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What on earth is going on with motor insurance premiums in Ireland?

A protest took place in Dublin today over the spiralling cost of car insurance premiums here.

shutterstock_144026356 Source: Shutterstock/Monkey Business Images

A PROTEST TOOK place in Dublin city centre today over the spiralling cost of Irish motor insurance.

It’s an issue that greatly affects young drivers in particular, with stories of young men in their early 20s being asked to pay anything between €6,000 and €14,000 for an annual premium par for the course.

But at this stage the issue of premium-costs affects all drivers.

dok Source: Facebook

Thousands of people were expected to take part in today’s protest, organised by motoring magazine Ireland Underground, but the turnout was much smaller than predicted.

The protest began at 2pm at Merrion Square.

02/07/2016. Car Insurance Protest. Pictured around Source: Sam Boal/RollingNews.ie

02/07/2016. Car Insurance Protest. Pictured a smal Source: Sam Boal/RollingNews.ie

02/07/2016. Car Insurance Protest. Pictured cars p Source: Sam Boal/RollingNews.ie

But what is the state of play with car premiums? Why are they spiralling to such an extent?

Young drivers

Traditionally, insurance costs have tended to be higher for younger drivers (and male drivers in particular) as they represented a higher risk of reckless behaviour.

But in recent times, annual hikes have become familiar for all drivers, not just the younger ones.

In the last year, more than a third of Irish drivers have seen their insurance rise by up to 50%, with people consequently driving with reduced levels of insurance in an attempt to manage costs.

The industry here has previously defended itself saying that higher claim payouts in recent years have necessitated premium hikes in order to balance the books.

17/5/2016. Mortgage Interest Rates Issues Michael McGrath Source: Leah Farrell

However, recently this fact was seemingly debunked by Fianna Fáil finance spokesman (and Cork TD) Michael McGrath.

In an answer to a parliamentary question submitted by McGrath, Minister for Finance Michael Noonan outlined the fact that claims have in fact been decreasing across Ireland since 2011.

In his written response, Noonan said the figures relating to 2015 are still being compiled.

However, the available figures showed insurance companies paid out €1.01 billion in 2014. This is less than the €1.5 billion paid out in 2011 and €1.06 billion paid in 2012. Just over €987 million was paid out in 2013.

McGrath said the figures show the amount paid out in claims in 2014 was 36% less than the amount paid out in 2011.

Of perhaps even more relevance is a case that came before the Court of Appeal here in March.

The judgement in that case ruled that Ireland’s insurance sector is liable for the costs of Setanta Insurance, which collapsed last year with roughly 1,750 claims outstanding (about €90 million worth). As you might expect having to cover those losses is seeing the losses passed onto drivers’ premiums.

Protest

Today’s protest is aimed more at stimulating a response from the government, organiser Kian Griffin tells TheJournal.ie.

Following McGrath’s revelations last month, the Fianna Fáil TD had a motion passed in the Dáil calling for the re-establishment of the Motor Insurance Advisory Board on a time-limited basis.

kian Source: Ireland Underground

Click here to view a larger image

Griffin (who gave his input regarding McGrath’s motion) sees this as the first step.

“We’re not specifically targeting insurers,” he says.

Primarily we’re looking to the government to do something about this.
We’ve already got a bit of movement through Deputy McGrath, with whom we’re in complete agreement.

Griffin agrees that, should today’s protest really attract 6,000 cars (which would probably mean an attendance of 15,000 people), the chaos caused around Dublin city centre on a weekend should be enough to get the movement’s concerns regarding premiums noticed.

Gardaí have confirmed that traffic and parking restrictions have been in place since yesterday evening incidentally. Again, it probably goes without saying, but Dublin city centre is going to be full to bursting point with beeping cars this afternoon.

The other side

So what do Ireland’s insurers make of all this?

Michael Horan of industry body Insurance Ireland says that, contrary to McGrath’s revelations regarding insurance claims, the value of claims is in fact increasing not decreasing.

The devil is in the detail it seems.

“You have to look at both sides of the equation,” he tells TheJournal.ie.

shutterstock_237097132 Source: Shutterstock/ambrozinio

You have to look at claims costs as well as premium levels, so claims costs as a percentage of premium. In 2011 we had higher claims it’s true, but we also had higher premium income because there were more cars on the road. The average cost per claim actually saw an increase between 2012 and 2014 and that’s borne out by the figures.

Horan says: “We’ve been calling for action on this constantly.”

At the end of the day it’s not in our interests to have higher premiums, because that means less insured drivers. It also means more uninsured drivers and nobody wants that.

Horan says that insurers here are “focused on solutions not problems”, and outlines four ways of combatting the rise of premiums.

  • Strengthen the powers of the Injuries Board - ”The board is very supportive but it needs more teeth. Eight out of 10 claims in Ireland are whiplash-based, and the average payout is €15,000 compared with €5,000 in the UK. That flows from over-generous court awards. Claimants should be compelled to attend medical exams with the board and prove loss-of-income. As things stand many people don’t show up and the whole thing ends up in litigation. And 60% of compensation claims are swallowed by legal costs.”
  • Increase investment in road traffic law enforcement – “In one third of all fatal  accidents here, a driver will have no insurance,” says Horan.
  • Fix the Setanta issue (outlined above) – “You don’t see Dunnes bailing out Tesco, do you? This is a company that charged unsustainably low premiums and went bust. And it’s affecting future costs.”
  • Benchmark claim awards internationally - “High awards lead to high premiums. If claims come down then so will premiums. Fraud is an issue as well, with staged accidents and the like, adding about €50 to the cost of every premium.”

“Look, we’re aware of the dissatisfaction of customers, and we understand their frustration,” says Horan.

We’ve diagnosed the problem, now let’s focus on the solutions. It’s in everyone’s interests – our market has been heavily loss-making for years.
We need to take the volatility out of the claim environment.

Enormous premiums?

And what of enormous premium quotes? Like a 25-year-old fully-licenced man in Letterkenny, Co Donegal, who was recently quoted a €14,000 premium?

“If you’re looking for quotes, you’ll get a variety across the spectrum,” says Horan.

“Some insurers have a more conservative risk appetite,” he says diplomatically.

Griffin is a little more clear-cut on this issue.

“It’s essentially a way of getting out of insuring an older car in our experience,” he says of such outlandish premium quotes.

The insurer knows full well the person in question can’t pay it. So they make it impossible for them to do so.

Today’s motor insurance protest will take place at Merrion Square from 2pm. Speakers will include Michael McGrath, Sinn Féin deputy leader Mary Lou McDonald, and independent Donegal TD Thomas Pringle.

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