Irish motor insurers’ profits rise as average premiums dip only 2% in 2021

The Irish motor insurance industry last year enjoyed its most profitable 12 months since at least 2009, with the average premium per policy declining just 2 per cent even as compensation awards for personal injuries began to drop sharply under new guidelines, according to new figures.

Still, only 16 per cent of all injury claims resolved last year were settled under the new personal injuries guidelines that were adopted in April 2021, according to National Claims Information Database (NCID) figures used for a Central Bank report published on Tuesday.

The average value of compensation for claims settled under the guidelines was 34 per cent below those settled against a previous set of guidelines contained in the so-called book of quantum.

However, Insurance Ireland, the industry lobby group, suggested costs have come down by more than a quarter from the peak five years ago if the NCID data for 2017-2021 is combined with Central Statistics Office figures for the first 10 months of this year.

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Insurers made a €176 million profit from motor insurance last year – equating to 13 per cent of €1.35 billion of gross earned premiums, even as the frequency of claims rose as there was more activity on the State’s roads following pandemic lockdowns. Both the profit and ratio for 2021 were the highest for a full year since at least 2009, the year to which the NCID data goes back.

The scale of profitability in motor insurance in recent years has partly been used by general insurers to subsidise loss-making underwriting of public and employers’ liability, and commercial property insurance. The wider sector had been hit by business interruption claims stemming from the Covid-19 crisis.

While the introduction of the new personal injury award guidelines by the Judicial Council was expected to see a decline in the number of cases essentially bypassing the Personal Injuries Assessment Board (PIAB) and resorting to the courts, the proportion of claims settled through litigation rose to 35 per cent last year, from 34 per cent in 2020, according to the figures. PIAB-settled claims declined by 1 percentage point to 15 per cent.

[ Personal injury awards: New guidelines’ impact ‘a bit of a shock’ ]

PIAB was set up in 2004 to provide an alternative to the courts for settling compensation disputes without expensive litigation, the objective being to reduce insurance costs. Figures published earlier this month by PIAB showed that the acceptance rate of awards was as low as 33 per cent in the middle of last year, but had subsequently risen to 48 per cent as of June.

There is a view in the insurance industry that the failure this year of some High Court challenges against the guidelines should ultimately see a drop in claims following the legal route.

The fourth Central Bank report on NCID motor figures underscores, again, how claimants opting for litigation in most cases gain little financially and lose time. The average award for litigated cases where claims were for less than €100,000 – 94 per cent of claimants – was €24,856 in 2015-2020. However, the average for a PIAB settlement was €21,856. The average for cases settled directly with insurers was €13,933. The average litigated case took 3.9 years to settle, almost double the PIAB average. Directly-settled claims averaged 1.4 years.

Meanwhile, the legal costs of claims settled through litigation was €15,567, compared to €686 for cases resolved through PIAB.

Moyagh Murdock, chief executive of Insurance Ireland, said it is “essential” that the Government continues to push through insurance reforms aimed at lowering claims costs and, ultimately, insurance costs. These include the passage of a Bill that will allow PIAB to offer a broader range of services and plans to rebalance a property owner or business’s duty of care with the personal responsibility of customers or members of the public.