Third Private Motor Insurance Report of the National Claims Information Database Published

• Report provides key statistics on the private motor insurance industry in Ireland.
• Key findings include figures on premium levels, the cost of claims, insurers’ income and expenditure, and how private motor insurance claims are settled.
• Report captures data for calendar year 2020, including some data on the impact of Covid-19.

The Central Bank of Ireland has today (16 November 2021) published the third annual Private Motor Insurance Report of the National Claims Information Database (NCID) (PDF 1.35MB). The NCID compiles aggregate data received from insurers. This allows the Central Bank to publish an annual report containing analysis on the cost of premiums, the cost of claims, the aggregated financial performance of firms providing this insurance, and key settlement channel information.

This third annual Motor Insurance Report of the NCID captures data for the calendar year 2020. The impact of Covid-19 is therefore highlighted within the report.

Among the key findings published today are -

Premiums

On an annual basis, average earned premium decreased by 7% from 2019 to 2020.

• On a quarterly basis, as at Q4 2020, the average earned premium has decreased by 16% since Q4 2017.
• The decrease in 2020 was influenced to some extent by Covid-19 premium rebates. In respect of private motor insurance, insurers issued premium rebates of €42.5m (equating to 3% of Gross Earned Premium in 2020).

During the period 2009 to 2020, the annual average earned premium increased by 26%. This can be split into three distinct periods -

• Decreased by 12% between 2009 and 2013;
• Increased by 62% between 2013 and 2018;
• Decreased by 11% between 2018 and 2020.

Cost of Claims

The average claim cost per policy decreased by 20% from 2019 to 2020, reflecting the impact of Covid-19.

There was a significant drop of 26% in the frequency of claims (injury and damage combined) in 2020. However, the average cost per claim increased by 9% from 2019 to 2020.

During the period 2009 to 2020 claims accounted for 69% of earned premiums (on average);

• Claims costs as a percentage of earned premiums were at their highest in 2014; accounting for 92% of earned premiums that year.
• By contrast, claims costs as a percentage of earned premiums reached their lowest point in 2020, accounting for 50% of earned premiums and again reflecting the impact of Covid-19.

Income and Expenditure

Insurers’ Operating Profit for 2020 amounted to 12% of total income. Between 2009 and 2020, Operating Profit amounted to 3% of total income.

There were three distinct periods observed; operating profits of 7% from 2009 to 2012, operating losses of 10% from 2013 to 2016, and operating profits of 9% from 2017-2020.

Reinsurance had a much more material impact on profitability between 2017 and 2020, at a cost of 8% of total income, than in the years prior to this.

From 2009 - 2012, investment income accounted for 9% of total income. This decreased to 6% of total income from 2013 – 2016, and decreased further to 3% between 2017 and 2020.

In terms of the Combined Operating Ratio (COR):

• For 2020, the COR amounted to 77% gross of reinsurance and 79% net of reinsurance.
• Between 2009 and 2020, the COR was 98% gross of reinsurance and 103% net of reinsurance.
• 2011 was the only year between 2009 and 2016 in which claims and underwriting expenses were less than earned premiums.
• Claims and underwriting expenses have been less than earned premium for all years between 2017 and 2020.

Settlement of Injury Claims

In terms of injury claim settlements for claims settled between 2019 and 2020:

• 36% of claimants settled directly before engagement with the PIAB,
• 13% settled directly after engaging with the PIAB,
• 15% settled through the PIAB,
• 34% settled via litigation before a court award,
• 2% settled via litigation, with a court award.

In terms of injury claim settlements between 2015 and 2020 and duration of claim:

• Claimants that settled directly (before or after engagement with the PIAB) had an average duration of 1.3 years,
• Claimants that settled through the PIAB had an average duration of 2 years,
• Claimants that settled via litigation (before or with court award) had an average duration of 3.9 years,
• 22% of costs related to claimants settling directly, 11% to claimants settling through the PIAB, and 67% to claimants settling via litigation.

For 94% of claimants, the total cost of a claim was less than €100K and the average settled costs for these claims were:

• Average compensation costs for direct claimants were €13k, with average legal costs of €1.4k;
• Average compensation costs for PIAB claimants were €22k, with average legal costs of €0.7k;
• Average compensation costs for litigated claimants were €23k, with average legal costs of €15K.

Commenting, Mark Cassidy, Director of Economics and Statistics at the Central Bank of Ireland, said, “As with previous versions of this publication, the NCID is a key area of interest for consumers, policymakers, and the wider financial services industry and the figures published today provide detailed insight into claims costs, settlement channels, and premiums.

“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 7% in the average motor insurance premium.  This included Covid-related rebates offered to customers equivalent to 3% of total premiums paid.  Operating profits across the sector last year were 12%.

“The data on the settlement of motor insurance claims show that 36% of injury claims are settled through litigation and these account for almost 70% 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). The report highlights that the vast majority of claimants, 94%, 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.”

Notes to Editor

All insurers selling private motor insurance in Ireland were required to submit data to the NCID, regardless of country of authorisation. Firms writing private motor insurance in Ireland are members of the Motor Insurance Bureau of Ireland (MIBI).

The ratio of insurance-related outgoings as a proportion of earned premium (Combined Operating Ratio or COR) is a key measure of profitability used by insurance companies to understand how well they are performing and to inform insurers’ pricing and underwriting decisions. If the ratio is greater than 100%, then the underwriting is unprofitable.

Personal Injuries Guidelines (PDF 626.64KB) were adopted by the Judicial Council on 6 March 2021. The data collected for the purpose of this NCID Report relates to the time period up to 31 December 2020. Therefore, this year’s report does not contain any information on the adoption of the Personal Injuries Guidelines or their impact on Private Motor Insurance in Ireland.

The Personal Injuries Assessment Board (PIAB) is Ireland’s independent state body which assesses personal injury compensation.

The Cost of Insurance Working Group was established in 2016 to examine the factors contributing to the increasing cost of insurance and to identify measures to reduce this cost, taking account of the requirement to maintain a financially stable insurance sector.  The focus of the first phase of its work was on the rising costs of motor insurance, which culminated in the publication of the Cost of Motor Insurance Working Group: Report on the Cost of Motor Insurance (PDF 1.65MB) in January 2017.

Recommendation 11 in this report required the Central Bank of Ireland to establish a National Claims Information Database (NCID), to improve data availability. Legislation was required to confer this new function on the Central Bank, and the Central Bank (National Claims Information Database) Act 2018 commenced in January 2019. The legislation requires that the Central Bank publishes a report on an annual basis.