MOTOR INSURANCE PREMIUMS have risen by an average of 35% in the last decade despite a 9% fall in the cost to the insurer of claims per policy over the same period.
Overall, the number of claims by motorists fell by 45% between 2009 and 2019, according to statistics contained in the Central Bank’s second annual Private Motor Insurance Report.
Based on data from the National Claims Information Database (NCID), the report is the second of its kind since the database was established.
It reveals that in 2019, the Irish insurance industry generated an average profit of 10% of total industry income, up from 9% in 2018. Total industry income was €1.47 billion last year, 96% of which came from premiums.
In relation to the cost of premiums, two distinct periods are noted in the report — from 2009 to 2013, average premiums fell by 15% before increasing by 63% to its peak in the second quarter of 2018.
The average premium then fell by 4% to €676 last year.
At the same time, the average value of motor insurance claims increased by 65%, from €2,726 in 2009 to €4,487 in 2019.
Digging into the figures behind that spike reveals that the average injury claim increased by 53% from €29,780 in 2009 to €45,576 in 2019. Meanwhile, the average cost of a claim for damage increased by 6% to €1,262 in 2019.
Crucially, however, because there were fewer claims over the period, the average cost of claims per policy incurred by the insurer actually fell by 9%.
The overall number of claims fell by 40% between 2009 and 2018 and a further 5% between 2018 and 2019.
Injury claims declined by 25% and claims for damage fell by 46% over the same ten-year period.
Experts say these peaks and troughs reflect the well-established cyclical patterns of the industry, although there is evidence that the Irish cycles are more volatile than in many other markets.
In 2016, in response to political pressure, the government created the Cost of Insurance Working Group to examine the factors influencing the rising cost of insurance premiums in the State.
The following year, the Working Group recommended the creation of the NCID to improve transparency in the industry.
Settlement channels
Today’s report also provides detailed data on how claims are settled.
Between 2015 and 2019, half of all claimants settled directly with their insurer.
Some 33% of claimants reached a litigated settlement, 85% of whom settled for less €100,000.
Those claimants received average compensation of €23,572 and incurred average legal costs of close to €15,000.
At the other end of the spectrum, 17% of claimants reached an agreement with their insurer through the Personal Injuries Assessment Board over the five-year period.
They received average compensation of €23,137 while their average legal costs were just €716.
In 2019, 52% of all claims were settled directly with the insurer while 33% were litigated.
“The 33% of claimants that settled through litigation in 2019 can be divided into 31% that settled before a court award and 2% that settled with a court award,” according to the report.
“This, the second Motor Insurance Report, provides key information to enable understanding of the operation of the motor insurance market in Ireland,” said Mark Cassidy, Director of Economics and Statistics at the Central Bank.
“The insurance industry plays a critical role in the Irish financial services industry and for the economy and its citizens.
“The new data that we are releasing today will improve transparency in the Irish motor insurance market, particularly with regard to claims costs, settlement channels and premiums paid by customers.”
Insurance Ireland chief executive Moyagh Murdock said the lobby group welcomes the report.
“However, we would like to stress that these figures should be looked at in context and over time,” she said.
“It is widely acknowledged that the insurance industry, more than other industries, experiences cycles of contraction and expansion. We would like to see less volatility over time.
“A stable, healthy and profitable insurance sector is fundamentally important in a functioning economy, facilitating business and enabling citizens to go about their daily lives securely.”
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