Noel Grealish (Galway West, Independent)
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169. To ask the Minister for Finance the reason that the Action Plan on Insurance Reform has been so successful in reducing motor insurance premiums but premiums for business insurance, which includes employers and public liability, continue to rise; and if he will make a statement on the matter. [60173/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Action Plan for Insurance Reform, published in December 2020, is a whole-of-Government strategy containing several initiatives expected to positively impact insurance costs. The third Action Plan for Insurance Reform Implementation Report was published in November. This shows that work is progressing well to implement these important reforms, with 90 per cent of the actions already delivered.

As the Deputy notes, recent data from the Central Statistics Office show that average private motor insurance prices have fallen by over 43 per cent since their peak in July 2016, and over 10 per cent in the last year. This is to be welcomed, particularly at a time when general inflation is about 9 per cent year-on-year.

Regarding insurance for businesses – namely employer (EL) and public liability (PL) insurance – it is more difficult to assess these insurance price changes as the risk profile is heterogeneous and can vary widely from firm-to-firm. This market segment is also closely linked to global insurance developments, and is therefore slower to reflect the changes being delivered through the Government reform agenda than more standardised products such as motor insurance. 

The latest National Claims Information Database (NCID) report shows that the EL/PL market is a large, diverse market. In 2020, there were over 328,000 policies with nearly €1.1 billion in premium earned in the EL, PL and Commercial Property market.  Most policies (84 per cent) are sold as part of a bundled package.  

The average earned premium for these “packaged” business policies increased by 2 per cent during 2020. However, the experience varies widely between sector types – for instance, in 2020 packaged premiums for businesses engaged in “Financial and Insurance Activities” fell by an average of 15 per cent, while “Transportation and Storage” enterprises saw the greatest average rise, at 13 per cent.  

Nevertheless, I would note that the NCID also shows that 57 per cent of these package policies had premiums of less than €1,000 and 92 per cent less than €5,000.  Only 2 per cent had premiums over €25,000.  This is important as would appear to indicate that for the vast majority, insurance premiums would appear to be within a range with what one might expect for the size of the business.  

The reasons for the increase in business insurance costs are varied, but it is widely accepted that premiums are driven by the cost of claims. Indeed, NCID data also indicates that the average cost of claim for EL and PL increased from 2019 to 2020, by 37 per cent and 24 per cent respectively. Furthermore, from 2009 to 2020, the average cost of EL and PL claims increased by 68 per cent and 40 per cent overall, respectively. Combined with this, we can also see from NCID data that the EL/PL sector has been largely loss making since 2015, and thus many firms have had to increase premiums to cover these losses.

The introduction of the Personal Injuries Guidelines (implemented in April 2021) is a key achievement of the Action Plan. These have significantly lowered award levels for many common injuries, with the latest data from the Personal Injuries Assessment Board (PIAB) indicating that the overall average award has reduced by 38 per cent compared to 2020. Consistent implementation of the Guidelines by insurers, the Personal Injuries Assessment Board, and the courts should therefore lead to a reduction in the cost of claims, which is the main driver of the cost of insurance. It is my hope that this will ultimately feed through to lower, more sustainable business premiums in the future.

In addition, upcoming legislative changes to enhance the role of the Personal Injuries Assessment Board and rebalance the duty of care should have a positive impact on businesses in terms of insurance accessibility and affordability. Furthermore, Minister of State Fleming has had wide engagement with a range of firms and my Department is working closely with the IDA to help leverage the reforms to promote the Irish insurance market as an attractive location for investment.