Insurers made huge profits on motorists in lockdown

Motor insurance companies have been accused of exploiting the pandemic to pump up their profits.

Insurers saw their profits jump to a 10-year high last year when most people were forced to stay off the roads due to lockdowns.

The latest Central Bank report into the motor insurance market shows premiums fell.

But the rise in profits was higher, which is sure to anger motorists.

Central Bank statisticians referred to the industry “nearing the peak of profitability”.

Insurance companies have been accused of exploiting the pandemic after they saw combined profits shoot up to €163m last year.

This is up from the previous year when motor insurers in this market collectively made profits of €159m. And this again was up from €130m in profits in 2018. Operating profit levels have hit a 10-year high at 12pc last year, rising steadily since 2007.

Premiums were down on average 7pc last year, while rebates were paid by most insurers to compensate drivers for restricted use of their vehicles. When the value of the rebates are stripped out it means premiums fell by just 4pc.

The findings indicate that insurance companies are failing to pass on all of the benefits from the lower cost of settling claims to motorists.

Central Bank economists have worked out that the cost of claims was down 20pc last year, while there were fewer claims. Despite this, the cost of claims rose by 9pc.

Along with insurers, the third Private Motor Insurance Report of the National Claims Information Database from the Central Bank shows that lawyers and insurance brokers are reaping millions of euro from the sector.

Brokers have seen the overall commission payments, as a percentage of premiums, they get from insurance companies rise from 14pc in 2015, to 17pc last year.

The industry has seen a flurry of buyouts of broker firms, as intermediaries benefit from high insurance costs.

The report shows legal costs made up more than half of the compensation costs for claims that are litigated through the courts.

Between 2015 and last year the compensation for litigated claims of less than €100,000 was around €23,000, with legal fees averaging €15,235 .

Central Bank statisticians said this may even be understated as claimant legal costs are not always captured by the settling insurer.

Chairman of the Consumers’ Association Michael Kilcoyne accused insurers of using the pandemic to boost their profits.

“They have exploited the pandemic to increase their profits. They should be looking after their customers better instead of exploiting them.”

Mr Kilcoyne demanded deep cuts in premiums.

Insurance Ireland said the report highlights the overall reduced cost of claims, and a clear downward trajectory in overall motor premiums.

It insisted the overall reduction in motor premiums was 24pc between the end of 2017 and October this year.

Chief executive of Insurance Ireland Moyagh Murdock said Insurance Ireland members remain committed to passing on the benefits of lower costs of claims to customers.

Insurers said they are concerned at the high level of legal fees which feed into overall litigated awards.

https://www.independent.ie/business/personal-finance/insurance/insurers-made-huge-profits-on-motorists-in-lockdown-41055543.html

Leave a Reply

Your email address will not be published. Required fields are marked *