This emerges from the latest Central Bank report on the auto insurance industry.
The report – the second in the Irish Premium and Expense Claims Study – is based on information contained in the National Claims Information Database.
It concluded that the loss frequency decreased by 11% by 45% during the reporting period.
However, the costs per claim rose by two thirds from € 2,726 in 2009 to € 4,487 in 2019.
The report also looked specifically at 2018 and 2019, which found that the price of the average policy decreased by 4% while the cost of claims per policy decreased by 1%.
The average cost of a claim increased by 4%, but the frequency of claims decreased by 5%.
The operating profit of insurers as a percentage of total income was 10% in 2019 compared to 9% in the previous year.
Insurance Ireland, which represents insurers, said the numbers indicated an industry that was cyclical and showing signs of volatility.
“The insurance industry experiences cycles of contraction and expansion more than any other. We would like to see less volatility over time, ”said Moyagh Murdock, CEO of Insurance Ireland.
“A stable, healthy and profitable insurance sector is fundamental to a functioning economy,” she added.
Ms. Murdock said the key to reducing volatility is delivering the reforms needed to reduce the high and inconsistent cost of claims.
“For this reason, we fully support the government’s reform agenda through the Personal Injury Policy, strengthening the Personal Injury Assessment Committee and reviewing due diligence laws, among other things. This, in my view, will bring better value to consumers in the long run. ” ”
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However, the Alliance for Insurance Reform, a representative group for businesses and civic organizations, said the report was meant for dismal reading.
“Car insurance premiums have not decreased dramatically in the past two years, contrary to sample data published by the CSO and used extensively by the government to illustrate progress,” said Peter Boland, Allianz director.
“The report also shows the level of greed that the current insurance crisis has sparked, enriching insurance companies, brokers and lawyers at the expense of Irish motorists who are struggling to make ends meet,” he added.
The alliance called for an urgent reduction in compensation for minor injuries as well as a “properly funded” response from Lake Garda to insurance fraud.
“We want insurers to make firm commitments as to which cuts in liability premiums will result from all of the reforms currently in the pipeline. We have waited four years for substantial reforms and cannot wait any longer, ”said Boland.
Litigation attorney and former Law Society president Stuart Gilhooley said the cost of legal fees is a “red herring that the insurance industry likes to throw at us all the time,” and what matters is the price of insurance premiums.
He said the cost of damage per policy had decreased by 9% over the past decade (including legal costs), while premiums had increased by 35%.
Speaking to Claire Byrne on RTÉs Today, Gilhooley said the insurance industry is using a “Trump trick”: “don’t look here, look there” and draw people to the “unpopular question of lawyers”.
Injury claims by more than half
Claims for damages far exceeded claims for damages, with the average cost of the former rising 53% from € 29,780 in 2009 to € 45,576 in 2019.
The average cost of a claim for damages increased by 6% from € 1,194 to € 1,262 over the same period.
The average cost of claims for damages decreased by around a fifth from 2009 to 2013, but then increased by 30% by 2019.
The industry’s claims ratio, defined as compensation as a percentage of premiums, averaged 72% between 2009 and 2019.
This metric reached a high of 92% in 2014 and a low of 57% in 2017 and 2018. The average loss ratio in 2019 was 59%.
“This is essentially what insurance companies pay out in the form of premiums as a percentage of their premium payments. It’s a good, but not a perfect, indicator of profitability, “said Mark Cassidy, director of statistics at the central bank.
He said the general trend is in line with the long-term insurance cycle with peaks and troughs in premiums, reserves and profitability.
However, he said the volatility here was particularly remarkable when compared to other countries.
“The average of 72% in Ireland over the decade is a strong indicator of our long-term performance. This means a low claims rate and therefore a healthy, affordable rate of return by historical standards, ”he concluded.
The premium costs fluctuate
A breakdown of the premium costs over the period indicates two different price periods.
2013 was the lowest point where premiums averaged € 435, a 13% decrease from € 499 in 2009.
The premiums rose again in 2013 and rose by 63% in 2018 to an average of € 707.
The premiums have decreased by 4% since 2018 to an average of € 676 in 2019.
“At the end of 2019, they were 9% below their mid-2018 peak. Quarterly data shows that premiums have declined over the past year, and isolated indications suggest that they have continued to decline in 2020. Overall, however, last year’s engine rewards were still 35% higher on average than at the start of the 2009 study period, “explained Mark Cassidy.
Average claims costs per policy
This key figure also showed certain fluctuations in the reporting period.
The average cost of a claim per policy decreased by 14% from € 438 in 2009 to € 375 in 2013. They then increased by 7% to € 402 in 2018. The average cost of claims per policy in 2019 hardly changed, when it was € 400, the report concludes.
The report also looked at claims settlements between 2015 and 2019, noting that half was settled directly, 17% through the Personal Injuries Assessment Board (PIAB), and the remaining third through litigation.
In terms of infringement costs, however, litigation accounted for two-thirds of the cost, with 22% being settled directly and the remaining 12% settled through the PIAB.
Average litigation compensation was € 46,214, while a head-to-head settlement averaged € 13,427.
The remuneration for a PIAB settlement averaged € 23,137.
The average legal costs for a PIAB settlement are € 716, compared to the average costs of € 23,409 for representation in a legal dispute.
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