Insurance Industry itself has a lot to answer for the recent increases in premia

Dec 15, 2016

Over the last year, in particular, the Irish Insurance Industry has been blaming rising claims and increases in the amount of compensation paid to victims as the reasons for the steep hike in insurance premiums. An Oireachtas Committee has recently reported its findings on those claims.

The report states

“The Insurance sector has repeatedly stated that an increase in the frequency of claims and awards have been key contributors to the rise in insurance premiums.

Firstly, it is difficult, if not impossible, to verify this statement without full knowledge of the claims details for some 70% of the market. With what is known, one can only conclude that claims and awards are not the driving force behind steep increases. The data provided by the Personal Injuries Assessment Board shows relatively minor change – an increase of 6% year-on year in claims processed through that body. Similarly, the Committee heard evidence showing that movement in the number of court claims is static and may even have marginally declined. The Committee also heard in evidence that in any given year 92% of policy holders contribute towards the 8% of claims. Compensation awards have increased but not to the extent that would merit a 70% increase in premiums.

From evidence presented to the Committee, it is clear that the levels of compensation in PIAB have remained stable. By way of example, in 2013, the average motor award was €21,730. The average motor award in the last 12 months to the end of June 2016 was €21, 782. The figures are almost identical. The Courts Services reports indicate increases of 13.5% in personal injury awards in the High Court and 20% in the Circuit Court for 2015. Furthermore, in an exchange between Insurance Ireland and the Committee on the issue of claims payouts in 2014, it was clearly calculated using the figures provided by Insurance Ireland that claims payouts had increased by 24%. Thus, the evidence and data confirms that the level of premium increases far outstrips the actual increase in the amount of claims paid out by the industry. ”

In their contribution to the Committee, The Law Society of Ireland stated :-

The Law Society of Ireland firmly laid the blame for the current market difficulties in the insurance sector at the door of the Insurance Industry. It criticised what it labelled a “widespread public relations campaign by the insurance industry that sought to blame everybody but itself.” Excessive legal costs were not the key contributor to increased motor insurance costs. Instead, “the answer lies within the closely guarded books of the insurance industry”. The Law Society recommended the establishment of a new task force, along the lines of the Motor Insurance Advisory Board, to discover the “real” reasons for the marked increase in insurance costs. The Law Society provided statistics showing that personal injuries claims through PIAB had only increased by 6% in 2015. Similarly, they argued that there was no significant increase in the number of claims being processed through the Courts on an annual basis. As for award levels, the Society presented figures to the Committee revealing an increase of 8% in High Court awards in 2015 and a corresponding 20% increase in Circuit Court awards for personal injuries.

You can read the full report here

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