Motor insurance premiums fall 5%, according to new Central Bank report
Daragh Cassidy
Daragh Cassidy
Head Writer

The latest motor insurance report from the Central Bank sheds light on the cost of car insurance and claims in Ireland as well as industry profits.

The Central Bank of Ireland (CBI) has released its latest report into the motor insurance industry in Ireland, the results of which always raise a few eyebrows among drivers. 

The aim of the report is to improve the transparency of the motor insurance sector here, in particular around the area of claims and premiums, which have been a hot topic of conversation in recent years. 

The report provides detailed analysis on the the cost of premiums, the number of motor insurance claims, the level of payouts, how claims are settled, as well as what makes up settlement costs, and is based on information contained in the National Claims Information Database.

This is the first time the report has been published on a bi-annual basis having previously been issued once a year.

A major aim of the report is to help inform policymaking in Ireland as the Government seeks ways to reduce the cost of insurance for consumers and businesses. 

Here we take a look at some of the main findings of the latest report which covers the first half of 2022.

Premiums

According to the report, motor insurance premiums fell by 5% in the first half of 2022 compared to 2021. This left the average premium at €578. Though the price drivers will have actually paid will have differed wildly depending on their age, where they live, the type of car they drive, and their no-claims basis. 

However, between Q4 2017 (when car insurance premiums, at €710, were at their highest) and H1 2022, the average premium has fallen by around 19%.

On top of this, more recent inflation figures from the CSO for all of 2022 show that car insurance premiums continued to fall in the second half of 2022. So it will be interesting to see if this is reflected in the next CBI annual report for all of 2022 which should be published in November.

However, looking at a wider period from 2009 to 2022, the average car insurance premium is still up by 17%. And this can be split into three distinct periods:

  • A decrease in premiums by 14% between 2009 and 2013
  • An increase in premiums by 63% between 2013 and 2018
  • A decrease in premiums by 18% between 2018 and 2022

Cost of Claims 

The cost of settling personal injury claims has been a hot topic of conversation in recent years, with insurers blaming this for the high cost of insurance here.

In the first half of 2022 there were 67,000 claims, costing €278 million. 

There was an increase in the number and cost of damage claims (vehicle damage etc) but a decrease in the number and cost of injury claims.

For example, there were around 58,000 damage claims settled in H1 2022, more than any other half-year period since H1 2016. The total cost of these damage claims was €122m, significantly higher than any other half-year period since at least 2016.

Conversely, there was a fall in the number of injury claims settled in H1 2022. Approximately 3,600 injury claims were settled in H1 2022, less than any other period since 2016.

5,000 claimants settled without receiving compensation with a total cost to insurers of €3.2m.

Settlements

The report also looked into injury claim settlements by channel and cost. 

  • 48% of claimants settled directly, making up 15% of total claims costs
  • 13% of claimants settled through PIAB, making up 6% of total claims costs
  • 39% of claimants settled through litigation, making up 79% of total claims costs

PIAB is an independent state body which assesses personal injury compensation. It was set up in 2004 to avoid the need to go to litigation and thereby help reduce legal costs and insurance premiums. And it's working in the sense that the legal costs for settlements that go through PIAB are a fraction of those that go to court or involve solicitors. However, an increasing number of claims have ended up in the courts in recent years as claimants seek higher payouts.

On average it took 1.8 years to settle directly, 2.7 years through PIAB and 4.8 years through litigation. 

New injury guidelines

In April 2021 new personal injury guidelines were brought in for courts to follow to reduce the level of payouts and bring down the cost of insurance. The level of payouts in the personal injury guidelines booklet is generally far below those in the previously referenced Book of Quantum.

For injury claims settled in H1 2022, 43% of claimants settled under the new guidelines. This means the majority of claims were still under the older, much higher guidelines. It will therefore take time to see the full effects of the insurance reforms in car premiums. 

Income and expenditure

Motor insurers are earning relatively healthy profits. 

No figures for 2022 are available yet but insurers’ operating profit for 2021 was 13% of total income. This compares to operating profit of 12% for 2020 and just 4% between 2009 and 2021.

Again, three distinct periods were observed:

  • operating profits of 8% from 2009 to 2012
  • operating losses of 9% from 2013 to 2016
  • operating profits of 11% from 2017 to 2022

Why has my premium not gone down?

Although premiums are falling, not everyone may be benefitting.

Obviously if you made a claim over the past year and lost your no-claims bonus, you'll be hit with a higher premium come renewal.

If this isn't the case, then the end of price walking might the reason. 

Last year, the Central Bank's ban on so-called ‘price walking’ came into effect in the insurance sector. 

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 knew were 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 be charged the same price for their car insurance. 

So if you've seen a big increase in your car (or home insurance premium for that matter) at renewal it could be because:

  1. You had a first-year new customer discount which has now come to an end.
  2. You’ve been with the same insurer several years and had perhaps negotiated/haggled 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.

Get the best value car insurance on bonkers.ie

If you’re looking for cheaper car insurance cover, look no further.

Because of the ban on price walking, you can no longer haggle with your existing insurer. So you have to switch to get the best deals.

Here at bonkers.ie our new car insurance service will provide you with a discounted quote in just a few clicks. So see what you could save with us today!

We can also help you save for other forms of insurance, as well as your energy, broadband, and banking costs.

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