This week the Government launched the latest public consultation on insurance reform.
It is part of a new action plan on insurance, aimed at encouraging more competition in the market and with the ultimate goal of bringing premium prices down.
The previous government had a similar action plan that had some notable achievements such as the introduction of personal injuries guidelines, reforms of the Injuries Resolution Board, and passing legislation revising the duty of care owed by occupiers.
While these measures were broadly welcomed, they did not make much of a dent in the cost of car insurance.
And when we delve into the figures we can see why.
Take the personal injuries guidelines for example. They were brought in for 2021 and set guideline levels for personal injury compensation awards that are used by both the courts and the Injuries Resolution Board to assess compensation levels for personal injury claims.
According to the Central Bank’s National Claims Information Database – a reliable independent guide on the cost of both motor premiums and claims – the guidelines have led to a reduction in the cost of injury claims.
Between 2022 and 2023 (the most recent year for which we have accurate data), the number of personal injury claims was unchanged, however, the total value of such claims fell by €12 million (from €434 million to €422 million).
Despite this the overall cost of claims over the same period rose (from €763 million in 2022 to €816 million in 2023).
Why was this? A €65 million jump in damage claims.
This meant that insurers’ ultimate cost of claims per policy increased by 5% in 2023 to €369, which is a similar level to the years before the Covid pandemic and the highest figure since 2016.
So while injury awards have reduced, damage claims have increased.
Motor premiums paid by drivers are also on the way back up.
The average policy cost in 2023 was €568 – 2% higher than the previous year.
In relation to this, insurance companies will point to figures showing that the proportion of policies that include comprehensive cover, rather than third-party, has increased from 83% of policies in 2017 to 93% in 2023.
In addition premiums fell by 23% between 2017 and 2022, but that was after a huge jump of 67% in the previous five years.
Level of uninsured vehicles dropping
Another strategy to tackle high policy costs has been to target uninsured drivers.
The Motor Insurers’ Bureau of Ireland (MIBI) estimates that claims involving uninsured drivers add up to €35 to the cost of every motor insurance policy.
In 2022, MIBI figures indicated there were around 187,000 uninsured vehicles on Irish roads, which was four times higher than the EU average.
But since the introduction last year of the Irish Motor Insurance Database, which helps gardaí to more easily detect uninsured drivers, that figure has fallen to around 100,000.
However, Insurance Ireland – the group representing insurers – says it will likely take some time for this drop to work its way through the sector in relation to lowering premiums.
The Alliance for Insurance Reform has welcomed all of the reforms and initiatives mentioned here but said that “it must be a source of growing frustration for politicians, as it is to policyholders, that the reforms to date have primarily benefited insurance company profit margins, rather than reducing the premiums people pay”.
Improving competition
According to the Alliance, what will have the biggest impact in significantly driving down insurance costs for drivers is more competition – attracting new entrants into the market.
That could be tricky in the short-term though; Ireland is a relatively small market with high costs.
Also, the track record of big insurers entering the Irish market and competing on price has not been great.
Quinn Insurance (2010) and Setanta Insurance (2014) both had high-profile collapses and these cases may make some wary of operating here.
We have in and around 25 companies selling car insurance here. That might seem like a good number, but compare that with markets like France and Germany where there are three to four times as many providers for consumers to choose from.
The average annual motor premium for the EU is €315 – Ireland’s average is not far off double this figure.
But the cost of claims here is a lot higher than the EU average, and it’s unlikely we’ll get down to that level any time soon.
As part of its public consultation on insurance reform, the Government says it’s keen to hear from consumers, representative groups, and those operating in the insurance sector.
As mentioned earlier, those suggestions bore some fruit last time this was done.
Proposed rise in personal injuries guidelines
Though what might have a major effect on the cost of insurance before any more new initiatives are a factor is the Judicial Council’s proposed 16.7% increase in the personal injuries guidelines.
Insurance Ireland said this could “erode” the progress made by the Government’s insurance reform agenda, and that it may prove counter-productive in terms of encouraging further competition in the Irish insurance market.
The Oireachtas will ultimately decide whether this increase will be approved, and if it is then the inevitable rise in the cost of claims that follows will very likely be passed on – adding more pain to consumers in terms of higher insurance premiums.
