Thursday, 5 March 2020
Department of Finance
Motor Insurance Data
74. To ask the Minister for Finance the number of motor insurance premiums paid by policyholders; the number of claims paid out by the different settlement channels as described in page 8 of the first national claims information database report on private motor insurance; the total amount paid out on claims by the different settlement channels as described in page 8 of same in nominal figures in each of the years 2009 to 2018, in tabular form; and if he will make a statement on the matter. [2662/20]
In order to address the Deputy's question, my officials contacted the Central Bank of Ireland (CBI) to request the necessary information. In response, the CBI noted that in compiling the NCID Report, the data used had the following market coverage (based on the proportion of total premium earned in 2018):
- Premium and policy count data covers 90% of the market;
- Claims settlement costs and numbers data covers 83% of the market.
- Banded claims settlement costs and numbers data covers 70% of the market.
This level of coverage should be borne in mind when using data in relation to absolute amounts, e.g. of premiums or settled claims paid. In addition, while the information in respect of the number of premiums earned covers the years 2009 – 2018, the information in respect of settlement claims covers the years 2015-2018 only.
I will now address the three questions raised by the Deputy and provide the information given to my officials from the Central Bank of Ireland. Please note that this data is available in Annex 2 of the NCID private motor insurance report published on the Central Bank of Ireland website www.centralbank.ie/statistics/data-and-analysis/national-claims-information-database.
1. The number of premiums paid by policyholders in respect of motor insurance in nominal figures in each of the years 2009 to 2019
The CBI has provided officials with the following data in respect of the number of premiums earned for the years 2009-2018:
Table 1- Number of premiums earned in respect of private motor insurance (all policies).
|Year||Number of Premiums (Earned Policy Count)|
2. The total amount paid out on claims (or the cost of claims) by the different settlement channels in tabular form
As noted above, the CBI advised my officials that the figures relating to settlement channels need to be considered in the context that the NCID Report is covering an estimated 83% of the market for settled claims (Table 2) and 70% of banded settled claims (Table 3), based on the 2018 earned premium of the companies included versus the total market 2018 earned premium. This means that when calculating the amount paid out on claims by the different settlement channels using the NCID data, it is important to consider that this is a portion (albeit a very significant portion) of the actual cost of claims and thus not the total cost of claims.
The Deputy will note that the information related to the average injury settlement costs in each settlement channel is available in the NCID Report (Table 3, page 27). The numbers and costs of claims for Table 3 of the NCID report can be seen in Table 2 (also published in Annex 2 to the 2019 NCID report).
Table 2- Cost of injury claims by settlement channel and settled year 2015 – 2018 (Accompanies 2019 NCID private motor report Table 3 - breakdown of the average injury settlement costs in each settlement channel. Figures represent 83% of the market.)
|Sett Year||Settlement Channel||Number of Claimants||Comp Costs (€)||Legal Costs (€)||Other Costs (€)||Total Costs (€)|
Referring to Table 2, it can be seen that the value of total costs for direct settlements have increased by 11% between 2015 and 2018, the cost of injury claims settled by PIAB decreased by 13.6% and the cost of injury claims settled through litigation increased by 26.2%.
While it is true to say that the nature or severity of the injury claims settled in the different channels can vary significantly and there may be good reasons for pursuing litigation, it can be stated that the pursuit of litigation is contributing significantly to overall settlement costs, and that the cost of claims settled by litigation has increased significantly since 2015.
Table 3- Cost of injury claims less than €100k by settlement channel and settled year 2015 – 2018 (accompanies 2019 NCID private motor report Table 4 - breakdown of the average injury settlement costs, where the total cost of settlement is less than €100k. Figures represent 70% of the market)
|Settled Year||Settlement Channel||Number of Claimants||Compensation Costs (€)||Legal Costs (€)||Other Costs (€)||Total Costs (€)|
Table 3 focusses on the cost of injury claims less than €100k by settlement channel. It reinforces the point made above about the impact that litigation is having on settlement costs. The above figures are aggregate in nature. However when examined from an average claim perspective, they indicate that the average settlement for litigated cases under €100,000 is just over €23,000 while the accompanying average legal costs is just over €14,500. When this is compared with the average PIAB award of just over €22,500, and its average legal costs of €753, it raises questions about how the differential in legal costs can be justified. In addition, the length of time to settle these claims is nearly two years longer than in PIAB, which in itself drives up the cost of insurance. I do not believe these differentials are sustainable and in light of this comparative information, set out in the NCID report and the table, I believe that legal profession needs to recognise their role regarding costs. The data within the NCID report makes it clear that in overall terms, PIAB offers the most cost effective settlement channel and I would hope that its settlement rates increase going forward. This is a key aim of our work in the CIWG.
In conclusion, the NCID Report demonstrates why we must address award levels in this country if we want to see cheaper insurance premiums and an increased risk appetite from insurers. In this regard, the data in the NCID Report shows that personal injury claims have been driving the cost of claims in recent years – representing 75% of the ultimate claims costs over the period. This is not sustainable in my view. This is all the more concerning as the Report shows that these increased costs are not being driven by a higher frequency of claims. I believe that our focus therefore must continue to be on the Judicial Council and its publication of the new Personal Injuries Guidelines later this year.