Niamh Smyth
Ceist:23. Deputy Niamh Smyth asked the Minister for Finance the steps his Department is taking to assist with the increasing price of insurance premiums, despite the fact claims are going down. [22025/24]
Amharc ar fhreagraWednesday, 15 May 2024
Ceisteanna (23)
Freagraí scríofa
As the Deputy will appreciate, neither I, nor the Central Bank of Ireland, can direct the pricing or provision of insurance products. This position is reinforced by the EU Single Market framework for insurance (the Solvency II Directive).
Notwithstanding this, reforming the insurance sector is a key policy objective for the Government. Through the comprehensive Action Plan for Insurance Reform, targeted measures have been delivered across a broad spectrum of policy areas, with the aim of reducing costs and increasing availability of cover. The most recent Action Plan Implementation Report, published in February 2024, indicates that the Plan is over 95 per cent complete, with all principal actions complete. This includes the introduction of the Personal Injuries Guidelines, an enhancement of the Injuries Resolution Board, and a rebalancing of the Duty of Care (via amendments to the Occupiers’ Liability Act 1995). These reforms have had a notable impact on motor insurance premiums, with CSO data showing that in April 2024, even though they had risen 5.9 per cent year-on-year, they remained 40.2 per cent lower than their July 2016 peak.
As the Deputy notes, there has been a notable drop in claims in recent years. As per the Injuries Resolution Board’s Average Rewards Report No. 4, the volume of claim applications submitted to the Board fell from 31,072 in 2019 to 18,453 in 2022. The Board notes that “accident levels remain below pre-Covid levels but there are indications of some recent level of increase”.
It is important to note that the impact of Government reforms takes time to transmit to price levels for a variety of reasons. These can include: uncertainty arising from legal challenges (the Delaney judgment on the validity of the Personal Injuries Guidelines was only decided last month); the inherent complexity of the insurance sector’s operating environment; or even dynamic, external developments which can determine price or supply in a small market such as Ireland. It is unfortunate that the global insurance market is one that appears to be “hardening” at present.
While personal injury claims costs have been a major component of insurance costs for many years, it is also important to note that other components – in particular damage costs (for motor insurance) and commercial property costs (for business insurance) – have been experiencing significant inflationary pressures in recent years, as material and labour costs increase. Indeed, the most recent National Claims Information Database report on motor insurance notes that the average cost per policy for damage claims increased by 44 per cent in 2022, with claims frequency increasing by 20 per cent in the same year. As inflationary pressures settle, I would expect to see insurance premiums to mirror this as damage claims costs become more predictable for insurers.
The Government’s focus is now firmly on ensuring that the savings generated by the entire reform programme are realised, for the benefit of consumers, businesses, and community and voluntary groups. In this regard, Minister of State Richmond has been meeting with the CEOs of the main insurers in the Irish market, in order to reiterate the Government’s expectation that insurers will reduce prices, and increase their risk appetite, in light of this improved operating environment.