Motor insurance premiums are creeping higher again

Despite a reduction in the cost of claims to insurers in recent years. premiums have started rising again, writes John Hearne

Recent figures from the CSO show the cost of car maintenance and repairs has risen at 10 times the rate of inflation.

Between 2022 and 2023, the average motor insurance premium increased 2% to €568. That is according to new figures from the Central Bank.

Paul Walsh of Peopl Insurance says despite the fact this is not a huge increase, it is still worrying.

“There has been great progress in reducing the cost of claims and motor insurance premiums in recent years, but sadly this has been heading in the wrong direction of late, with this report showing claims costs have returned to pre-covid levels.”

He says the uptick in motor insurance premiums recorded in the Central Bank report is evidence high claims costs are always paid for by the consumer.

“The increase in motor insurance premiums captured in this report is for the year 2023. They have been steadily rising throughout 2024 too, with the latest figures from the CSO showing motor insurance premiums have risen at 15 times the rate of inflation.”

To give it its full title, this is the Central Bank’s sixth annual Private Motor Insurance Report from the National Claims Information Database. It reveals just how hard premiums have been hit by the high inflation environment of the post-covid period.

Damage claim costs have overtaken injury claims costs, and now account for 53% of total settled claims costs — up from 47% in 2022. High inflation is likely at the heart of much of the increase in the cost of damage claims. It is well-documented that soaring inflation has led to shortages of labour and car parts worldwide and this in turn has driven up the cost of car repairs.

Don’t expect any change in this trend. Recent figures from the CSO show the cost of car maintenance and repairs has risen at 10 times the rate of inflation. If the cost of damage claims continues to go up, so too will motor insurance premiums.

Mr Walsh notes too that litigated channels account for almost four in 10 injury claims settled in 2023.

“More needs to be done to encourage people to use the Personal Injuries Assessment Board because this will ultimately reduce claims costs — and in turn insurance costs for consumers. 

"Motor insurance premiums would likely fall further if we could strip out the legal bills associated with claims pursued through the courts.”

Uninsured drivers

Then there are uninsured drivers. One of the recommendations in the Government’s cost of insurance working group back in 2017 was to reduce the number of uninsured drivers in order to reduce premiums.

“Unfortunately, this too is a trend that is heading the wrong direction, with the number of claims related to accidents caused by drivers who were either uninsured or untraced rising 11% last year. A survey conducted by Peopl last year found one in five people know someone who has got behind the wheel uninsured,” Mr Walsh says.

It is well known the cost of car insurance is often prohibitive for young people. If affordability issues are at play here, Mr Walsh believes the Government should do more to look at what measures could be taken to bring down the cost of insurance for starter drivers.

"More needs to be done to discourage the uninsured driving in this country, as the message has clearly not got to everyone. It is unfair on drivers who rightly pay for their insurance that so many others are flouting the rules and driving uninsured. Ultimately, this costs honest drivers money."

Ways to reduce your premium

In the absence of any further action by Government, there are plenty of ways of reducing your premium. First and foremost, shop around. Always make sure to get quotes from a number of insurance companies, including your current one. 

Alternatively, you can call a broker, but if you do, always ask how many quotes they look for, if they charge a fee and if they offer other services — making a claim for example. And before you leave your current insurer, ask them for a discount. If you have got a better quote elsewhere, give them a chance to match it.

Bear in mind too how you buy may have an impact on how much you pay. Many insurance companies offer discounts when you buy online. And how you pay will also usually have an impact on how much. If you pay by monthly direct debit, you will usually be charged interest. This, of course, will increase the overall cost of your insurance.

Paul Walsh: 'More needs to be done to encourage people to use the Personal Injuries Assessment Board.'

The insurer will want to know the value of your car. Try to be as realistic as possible here. If you have a claim, the insurance company will only pay what they consider to be the current market value of the car. For example, if you insure your car for €8,000 and its current market value is €10,000, you will only get 80% of the cost of the repairs or replacement if you make a claim.

It goes without saying penalty points and driving convictions will not do your premiums any favours, but it’s not quite as well known that changing where you park can have an impact here. You may be able to save money if you let your insurer know you park your car in a locked garage. Insurers often prefer this to the car being parked on the street or in your driveway. Some areas will have higher claim rates and you will pay more if you live in a city than in a rural area.

Adding a named driver

As the Competition and Consumer Protection Commission points out, adding a named driver can increase your premium if you add a younger family member. In other cases, however, it can reduce your premium — if, for example the named driver has a good driving and claims history.

Choose the car itself wisely. Usually the bigger your car, the bigger the engine and the higher the cost of insurance. Left-hand drive, convertible and modified cars are usually more expensive to insure. Always check with an insurance company or broker to see what the premium would be before buying a car, or if you are changing cars during the policy period.

It costs more to insure a car or van for commercial use than for personal use. You will usually have to pay commercial premium rates if you drive a van, even if it’s only for domestic use. Check with your insurance company about the definition of ‘use for work’ in your policy and ask about cover for work-related items in your car.

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Finally, be warned if you are allowing a young person to drive on your insurance. Insurers are clamping down on parents insuring a vehicle and naming their children on them, even though the parent is not the main user of the vehicle. 

This is called ‘fronting’. If you get caught doing it, you could have your policy cancelled, a claim declined, or you could well have difficulty getting insurance in the future.