Car insurance inflation is now running at 11%, well above the general rate of inflation. But why are car insurance premiums back on the rise and what can motorists do about it?
According to the Central Bank, the average car insurance premium rose by 2% in 2023 to €568, the first increase in five years.
However in recent months the level of increase has picked up even more. According to the Central Statistics Office (CSO), in October premiums were up by 11% compared to the same time last year.
So what's causing the increase and is there anything motorists can do?
Why is car insurance increasing?
1. Increase in damage claims
In general car insurers pay out on two types of claims: personal injury claims and damage claims..
In recent years a lot of work has been done to try to bring down the cost of personal injury claims in Ireland.
As most readers will be well aware, the awards for personal injuries are far higher in Ireland than in almost every other EU country. And the threshold for taking a person injury claim appears to be far lower.
Recently, new (lower) guidelines have been set for judges to follow when awarding payouts for personal injuries and the cost of individual personal injury claims has begun to fall. However the number of these claims remains as high as ever.
And there has also been a big increase in damage claims over the past year due to more accidents on the roads. This is partly due to an increase in the number of drivers on the roads and poorer driving behaviour by many motorists in recent years.
Motorists are also driving ever bigger and more expensive cars, which cost more to repair or replace in the event of an accident.
2. Increase in car thefts
Car thefts are increasing, particularly for more expensive vehicles.
Theft doesn’t have the same impact on the cost of car insurance as personal injury claims do, but it impacts on the cost nonetheless.
Those living in areas where the greatest number of thefts are taking place will face the biggest hikes.
3. High overall inflation
No one needs reminding that there has been a surge in inflation over the past three years.
High inflation has led to an increase in the cost of labour and car parts and that in turn has driven up the cost of car repairs and insurance.
4. End of price walking
In 2022, the Central Bank implemented a ban on so-called ‘price walking’.
Price walking is a pricing strategy whereby loyal customers who stay with the same insurer for many years gradually end up getting charged higher and higher prices at each renewal compared to newer or more price-savvy customers.
In other words, their loyalty is penalised and they end up paying a so-called 'loyalty premium'.
Insurance companies were able to use detailed analytics and algorithms to target those customers it knows are more likely to pay the higher prices.
However, this is now illegal.
While first-year introductory discounts and offers are still allowed, from year two onwards, everyone with the same risk profile must now, theoretically, be charged the same price for their car insurance.
So if you've seen a big increase in your car insurance premium at renewal it could be because:
- You had a first-year new customer discount which has now come to an end.
- You’ve been with the same insurer several years and had perhaps negotiated a discount for the previous year or had not been the victim of price walking. You must now be charged the same as everyone else with a similar risk profile.
As you can see, there are winners and losers from the end of price walking.
People who haven’t tried to negotiate better deals in previous years will likely have seen their premiums fall, while those who had negotiated better deals will see theirs rise as everyone must now be charged the same.
Are insurers just trying to fool us?
Not really.
According to the Central Bank, insurers made combined operating profits of just over €100 million in 2023, well down on the €159 million recorded in 2022.
This profit represented 8% of total income for the sector, compared to 12% in the previous year.
Profitability in the motor insurance sector is now actually at its lowest level since 2017.
What can motorists do about rising car insurance?
If you’ve been hit with a big premium hike that seems difficult to justify, you have a few options:
1. Ring your car insurer and ask why
Make sure a mistake hasn’t been made. Query why the premium has gone up.
However, due to the end of price walking, you’re unlikely to be offered any type of major discount on your premium even if you haggle. This is because theoretically, the insurer would then have to offer that discount to everyone else. But you never know...
2. Review your level of cover
It’s usually better to be slightly overinsured than underinsured, but if you’re unhappy with the cost of your premium, review your level of cover to ensure you’re not paying extra for something which you may not need.
If you drive an old car, consider if you need fully comprehensive cover. And are you paying for breakdown assistance that you already have with the AA?
Consider where you park your car. If you’re able to park it in a garage instead of on the street, you might be charged less.
3. Switch insurer
Insurers are still able to offer good introductory discounts to new customers for the first year. So if you’re not happy with the cost of your car insurance, switch insurer and save.
And the good news is that you can get great value car insurance on bonkers.ie!
4. Consider a telematics insurance product
Some insurers such as AIG sell telematics car insurance.
What this means is that a telematics device or ‘black box’ will be installed in your vehicle shortly after your insurance policy comes into force. The small device will track various aspects of your driving and provide detailed analytics on your driving behaviour to both you and the insurer.
This information can then be used by drivers to improve their driving, making the roads safer for everyone. And it also allows drivers, especially younger drivers or those with little driving experience, to avail of more affordable premiums.
You can learn more about the use of telematics in car insurance here.
