Taxes on fuels could also be repurposed so as to contribute to this fund, but to release funds so as to do that, direct water metering/charging will have to be reintroduced.  This could also facilitate the abolition of VRT.

To make life easier for young drivers who usually don’t own any property and are on low wages, it would be an excellent idea if road tax, local property tax and commercial rates, were replaced with a land value property tax payable by the owner rather than the occupier of the property. In the absence of a need to police car insurance and road tax, the judiciary will have additional resources to police other types of driving offence and indeed other non driving offences.

In the final analysis…

Universal no fault personal injuries insurance has the potential to transform the Irish economy beyond recognition because the need for corporations to buy public liability and employee liability insurance will be gone.  This will enhance competitiveness.  Sole traders and members of partnerships will only have to insure themselves and their property rather than the public and their employees, and when combined with the abolition of road tax and VRT, will contribute hugely to the growth of their business and generate employment.  Most jobs are in small businesses, and most small businesses start out as sole traders and partnerships, so there will be a boom in this area.  People will choose to keep their vehicles for longer rather than take out a car insurance policy to cover a new vehicle.  This will generate additional employment in the circular economy and hold more money in the economy for longer, because money that would have been spent on importing new vehicles will be spent elsewhere in the economy instead.  

Separately from that, it will have a small additional positive impact on productivity as people who may not have been in a position to commute or rent away from home because of the cost, will be able to get on the road and work.  So there will be a reduced demand on social programmes too and enhanced revenues in other areas.

Where the mostly foreign owned insurance firms operating in Ireland will invest much of their revenues abroad, there will be no profit motive in a universal no fault personal injuries insurance setting.  Revenues raised from the universal no fault personal injuries levy could, along with state pension contributions be placed in a constitutionally protected sovereign fund and invested in Ireland so as to generate additional wealth and employment.  Like any other sovereign fund, it can be drawn down as needed to make payments under the personal injuries insurance and pension schemes.  

Health budgets will go further in the absence of a need to buy medical negligence insurance as well as public liability and employee liability insurance. Government revenues in general, will go much further in the absence of a need to buy public and employee liability insurance.  

It may even make a dent in homelessness as those who, in the current insurance environment have to rent close to work or college will find commuting cheaper than maintaining a weekday address and a weekend address. This will be enhanced by the abolition of road tax.  

Universal no fault personal injuries insurance is in operation quite successfully in various forms in  many jurisdictions around the globe including New Zealand, Australia, parts of Canada, Brazil and even parts of Europe and in the absence of lawyers, is much cheaper than the existing Irish system.

Universal no fault personal injuries insurance truely is a “no brainer”!