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Data on insurance costs from industry could be knowingly misrepresenting 'full picture', Doherty claims

The official CSO stats say the cost of insurance is going down but that isn’t being felt by many on the ground, Pearse Doherty has claimed.

Image: Sam Boal/Rollingnews.ie

THE WAY OFFICIAL CSO stats on the cost of car insurance are compiled leaves it “open to the industry to knowingly present certain figures that may not reflect the full picture”, Sinn Féin’s Pearse Doherty has claimed. 

CSO stats say that the cost of premiums has fallen in the last few years, but that isn’t being felt by many customers, Doherty said. 

The government is yet to implement many of the recommendations from the Cost of Insurance Working Group it set up – such as dedicated garda unit to tackle insurance fraud. The opposition claims the public is being left out of pocket because of this inaction, with the official stats provided not reflected on the ground. 

CSO figures

According to most recent Consumer Price Index for January, the average cost of motor insurance had fallen six points in the previous 12 months.

In a recent parliamentary question, Doherty asked the Taoiseach the way in which the CSO acquires data on the price of motor insurance.

In reply, Varadkar said that to compile that particular index as part of the overall Consumer Price Index, the CSO collects data on premiums from a sample of insurance companies.

“The sample covers approximately two-thirds of the motor insurance premiums written in the market,” he said. 

The insurance companies are requested to supply price quotations for defined customer profiles for both new and existing customers. This request is made monthly via email from a member of the CSO’s CPI team directly to a representative of each of the insurance companies in the sample. As with all companies contacted directly for information used in the compilation of the CPI, the CSO team members identify themselves.

The Taoiseach added that the CSO keeps the profiles regularly updated so they can continue to be representative of the market, collating characteristics such as model and age of the car, and the sex, age, location and occupation of the insured person.

Doherty said that a “more detailed and robust way of checking the actual prices is warranted given that the public continue to report large increases”.

For example, a survey of 4,000 motorists from the AA last year found that 56% of those polled said they’d seen a significant increase in their car insurance at the time of renewal. This dataset, however, would be smaller than that available to the CSO. 

The Sinn Féin finance spokesperson said he questioned whether the insurance industry could be relied upon to provide “straight up data” when approached officially by the CSO and asked its prices.

“The CSO approach is fine for the price of milk or nappies – or most products – but insurance is a notoriously difficult product to price which varies widely from person to person and place to place seemingly without rhyme or reason,” Doherty said.

“Through an FOI request I have obtained documentation which shows an industry commissioned report actually disputes the CSO’s figures of a large increase arguing that in fact prices only increased by 22% between 2011 and 2016.

At the very least, Ministers quoting these figures should be more circumspect given their ultimate source is the insurers themselves.

Reacting to Doherty’s claims, a spokesperson for Insurance Ireland told TheJournal.ie that it has “always accepted the veracity of the CSO process and considers its data to be indicative of market conditions”.

“This was a view shared by Deputy Doherty when he relied on the index in Dáil contributions when premium levels were increasing,” the spokesperson said.

The report Deputy Doherty refers to was supplied to the Government’s Cost of Insurance Working Group by Insurance Ireland and it stated that it is not correct to directly compare the increases it found in premium levels (22%) with the CSO index. The purpose of this comment in the report was to avoid inaccurate interpretations such as those put forward by Deputy Doherty.

The spokesperson added that “systemic reform” is needed to address the “volatility of claims” which helps to drive the cost of premiums upwards for some drivers.

“We want to see greater urgency in the pace of reform to tackle the costs all policyholders pay,” the Insurance Ireland spokesperson added. 

Cost of awards

On a repeated basis, the level of compensation payouts for injuries sustained in road collisions has been cited as a chief cause in the high cost of premiums in Ireland.

A report from the Personal Injuries Commission last September found that the average claim for soft tissue injuries in Ireland was €19,862 – over four times higher than the average in the UK

Speaking to TheJournal.ie last year, insurers told us that the cost of paying out these claims out, as well as the expectation that some people have regarding the payout they may receive.

Insurance Ireland CEO Kevin Thomson said: “It’s fair to say that we’re at a new norm, in terms of the cost of insurance out there. If we want to tackle it, it’s the cost of awards we need to look at.”

In one recent case that took place in Dublin, a young driver now fears his premium could skyrocket after being involved in a minor crash where the driver of the other car has now claimed an injury.

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John* told TheJournal.ie that it was during morning rush hour when he drove into the back of another car at a relatively low speed.

“It really was only a tip,” he said. “It was a busy city centre street at rush hour, you’re not going to be going that fast.”

He said that none of the occupants of either of the cars reported injuries at the scene, but the driver of the other car subsequently submitted a claim.

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John said: “And my insurance company just said they’d pay him out straight away. I think the photos show how little the impact was.

That’s my no-claims gone now, and my insurance is up for renewal in the summer. As a young driver, my premium was high anyway. But depending on how high it goes it might force me off the road.

In regards to injury payouts, there may be some move from government in this regard, with Minister for Justice Charlie Flanagan last month asking the Chief Justice of the Supreme Court Frank Clarke for help in efforts to bring down the size of compensation awards.

The Alliance for Insurance Reform called it a “welcome development” after “months of frustration at the pace of reform on insurance costs”. 

Its spokesperson Peter Boland said: “Insurers can’t have it both ways – if the volume and quantum of awards are the problem then reform must be matched with cuts to premiums. 

What we have not seen from insurers is a commitment to cut premiums if necessary reforms are made.  A tangible commitment on premium cuts would provide an additional impetus on the government to act.

*Names have been changed at the person’s request.

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Sean Murray

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