Friday 28 October 2016

Drivers brace themselves for insurance rate shock

More premium hikes on the cards this year after recent 20pc jump

Published 09/08/2015 | 02:30

Motorists living north of the border have to pay an average of 5pc more for their car insurance than those in the south
Motorists living north of the border have to pay an average of 5pc more for their car insurance than those in the south

Drivers facing hikes in their car insurance premiums this year may take some solace in the fact that drivers north of the border are paying even more.

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Car insurance premiums rose by an average of 20pc or more over the past year - thanks to fraudsters and lawyers raking in more in legal costs and payouts, as well as the industry itself passing its own losses onto drivers.

Industry officials have warned drivers to brace themselves for more hikes this year for the same reasons, although no insurer has said how much more drivers will be paying, except that it could hit double figures.

But a comparison of rates paid here and in the UK over the past decade reveals that drivers north of the border and in Britain are paying an average of 5pc more than drivers in the Republic this year.

The average Irish driver paid €747 in premiums this year compared to an average of €786 in the UK, according to the survey by AA Ireland.

Drivers in both countries saw their premiums shoot up by an average of 18.94pc and 20.73pc respectively since 2014.

AA Ireland spokesman Conor Faughnan said fraud alone is responsible for an average of €60 added onto each premium. "It comes in different forms, from the organised criminal gangs staging accidents down to the otherwise decent citizens telling what they think are white lies about who drives the car, how many penalty points you have, etc."

He also blamed rising legal costs for adding to the increases despite the establishment of the Personal Injuries Board in July 2004 to lower legal costs and compensation payments stemming from the so-called "compo culture" which saw high legal costs and very high personal injury settlements.

"We need to look again at exactly how the Injuries Board is working," he said.

"It has served us well but we are now seeing legal costs rise again. Partly this is because of a change to court awards last year that means that the Circuit Court can now make higher personal injury awards than the Injuries Board. That should be changed," Mr Faughnan said.

The survey, meanwhile, revealed there have been massive insurance price fluctuations over the past decade, both here and in the UK.

In 2005, for example, motorists in the Republic of Ireland were paying almost 50pc more to insure their cars than their UK counterparts, at an average cost of €459 in the UK compared with €669 in Ireland.

"Ireland's response was to establish the Injuries Board to take lawyers out of the settlement process where liability was not in doubt," he said.

"We also adopted a series of road safety policies which had the broader social goal of reducing death and injury but had the secondary benefit of reducing insurance costs," he added.

The policy resulted in a massive drop in Irish premiums, from an average of €669 to €531 by 2008.

Our counterparts in the UK saw their premiums rise from an average of €443 in 2009 to €887 by 2012, while Irish rates rose slightly from €563 in 2000 to €575 in 2012.

Mr Faughnan attributed the stability in Irish premiums to the containment of legal costs here, while those in the UK were allowed to escalate.

While Irish prices remained low in 2013, they were artificially so, he said.

"It is during that period that Irish prices were distorted by the insurance companies collectively engaged in an unsustainable price war.

"That could never last forever - and the premium changes this year are partly a correction to that," he said, adding that it will come as little consolation to drivers to know "they were probably under-charged in the last few years".

Sunday Independent

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