Monday 5 December 2016

Revealed: Motorists face €130 hike in average car insurance premiums

Published 28/10/2016 | 02:30

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The average motor premium will go up by €130 by the middle of next year, as the insurance crisis continues.

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Credit rating agency Standards & Poor's (S&P) said in a new report that motorists were typically paying €900 a year for cover at the moment.

No justification: Conor O’Brien of the Injuries Board. Picture by Shane O'Neill Photography.
No justification: Conor O’Brien of the Injuries Board. Picture by Shane O'Neill Photography.

S&P said it expected to see a further rise of 10 to 15pc before the middle of 2017.

It blamed the Government's decision to allow the Circuit Court to handle higher-value claims for inflating the expectations of claimants.

High legal costs and the length of time it takes to settle personal injury claims were also singled out for pushing up premiums.

But the good news for drivers is that S&P reckons that premiums are set to come close to their peak at the end of next year. That means that in the second half of 2017 price hikes are set to slow to "sustainable levels", with increases down to 5pc.

Prices were rising at a rate of 40pc at one stage during the summer. Although the rate of increase has slowed, they were still up 25pc in the past year, according to the latest Central Statistics Office figures.

Some drivers are seeing premiums more than double when they renew their cover.

In the report, S&P said: "Although this growth rate is high by Western European standards, the market is only now starting to regain a decade of lost premiums."

The Irish market is also considered more volatile compared with countries such as the UK, Italy and Spain.

S&P blamed an increase in court awards, high legal costs and a rise in the frequency of claims as economic activity expands for the difficulties being experienced by drivers and insurers.

"An improvement in market profitability will be contingent on the evolution of claims costs and Irish property/casualty insurance companies' actions on premiums, underwriting, and risk selection," the agency's report said.

The general insurance sector here is unprofitable at the moment. S&P said the industry was being hampered by what it said was an increase in court awards.

It also singled out the increase in the Circuit Court jurisdiction upper limits to €60,000 from €38,000 for personal injury awards.

"This has heightened claimants' expectations and had a negative retrospective impact on existing claims."

S&P also cited high legal costs as an issue.

"The process of agreeing plaintiffs' legal costs following settlements is very protracted and contentious, leading to higher costs for both sides," it said.

It said the pace of claims settlement had slowed significantly from 2014 into 2015. "It has increased somewhat in the past nine months but remains below historical norms," the report added.

A rise in claims frequency, associated with economic growth, was another factor pushing up premiums, S&P said.

The ratings agency also listed the slow pace of settling claims, the need for higher provisioning due to the introduction of periodic payment orders, and high expense costs in insurance companies as reasons for the debacle.

The surge in the cost of premiums comes despite the State body that deals with insurance claims telling TDs and senators that it sees no justification for the huge increases in motor premiums that drivers are experiencing.

Conor O'Brien, of the Injuries Board, said there had been no big increase in claims to justify rises of 70pc in the average premium in the last three years.

It comes as the State's competition watchdog said it was probing suspected cartel activity in the insurance industry.

The Competition and Consumer Protection Commission said it was concerned that motor insurers were signalling price increases to each other before raising prices.

Irish Independent

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