Car insurance premiums in Ireland have surged sharply, diverging from the broader trend of declining inflation, according to recent figures from the Central Statistics Office (CSO). The average cost of motor insurance increased by 9% in July compared to the previous year, marking the eleventh consecutive month of rising premiums.
This spike contrasts with the general trend of inflation, which has moderated in recent months. Despite a period of declining insurance costs due to reforms, premiums are once again on the rise.
Recent reforms aimed at curbing high insurance premiums included the introduction of new judicial guidelines that reduced personal injury claims amounts, and updates to the Injuries Resolution Board (formerly PIAB) designed to cut legal costs. Additionally, a dedicated Garda unit was established to address insurance fraud. These measures led to a significant 20% decline in average private motor premiums from late 2017 to 2022, a period which also saw reduced claims due to pandemic-related traffic decreases.
However, since early last year, average premiums have begun to climb again. Data from the Central Bank showed a 0.5% increase in premiums during the first half of 2023, although this was still below the broader inflation rate at that time. The CSO’s latest figures suggest that the upward trend in motor insurance costs is continuing even as overall inflation rates subside.
One factor contributing to the rising costs is the increase in traffic and subsequent collisions. The repair costs for vehicles have surged due to inflation-driven shortages of labor and parts. Paul Walsh, CEO of Peopl Insurance, noted that the cost of settling damage claims in early 2023 was 126% higher than the 2015-2019 average, largely due to these repair costs.
While injury claim costs have decreased by about 20% recently, a significant portion of claims still proceed through litigation, which incurs higher legal fees. The Central Bank reports that while public liability awards are only marginally higher through litigation (€23,458) compared to the Injuries Resolution Board (€23,122), legal fees for litigation are disproportionately high.
Tracy Sheridan, a board member of the Alliance of Insurance Reform, criticized the preference for litigation, arguing that the Injuries Resolution Board offers a quicker and cheaper alternative. Insurance Ireland’s CEO, Moyagh Murdock, echoed this sentiment, highlighting that litigation accounts for 37% of claims but makes up 79% of total costs for injury claims.
Despite insurers reporting strong profits in recent years, including a particularly profitable period in 2021, the current rising costs suggest that savings from reforms may not be fully benefiting consumers. The Alliance for Insurance Reform and other advocates stress the need for further scrutiny of how much insurers are truly passing on in savings.