As the Deputy is aware, the National Claims Information Database (NCID) is intended to facilitate a more in-depth analysis of annual trends in motor insurance claims. This is seen as key to developing an understanding of how claims costs are impacting premiums, in particular understanding the relationship between the price paid by a customer for motor insurance and the cost to insurance undertakings. Following the enactment and commencement of the Central Bank (National Claims Information Database) Act 2018, and the subsequent making of the Central Bank (National Claims Information Database) Regulations 2019 (S.I. No. 174 of 2019), earlier this year, the NCID has been established in the Central Bank of Ireland.
The Deputy will be aware that yesterday, 16 December 2019, the Central Bank of Ireland published the first National Claims Information Database Report on Private Motor Insurance, which includes aggregate data from the NCID. The aggregate nature of the data collected has meant that there are fewer legal and technical complexities involved, and that is why it has been possible to have the NCID established and reporting so quickly.
Both Minister of State D’Arcy and I commend the work of the Central Bank in bringing this Report to fruition. We believe it is an excellent report, which provides an objective overview of private motor claims costs including legal costs over the last number of years.
I would hope that going forward the increased transparency brought about by the NCID, along with other legislative changes, can help to provide more stability in the market, thus avoiding the peaks and troughs for consumers in terms of premium pricing. This should ultimately make the Irish market more attractive to new entrants and I would hope that this might be one of the outcomes of this exercise in time.
I believe that the Report shows that the insurance and legal sectors have both serious questions to answer regarding the difficulties we have faced over the last number of years with the price of motor insurance.
It appears that insurers under-priced in the early part of this decade and then increased premiums beyond levels that were needed to cover losses incurred and consequently are now making significant profits. At the same time, the legal costs associated with the litigation settlement channel seem disproportionate when one considers that the report indicates that the award levels for those settlements under €100,000 are not much higher than equivalent settlements in PIAB. In addition, the length of time to settle these claims is nearly two years longer than in PIAB, which in itself drives up the cost of insurance.
While it is true to say that the nature or severity of the injury claims settled in the different channels can vary significantly and there may be good reasons for pursuing litigation, I believe that this report makes it clear that in overall terms, PIAB offers the most cost-effective settlement channel and I would hope that its settlement rates increase going forward. This is a key aim of the work of the Cost of Insurance Working Group.
The NCID Report also demonstrates why we must address award levels in this country if we want to see cheaper insurance premiums and an increased risk appetite from insurers. In this regard, the NCID Report shows that personal injury claims have been driving the cost of claims in recent years – representing 75% of the ultimate claims costs over the period. This is not sustainable in my view. This is all the more concerning as the Report shows that these increased costs are not being driven by a higher frequency of claims. I believe that our focus therefore must continue to be on the Judicial Council and its publication of the new Personal Injuries Guidelines.
With regard to employer and public liability insurance claims related information being incorporated into the NCID, the Deputy should note that the Central Bank has the power to expand the scope of the NCID to other classes of non-life insurance under the Central Bank (National Claims Information Database) Act 2018. The Deputy will recall that our focus was on ensuring that the NCID was able to collect private motor insurance first and it was for that reason that the CIWG recommended that the Central Bank first undertake a study on the merits and feasibility of expanding the scope of the NCID to employer and public liability insurance claims (recommendation 2). The Central Bank is finalising its consideration of the merits and feasibility of collecting this data and the CIWG expects to receive the Central Bank’s final view on this shortly in line with the timeframe for the recommendation. A decision will be made at that stage as to whether the database will be expanded to cover employer and public liability insurance.