IT WAS the worst of times for insurance firms, the best of times for the legal business. By 2001, the phenomenon known as 'compo culture' was at its height. Insurance premiums for the state, motorists, businesses and homeowners were going through the roof. Profits for insurance companies were stagnant. And solicitors and barristers were raking in binliners of money for old rope.

At the coalface of this culture was Quinn Direct, the company set up by billionaire Sean Quinn, which was attempting to take on the big boys.

Quinn Direct was finding the going tough in an environment where claims costs appeared to be out of control. In an overhaul of the business, a key area was identified as crucial.

"They saw that how fast you react after an accident and get a claim settled as quickly as possible was the key to keeping costs down, " according to an industry figure. One approach the company decided on was to set up a "garda panel", a group which would investigate claims and attempt to settle them as quickly as possible.

An internal company memo from general manager Kevin Lunney, dated October 2001, was circulated to all claims supervisors in Quinn Direct.

"We have recruited a panel of senior gardai (mainly retired but some still serving) on a fee basis to investigate and settle damage and personal injury claims on our behalf arising from road accidents, " the memo read. "The results to date from the garda investigations and settlement work have been very impressive with claims costs incurred dramatically falling."

Lunney detailed three ways in which the recruited (serving and former) gardai had helped keep costs down: "The panel's ability to access, source and relay detailed information to us on road traffic accidents involving our policyholders through the garda computer system and records; "Their contacts within the garda force that enables them to carry out background checks on accident participants where Quinn Direct are involved as insurer for one or more of the parties; "Their negotiation, influencing and persuasive skills in settling claims on the doorsteps of third parties as opposed to the steps of the courthouse as was traditionally the case."

The new strategy also included another element: "an incentivisation scheme for plaintiff solicitors". The gardai now working for the company were to approach plaintiffs' solicitors "to induce the quick settlement of claims before proceedings have been issued or, if they have been, at the earliest possible stage of the proceedings".

"Here we instruct our garda panel to approach plaintiff solicitors offering the plaintiff solicitors a bonus/ extra payment on their fees to recommend reduced settlements to their clients in cases against Quinn Direct.

This strategy is proving particularly useful in the disposal of whiplash/softtissue personal injury actions against the company."

The system was strategically innovative from the company's point of view, as outlined in the memo. The expertise of serving and retired officers was utilised, along with quick access to garda intelligence. In doing this, the window of time between an accident and settlement of claim was narrowed considerably, leading to huge savings. This window was further narrowed by offering a sweetener to the solicitors of claimants to settle quickly. Solicitors were effectively being paid by the opponents of their client to minimise their client's claim.

The strategy, as outlined in the memo, is heavy with legal, ethical and competitive issues. If the company, through its garda panel, had access to garda information, criminal and data protection matters arise.

A private company had access to "background checks" from classified information. How did the panel's ability to "access, source and relay detailed information to us on road traffic accidents" affect the force's ability to do likewise in the public interest or for a competitor of Quinn Direct? Who were these members and former members representing themselves as when they exercised their "negotiation, influencing and persuasive skills in settling claims on the doorsteps"? Many vulnerable people might be unfairly persuaded by a serving or recently retired garda to settle rather than seek independent legal advice.

Then, there are the solicitors. In whose interests were they accepting a "bonus/extra payment on their fees to recommend reduced settlements to their clients in cases against Quinn Direct"?

The strategy on keeping costs low worked well for the company. Profits began to grow exponentially. Quinn Direct started to eat into the market share of the established insurance companies. The big boys were getting nervous.

One of the biggest boys on the block is Axa, the Irish arm of a French multinational company, which took over PMPA in 1999. By 2004, Quinn Direct was threatening Axa's market share. Executives in Axa identified the early settlement of claims as a key component in Quinn's success. The company decided to concentrate on aping Quinn's success, albeit not in as aggressive or questionable a manner as its Irish-owned competitor.

Two plans were conceived. In one, recently retired assistant garda commissioner Tony Hickey was employed "primarily for the development of an investigation panel". As part of his contract he was to be paid 500 a day for the four-month contract, including a performance-related bonus of up to 15,000.

Over the following months, a series of "claims investigation meetings" were held at centres throughout the state, attended by dozens of ex-gardai.

In a few cases, the officers present had not yet left the force. Each attendee was given an induction course and paid their mileage expenses, and their contact details retained by Axa representatives.

A document setting out the requirements of the new investigators specified that they should have a number of skills, including "excellent negotiation and influencing skills".

A team of investigators, nearly all of them ex-garda members, were duly employed by the company. There is nothing to suggest that these members had the same access to the "garda computer and records" that the former officers employed by Quinn had, as per Kevin Lunney's memo.

According to an industry source, the employment of ex-gardai offers advantages apart from their investigative experience.

"If you ring up a garda station after an accident to get a report, it can take weeks before a full answer is given, " the source says. "If they are talking to an ex-colleague, somebody they know they can trust, this information is available very quickly. In some ways, it's just human nature. On the other hand, the whole problem of the long life of a claim cycle is often down to sloppy and slow procedure by the gardai. They have no rush to get reports to insurance companies."

Dovetailing with the new investigation unit, Axa also formulated a plan for early settlement claims with An Garda Siochana.

After some negotiation, a pilot project was set up in which the gardai would react quickly . . . and to Axa's exclusive benefit . . . in the aftermath of road traffic accidents. The company opened negotiations with the force. A pilot project was agreed on for the southeast garda division. A "memorandum of understanding between An Garda Siochana and Axa (Ireland) in relation to the removal and storage of mechanically propelled vehicles involved in road traffic collisions" was drawn up.

The project was operated as follows. After an accident involving at least one Axa premium holder was reported, the gardai in the division were obliged to contact Axa within 45 minutes.

The members present then dispatched the incapacitated vehicle by an Axa-approved towing agent to an Axa-approved storage facility. Here, the vehicle could be quickly examined for the specifics of damage. If the second driver in an accident was insured by another company, their vehicle, too, would end up in the storage facility, available for examination. This presented Axa with the opportunity to examine this other vehicle without the owner's consent.

As part of the agreement between Axa and the garda, a "Collision Notification Form" was conceived, which gardai at the scene would fill out and pass on to the company. At one meeting in Kilkenny, the gardai present were instructed by Axa representatives about what was expected of them. In effect, the force was operating at the behest of a private company, conferring competitive advantage on Axa. Data protection issues also arise from the agreement.

A premium holder's damaged car was available to Axa for examination without the consent of the premium holder.

The relationship was extremely close. In a memo circulated to members of the southeast division, Superintendent PV Murphy instructed that "attending gardai [at the scene of an accident] will not call any vehicle recovery agent other than through the use of the freephone number [supplied by Axa]. He also wrote that end-of-month returns from each district will have to include any "reasons for not using the Axa Ireland towing service" when an Axa-insured vehicle was involved.

According to documents seen by the Sunday Tribune, the savings accumulating to Axa as a result of the pilot project were estimated to be 250,000.

In reply to a parliamentary question from Socialist TD Joe Higgins last week, the minister for justice confirmed that the pilot project had taken place, with an estimated 10,000 savings for the force. He also stated that a similar project is planned for the Dublin region next year.

From the insurance companies' point of view, it's all gravy at the moment. The establishment of the Personal Injuries Assessment Board has led to a huge reduction in claims costs.

Meanwhile, most companies are now employing ex-gardai as investigators. It is unclear whether some or any of these ex-officers have access to garda intelligence, as the Quinn Direct memo indicates its investigators had in 2001.

It is also unclear as to whether any plaintiff solicitors continue to receive sweeteners from Quinn Direct, as was also indicated.