AIR highlights €2bn insurance ‘black hole’

A €2bn ‘black hole’ is evident in the amount of money taken in by insurers on personal injury-related premia (€2.285 billion) in 2017 and the total paid out (€276 million) by the insurance industry according to the Alliance for Insurance Reform.




The €2.285 billion taken in premia in 2017 comprises €1.7 billion in motor premia and €585 million in public liability premia while the 2017 payout total comprised €107 million via the courts and €169 million via the Personal Injuries Assessment Board.

“This leaves an unaccounted for black hole of €1,019 million made up of secret insurance company settlements, legal fees, brokers’ commissions and insurance company profits,” points out AIR in an infographic published recently, “What we do know is that ‘over the ten years to 2014, the profit for the seven main players (insurers) was €1.7 billion’. And that is on motor insurance alone.”

Of the 33,500 annual personal injury claims in Ireland 1,800 (5%) were settled through the courts while 7,000 (21%) were settled through the PIAB. But 24,700 (74%) were settled by insurers directly – or abandoned.

All this has led to skyrocketing insurance premium costs.

Between 2011 and 2016, the years motor insurance sky-rocketed, the average cost of motor insurance premia rose by 57% which led to a rise of 14% per insurance policy due to the total claims cost.

Similarly, the lack of any form of retribution for those making fraudulent claims has contributed towards the €350 million total for lawyers’ fees for personal injury cases – “sufficient to build a 344-bed acute hospital every year” states AIR which points out that the total number of prosecutions for insurance fraud under current legislation which came into effect in 2004 is 1.

Delivery costs via PIAB (admin & medical – no legal fees payable via PIAB) amounted to 6.9% of the awards total between 2013 and 2015 while delivery costs once a claim goes through the courts amounted to 45.3% of the total award – these delivery costs are on top of the awards total, points out AIR.

The awards themselves compare unfavourably with other countries where the average award for minor soft tissue (whiplash) injury runs at €17,338 here. Compare this with an average of €3,798 in the UK or Canada where such injuries are capped at €2,315 or Germany (capped at €1,125).

Claimants are unlikely to qualify for any compensation in Australia while less severe whiplash injuries do not receive compensation in Sweden.

AIR points out that six insurers control 89% of the Irish motor insurance market while eight insurers control 91% of the Irish liability insurance market.

“One of the most frustrating things about the insurance industry is the lack of reliable, impartial information,” commented Alliance Director Linda Murray, owner of Huckleberry’s Den play centre in Navan, of the AIR infographic, “The figures in this infographic really help clarify the scope of the crisis and the challenge facing us.”

And Alliance Director Peter Boland added, “The absence of any real data from the State and its agencies has not only undermined the State’s ability to supervise the insurance industry but it has also created a vacuum into which vested interests have poured a stream of selective, self-serving data and research”.

He pointed out that the most serious examples of that transparency vacuum include:

  • The abolition of the Blue Book insurance industry statistics by the Central Bank since 2015 with no replacement data proposed or planned
  • The abolition of the Private Motor Insurance Statistics by the Central Bank since 2015 with no replacement data proposed or planned
  • The delay in the production of National Claims Information Database motor insurance statistics until the second half of 2019 at the earliest. This data will be claims-based and will not replace the policyholder data in the PMIS
  • No firm plans to produce Liability insurance data in the NCID – proposals due end 2019
  • No CSO statistics on Liability insurance – proposal from CSO due this Summer
  • Review of the impact of the 2014 changes in Court jurisdictional limits by the Department of Justice and Equality – due to be completed in Q2 2018 but still not completed. (see P14)
  • Report on the impact of legal and other fees on personal injury awards. Again, this report was due to be completed in Q2 2018. It hasn’t commenced yet and the latest update (see P14) suggests that it will take two to four years before data is available.

“In the light of all of this, we hope launching the infographic will clear some of the fog around the debate on the insurance crisis,” he stated, “We look forward to the discussion it may stimulate and to publishing additional infographics as the need arises.”

AIR points out a number of insurance anomalies in its infographic factsheet published recently.

AIR points out a number of insurance anomalies in its infographic factsheet published recently.



Sign Up for Drinks Industry Ireland

Get a free weekly update on Drinks Industry trade news, direct to your inbox. Sign up now, it's free