There was further bad news for the Government's road safety strategy yesterday with a new report showing a rise in the crash rate.
The frequency of road crashes in 2005 reached the highest level in four years, a trend that largely offset the benefits arising from lower claim costs, according to the Financial Regulator's analysis of the motor insurance industry for that year, published yesterday.
In 2005, there were 6.7 crashes for every 100 comprehensive insurance policies and 4.9 crashes per 100 third party, fire and theft policies. Despite the introduction of a range of cost-cutting initiatives, average claim costs per policy fell by just 3 per cent for third party, fire and theft cover and they actually increased by 5 per cent for comprehensive cover.
The Road Safety Authority said it was disappointed but not surprised by the figures. A spokesman attributed them to a spike in deaths in 2005, when almost 400 people were killed on the roads. He predicted an improvement in the figures for subsequent years, when a range of safety measures introduced last year take effect.
The report shows that young drivers, who are the focus of many of recent road safety measures, are also the most profitable area of business for insurers. The average surplus on cover for a 21- 24 year-old male on a provisional licence is €1,500, for example.
Insurance companies point out that the figures for surpluses do not include additional costs, expenses and tax; however, neither do they take account of the profits made by insurers from investing premium income.
The National Youth Council said the figures showed that insurance companies were not passing on all the savings they were making to young policyholders.
"There has been some reduction in premiums but it's more modest than we would like," said the NYC's James Doorley.
The report also reveals large differences in the average premiums charged by different companies for different age groups. Premiums for a 17-20-year-old male on a provisional licence range from €4,291 down to €2,553 for comprehensive cover, for example, while someone of the same age on a full licence can expect to pay anywhere between €3,015 and €1,991.
Profitability in the insurance industry, as measured by the average surplus on each policy, continues to decline. Insurers made an average profit of €346 on comprehensive cover, down from €451, and €515 on third party, fire and theft, down from €594.
One reason for this is growing price competition between insurance companies and a consequent reduction in premiums. The report says comprehensive cover dropped 12 per cent in price and third party, fire and theft fell 10 per cent over 2004.
The figures also show that the Personal Injuries Assessment Board is helping to reduce insurers' claim costs and achieve faster settlements. The board, which had its first full year of operation in 2005, has replaced the old courts-based system for processing personal injuries claims.
About 44 per cent of motor insurance claims were settled within a year for comprehensive cover, up from 39 per cent in 2004, according to the report. For third party, fire and theft cover, the one-year settlement rate increased from 24 per cent to 32 per cent.
The report says the impact of Piab on claim costs is greater for motorists with third-party insurance than for comprehensive cover because comprehensive costs include a high proportion of low-value claims (often for minor car body damage) which are outside Piab's remit.
About 70 per cent of drivers are insured comprehensively and 30 per cent have third party, fire and theft. While there was no significant change in the overall market, Quinn Direct now holds 30 per cent of the third party, fire and theft market. Almost 1.6 million policies have been written, twice the number of a decade ago.
The report criticises insurance companies for not supplying data on commissions, expenses and tax costs that would help build a full picture of the industry.
