The Agenda for Insurance Reform is slowly but surely making a difference – here’s the evidence

The implementation of the reforms is happening at a time when inflationary pressures caused by the aftermath of the Covid crisis and geopolitical tensions is impacting negatively on consumers in Ireland and across Europe.

However, the Government’s reforms alongside the industry’s strong commitment to deliver has insulated the Irish insurance market against the steep increases in costs and premiums seen in neighbouring countries.

Recent figures from the Central Statistics Office (CSO) show that premiums for motor insurance are increasing due to inflationary pressures.

But this follows the steep decreases in recent years that flowed from the implementation of the actions under the Agenda for Insurance Reform.

The Government, along with the industry, have made considerable efforts to reduce the volatility in the Irish market through actions to mitigate exorbitant and exaggerated personal injury awards, particularly for minor injuries.

The absolute numbers show the impact the measures have had – with premiums down 17pc in the last three years.

This is despite the fact that the full impact of the reforms have yet to unfold.

New Personal Guidelines in the pipeline will feed into court decisions, where currently there is large back log of cases, the vast majority of which are settled through expensive litigation.

The recently enacted changes to the Duty of Care Legislation is also an important step, and how the courts treat early cases will be an important indicator of the effectiveness of this reform

While reforms are being implemented, inflation, rising costs of goods and services, supply-chain problems and a worrying increase in road collisions are starting to eat up the benefits of the actions taken.

However, the impact of the reforms is protecting customers against the full impact of rising costs.

Comparing the trends of the last 12 months between Ireland and the UK provides a valuable insight into the impact of the agenda.

Each year, professional services company, Deloitte undertakes a review of trends in the Irish motor insurance market.

The average earned premium per policy decreased by 7pc in 2022 alone

Based on their report and data from the CSO, the impact of the reform agenda on motor insurance premiums has been quantified as a 15pc reduction in the two-and-a-half year period from the introduction of one of the central elements of the reform agenda – the Personal Injury Guidelines from April 2021 to September 2023.

The latest National Claims Information Database (NCID) Motor Insurance report published by the Central Bank broadly supports this trend, finding the average earned premium per policy decreased by 7pc in 2022 alone.

Since 2016, Irish motor insurance premiums have materially fallen below the CSO Consumer Price Index (CPI).

The reduction in motor insurance premiums in the Republic since Q1 2016 is in stark contrast to significant premium increases in UK/NI motor Insurance and in several EU countries.

Today, the average motor premium in Ireland is €670 compared to €1,100 in the UK and Northern Ireland. Most European countries also have higher premiums than Ireland’s.

Proof of a more stabilised environment is illustrated by the decision by OUTsurance to establish in Ireland

Two major components determine the cost of motor insurance: injury claims and property damage claims.

On the cost of claims, there appears to be a correlation between the reduction in injury claims costs (real and anticipated) and the reduction in the premium levels.

The most recent Injuries Resolution Board (formerly PIAB) annual report in December 2023, shows a 22pc reduction in average PIAB motor awards from €17,945 in 2021 to €13,975 in 2022.

Motor property damage claims costs increased significantly from 2021 onwards as can be seen in the Central Bank’s (NCID) reports. Increasing property damage claims are partially offsetting the positive impact of the improved injury claims costs arising from application of the Personal Injury Guidelines.

Assessing the situation for customers of motor insurance in Ireland, the remaining uncertainty about the consistency of the application and adherence of the Reform Agenda must be kept in mind.

However, the substantial improvements which the actions delivered for Irish customers should not be underestimated.

Indeed proof of a more stabilised environment is illustrated by the decision by OUTsurance, the first new competitor in the Irish market in years, to establish in Ireland.

The continuing success of the Agenda for Insurance Reform and the improved attractiveness and reputation of the Irish market will lead to more new entrants and greater benefits for consumers.

Moyagh Murdock is the CEO of Insurance Ireland