Image Motor insurance profits drive higher as the number of claims falls
Image Daragh Cassidy
Head Writer

The third 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 third annual report into the motor insurance industry in Ireland, the results of which always raise a few eyebrows among drivers who have been hit with some hefty premium increases over recent years.

The aim of the annual report is to improve the transparency of the motor insurance sector in Ireland, in particular around the area of claims and rising premiums, which have been a hot topic of conversation in recent years. 

The report provides detailed analysis on the cost of motor insurance claims, the cost of premiums, 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 2020.

Premiums

According to the report, motor insurance premiums fell by 7% from 2019 to 2020.

However, when compared to Q4 2020, premiums are now down by 16%.

The rate of decline in motor insurance tallies with the CSO's recent inflation figures for October, which show that car insurance premiums have fallen by almost 9% over the past year alone.

The decrease in 2020 was influenced to some extent by Covid premium rebates. For example, motor insurers issued premium rebates of €42.5m last year.

However, over the period from 2009 to 2020, the average premium is still up by 26%. And this can be split into three distinct periods:

  • Decrease in premiums by 12% between 2009 and 2013.
  • Increase in premiums by 62% between 2013 and 2018.
  • Decrease in premiums by 11% between 2018 and 2020.

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 2020 the number of claims (for injury and vehicle damage combined) fell by 26% compared to the year before.

However, the average cost per claim increased by 9%, mainly due to higher legal fees.

Despite this, the cost of claims as a percentage of premiums reached its lowest level on record in 2020, accounting for 50% of premiums. However Covid is likely to have skewed the figures.  

In comparison, during the period from 2009 to 2020, claims accounted for 69% of insurers’ premiums (on average); and were at their highest level in 2014; accounting for 92% of earned premiums that year.

Income and Expenditure

Motor insurers are earning healthy profits. 

Insurers’ operating profit for 2020 was 12% of total income. This compared to operating profit of just 3% between 2009 and 2020.

Again, there were three distinct periods observed; operating profits of 7% from 2009 to 2012, operating losses of 10% from 2013 to 2016, and operating profits of 9% from 2017-2020.

Settlements

The report also looked into injury claim settlements between 2019 and 2020.

  • 36% of claimants settled directly before engagement with The Personal Injuries Assessment Board (PIAB). 
  • 13% settled directly after engaging with the PIAB. 
  • 5% settled through the PIAB. 
  • 34% settled via litigation before a court award.
  • 2% settled via litigation, with a court award.

 For 94% of claimants, the total cost of a claim was less than €100K and the average settled costs for these claims were:

  • Average compensation costs for direct claimants were €13k, with average legal costs of €1.4k;
  • Average compensation costs for PIAB claimants were €22k, with average legal costs of €0.7k;
  • Average compensation costs for claimants who went to court were €23k, with average legal costs of €15K.

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.

Compare, switch and save

While hopefully you’ve seen a reduction in your car insurance premium recently, if it has gone up and your driving circumstances haven’t changed, then the most important thing to remember is to be money savvy and shop around.

As we always say, loyalty doesn’t pay, so you should never rely on getting a reduction in your premium based on how long you've been with a particular insurer.

The only way to see a reduction in your premium from year to year and get the best value is by comparing the latest deals on the market.

To help with this, back in late 2019, the Central Bank introduced a number of rules to combat the growing cost of car insurance in Ireland. For example, renewal notices must now be issued 20 days before a policy is due to expire and they must now include a quote for all cover options. 

More recently in July 2021, the Central Bank announced that it was banning ‘loyalty penalties’ for car and home insurance customers. This means that insurers won’t be able to charge an existing customer who’s renewing their policy any more than an existing customer who’s renewing for the first time. However any legislation is yet to come into force. 

Remember that motor insurance is one of the most fragmented products out there when it comes to pricing – quotes can vary wildly from person to person and insurer to insurer. That’s why it’s absolutely imperative that you don’t simply accept the renewal price given by your current insurer and instead shop around and look for better value.

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. 

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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