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Insurance

Motor insurance premiums drive 42% higher, despite falling cost of claims, according to CBI

Motor insurance premiums drive 42% higher, despite falling cost of claims, according to CBI
Rob Flynn

Rob Flynn

Staff Writer

The latest report on the motor insurance sector is sure to vex drivers who have seen the cost of their premiums increase hugely in recent times.

A new report from the Central Bank has revealed a number of intriguing statistics concerning the motor insurance industry in Ireland, chief of which is that the average cost of claims for motor insurers fell by 2.5% from 2009 to 2018, despite premiums increasing by 42% over the same period. 

The report also revealed the huge legal costs associated with bringing a claim to court.

Increased premiums

The report from the Central Bank, based on data from the National Claims Information Database (NCID), shows that the average cost of claims per policy, in other words the cost incurred by insurance companies, decreased by 2.5% from 2009 to 2018, falling from 437 to 426.

The cost of claims saw a reduction of 14% between 2009 and 2013 to just 375 per policy, however, it did rise by 14% again by 2018 to 426.

The fall in costs is sure to frustrate and vex drivers as it was also revealed that motor insurance premiums increased by an astonishing 42% over the same period bringing average premiums from €498 in 2009 to €706 in 2018.

The report further revealed that, despite recent media hype around the number of claims in Ireland, motor insurance claims reduced by 40% over the nine-year period, with injury claims falling by 20% and damage claims reducing by 43%.

The news is not going to sit well with drivers, of whom there are over 2 million, whose premiums have increased almost twofold since the start of the decade.

Settlements

The report also delved into how insurance claims are settled and the payouts associated with each channel.

Between 2015 and 2018, 53% of all injury claimants decided to settle directly, while 31% settled through litigation i.e. the courts, and the remaining 16% settled through the Personal Injuries Assessment Board (PIAB).

The average settlement achieved through PIAB was €22,631, with average legal costs coming in at just €753, or 3% of the total. 

The average compensation achieved in direct settlements was just under €12,000, with average legal costs estimated at 12% or €1,385 of the total.

However in cases that went to court and involved litigation, the average compensation was €45,390 while legal costs came in at a whopping €23,031.

It took 1.7 years on average to settle a claim directly, 2.5 years with the PIAB and 4.7 years through the courts. 

Cost of legal fees

With claims and costs for motor insurers falling, the report is very much at odds with the industry’s idea that claims have been increasing while insurance companies have been burdened with huge payouts.

However one area where the report and the industry can agree on is the cost of legal fees.

The industry has long complained about the cost of fees in cases that are brought through the courts, which is backed up by this report which shows that for settlements of up to €100k (85% of litigation claims), legal costs accounted for 63% of the total amount awarded!

Increased transparency

New rules introduced by the Central Bank back in November sought to bring more transparency to the motor insurance sector, specifically aiming to provide more information to people renewing their motor insurance policies. And this latest report from the Central Bank helps shed some more light on the area.

Deputy Governor of the Central Bank, Sharon Donnery said:

“This first report will play an important role in bringing a greater level of transparency to the market, and providing data to support evidence-based decision making. Better data on insurance claims can inform the policy debates in Government, in the Oireachtas, in the firms and in wider society, as well as informing our own work in the Central Bank.”

Value for money

What do you think about the figures released from the Central Bank?

Do you think the report will help make the market more transparent? And do you think you're paying too much for your car insurance?

We’d love to hear from you in the comments below. Alternatively, contact us over on Facebook, Instagram, and Twitter and let us know the issues you're facing.

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