Brendan Burgess
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I was busy with other stuff when this report came out but my gut feeling was that the media and political response was all wrong. They were blaming insurance companies by making meaningless comparisons. I was going to study it today and write a piece about it, but the editorial in yesterday's Sunday Times says exactly what I want to say.
Here are the key points:
The data dump by the Central Bank of Ireland last week served only to reinforce entrenched positions rather than add any clarity to the vexed debate about who is to blame for the high cost of motor insurance. The report, spanning almost 50 pages and trawling through a decade’s worth of insurance statistics, is the most comprehensive analysis yet of why the average policy costs more than €700 a year. The trouble is that it contains enough evidence to support whatever side of the argument you find yourself on.
Most media reports were in no doubt that insurance companies are the real culprits. They raised premiums by 42% between 2009 and 2018, even though the cost of claims fell by 2.5% over the same period. This was the cue for some commentators to choke with indignation. Charlie Flanagan, the justice minister, muttered about excessive profit-taking. It seemed that the villains had been unmasked even before the report was digested. Less attention was directed at the role of the legal profession, even though the Central Bank’s research shows clearly that going to court is unlikely to win you more compensation but will undoubtedly result in huge legal bills — a big driver of insurance costs.
The trouble with plucking statistics from midair is that they lack context. Jacking up premiums while claims are falling certainly smacks of profiteering, until you consider where the insurance industry was coming from. Its finances were in tatters in the early period covered by the Central Bank’s review. Unless premiums were hiked significantly and claims costs curbed, Ireland risked being left without a functioning insurance industry.
Insurance follows a boom-and-bust cycle, with years of plenty invariably followed by tougher times. The helter-skelter is more pronounced in Ireland than elsewhere because of the opportunistic behaviour of offshore insurance providers that swoop in during the good times and disappear when the going gets tough.
During the halcyon days between 2003 and 2010, average premiums declined by 27% as the insurance companies embarked on a boom-time gamble for market share. It cost more to tax some cars during this period than to insure them, although we choose to forget this now. The reckless behaviour continued behind the scenes, with insurers taking a cavalier attitude to the amounts they needed to set aside to cover future claims.
The reckoning came in the early years of this decade when the industry lost close to €1bn over the space of five years. Some of the leading names — RSA, Liberty, FBD — survived only thanks to desperate rescue attempts. Motorists rightly bristle at being forced to pay for a mess that was entirely of the insurance industry’s making. Without drastic measures, though, drivers might have found it impossible to find anybody willing to provide them with cover.
Editorial: Full speed ahead to figure out Ireland's motor insurance conundrum
Last week’s data dump by the Central Bank of Ireland only served to reinforce entrenched positions rather than add any clarity to the vexed debate about who is to blame for the high cost of motor insurance. The report, spanning almost 50 pages and trawling through a decade’s worth of insurance stati
Here are the key points:
The data dump by the Central Bank of Ireland last week served only to reinforce entrenched positions rather than add any clarity to the vexed debate about who is to blame for the high cost of motor insurance. The report, spanning almost 50 pages and trawling through a decade’s worth of insurance statistics, is the most comprehensive analysis yet of why the average policy costs more than €700 a year. The trouble is that it contains enough evidence to support whatever side of the argument you find yourself on.
Most media reports were in no doubt that insurance companies are the real culprits. They raised premiums by 42% between 2009 and 2018, even though the cost of claims fell by 2.5% over the same period. This was the cue for some commentators to choke with indignation. Charlie Flanagan, the justice minister, muttered about excessive profit-taking. It seemed that the villains had been unmasked even before the report was digested. Less attention was directed at the role of the legal profession, even though the Central Bank’s research shows clearly that going to court is unlikely to win you more compensation but will undoubtedly result in huge legal bills — a big driver of insurance costs.
The trouble with plucking statistics from midair is that they lack context. Jacking up premiums while claims are falling certainly smacks of profiteering, until you consider where the insurance industry was coming from. Its finances were in tatters in the early period covered by the Central Bank’s review. Unless premiums were hiked significantly and claims costs curbed, Ireland risked being left without a functioning insurance industry.
Insurance follows a boom-and-bust cycle, with years of plenty invariably followed by tougher times. The helter-skelter is more pronounced in Ireland than elsewhere because of the opportunistic behaviour of offshore insurance providers that swoop in during the good times and disappear when the going gets tough.
During the halcyon days between 2003 and 2010, average premiums declined by 27% as the insurance companies embarked on a boom-time gamble for market share. It cost more to tax some cars during this period than to insure them, although we choose to forget this now. The reckless behaviour continued behind the scenes, with insurers taking a cavalier attitude to the amounts they needed to set aside to cover future claims.
The reckoning came in the early years of this decade when the industry lost close to €1bn over the space of five years. Some of the leading names — RSA, Liberty, FBD — survived only thanks to desperate rescue attempts. Motorists rightly bristle at being forced to pay for a mess that was entirely of the insurance industry’s making. Without drastic measures, though, drivers might have found it impossible to find anybody willing to provide them with cover.