Bad news for drivers as motor insurance premiums are set to continue rising
THE average motor premium will go up by €130 by the middle of next year, as the insurance crisis continues.
Credit rating agency Standards & Poor’s (S&P) said in a new report that motorists are typically paying €900 a year for cover at the moment.
S&P said it expects to see a further rise of 10pc to 15pc before the middle of 2017.
It blamed the Government decision to allow the circuit court to handle claims higher-value claims for inflating the expectations of claimants.
And high legal costs and the length of time it takes to settle personal injury claims were also singled out for pushing up the cost of 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.
This means that in the second half of next year price hikes are set 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 rise 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 it comes to renewing 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.
The international credit ratings agency 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 report said.
The general insurance sector here is unprofitable at the moment. And S&P said the industry is being hampered by what it said was an increase in court awards.
It also singled out the increase 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 plantiffs' 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.”
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 higher provisioning due to the introduce of periodic payment orders, and high expense costs in insurance companies for the insurance debacle.