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Profits for motor insurers increased in 2020

Motor insurers in Ireland saw their profits increase to a 10-year high in 2020, despite the majority of motorists being off the road due to Covid-19 lockdowns.

According to the latest report from the Central Bank, which uses data contained in the National Claims Information Database, insurers’ operating profit last year amounted to 12 per cent (€163m) of total income.

Between 2009 and 2020, operating profit amounted to three per cent of total income, the report says.

However, the report adds that there was a significant drop of 26 per cent in the frequency of claims (injury and damage combined) under motor insurance policies in 2020.

The average cost per claim increased by nine per cent from 2019 to 2020, according to the Central Bank report. The average claim cost per policy decreased by 20 per cent from 2019 to 2020, it claims.

It says premiums dropped by seven per cent last year and have fallen by 16 per cent since Q4 2017. The report says that the decrease was influenced by Covid-19 premium rebates, which amounted to €42.5 million.

During the period 2009 to 2020, the annual average earned premium increased by 26 per cent. The biggest jump was 62 per cent between 2013 and 2018.

Mark Cassidy, director of economics and statistics at the Central Bank of Ireland, said: “The key findings of the latest report, based on data up until the end of 2020, are clearly affected by the Covid-19 pandemic, with a significant reduction in the number of private motor claims and a subsequent reduction in claims costs.

“The trend of decreasing premiums that has been evident since 2018 continued last year, with a further decline of seven per cent in the average motor insurance premium.

“This included Covid-related rebates offered to customers equivalent to three per cent of total premiums paid.  Operating profits across the sector last year were 12 per cent.”

“The data on the settlement of motor insurance claims show that 36 per cent of injury claims are settled through litigation and these account for almost 70 per cent of total settlement costs. Claims settled through this channel take significantly longer to settle on average compared to claims settled directly or through the Personal Injuries Assessment Board (PIAB).”

He added: “The report highlights that the vast majority of claimants, 94 per cent, settle for less than €100K and while the average compensation amount for these claimants is comparable across PIAB and litigation, the average  total cost of claims is much larger for litigated claims due to the higher legal costs associated with settling these claims.

“The new Personal Injuries Guidelines from the Judicial Council enacted in 2021 are a significant development regarding settling claims and in future reports we will look to assess their impact.”