Why car insurers are charging sky-high premiums - and what you can do about it
The costs of claims and the growing problem of fraud are both factors.
AS AN INSURANCE broker, it’s no surprise to me that almost half of Irish motor insurance customers are dissatisfied with their premiums.
Over the past 18 months they’ve been presented with large premium increases. Triple-digit increases are commonplace now and are difficult to swallow.
Unfortunately, we hit the bottom of the motor insurance pricing cycle with a bump about two years ago. As a result of significant losses experienced by insurers over the previous years, there has been a dramatic reaction from insurers as they try to bring their books back to profitability.
When something like this happens, it’s not as simple as spreading the increase evenly across everybody’s premium. Inevitably, insurers look at segments of their business that are preforming most poorly, and that’s where they apply the biggest increases.
For example, certain types of cars and certain age groups and certain occupations will be targeted and, if a motorist happens to fit a couple of those categories together, they will be hit hardest.
The cost of claims
Obviously, claims and the costs associated with claims pay a major part in determining an insurers’ pricing strategy, and something can be done about this.
In 2003, the Personal Injuries Assessment Board (PIAB) was introduced to assist in managing the cost of claims by removing the need for legal representation and through the introduction of a set scale of awards associated with particular injuries called the ‘book of quantum’.
Up to then, awards were arbitrary, particularly for whiplash claims, and the idea was to create a fair and speedy resolution process for customers and insurers alike, while reducing legal costs.
Unfortunately, it hasn’t worked out that way. Most claimants bring legal representation before the PIAB and this forces up the cost. Furthermore, a large percentage of PIAB awards are appealed to the courts, further pushing up the cost of claims.
A further factor at play is that insurance fraud is costing the industry a staggering €200 million a year. Staged accidents occur regularly around the country, putting further strain on the industry.
Clearly, a fundamental reform of the system is needed and, as has already been suggested by other commentators, this could be achieved through the formation of a taskforce involving all of the various stakeholders including the insurance industry, the Central Bank, the Irish courts and An Garda Síochána.
However, it’s not all doom and gloom. As is said over and over again, shop around. Different insurers experience different loses and will apply premium increases differently from each other. As a result, premiums being charged can vary to a significant degree from insurer to insurer.
David Hughes is operations director at GetCover.
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