The report highlights the cyclical nature of the insurance market, in particular the growth in insurance premiums relative to the cost of claims, and the growth in profitability of motor insurance underwriting since 2015.
It also provides important information on how claims are settled, the time this takes, and the legal costs associated with the different settlement channels.
Law Society welcome
The Law Society of Ireland has welcomed the publication of the Central Bank’s data, asking: “How will the insurance industry propaganda machine spin this?”
The Law Society says that the Central Bank data “strips away the insurance-industry mask to reveal [that] motor insurance premiums have risen by a massive 42%, even though, in the same period, claims fell by 2.5%”.
The Central Bank report reveals that the industry is generating an operating profit of no less than 9%, while the average level of profit in Britain is 5%.
Ken Murphy, Director General of the Law Society, said: “The Central Bank has shone a statistical searchlight on the false and exaggerated claims of the Irish motor-insurance industry. Only one question remains: how will the insurance industry propaganda machine spin this?”
“Today’s data vindicates what the Law Society has been highlighting for years. Neither claims costs nor legal fees could possibly account for, or justify, the massive increases in the premiums motorists have been compelled to pay by extremely profitable insurance companies.”
He added: “A constant feature of this debate is that Irish insurers appear to be very keen to compare average award levels for some forms of injury with their equivalent in the UK. Are they equally keen to compare their operating profit level of 9% in Ireland to the equivalent 5% across the Irish Sea?”
He said that insurers continuously called for injury victims’ awards to be reduced, and attempted to deflect blame for ever-rising premiums onto the courts, accident victims and their solicitors.
Black and white
“They surely cannot continue to do this when the official data is now here, in black and white,” said Murphy.
“We reiterate: why should injury victims have their awards reduced, only to further increase the already massive profits of insurers?
“The Government should now switch its strategy from pressurising the Judicial Council to reduce awards to the victims of accidents and, instead, focus on using this data to attract international competition into Ireland’s uncompetitive and dysfunctional motor insurance market,” the director general concluded.
- Cost of claims per policy: between 2009 and 2018, the average cost of claims per policy decreased by 2.5% from €437 in 2009 to €426 in 2018. Between 2009 and 2013, claims’ costs reduced by 14% to €375, followed by an increase of 14% to €426 in 2018,
- Premium per policy: between 2009 and 2018, the average premium per policy increased by 42%, from €498 in 2009 to €706 in 2018. Between 2009 and 2013, average premiums decreased by 13% to €435, followed by an increase of 62% to €706 in 2018,
- Loss ratio: claims were, on average, 75% of premiums between 2009 and 2018. This peaked at 94% in 2014, before dropping to 59% in 2017. In 2018, it was 60%,
- Number of claims: between 2009 and 2018, claims frequency reduced by 40%. In this time, injury claims reduced by 20%, and damage claims reduced by 43%,
- Cost of a claim: between 2009 and 2018, the average cost of a claim increased by 64%. In this time, injury claims increased by 54%, and damage claims increased by 2%,
- Settlement channels: in the period 2015 to 2018, 53% of all injury claimants settled directly, while 31% of injury claimants settled through litigation; 16% of injury claimants settled through PIAB,
- Direct settlements: directly settled injury claims had an average compensation of €11,674 in the period 2015-2018. In addition, average legal costs were €1,385, while claims took, on average, 1.7 years to settle,
- Personal Injuries Assessment Board (PIAB) settlements: injury claims settled through PIAB had an average compensation of €22,631 in the period 2015-2018. In addition average legal costs were €753, and claims took on average 2.5 years to settle,
- Litigated settlements (total): injury claims settled through litigation had an average compensation cost of €45,390 in the period 2015-2018. In addition, average legal costs were €23,031, and claims took, on average, 4.4 years to settle. Litigated settlements costing more than €100k accounted for 15% of claimants settling through litigation, but accounted for 53% of total litigated costs, and involved a number of very large settlements. These latter settlements can have a significant impact on the average compensation and legal-cost figures,
- Litigated settlements less than €100k: injury claims settled through litigation with total settlement costs less than €100k (85% of litigated claimants) had an average compensation of €23,199 in the period 2015-2018 (comparable with the average compensation of claims settled through PIAB) and average legal costs of €14,684,
- 2018 private motor revenue results: insurers’ gross combined operating ratio (COR) on private-motor business was 81%, and net COR was 88%. As firms do not account for private motor-insurance business separately, an income and expenditure statement was prepared on a proportioned basis.
The nature or severity of the injury claims settled in the different channels could vary significantly. This should be borne in mind when comparing the cost and time of settling injury claims in the different channels, the Central Bank says.
Deputy governor 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.”
The statistics are based on data gathered from insurance undertakings providing private motor-insurance products in Ireland, including foreign companies selling into the Irish market. The findings reflect an aggregate view of all undertakings.
The legislation underpinning the collection of data for the NCID precludes publishing data at an individual, institutional level.
Central Bank Director of Economics and Statistics Mark Cassidy, said: “The NCID is a positive step for data availability and insight into the insurance sector, as its scope includes all insurers selling private motor insurance in Ireland, regardless of the country of authorisation.
“The Central Bank is focused on ensuring that the insurance sector sustainably serves the needs of the economy and its customers. This includes ensuring that claimants can have confidence that insurance claims will be paid when required, and that consumers have clear information to allow them to make informed decisions.
“While the Central Bank does not have a mandate to fix prices in the insurance sector, today’s report will assist the Cost of Insurance Working Group, Government, Oireachtas and wider stakeholders in their consideration of the relevant issues.”
The Cost of Insurance Working Group was established in 2016 to examine the increasing cost of insurance, and to identify measures to reduce this.
The Cost of Motor Insurance Working Group: Report on the Cost of Motor Insurance was published in January 2017.
Recommendation 11 in this report required the Central Bank of Ireland to establish a National Claims Information Database (NCID) to improve data availability.
Legislation was required to confer this new function on the Central Bank, and the Central Bank (National Claims Information Database) Act 2018 commenced in January 2019.
The legislation requires that the Central Bank publishes a report on an annual basis.
The Personal Injuries Assessment Board (PIAB) is Ireland’s independent state body, which assesses personal-injury compensation.