The fourth annual motor insurance report from the Central Bank sheds light on the cost of car insurance and claims in Ireland as well as industry profits.
The Central Bank of Ireland (CBI) has released its fourth annual report into the motor insurance industry in Ireland, the results of which always raise a few eyebrows among drivers.
The aim of the report is to improve the transparency of the motor insurance sector here, in particular around the area of claims and premiums, which have been a hot topic of conversation in recent years.
The report provides detailed analysis on the the cost of premiums, the number of motor insurance claims, the level of payouts, how claims are settled, as well as what makes up settlement costs, and is based on information contained in the National Claims Information Database.
A major aim of the report is to help inform policymaking in Ireland as the Government seeks ways to reduce the cost of insurance for consumers and businesses.
Here we take a look at some of the main findings of the latest report for 2021.
Premiums
According to the report, motor insurance premiums fell by 2% between 2020 to 2021. This left the average premium at €607.
However, between Q4 2017 (when car insurance premiums were at their highest) and Q4 2021, the average premium has fallen by 17%.
On top of this, recent figures from the CSO for October show that car insurance premiums have fallen by another 10% or so over the past year alone. This means that over the past five years premiums have fallen by around 30%, despite overall inflation being at a near record high.
However, over the period from 2009 to 2021, the average car insurance premium is still up by 23%. And this can be split into three distinct periods:
- Decrease in premiums by 12% between 2009 and 2013
- Increase in premiums by 63% between 2013 and 2018
- Decrease in premiums by 14% between 2018 and 2021
Cost of Claims
The cost of settling personal injury claims has been a hot topic of conversation in recent years, with insurers blaming this for the high cost of insurance here.
The report shows that in 2021 the number of claims (for personal injury and vehicle damage combined) increased by 11% compared to the year before. However this was partly due to less Covid restrictions in 2021 meaning there was more traffic on the road compared to 2020. The number of claims in 2021 is still lower compared to 2019 and earlier years, particularly for injury claims.
The average cost of an injury claim increased by 69% from €29,620 in 2009 to €49,930 in 2020. It then reduced by 7% to €46,509 in 2021.
The average cost of a damage claim increased by 12% from €1,198 in 2009 to €1,346 in 2021.
Income and expenditure
Motor insurers are earning healthy profits.
Insurers’ operating profit for 2021 was 13% of total income. This compares to operating profit of 12% for 2020 and just 4% between 2009 and 2021.
Again, three distinct periods were observed:
- operating profits of 8% from 2009 to 2012
- operating losses of 9% from 2013 to 2016
- operating profits of 11% from 2017 to 2022
Settlements
The report also looked into injury claim settlements between 2019 and 2021. And in brackets is the percentage cost of legal fees.
- 35% of injury claimants settled directly before engagement with The Personal Injuries Assessment Board (PIAB) (12% of costs)
- 14% settled directly after engaging with PIAB (11% of costs)
- 16% settled through PIAB (10% of costs)
- 34% settled through litigation before a court award (66% of costs)
- 2% settled through litigation with a court award (1% of costs)
PIAB is an independent state body which assesses personal injury compensation. It was set up in 2004 to avoid the need to go to litigation and thereby help reduce legal costs and insurance premiums. As we can see from the figures it's working in the sense that the legal costs for settlements that go through PIAB are a fraction of those that go to court or involve solicitors. However, an increasing number of claims have ended up in the courts in recent years as claimants seek higher payouts.
New injury guidelines
In April 2021 new personal injury guidelines were brought in for courts to follow to reduce the level of payouts and bring down the cost of insurance. The level of payouts in the personal injury guidelines booklet are generally far below those in the previously referenced Book of Quantum.
For injury claims settled in 2021, 16% of claimants settled under the new guidelines.
For claims that settled through PIAB in 2021, 20% settled under the new guidelines and the average compensation for claims that settled under the guidelines was 34% lower than for claims that settled with reference to the previous Book of Quantum.
Settled injury claims
Finally, the report also looked at the average cost of a settled injury claim for less than €100k during the 2015 to 2021 period.
- For 94% of claimants, the total cost of a claim was less than €100k
- Where settled directly, average compensation was €13,933 and the average legal costs were €1,568
- Where settled via PIAB, average compensation was €21,856 and the average legal costs were €686
- Where settled via litigation, average compensation was €24,174 and average legal costs were €15,567 - so you can see how profitable litigation is for solicitors!
The cost of insurance is a key concern for consumers, so it is positive to see motor premiums falling for a fifth consecutive year. We have consistently called for the introduction of reforms by Government that would reduce market volatility and bring more consistency for policyholders. The falling premiums in this Report provide clear evidence that the reforms are starting to work and consumers are benefitting while they are seeing rising costs in many other areas of the economy.
Moyagh Murdock, Chief Executive of Insurance Ireland
Why has my premium not gone down?
Although premiums are falling, not everyone may be benefitting.
Obviously if you made a claim over the past year and lost your no-claims bonus, you'll be hit with a higher premium come renewal.
If this isn't the case, then the end of price walking might the reason.
Earlier in the year, the Central Bank's ban on so-called ‘price walking’ came into effect in the insurance sector.
Price walking is a pricing strategy whereby loyal customers who stay with the same insurer for many years gradually end up getting charged higher and higher prices at each renewal compared to newer or more price-savvy customers. In other words, their loyalty is penalised and they end up paying a so-called 'loyalty premium'.
Insurance companies were able to use detailed analytics and algorithms to target those customers it knows are more likely to pay the higher prices.
However, this is now illegal.
While first-year introductory discounts and offers are still allowed, from year two onwards, everyone with the same risk profile must now be charged the same price for their car insurance.
So if you've seen a big increase in your car (or home insurance premium for that matter) at renewal it could be because:
- You had a first-year new customer discount which has now come to an end.
- You’ve been with the same insurer several years and had perhaps negotiated/haggled a discount for the previous year or had not been the victim of price walking. You must now be charged the same as everyone else with a similar risk profile.
As you can see, there are winners and losers from the end of price walking.
People who haven’t tried to negotiate better deals in previous years will likely have seen their premiums fall, while those who had negotiated better deals will see theirs rise as everyone must now be charged the same.
Get the best value car insurance on bonkers.ie
If you’re looking for cheaper car insurance cover, look no further.
Because of the ban on price walking, you can no longer haggle with your existing insurer. So you have to switch to get the best deals.
Here at bonkers.ie our new car insurance service will provide you with a discounted quote in just a few clicks. So see what you could save with us today!
We can also help you save for other forms of insurance, as well as your energy, broadband, and banking costs.
Take a look at our insurance articles
If you’re looking for more information, we have a range of different insurance blogs and guides that will help you navigate the car insurance world.
- It's common to come across a lot of inaccurate information about car insurance. We separate the fact from the fiction in this guide by debunking some common car insurance myths.
- If you’re looking to lower your premium, we’ve compiled a list of ways to reduce your car insurance costs.
- When taking out car insurance, you’ll also want to avoid these 10 mistakes and pitfalls to ensure you don’t overpay or receive inadequate cover.
And you can easily stay up-to-date with all the latest car insurance news and discover more top tips with our blogs and guides.
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