Cost of motor insurance falls 40% in five years

HOW private motor insurance has tumbled in five years (AA data, for a small car assuming no no-claims bonus).

2002: Cheapest policy was €1,170.

2003: Cheapest was €1,244.

2004: Cheapest was €970.

2005: Cheapest was €844.

2006: Cheapest was €760.

2007: Cheapest was €700.

*AA figures

MOTOR insurance has fallen by 40% over the past five years due mainly to the Government’s introduction of the Personal Injuries Assessment Board (PIAB) and improvements in road safety.

Since the PIAB came into operation in 2004 to handle most claims in place of the courts, the average price of a basic motor policy has fallen to €700.

Yesterday, accountants Deloitte revealed the price of an average policy has fallen 10% this year alone, thanks to the PIAB, competition for business as well as improvements in road safety.

But AA Ireland yesterday said prices had now reached rock-bottom and could start going back up next year to keep pace with inflation.

“The cost of motor insurance used to be unacceptably high and was among the worst in Europe, but the last five years have been good for consumers,” said AA Ireland spokesman Conor Faughnan.

“But we believe we have seen the last of the major falls in motor insurance and we are not predicting any significant falls next year — and prices may even start to rise somewhat.”

Inflation running at around 4.5%, as well as rising medical costs of assessing personal injuries and lower industry profits, are adding pressure to insurers to hike their prices.

Premiums have fallenbecause motor insurers have passed on the savings they have made through dealing with the low-cost PIAB claims board, which is State-owned but funded by insurers.

Before the PIAB, insurers were paying barristers and solicitors around €3 of every €10 that went to accident victims or their families.

In 2003, the year before the PIAB started up, theinsurance industry paid out €864 million to settle accident claims, of which around €259m went to lawyers.

Now insurers pay on average €1,383 per case to the PIAB instead of the €7,685 they were paying to lawyers per case.

The AA Ireland also said improvements in road safety had resulted in fewer accidents and in turn had led to reduced claims and lower premiums.

Competition in Ireland’s €1.1 billion-a-year private motor insurance market has also driven prices down.

A survey by Deloitte’s yesterday revealed two-fifths of insurers reckon policies will rise up to 10% next year, adding around €70 to a basic policy — but another two-fifths predict premiums will fall 10%.

Mr Faughnan said:“Motor insurers have been squeezed on all sides and they’re also feeling the full competitive pressures.

“Another significant factor is that price inflation is running at about 4% to 5% so it’s hard to see premiums coming down again.”

Medical costs of assessing personal injuries in road accidents were also rising, adding to insurers’ costs.

But Deloitte’s said profits in the motor industry had fallen in recent years on the back of reduced premiums, with the possibility of further falls in prices paid by consumers.

“Motor insurance companies will come under pressure to decrease premiums as the general public become more sympathetic with road safety measures and the PIAB continues to have a positive impact on compensation culture,” said Deloitte’s partner Glenn Gillard.

“There will be very little justification for increased premiums.”