Second Motor Insurance Key Information Report
- Second Motor Insurance Key Information Report
- Key Findings
- Third Party Injury
- Comparison to the UK market
Second Motor Insurance Key Information Report
On 11 May the Cost of Insurance Working Group published the Second Motor Insurance Key Information Report. The report is the second in a series published by the group, which address trends in the Irish motor insurance market.
The report considers ultimate projections of frequency and average claim cost separately for different types of bodily injury and non-bodily injury claims. The report covers the motor insurance environment in Ireland from years 2011 to 2016 and includes comparisons to the UK market for the period.
The report attempts to lay the groundwork for the establishment of a National Claims Information Database.
Over the period, the average earned premium per policy increased by 22%. Average earned premium declined by 12% between 2011 and 2013 before rising in subsequent years. Total claims cost per policy, based on ultimate projections for all claims types, increased by 14% over the same period.
The report finds that this increase has been driven by Third Party Injury claims, while experience on Damage claims has largely been positive. The worst performing segment of the analysis is Third Party Injury Claims which have been capped at €250k. These claims have experienced a 7.3% increase per annum from 2011 to 2016.
The UK market experiences a lower cost per claim for Third Party Injury, however claims frequency is higher.
Third Party Injury
The portion of total claim costs which relate to Third Party Injury claims has increased significantly during the period, from 68% in 2011 to 77% in 2016.
The increase in Third Party Injury claims is seen in both the frequency and the severity of claims. The frequency of Third Party Injury claims has increased over the period, from 0.546% in 2011 to 0.579% in 2016 while the average severity has increased at a rate of approximately 4% per annum.
The report analyses two segments of Third Party Injury claims, those capped at €250k and those higher than €250k.
Third Party Injury Capped claims are the largest segment considered by claim cost. This segment is projected to account for 57% of total claims costs in 2016. The report makes a number of findings in relation to these claims, including;
- The average cost of Capped Third Party Injury claims (capped at €250k) has been growing by an average of 6.2% per year over the period examined, from €32,024 in 2011 to €43,179 in 2016.
- The frequency of Capped Third Party injury claims has increased by 1.1% per annum over the period from 0.531% in 2011 to 0.559% in 2016
Uncapped Third Party Injury claims are projected to account for 20% of total claim costs in 2016.
The frequency of uncapped Third Party Injury claims increased by 5% per annum over the period examined. This is offset by an improving average cost per claim, which has decreased by 4.4% per annum. There seems to be a decline in average claim in this segment from 2011 to 2015 and then an increase in 2016. However, it is important to bear in mind that there is much less data in this segment and as such the credibility is lower as individual large claim(s) may skew the statistics.
The cost of Non-Injury claims per policy has been decreasing over the period of the investigation. The average non-injury cost per claim is generally rising, but this is more than offset by a reduction in the number of non-injury claims per policy.
The following findings on damage claims are included with in the report:
- Third Party Damage claims have been stable over the period of the investigation.
- The projected own damage cost per claim has increased by 4.3% per annum, while the projected ultimate frequency has decreased by 9.1% per annum.
- The projected Own Damage claim cost per policy has therefore decreased by 5.2% per annum.
- The ratio of projected Third Party Injury claims to Third Party Damage claims by frequency has increased from 0.3 in 2011 to 0.4 in 2016. This is caused by both the decrease in frequency of own damage claims and increased frequency of Third Party Liability claims.
The report sites claims mitigation as a reason for the reducing frequency of Own Damage claims. We also believe that the reluctance of consumers to claim is a factor to consider here.
Comparison to the UK market
The report also compares claim experience in Ireland to the UK.
There have been large differences in Third Party Injury claim experience between Ireland in the UK and the report notes the following:
- The projected ultimate Third Party Injury cost per claim ranges from £11,000-£13,000 (€12,500 - €15,000) compared to €40,000-€60,000 in Ireland.
- Frequency of claims is higher in the UK, at 1% for 2016 compared to 0.579% in Ireland.
- UK Third Party Injury claims frequency has been trending downwards while the average severity has been increasing at a slightly lower pace.
- The projected average cost per policy for Third Party Injury claims in the UK decreased by 1.5% per year for the period 2011-2016 in the UK.
While there are considerable differences between the Third Party Injury claim costs between Ireland and the UK, Third Party Damage claims experience has been more consistent.
For Third Party Damage Claims, frequency and cost inflation in Ireland were 3.6% and 3.7% respectively. In the UK claim cost inflation was 2.4%, while claims frequency decreased slightly.