Thursday 15 November 2018

Dorothea Dowling: How the numbers on car insurance do not add up and why we need change

Car Insurance forms
Car Insurance forms
Car accident

Dorothea Dowling

The numbers on car insurance do not add up.

On October 19 the Government announced abandonment of its plan to establish a claim-by-claim register of injury compensation cases.

That decision is both surprising and disappointing.

One of the challenges when analysing the car insurance market here is the lack of hard facts and the paucity of published data.

That problem also arises on liability insurance which covers other types of injury claims.

At a headline level, the annual premium income for insurers on motor and liability is around €2.3bn.

However, only €276m in compensation can be accounted for during 2017.

That figure is made up of €107m awarded by the courts (excluding the €100m relating to medical negligence) and €169m in PIAB awards.

That is a data black hole of €2bn every year.

A claim-by-claim register would have facilitated the identification of repetitive claimants who often 'forget' to reveal pre-existing injuries.

To be clear, this claim-by-claim register was to be separate from the proposed fraud register.

If that ever comes into existence, there will be very few entries because of the small number of claimants who are convicted in the criminal courts.

Having a claim-by-claim register would add considerably to transparency of the insurance sector.

Currently fewer than 5pc of claims proceed to an oral hearing.

Details of the parties involved in those cases can be found in the daily legal diary, and the written judgments explaining decisions about compensation are also published online by the Courts Service.

So what happens to the other 95pc of the volume of injury claims? Only insurers know the answer to that.

If they want to demonstrate the data that justifies premium charges, why have they resisted the claim-by-claim register?

Their lobby group, Insurance Ireland, submits that there are "practical and cost considerations associated with collecting a high level of detail on individual claims".

But, surely, if they are doing the job of defending their policyholders, they must already be collating lots of data on claimants?

Another of the submissions, which is from a shared services provider, states that 90pc of the US insurance market operates a single all-claims database.

A submission from the Society of Actuaries highlights that "recent targeted policy making in the UK has been informed by analysis of settled claims based on claimant-by-claimant data".

So if it works in the US and in the UK, why can't we make it work here in Ireland?

Basically, this is a matter of double-entry bookkeeping.

If you could add up who is being paid how much and for what on the claim-by-claim register, then the totals should tally with the numbers that insurers cite for fees to lawyers and other experts payable on top of compensation for the injury and/or losses.

Yearly comparisons would also identify trends that could better inform public policy, rather than leaving us reeling from one insurance cost crisis to another.

This is the latest in a line of missed opportunities to improve matters for motorists.

Indo Motoring

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