Motor Insurance Premiums Rise Amid Increasing Claims Costs

In recent years, the landscape of motor insurance has seen significant shifts, with the average premium per policy experiencing a notable increase. Between 2023 and 2024, there was a 9% rise in the average premium, reaching €623. This trend reflects broader changes within the insurance sector, marked by the escalation of claim costs, particularly those related to vehicle damage. The Central Bank’s latest figures underscore these developments, revealing a total gross written premium for private motor insurance of €1.46 billion in 2024.

The cost dynamics within the insurance market have been further complicated by rising claims expenses. Specifically, the expected cost of claims per policy climbed by 3% to €397 in 2024, marking the highest level since 2014. This surge is primarily attributed to the increasing costs associated with damage claims, which averaged €192 per policy. On the other hand, injury claims, although stable in recent years, continue to play a significant role in the overall claims landscape, with costs per policy remaining below pre-pandemic levels at €205.

The data derived from the National Claims Information Database, compiled by the Central Bank, provides valuable insights into the evolving nature of motor insurance claims. A notable trend is the stability of injury claims costs between 2022 and 2024, which contrasts with a higher average of €257 recorded during the pre-pandemic period from 2015 to 2019. While smaller injury claims have seen a reduction in costs, this has been counterbalanced by an uptick in the cost of larger injury claims.

In terms of premiums versus claims, the expected claim costs equaled 68% of the premiums received in 2024, maintaining a consistency with the previous year’s trend where 93% of policies included comprehensive coverage. This stability in comprehensive coverage underscores the market’s resilience amidst fluctuating claims costs.

Examining the total claims settled in 2024 offers further insights. The total amount settled reached €792 million, with damage claims representing a significant portion, accounting for 54% of total settled claim costs. This is a substantial increase from the 29% average observed between 2015 and 2021. Damage claims, in particular, saw a 6% increase in number and an 18% increase in average costs compared to the previous year.

The complexity of injury claims settlement processes is another noteworthy aspect. In 2024, 48% of such claims were settled directly with insurers, taking an average of 1.8 years to resolve. Another 16% were managed through the Injuries Resolution Board, with settlements averaging 2.7 years, while 36% were resolved via litigation, extending the average settlement time to five years. Each pathway presents its own set of challenges and timelines, influenced by the nature and complexity of the claims involved.

The adoption of the Guidelines in 2024 has significantly impacted the cost efficiency of claim settlements. Claims settled under these guidelines saw a reduction in costs, with direct settlements prior to the Injuries Resolution Board being 33% lower, settlements through the Board 8% lower, and direct settlements post-Board 26% lower.

Robert Kelly, the Director of Economics and Statistics at the Central Bank of Ireland, highlighted these trends in his recent comments. He noted the notable 9% increase in the average written premium from 2023 and the persistent growth in claims costs driven by damage-related claims. Kelly emphasized the importance of this data in understanding the ongoing changes in claims settlements and their implications for the insurance industry.

Despite the upward trend in damage claims, there has been a notable decrease in injury claim costs, which were 16% lower in 2024 compared to the average from 2015 to 2019. Additionally, there was a 23% reduction in the total number of injury claims settled during this period. This decline in injury claims reflects broader shifts in claims management and resolution strategies.

Looking at the financial health of the insurance sector, operating profits were at 4% of total income in 2024, a decline from 8% in 2023 and 12% in 2022. Over a longer timeframe, from 2010 to 2024, the operating profit averaged 5%, demonstrating the industry’s challenges in maintaining profitability amidst rising claims costs and other market pressures.

The motor insurance market continues to navigate a complex environment shaped by evolving claims dynamics, regulatory changes, and shifting consumer expectations. These factors collectively influence premium pricing and the financial performance of insurers. As the industry adapts to these changes, stakeholders must remain vigilant in monitoring trends, implementing effective risk management strategies, and ensuring adequate coverage and pricing models to meet the needs of policyholders while maintaining financial viability.