Motor insurance policies increased in cost in 2015 - report

Average motor insurance premiums increased in 2015 even though the amount of claims fell, statistics released by the Central Bank have shown.

The data, provided by insurance companies, shows an increase in premiums between 2014 and 2015 across both comprehensive and third party fire and theft policies.

It is one of three reports on insurance costs in the sector this week, followingthe Personal Injury Assessment Board (PIAB) annual report for 2016 and the Department of Finance's Motor Insurance Key Information Report.

According to the Central Bank, the cost of comprehensive cover rose by 9 per cent from €459 in 2014 to €500 in 2015, while third party fire and theft cover increased by 19 per cent from €557 in 2014 to €663.

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Total claims frequency has trended downwards since 2008, the report found, for both comprehensive and third party cover, and relating to both vehicular damage claims and personal injury claims.

The average cost of year one claims - incidents that occurred in 2015 - for comprehensive policies increased by 10 per cent from €5,264 in 2014 to €5,776 in 2015.

The cost of claims on comprehensive policies increased by 45 per cent since 2010 when an average cost of €3,993 was reported.

The Average cost of year one payments on third party policies increased by 11 per cent from €7,845 in 2014 to €8,732 in 2015. In 2010, the average cost was €5,395.

Decrease in claims

In terms of the frequency of claims, comprehensive policies saw a decrease from 5.2 claims per 100 policies in 2014 to 4.5 the following year. For third party policies, the rate was 3.7 to 3.1.

Large claims, in excess of €100,000, also fell. For comprehensive cover, the rate decreased from 19 to 17 per 100,000 while third party dropped from 31 to 29.

The total number of policies recorded in the market decreased by 2 per cent from 1.8 million in 2014 to 1.77 million in 2015. Comprehensive fell by 2 per cent and third party by 3 per cent.

The annual Private Motor Insurance Statistics report is prepared by the Central Bank and based on data for 2015 submitted by Insurance Ireland, the industry representative group, on behalf of its members.

“The defining issue in motor insurance is the rising cost of claims which is the level of awards and the costs associated with settling them,” said Kevin Thompson, chief executive of Insurance Ireland.

Increase in costs

He said collectively the reports showed the amount paid out in claims are increasing as well as legal and other costs associated with the system.

The total amount paid out in motor claims by Insurance Ireland members has increased by 23 per cent from 2011 to 2016. In the same period, the amount paid out by the PIAB across all classes of insurance increased by 50 per cent, Insurance Ireland said.

“Given that it can take many years for a claim to be settled, there is a ‘long tail’ effect where any increase in awards and delay in settlement can lead to insurers having to revise upwards the cost of settling unsettled claims on their books,” Mr Thompson said.

“This underscores the need for consistency in awards and the importance of strengthening the PIAB legislation to prevent claims proceeding to expensive litigation which the Department of Finance report says can cost upwards of 42 per cent of the compensation paid to claimants.”

Insurance Ireland returned to its familiar message that Irish awards values are “out of kilter” with other jurisdictions - average whiplash payments being three times that of UK levels.