The average cost of a private motor insurance policy fell by 7% last year to €568, new data from the Central Bank has found.
That is despite a 20% rise in the cost of an average damage claim during the year, amid the inflationary environment.
It means that on average, damage claim costs have risen by 35% since 2020 and they now make up 46% of settled claims, up from 30% in 2021.
Overall, the value of claims as a percentage of premiums increased from 47% in 2021 to 61% last year.
“The data released today show that premiums continued to fall in 2022,” said Robert Kelly, Director of Economics and Statistics at the Central Bank of Ireland.
“Claims costs have increased, returning to pre-Covid levels, but driven by an increase in the cost of damage claims.”
The data is contained in the fifth annual Private Motor Insurance Report of the National Claims Information Database (NCID), which is managed by the Central Bank.
The total premiums earned for private motor cover last year was just under €1.3 billion, down from €1.35 billion in 2021, with the average earned premium per policy falling 2%.
Out of that, insurers made a profit of 12% or €159m, down from €176m a year earlier.
The total cost of underwriting was €1.14 billion, up from €1.07 billion in 2021.
The cost of settling claims reached €548m, with 54% of that relating to injury claims and 46% to damage costs.
There were 134,000 claims in total, with 6% for injuries and 94% for damage.
Claims that were settled through the litigation process made up the biggest portion of costs for injury claims settled in 2022.
Over three quarters of injury cases were settled in the courts, 7% through the Personal Injuries Assessment Board (PIAB) and 16% directly with the insurer.
Half of all injury claimants settled under Personal Injury Guidelines that were introduced in April 2021.
85% of those settled directly with insurance firms and before going to PIAB.
Settlements that were reached under the new guidelines directly with insurers and before going to PIAB, were 47% lower than those settled using the old Book of Quantum three years ago.
Those settled through PIAB using the guidelines were around a third lower than those that previously used the Book of Quantum.
Claims settled directly after the PIAB process which used the Personal Injury Guidelines were 41% down on those that that involved the Book of Quantum.
“Significant reductions in average claim costs are seen in the direct and PIAB channels,” said Mr Kelly.
“However, it is still not possible to determine the impact of the Guidelines on claims settling through litigation due to the small number of claims settling through this channel.”
“This is important to note as 77% of all injury costs were associated with litigated claims.”
Nevertheless, Minister of State for Financial Services, Credit Unions and Insurance, Jennifer Carroll MacNeill, claimed the report shows that the Personal Injuries Guidelines are working.
“We need to keep working to ensure the Guidelines continue to stick and that all solicitors engage fully with the PIAB process,” she said.
“However, the Central Bank’s report also highlights that litigation remains a main driver of claims costs, an issue I am raising directly with firms in the industry and with the Law Society of Ireland.”
“I am also engaging with insurers on the need for them to increase their risk appetites and reduce prices for home owners, voluntary groups and businesses so that they too can benefit from the recent package of insurance reforms by government in a way that motorists already have.”
Industry group Insurance Ireland said the report points to the fact that the Government’s insurance reform agenda is working, and insurers have been delivering the benefits back to consumers.
“We believe it is the combination of the reforms and prudent cost management on the part of the insurers that is enabling this benefit to be fed through, delivering stability to motor insurance customers at a time when they are dealing with very high levels of inflation in almost every other aspect of their daily lives,” said Moyagh Murdock, the chief executive of Insurance Ireland.
“It is noteworthy to see the NCID report showing damage cost inflation as this offsets to some extent the reductions in injury costs, especially when combined with the significant increase in the number of serious injury and fatal collisions in recent years,” she added.
Welcoming the 7% drop in motor insurance premiums last year, the CEO of the Alliance for Insurance Reform said that in the context of the range of reforms to the insurance sector it is only right that at least some of the savings were passed on to policy holders.
“As the Judicial Guidelines filter through into more cases that are being settled in the litigation channel, replacing the Book of Quantum, this should lead to further reductions notwithstanding challenges such as inflation,” Brian Hanley said.
“Businesses right across the country are also left wondering why premium reductions could be passed on in the context of motor insurance but have not been forthcoming for public or employer liability policies, which remain stubbornly high,” he noted.
“The reforms applied to and should benefit everyone,” he added.