Written answers

Wednesday, 1 December 2021

Department of Finance

Insurance Industry

Photo of Peadar TóibínPeadar Tóibín (Meath West, Aontú)
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76. To ask the Minister for Finance the efforts he and his Department have taken to lower insurance premiums or for insurance firms to honour their pledge to reduce premiums. [59173/21]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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As committed to in the 2020 Programme for Government, Government is prioritising reform of the insurance sector with particular emphasis on motor, public, and employer liability insurance. The whole-of-Government approach being taken through the Action Plan for Insurance Reform, which sets out 66 actions that aim to improve both the cost and availability of this key financial service, particularly for businesses.

A number of the actions from the Action Plan fall under the responsibility of my Department. This includes the expansion of the National Claims Information Database (NCID) to include information on employer and public liability insurance claims – the first report of which was published in July this year. The enhanced transparency this provides is key to further developing our understanding of how claims costs are impacting premiums, and in particular, the relationship between the price paid by a customer for a policy and the cost to insurance undertakings.

Other actions that have been taken by my Department include the establishment of the Office to Promote Competition in the Insurance Market, which is chaired by Minister of State Fleming. Since its establishment, the Office has held meetings with wide range of stakeholders including insurance bodies, civil society and other state regulators on the issues of competition and switching, which are key for lowering insurance premiums. Furthermore, the Department is also working closely with IDA Ireland to target firms to enter the Irish market and leverage the ongoing reforms to the insurance environment here, with the aim of increasing competition. In addition, Department is collaborating with the Central Bank to create an insurance databank, which will assist new providers seeking to enter the Irish insurance market.

The adoption of the new Personal Injuries Guidelines by the Judicial Council was another key measure in the reform agenda. As the Deputy will appreciate, consistent implementation of these Guidelines by insurers, the Personal Injuries Assessment Board (PIAB) and the judiciary will be vital in achieving an improved claims environment.  These are early days in relation to assessing the impact of the Guidelines. However as the insurance reform agenda progresses, we will continue to hold the industry to account on its commitment to reflect savings from the Guidelines, and other elements of the reforms, to customers.  Minister of State Fleming, in his ongoing engagement with the sector, has emphasised the need for insurance providers to reduce premiums and increase their risk appetite to provide cover in new areas.  The Minister recently met with the main insurers to assess their response to the Guidelines, and to emphasise the importance of insurers when settling claims, to not undermine the Guidelines by settling for amounts that are inconsistent with them.

Finally, I would like to assure the Deputy that work remains ongoing across Government to deliver further elements of the Action Plan, including measures to reform the PIAB, reduce fraud, and make changes to the duty of care, which is a matter for my colleague, the Minister for Justice.  It is my hope that the implementation of these key actions in particular should have a positive impact on the affordability and availability of insurance for individuals, businesses, community and voluntary groups across Ireland.

Photo of Peadar TóibínPeadar Tóibín (Meath West, Aontú)
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77. To ask the Minister for Finance the level of profit from the insurance sector; the average insurance premium per type of insurance; and the level of payouts for insurance claims from 2016 to 2020 and to date in 2021, in tabular form. [59174/21]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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At the outset, it is important to note that as Minister for Finance, I am responsible for the development of the legal framework governing financial regulation. Neither I, nor my Department, collect the type of information being sought by the Deputy. However, the Central Bank publishes data into the insurance sector via the National Claims Information Database (NCID).  To date, the NCID has published three reports on private motor insurance and one report on employer liability (EL), public liability (PL) and commercial property insurance.  It should be noted that NCID data in relation to motor insurance currently covers the period 2009-2020, while for employer liability, public liability and commercial property, it covers the period 2009-2019.  Therefore, data for 2021 to date is not available.

To be of assistance to the Deputy, my officials consulted the Central Bank and collated the below tables from the NCID reports to provide the information that the Deputy is seeking, as far as it is currently possible.  Please note that the Deputy can find this and other data in published Annexes to each of the NCID reports.  They are published on the Central Bank of Ireland website (www.centralbank.ie/statistics/data-and-analysis/national-claims-information-database).

Profitability

For the purpose of providing data on the level of profit from the insurance sector, my officials have provided the data in respect of private motor insurance and general liability insurance separately, as per the reports. There are two overall profitability indicators shown in the NCID reports - the operating profit as a percentage of total income and the net combined operating ratio (COR). The COR is a key ratio used by insurers to measure the underlying performance of their insurance related activities. The COR describes insurance related outgoings as a proportion of earned premium. A COR greater than 100% represents a higher level of insurance related outgoings than insurance-related income.

In respect of private motor insurance, the profitability per year going back to 2009 was:

Year Operating profit or loss as a percentage of total income Net Combined Operating Ratio (COR)
2020 12% 79%
2019 11% 81%
2018 9% 87%
2017 6% 94%
2016 -4% 112%
2015 -9% 123%
2014 -10% 123%
2013 -20% 132%
2012 11% 100%
2011 7% 95%
2010 6% 102%
2009 3% 109%
Source: Table 5 and Figure 18, NCID Private Motor Insurance Report 3

Note: This data is based on data from firms that insured 98% of the private motor insurance market in Ireland in 2020.

For general liability (employer liability/public liability) and commercial property insurance, the profitability over the period 2009 to 2019 was:

Year Operating profit or loss as a percentage of total income Net Combined Operating Profit (COR)
2019 3% 100%
2018 -3% 96%
2017 -2% 110%
2016 -12% 137%
2015 -4% 128%
2014 2% 116%
2013 2% 107%
2012 6% 122%
2011 10% 93%
2010 23% 73%
2009 23% 81%
Source: Table 13 and Figure 10, NCID Employers’ Liability, Public Liability and Commercial Property Insurance Report 1

Note: This data is based on 83% of the EL, PL and Commercial Property insurance market in 2019.

It should be noted that in respect of private motor insurance, recent profitability in the sector followed a number of years of negative net insurance-related results which falling levels of investment income could not offset fully.

I understand from the Bank that the profitability figures will have an element of 'survivor' bias; they will not include the results of those firms that exited the market in 2019 and prior for private motor insurance, and 2018 and prior for general liability and commercial property insurance.

Average earned premium per policy

For private motor insurance, the average earned premium per policy was:

Year Private motor: average earned premium per policy (€)
2020 622
2019 666
2018 699
2017 689
2016 600
Source: Figure 4, NCID Private Motor Insurance Report 3

Note: This data is based on data from firms that insured 99% of the private motor insurance market in Ireland in 2020.

The Bank notes that it is important to stress that calculating an average premium metric that accurately reflects market price movements in liability and commercial insurance markets is very challenging due to changes in the mix of policies, lines of business and sectors as well as changes in the size of policies, policy excesses, limits, risk and covers. These can all significantly impact the average premium so that this may not accurately reflect the change in rate charged per unit of risk by insurers nor may it reflect the average premium experience of insured customers in particular sectors.  Therefore while an average premium metric is a crude measure, this metric represents the best currently available indicator of overall average premiums from the data captured.

For general liability (Employer and Public Liability) and commercial property package insurance policies, the average premium per package policy was:

Year General liability package policies (EL/PL/commercial property): average earned premium per policy (€)
2019 2,269
2018 2,173
2017 2,065
2016 2,000
Source: Figure 2 (and Annex), NCID Employers’ Liability, Public Liability and Commercial Property Insurance Report 1

Note: This data is based on 86% of the EL, PL and Commercial Property insurance market in 2019.

With regard to employer and public liability data, the Central Bank notes in its Report that package policies represent 86% of EL/PL/commercial property policies, and there is a large spread in the size of policies earned in the EL, PL and commercial property market based on the premium per policy which reflects the large range of policyholders and diverse set of risks which fall under this insurance cover.  The Report also notes that from 2009 to 2019, 59% of Package policies and 78% of Standalone policies had a premium of €1,000 or less; 93% of both Package and Standalone policies had a premium of €5,000 or less.

Claims settlement costs

For private motor insurance, the total cost of settled claims by year was:

Settled Year Private motor: total claims settlement costs (€m)
2020 621
2019 639
2018 608
2017 621
2016 588
2015 601
Source: Table 8, NCID Private Motor Insurance Report 3

Note: This data based on firms that insured 88% of the private motor insurance market in 2020.

The above includes damage and personal injury claims costs. 90% of claimants made damage claims between 2015 and 2020. Damage claims would seldom require PIAB or court assessment and 99% of them settled directly with the insurer. Injury claims accounted for 10% of claimants and 72% of total settlement costs between 2015 and 2020.

For general liability (Employer and Public Liability) insurance, the total cost of settled claims by year was:

Settled Year General liability package policies (EL/PL): total claims settlement costs (€m)
2019 390
2018 362
2017 375
2016 372
2015 334
Source: Table 19, NCID Employers’ Liability, Public Liability and Commercial Property Insurance Report 1

Note: This data is based on 82% of the EL, PL and Commercial Property insurance market in 2019.

The above includes damage and personal injury claims costs. 33% of claimants made damage claims between 2015 and 2019. Injury claims accounted for 67% of claimants and 92% of total settlement costs between 2015 and 2019. EL claims are predominantly injury claims; however, PL claims are a mix of bodily injury and damage.

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