The cost of motor insurance claims in Ireland rose by almost 25 per cent last year to €751 million, according to new figures from the Central Bank of Ireland.
This contributed to a fall in motor insurers’ profits at a time when premiums also continued to fall.
Insurers had previously highlighted that the rising cost of parts and labour had contributed to claims costs last year.
According to figures from the National Claims Information Database (NCID) used for Wednesday’s Central Bank report, the number of Irish injury and damage claims rose by 16 per cent and 20 per cent respectively, following two years in which pandemic restrictions depressed accident rates.
Of the €548 million in total settled claims costs reported last year, 54 per cent were for bodily injury claims and 46 per cent for damage claims.
Half of all injury claims settled last year were settled under the Personal Injury Guidelines, which were adopted in April 2021 – up from 16 per cent the previous year.
The average cost of injury claims handled directly by insurers last year was 47 per cent lower than those settled under an earlier set of guidelines, known as the Book of Quantum. The average cost of cases settled through the Personal Injuries Assessment Board (PIAB) was 32% lower.
However, only a small number of claims were settled under the guidelines – as most cases settled through this route were filed before the latest guidelines came into force.
“It is not yet possible to determine the impact of the guidelines on litigated claims due to the small number of claims settled through this channel. This is important as 77 per cent of all claims costs were associated with litigated claims,” said Robert Kelly, Director of Economics and Statistics at the Central Bank.
The average premium earned per policy fell 7 per cent last year to €568, bringing the total decline from a peak in late 2017 to 22 per cent.
Despite this, FBD, the only home-grown insurer in the Irish market, said in August that its motor premiums rose by 1.7 per cent in the first half of the year, “reflecting the rising cost of motor claims, driven by increases in labour, parts and paintwork costs, with newer, more technologically advanced vehicles costing more to repair”.
The motor division’s profit fell from €176m to €159m last year, or 12 per cent of total income.
Last year, 48 per cent of settled claims were settled directly between insurers and claimants, 15 per cent through PIAB and 37 per cent through litigation – by far the most costly route.
The previous four Central Bank reports on NCID motor figures showed that most claimants who chose to litigate gained little financially and lost time compared to the PIAB channel.
However, the gap widened last year – reflecting the fact that most cases settled through the litigation channel were in the system before the injury award guidelines were introduced.
The average award for litigated cases with claims of less than €100,000 – 94% of claimants – was €22,856 last year, with legal costs adding €17,872 to the average total cost.
The average for a PIAB settlement was €15,500 and the average associated legal costs were €755.
The average for cases settled directly with insurers was €9,754, with additional legal costs averaging €2,130. The average litigated case took 4.8 years to settle, compared to averages of 2.7 years and 1.8 years for cases settled through PIAB and directly, respectively.
Minister of State for Financial Services Jennifer Carroll MacNeill said she would raise the issue of legal costs with insurers and the Law Society of Ireland.
