Despite the cost of settling car insurance claims surging to record highs in 2023, insurance companies saw profits increase by 8% to €105m as premiums also increased, a new report from the Central Bank shows.
In the sixth annual Private Motor Insurance Report of the National Claims Information Database, the Central Bank said there were approximately 2.28m motor insurance policies written last year costing a combined €1.29bn.
The average premium cost per policy increased by 2% during 2023 to €568. The vast majority, 93%, of policies were for comprehensive cover.
The total cost to settle claims during 2023 came to €693m, the highest the series has ever recorded and nearly 40% higher than in 2022. This was to settle approximately 160,000 claims, an increase from the 129,000 recorded in 2022.
The Central Bank noted that the 8% profit increase reported by these insurance companies was driven by an operating loss of 1% on current year claims, which was offset by reserve releases on prior years which contributed 9% to operating profit.
Last year, damage claim costs overtook injury claims costs and now account for 53% of the total settled claims costs – up from 47% in 2022.
The report said the increase in damage claims and costs are “likely reflective of the high inflationary environment over this period”.
Director of economics and statistics at the Central Bank Robert Kelly said claim costs have increased returning to pre-covid levels with a noted change in the composition of claims.
“The frequency and costs of damage claims have increased, while the frequency and costs of injury claims have decreased,” he said.
The average cost of a claim stood at €3,971 when both car damage and personal injury claims are combined.
If the two were separated out, the average cost of a damage claim would be €2,028 while the average cost of an injury claim was €37,171.
In relation to injury claims, 45% were settled directly with an insurer with an average time taken to settle of 1.9 years. A further 17% were settled through the Injuries Resolution Board (IRB) with an average time taken to settle of 2.7 years An additional 37% was settled through litigation with an average time taken to settle was 5.1 years.
Of all injury claims, 27% were settled using the personal injury guidelines and 73% using the Book of Quantum. The guidelines were introduced in 2021 as a means of bringing down the high cost of settlements.
Mr Kelly said the application of these guidelines continued to progress in 2023 with all claims settled directly or through the IRB channels, along with 23% of litigated claims, settling under the guidelines.
“Significant reductions in average claim costs are seen in the direct and IRB channels,” he said.
“It is still not possible to determine the full impact of the guidelines on claims settling through litigation. However, the report details decreases in the average compensation costs for the 84% of claimants whose claims settled for less than €100,000 in the litigated channel.”
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