Profits made by insurance companies on their auto business increased last year, according to the Central Bank.
In a new report on the private auto insurance industry, the price of the average auto premium has also fallen.
This latest report from the Central Bank uses data from the National Complaints Information Database.
It shows that the frequency of claims under auto insurance policies fell sharply during the year 2019 to 2020, in part due to the decrease in the number of people driving during the Covid-19 restrictions.
However, over a longer period from 2009, the downward trend persists.
Despite a massive 73% increase in the cost of injury claims over the period 2009-2020, more than half of which is attributed to legal fees by the Central Bank, costs per policy and as a percentage of premiums have declined.
This helped boost the profitability of the insurers’ auto business, which the bank said was € 163 million across the industry last year – a profit margin of 12% versus a margin average of 3% over the last decade.
The Central Bank report shows that the average car premium fell by 7% from 2019 to 2020. It has fallen by 16% since its peak in the fourth quarter of 2017. Over the period 2009-2020, the average premium is up by 26%.
The bank further details the price movements showing that between 2009 and 2013, premiums fell by 12%. From 2013 to 2018 they increased by 62% and from 2018 to 2020 they decreased by 11%.
The industry paid rebates worth € 42.5 million in 2020, due to Covid restrictions. The average discount was € 17, bringing the average premium to € 622 last year.
Covid was also evident in the decline in injury and damage claims in 2020. Overall, there was a 26% drop in the number of claims per 1,000 policies during the year. The reduction from 2009 to 2020 was 59%.
Despite this, the average cost of claims has increased significantly. The cost of injury claims from 2009 to 2020 increased by 73%. On the other hand, the cost of claims only increased by 9% over the same period. Last year, the cost of injury claims increased 18%, while the cost of damage claims increased 3%.
We need your consent to load this rte-player contentWe use rte-player to manage additional content that may place cookies on your device and collect data about your activity. Please check their details and accept them to load the content.Manage preferences
In a briefing, the Central Bank said the most important element in the increase in injury claims has been legal costs.
The report also notes that during the period 2015 to 2020, the average legal fees as a percentage of compensation claims were 51% for litigation claims, compared to 3% for claims submitted through the Review Council. personal injury (PIAB).
For claims of less than € 100,000, the average legal cost was € 665, or 3% of the average compensation cost of € 21,845 for claims lodged through the PIAB.
This compares to € 15,235 or 65% of the average compensation cost of € 23,454 for claims resolved through litigation.
The practice of overcharging loyal customers “must stop”
Meanwhile, the Minister of State at the Ministry of Finance said the practice of overcharging loyal customers must end.
Seán Fleming said auto insurance premiums have fallen 8% so far this year, which means premiums have fallen by around 15% for most people in the past 22 months.
He said that reduction will continue next year as legislation comes into force to eliminate the loyalty payment.
This ensures lower auto and home premiums for those who don’t shop, he said.
Seán Fleming advised consumers to go through PIAB for personal injury claims, as court-related legal costs are much higher.
He told Morning Ireland that he will meet with the CEOs of the eight major insurance companies over the next few days to ensure they pass on the savings currently being made through the personal injury board and the savings that will be made. next year with the abolition of the loyalty penalty.