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Car insurance is up 100% for some drivers. What’s going on?

We can’t have high awards and low motor insurance premiums, writes Caeva O’Callaghan.

Caeva O’Callaghan

THE COST OF insuring your car is soaring. Last year, premiums increased by almost 20%. We are only into the second week of March and we are seeing massive price increases – in some cases over 100%.

Yesterday, one of my colleagues was processing a renewal for a client. Our client is married, with a full bonus, herself and her husband have full Irish licenses and they drive a 1.4 litre 2003 car.

Last year she paid €467. This year her insurance company, invited renewal at a premium of €2,204 and we offered her an alternative price, of €778. This example is typical of what we are seeing in the motor insurance market at the moment.

There have been many reasons for this massive increase. There is though, one over-riding and primary reason and that is the fact that insurance companies have been losing money on motor insurance in Ireland for six of the last seven years. There are many contributing factors as to why this is the case.

These include the fact that the insurers were all chasing market share at the expense of profitability. The fact that Quinn and Setanta went bust and that RSA had to be bailed out to the tune of €300 million verifies this hypothesis.

20/12/2011. Sean Quinn Court Cases Source: Laura Hutton/Photocall Ireland

On the rise 

Other contributing factors are fraud, uninsured drivers and claims inflation.

Claims inflation is the increasing cost of claims and the cost of claims is soaring at a frighteningly fast rate. We must ask ourselves why has there been claims inflation. There has not been inflation in general – the consumer price index has not increased.

What is going on and what can be done to protect consumers from continued rising car insurance prices?

First of all the government increased the jurisdiction of the Circuit Court – almost doubling it to €60,000. Effectively this is the government telling the judges they should be awarding more compensation. I would also countenance that there has been an abject failure of the Injuries Board to give guidance to the courts, the public, the legal profession and the insurance industry on the appropriate level of awards.

The Book of Quantum, which the Injuries Board was charged with, published in the early noughties, was inadequate at the time and has not been updated since. Our Book of Quantum contains very broad descriptions of injuries and its recommended bands of appropriate compensation are very wide. This renders it ineffective.

What injury gets what rate of compensation?

shutterstock_144026332 Source: Shutterstock/Monkey Business Images

By contrast the Books of Quantum in NI and the UK are much more detailed and relevant. They give certainty and clarity and people can deal with claims without needing lawyers.

For example, a good Book of Quantum will give the following type of guidance: Sore neck for 3 months = x amount of compensation, sore neck for 6 months = y compensation.

The High Court has had a very large turnover of judges in recent years resulting in a large number of new appointments. With no Book of Quantum to give guidance to these new judges, we are seeing huge variances in awards. The absence of any solid guidance has resulted in huge inconsistencies in awards in the court system.

There is anecdotal evidence from insurers that new judges are erring on the side of caution and being generous. The introduction of the Court of Appeal has meant that some cases have been appealed by insurers and awards substantially reduced.

By way of example, a few weeks ago, an insurance company appealed a recent soft tissue High Court award of €60,000 and the Court of Appeal reduced this award to €30,000.

Reducing awards

The Court of Appeal is in its early stages and it is too early to get a sense of how this will play through, but lawyers I have spoken to feel that the Court of Appeal will reduce the low end injury awards.

The real indicators of motor insurance premiums are injuries at the lower end – mostly soft tissue injuries and whiplash. Why is an Irish neck worth three times a British sore neck? We must ask ourselves what we want. We can’t have high awards and low motor insurance premiums.

We need compensation guidance that is strong and relevant. The Injuries Board is the body that must prepare this and they need to get on with the job.

Caeva O’Callaghan is Managing Director of O’Callaghan Insurances, a third-generationfamily brokers with four offices in the North East. You can contact her on 042-9359000 or go to www.quoteme.ie/ www.oci.ie

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