Insurance premiums increased in 2015, yet insurance claim frequencies decreased – as reported by the Central Bank
Rising Motor Insurance Premiums in Ireland: A Closer Look
Motor insurance premiums in Ireland have seen a significant increase since 2010, despite a decrease in claim frequency. This phenomenon can be attributed primarily to a sharp rise in the average cost of claims and settlements, as highlighted in the Central Bank's Private Motor Insurance Statistics.
According to the report, the average cost of 'year 1' claims for comprehensive policies rose by 10% to €5,776 in 2015. For TPFT policies, the average cost increased by 11% to €8,732 in the same year. This means that although fewer claims are made, each claim is more expensive to insure and settle, driving up premiums.
Factors contributing to increased costs per claim include higher repair costs, increased legal and medical costs, and inflationary pressures in the insurance and healthcare sectors. The report also notes that insurers have had to hold more capital to cover future claims, adding to costs.
Other contributors include changes in claims handling and liability awards, as well as inflation impacting the cost of parts, labour, and healthcare.
The Central Bank’s report also recommends the establishment of a National Claims Information Database by the Central Bank of Ireland, expected to be in place by Q2 2018. This database is intended to improve transparency and understanding of the motor insurance market in Ireland.
The report is particularly welcome as it lays the groundwork for the effective establishment of the National Claims Information Database next year. Minister of State with special responsibility for Financial Services and Insurance Michael D'Arcy considers the report as "the start of a process to improve data transparency in the insurance sector."
A report from the Cost of Insurance Working Group also recommends the Department of Finance publish key metrics on the insurance industry on a quarterly basis, beginning with Q2 2017.
The CEO of Insurance Ireland, Kevin Thompson, stated that the rising cost of claims is the defining issue in motor insurance. This enormous discrepancy between the CSO data and the industry data calls into question the validity of the data submitted by the industry.
Despite the increases, motor insurance premiums have stabilized since the third quarter of 2016, reduced by 8.5% in the year to May. The amount paid out by PIAB across all classes of insurance increased by 50% in the same years.
In summary, the significant rise in motor insurance premiums in Ireland since 2010 is mainly due to the steep increase in the average claim cost and insurer reserve requirements. The establishment of the National Claims Information Database is expected to improve transparency and understanding of the motor insurance market in Ireland.
- The steep increase in the average claim cost and insurer reserve requirements have significantly contributed to the rise in motor insurance premiums in the business sector, as highlighted in the Central Bank's report.
- The establishment of the National Claims Information Database by the Central Bank of Ireland, as recommended in the report, aims to provide more transparency in the finance sector, particularly the motor insurance industry.
