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Friday 17 January 2020

Insurers are told to slash their rip-off motor rates after premiums soared by up to 42pc

Central Bank report finds surge in price of premiums despite fall in claims costs

High price: Michael D’Arcy said insurers and lawyers were culpable. Photo: Damien Eagers/INM
High price: Michael D’Arcy said insurers and lawyers were culpable. Photo: Damien Eagers/INM
Charlie Weston

Charlie Weston

Insurers have been called on to immediately cut motor premiums after a damning report from the Central Bank showed the industry making huge profits on the back of drivers.

The report shows premiums are up but claims are down. And insurance company profits on motor policies are at a high.

The Central Bank report shows that the average motor premium was up by 42pc between 2009 and last year.

Average premiums were just over €700, some €265 more than in 2009.

Over the same period the cost of claims per policy fell by 2.5pc.

Central Bank statisticians found the average cost of claims per policy was €226 last year, down almost €10 per motorist since 2009.

Profitability for motor insurers operating in this market was 9pc of total income last year.

This is considered to be an extremely healthy level of profits for motor insurers.

The Alliance for Insurance Reform said the report showed the "greed" of the insurance industry.

Peter Boland, of the Alliance, said: "The motor insurance data lays bare the scale of the greed that has driven the current insurance crisis, enriching insurance companies and lawyers at the expense of Irish motorists struggling to make ends meet.

"This situation has been enabled by a Government too slow to react to the crisis and too weak to take on the big vested interests in order to make a difference."

His members demanded immediate reductions in premiums.

Junior Finance Minister Michael D'Arcy said the report "shows that the insurance and legal sectors are both culpable for the difficulties we have faced over the last number of years with the price of motor insurance".

Mr D'Arcy, who has responsibility for insurance reform, said: "It appears that insurers engaged in underpricing in the early part of this decade and then increased premiums beyond levels that were needed to cover losses over parts of the period, particularly between 2014 and 2017, and are now making significant profits as a result."

He said the legal sector had been charging considerable fees.

The new database is for all motor insurers in the market, including those offering cover which are based outside this country.

Although the cost of injury claims is up in the last decade, the number of claims being submitted to motor insurance companies is down. There has also been a fall in the cost of claims for damages to motor vehicles.

And lawyers do not come well out of the report either, as legal fees make up a high proportion of claims that are litigated.

Average legal costs make up more than half the amount awarded for injury claims.

Most litigated claims take far longer to settle than those that go through the State's Personal Injuries Assessment Board.

However, the average compensation amount is the same for cases settled by the Injuries Board as those that go though the courts.

Cases that go through the courts incur huge legal costs, prompting many to question what lawyers are adding to the process other than income for the profession.

And it takes more than four years for a claims case to come to a conclusion if it is litigated. Those settled by the Injuries Board take half this time.

Average settlements for litigated cases are €45,000, with legal costs averaging €23,000 in these cases. Legal costs include lawyer fees, medical report costs and other expenses.

The information comes from the first edition of the new National Claims Information Database, which has been put in place following a Government recommendation.

It is designed to improve data and transparency on insurance.

Interim head of Insurance Ireland Gerry Hassett defended his members.

"The data in this report highlights the importance of the cost of claims to the market as it is the largest cost paid by insurers. Insurers have seen a 64pc increase in average cost of a claim from 2009-2018 with the lion's share of this inflation coming from 2013 onwards."

He said the industry was loss-making in 2014, when premiums started rising. And the industry was also affected by increasing injury and damage claims costs, lower interest rate returns and the disruptive effects of failures like Setanta Insurance, he said.

Irish Independent

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