Motor insurance premiums drive higher, despite falling claims, according to latest CBI report

The Central Bank of Ireland (CBI) has released its second annual report into the motor insurance industry in Ireland, the results of which are bound to raise a few eyebrows among motorists who have been hit with some hefty premium increases over recent years.

The aim of the annual report is to improve the transparency of the motor insurance sector in Ireland, in particular around the area of claims which has been a hot topic of conversation in recent years. 

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

It is hoped that the report will 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 report. 

Cost of motor insurance claims 

According to the report, between 2009 and 2019:

• The number of motor insurance claims fell by 45%, perhaps reflecting safer roads and better driving
• However, the average cost of all claims rose a hefty 65%, from €2,726 in 2009 to €4,487 in 2019, meaning although there are now fewer claims, the ones that do proceed are for bigger amounts
• Within this, the average cost of an injury claim increased by 53% from €29,780 in 2009 to €45,576 in 2019
• The average motor insurance premium rose by 35%. However this was characterised by two distinct periods: a period of falling premiums from 2010-2013, when premiums decreased by 15%; and a period of increasing premiums from 2013-2018, when premiums increased by 63%
• The cost of claims per policy fell by 9%

More specifically, between 2018 and 2019:

• The number of motor insurance claims fell by 5%
• The average cost of a claim rose by 4%
• The average motor insurance premium decreased by 4% to €676. This has since decreased further to €653 in Q4 2019
• The cost of claims per policy fell by 9%

The report also revealed that profits among insurers increased to 10% of income in 2019 versus 9% of income in 2018, both considered high compared to other European markets where it's closer to 5%.

CSO clash 

The rate of decline in motor insurance outlined in the report is somewhat at odds with the CSO's inflation figures for September which show that motor insurance premiums have fallen by almost 9% over the past year alone and are down around 30% from their mid-2016 peak. 

The difference is largely down to the Central Bank using a much wider sample, according to a spokesman for the regulator.

However the question then is, why is the CSO using such a small sample?

Settlements

The report also looked into injury claimant settlements between 2015 and 2019

• 50% of injury claimants settled directly, 17% settled through PIAB and 33% settled through litigation
• 22% of injury costs settled directly, 12% settled through PIAB and 67% settled through litigation
• The average compensation for a direct settlement was €13,427 and average legal costs were €1,397
• The average compensation for a PIAB settlement was €23,137 and average legal costs were €716
• The average compensation for a litigated settlement was €46,214 and average legal costs were €23,409

The Personal Injuries Assessment Board (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. As we can see from the figures 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.

Of the claimants who settled injury claims through litigation during 2015 to 2019, 85% settled for less than €100K. For these claimants the average compensation was €23,572 and average legal costs were €14,949.

Compare, switch and save

While hopefully you’ve seen a reduction in your car insurance premium recently, if it has gone up and your driving circumstances haven’t changed, then the most important thing to remember is to be money savvy and shop around.

As we always say, loyalty doesn’t pay, so you should never rely on getting a reduction in your premium based on how long you've been with a particular insurer.

The only way to see a reduction in your premium from year to year and get the best value is by comparing the latest deals on the market.

To help with this, back in late 2019, the Central Bank introduced a number of rules to combat the growing cost of car insurance in Ireland. For example, renewal notices must now be issued 20 days before a policy is due to expire and they must now include a quote for all cover options. 

More recently in July 2021, the Central Bank announced that it was banning ‘loyalty penalties’ for car and home insurance customers. This means that insurers won’t be able to charge an existing customer who’s renewing their policy any more than an existing customer who’s renewing for the first time.

Remember that motor insurance is one of the most fragmented products out there when it comes to pricing – quotes can vary wildly from person to person and insurer to insurer. That’s why it’s absolutely imperative that motorists don’t simply accept the renewal price given by their current insurer and instead shop around and look for better value.

Take a look at our insurance articles

If you’re looking for more information, we have a range of different insurance blogs and guides that will help you navigate the car insurance world. 

• It's common to find a lot of inaccurate information about car insurance. We separate fact from fiction by debunking common car insurance myths in this guide.
• Taking out car insurance as a first-time driver can be confusing if you're not familiar with the process so we wrote about all you need to know in this guide. 
• If you’re an experienced driver but looking to lower your premium, we’ve compiled a list of ways to reduce your car insurance costs.
• When taking out car insurance, you’ll also want to avoid these 10 mistakes and pitfalls to ensure you don’t overpay or receive inadequate cover.

You can easily stay up to date with all the latest car insurance news and discover more top tips with our blogs and guides.

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