Second Motor Insurance Key Information Report

Second Motor Insurance Key Information Report

Cost of Insurance Working Group

11 May 2018

Minister of State, with special responsibility for Financial Services and Insurance, Michael D’Arcy T.D., today published the second Motor Insurance Key Information Report of the Cost of Insurance Working Group (the Working Group).  The Report is the second in a series of reports designed to address Recommendation 12 of the Cost of Insurance Working Group, which aim to increase the level of transparency of the insurance sector in advance of the National Claims Information Database.  The Report follows up on the first report, published in July 2017.

This Report provides information on overall ultimate claims costs trends from 2011 to 2016 for the main insurance companies operating in the Irish motor insurance market, who are Insurance Ireland members.  It sets these out broken down into Third Party Injury ultimate claims costs and Non-Injury ultimate claims costs including claims cost arising from damage, fire and theft, as well as windscreen claims.  In addition, it provides details on earned premium income and exposure in the sector for the same years.

Some key findings in the Report include:

  • Total claims costs per policy, for all claims types, based on projected ultimate costs, increased by about 2.7% per year, or 14% over the period from 2011 to 2016. These costs include both the general and special damages elements of compensation as well as associated costs such as legal, medical and other fees.
  • Driving this increase is the ultimate costs associated with third party injury claims, which represent 77% of the proportion of total ultimate claim cost per policy in 2016, as increase from 68% in 2011.
  • At the same time, the proportion of total ultimate claim cost per policy arising from non-injury claims (except Windscreen claims) was 29% in 2011, falling to 21% in 2016. This is primarily as a result of a fall in the frequency of non-injury claims.
  • The data also suggests that frequency of third party injury claims in Ireland is lower than in the UK but that the costs associated with those claims, including compensation, legal and other costs, are significantly higher than the same costs in the UK.

Commenting on today’s publication Minister D’Arcy noted that,

This report continues the process to improve data transparency in the motor insurance sector, particularly with regard to identifying trends with regard to the costs and types of claims being made.  The information contained in this second report, comes from companies representing approximately 90% of the Irish motor insurance market over the period 2011 to 2016, and has never before been published in this way on an aggregate basis across the industry.  The series of reports being published by the Department in advance of the establishment of the National Claims Information Database, demonstrate the potential usefulness of the Database in the future.  I would like to thank the insurance industry for their willingness to engage constructively on this project and look forward to the next report later this year, as well as progress on the National Claims Information Database legislation.”

 

ENDS

Further information from:

Aidan Murphy (Press Office) – pressoffice@finance.gov.ie

 

Detailed Information for Editors

 Preparation of the Report

A Sub-group of the Working Group, chaired by the Department of Finance, was established in January 2017 to implement this and other recommendations to improve data transparency.  The Sub-group includes members from the Department, the Central Bank, the State Claims Agency, the Personal Injuries Assessment Board and the Central Statistics Office.

The Sub-group engaged extensively with Insurance Ireland who indicated that a number of the metrics identified in the Working Group’s Report were not available in a consistent fashion due to different definitions and different ways for reporting and recording data.  A data set was agreed and a data request was issued to Insurance Ireland in March 2017.

This request sought information in two tranches.  The first tranche was received on 13 June 2017 and resulted in the publication of the first Motor Insurance Key Information Report in July 2017.

In line with the complexity of the additional data being requested in the second tranche, it was agreed that industry would not provide this data until 29 September 2017.  Insurance Ireland engaged independent consultants Verisk to collect and compile the data in the case of this more complex data set.  On 18 December 2017, a return, in the form of a report by Verisk outlining certain data and conclusions, was submitted to the Department by Insurance Ireland.

The Department while accepting that the process to collate the data was rigorous, emphasises that any conclusions reached on the data are Verisk’s and have not been subject to any further actuarial analysis by it or the Central Bank.  This is because, from a practical and cost perspective, there was little to be gained in the subgroup’s view from procuring a further actuarial analysis to verify the return, as to do so was unlikely to result in a major difference in outcome due to the fairly detailed approach to the gathering of this data by Verisk.  However, some clarifications in relation to the data and conclusions arrived at were sought and received from Insurance Ireland and Verisk.

Content of the Report

The attached Report has been prepared by the Sub-group using the data provided by Verisk on behalf of Insurance Ireland.

The key difference from the first report is that the claim costs presented in this report are ultimate claim costs.  In that regard, detailed information is provided on:

  • the projected ultimate frequency (i.e. the number of claims per policy) and average cost per claim for:
    • Third Party Injury claims, split into those claims where the Incurred Cost was always less than or equal to €250,000, and claims where the Incurred Cost was ever greater than €250,000;
    • total Third Party Injury claims;
  • the projected ultimate frequency and average cost per claim for non-Injury claims, split into Third Party Damage, Own Damage (i.e. claims made by an insured party for accidental damage to their own vehicle), other property-related claims (such as Fire and Theft), and Windscreen claims; and
  • the projected ultimate claim cost per policy for each claim type.

The Report includes a Summary of Key Data at the outset and appendices at the end setting out some of the relevant data received, the market coverage of those surveyed, the data return rates and methodologies used.

  • Part 1 of the Report sets out general information on the motor insurance sector.
  • Part 2 provides information on overall ultimate claims costs trends.
  • Part 3 looks at Third Party Injury ultimate claims costs trends.
  • Part 4 looks at Non-Injury ultimate claims costs trends.
  • Part 5 provides details on earned premium and exposure.

The Report is neutral in its presentation of the statistics and does not seek to engage in extrapolation or speculation.

Conclusions of the Exercise

The Sub-group believes that this exercise continues to lay the groundwork for the effective establishment of the National Claims Information Database as it helps to get insurers into the right frame of mind in terms of preparation for this next step.  However, the significant scale of the exercise also demonstrates how complex this whole area is and reinforces the importance of having a National Claims Information Database type framework arrangement in place sooner rather than later.