Greater stability in EL/PL/CP market but increase in litigation costs an ongoing concern
- NCID Report shows that out of 332,000 policies, the premiums for 90% of these is less than €5,000, 75% of policies have premiums of less than €2,000, while over half of all policies had premiums of less than €1,000.
- Employers’ liability (EL), public liability (PL) and commercial property (CP) have been challenging markets for insurers over the past decade or more, with 2.1% profitability over the past 15 year period – 2009 to 2023.
- Uncertainty over potential increase in Judicial Council Personal Injuries Guidelines could erode the positive benefits of Government Reform agenda and may prove counterproductive in terms of encouraging further competition in the Irish insurance market.
- Only 3% of litigated cases in 2023 were settled under the Personal Injuries Guidelines. The majority of cases in 2023 are still taking the litigated route.
- Report highlights the effectiveness and efficiency of the Injuries Resolution Board claims settlement process.
- Average premium for package policies increased by 4% in 2023. According to the CSO over the same period the Consumer Price Index (CPI) increased by 4.6%.
Insurance Ireland today commented on the publication of the Central Bank of Ireland’s (CBI) National Claims Information Database (NCID) report on the employers’ liability (EL), public liability (PL) and commercial property (CP) markets.
Moyagh Murdock, CEO of Insurance Ireland said: “. The report shows that 90% of policies in 2023 had a premium of less than €5,000, with 53% at less than €1,000. The report shows further stabilisation in the Irish market with profitability in 2023, and this is the sort of evidence needed to attract new entrants to the Irish market for Employers Liability and Public liability insurance and should also help increase the risk appetite of existing providers. It demonstrates that the market is now more attractive for competition.
The Report points to a more stable market environment following a longstanding period of loss making in these market segments, with an overall 2.1% level of profitability between 2009 and 2023. The true impact of the Personal Injury guidelines is still to be realised due to the low number of claims settled under the guidelines, and the outlook is uncertain due to the potential uplift in award levels as a result of the recommendation of the Judicial Council to increase awards by 16.7% on the horizon. The NCID publication also confirms that the legal costs in the claims environment remain stubbornly high.
Moyagh Murdock said “It is very good news to see these sectors stabilise after sustained periods of losses and volatility, but It is very disappointing to see the very high level of claims still going through the litigated route. While the report shows a small reduction in EL/PL compensation amounts since the new personal injury guidelines came into effect in 2021, especially in cases settled by the Injuries Resolution Board, the benefit of this is offset due the fact that total cost of claims are higher due to significant increases in legal fees.
The full benefit of 2021 Personal Injuries Guidelines has yet to be felt, we believe the recommended increase of 16.7% by the Judicial Council is premature and without supporting evidence and will undermine the progress made on the Government’s insurance reform agenda in removing volatility from the claims environment in Ireland if passed by the Oireachtas. When initially introduced the Guidelines brought consistency and transparency to award levels. The Guidelines have helped the Injuries Resolution Board reduce legal costs and increase claimant acceptance rates and have brought increased competition to the market by bringing consistency and predictability to the Irish market .This potential increase in award levels add significantly to the overall cost of claims which ultimately feed into the cost of insurance for Irish consumers and businesses. In Ireland, the awards for minor injuries are already multiple times those awarded in other EU countries. To implement the recommended increase in award values will further inflate the already excessive legal costs which will compound the impact on the cost of insurance for both business and consumers.
We can see from the publication of this report the positive impact on claims settled through both the Injuries Resolution Board route and direct with insurers. Regrettably, there is still a low volume of claims settled through these channels (5% for IRB) even though the compensation is now on a par with the litigated amount. Legal fees are 25 times higher through the litigated channel with no benefit to the claimant. Due to the length of time it takes going through this route, the true value of the compensation award is significantly less in purchasing power due to inflation i.e. €20k today is worth significantly more than €20k would be in 6 years’ time. Future data sets from Central Bank may give a clearer picture in relation to the impact on litigated claims. Continued positive trends in this area will be central ensuring the Irish market can attract new players into the market to the benefit of businesses and consumers. That is why we strongly support the Government’s work in this space. This in our view will deliver better value for businesses and consumers in the long run.”
Ends
Media contact:
Nuala Buttner
Q4 Public Relations
Tel: +353 (0)85 1744275
Notes:
The NCID report shows that:
- 90% of policies had a premium of less than €5,000.
- 77% of policies had a premium of less than €2,000.
- 53% of policies had a premium of less than €1,000.
- €123m paid out in legal costs on injury claims settled in 2023(page 53) versus €195m in compensation costs.
- Just 5% of claims costs in 2023 were settled through the Injuries Resolution Board and a further 5% were settled directly with insurers, either before or after the IRB.
- The length of time to settle through litigation is almost 6 years versus just over 2 years through the Injuries Resolution Board.
- 71% of claims were settled via the litigation route, accounting for 89% of the cost.
- The litigation channel accounted for only 3% of settled injury claims costs in 2023 under the Personal Injuries Guidelines.
- The full impact of the Personal Injuries Guidelines on the litigated cases is yet to be felt. The report notes that there have not been enough litigated claims settled under the Guidelines to assess the impact on the average cost of a claim in this channel.
- The average expected cost of EL claims increased by 1%, while PL claims decreased by 5% from 2022 to 2023. The average expected cost of Commercial Property claims increased by 28% in 2023
- In 2023 the average cost of EL claims increased 1% from €38,886 to €39,382 while average PL claim costs decreased 5% from €21,887 to €20,713. Over the whole time series from 2009 to 2023, the average cost of EL and PL claims increased by 55% and 69% respectively.
- During the period 2020-2023, the industry reported a profit of 6.8% due to a combination of a net insurance related profit (5.3%) and stable investment income (3.0%)
- Reserve releases on prior year claims contributed significantly to profitability in 2022 and 2023. Excluding reserve releases, the market was profitable on a gross basis with a Gross Current Year COR of 83% and a Net Current Year COR of 100% for 2023.
- Based on the estimate of claims for the current year only, the market made an operating profit of 1% or was loss-making for each year between 2016 and 2023(page 48).
ENDS.
