Average motor insurance premiums in Ireland rose 42% between 2009 and 2018, despite a decrease of 2.5% in the average cost of claims per policy over the same period, new data has revealed.
The statistics also show that the average legal costs for motor insurance injury claims settled through litigation between 2015 and 2018 were €23,031.
This compares to just €1,385 for claims settled directly and €753 for those settled through the Personal Injury Assessment Board (PIAB).
The data is contained in the Central Bank's First Private Motor Insurance Report of the National Claims Information Database.
It was set up following a recommendation made in 2017 by the Cost of Insurance Working Group.
"The Central Bank is focused on ensuring that the insurance sector sustainably serves the needs of the economy and its customers," said Mark Cassidy, Director of Economics & Statistics at the Central Bank.
"This includes ensuring that claimants can have confidence that insurance claims will be paid when required and that consumers have clear information to allow them to make informed decisions."
The statistics provide evidence of the known six-nine year cyclical nature of the insurance industry, although the data also shows a higher level of volatility in Ireland than elsewhere.
The research shows that last year motor insurers made an operating profit of 9% of their total income.
Cost of claims increased by 64% between 2009 and 2018, the database shows, driven by a 54% rise in injury claims. But during the same period the number of claims fell by 40%.
As a result the cost of claims per policy actually fell by 2.5% over the decade, falling by 14% to €375 per policy from 2009 to 2013, but rising again by 14% to €426 last year.
Yet the data shows that premiums per policy rose over the ten years by 42% on average, from €498 in 2009 to €706 in 2018, although they appear to have fallen again in 2019 as the peak of the cycle is passed.
Initially during the period between 2009 and 2013, average premiums fell 13% to €435, before rising dramatically by 62% to €706 in 2018.
Claims made up on average 75% of premiums received by motor insurers, with the figure peaking in 2014 at 94%, before dropping to 59% in 2017.
Last year it sat at 60%, indicating a favourable environment for the industry, leading to high profitability and consistent with the peak of the market cycle being reached.
The database also provides valuable new data on how motor claims are settled.
More than half (53%) of claims between 2015 and 2018 were settled directly between the insurer and the claimant, with 31% settled through litigation and the remaining 16% through PIAB.
Directly settled claims led to an average compensation payout of €11,674, with legal costs of €1,385 and a settlement time of 1.7 years.
Claims that were settled though PIAB led to average compensation payments of €22,631, with much lower average legal costs of €753 and a settlement time of 2.5 years on average.
However, claims settled using litigation led to average compensation of €45,390, with considerably higher average legal costs of €23,031 and average settlement time of 4.4 years.
But when settlements of less than €100,000, which make up 85% of all litigated claims, are examined in isolation, the data shows claimants only received €23,199 on average in compensation from litigation, similar to the figure from the PIAB settlements.
Legal costs though, in this scenario, were considerably lower at €14,684.
"While the Central Bank does not have a mandate to fix prices in the insurance sector, today's report will assist the Cost of Insurance Working Group, Government, Oireachtas and wider stakeholders in their consideration of the relevant issues," Mr Cassidy said.
Gerry Hassett, the interim CEO of Insurance Ireland, said the findings of the National Claims Information Database are clear - claims costs are the key cost in the motor insurance market.
Mr Hassett said the policy focus on reforming the country's personal injury award levels is critically important to address these costs.
In addition, the legal fees of 63% of compensation in litigated cases under €100,000 is a significant concern and underlines the need for these costs to be tackled," he added.
"The largest cost in motor insurance is the cost of claims and this database definitively shows claims costs are the key challenge in the market. New guidelines for compensation awards are urgently needed in 2020 to address these costs," Mr Hassett urged.
Meanwhile, the Alliance for Insurance Reform has reacted with anger to today's report from the Central Bank and said its members are demanding immediate reductions in motor insurance premiums to sustainable levels.
"Today's motor insurance data lays bare the scale of the greed that has driven the current insurance crisis, enriching insurance companies and lawyers at the expense of Irish motorists struggling to make ends meet," said Peter Boland, a director of the alliance.
"This situation has been enabled by a Government too slow to react to the crisis and too weak to take on the big vested interests in order to make a difference," he stated.
He said that as well as immediate reductions in motor insurance premiums, the Alliance wants firm commitments from insurers on what reductions we will see in liability premiums from all the reforms currently in the pipeline, and "not vague commitments to some reductions, sometime".
"We want the Judicial Council to be established as a matter of urgency to get general damages for minor injuries addressed once and for all," Mr Boland said.
"And we want the Government to provide funding as a matter of urgency to establish an Insurance Fraud Unit. We have waited three years for substantive reforms and we cannot wait any longer," he added.
The Minister of State with responsibility for Financial Services and Insurance said he believes the Central Bank report shows that the insurance and legal sectors are both culpable for the difficulties over the last number of years with the price of motor insurance.
Michael D'Arcy said that while the nature or severity of the injury claims can vary significantly and there may be good reasons for pursuing litigation, he said he hopes that consumers will see that in overall terms, PIAB offers the most effective settlement channel.
"I believe that the NCID Report also demonstrates why we must address award levels in this country if we want to see cheaper insurance premiums and an increased risk appetite from insurers," Mr D'Arcy said.
He said today's report shows that personal injury claims have been driving the cost of claims in recent years - representing 75% of the ultimate claims costs over the period.
This is not sustainable, the Minister said, adding that worryingly, the report shows that these increased costs are not being driven by a higher frequency of claims.
Mr D'Arcy said he also suspects that figures for employer and public liability insurance may have similar characteristics with personal injury awards and legal fees representing a very high proportion of the cost of claims.
He said he believes this shows the need for the Central Bank to expand the scope of the NCID in the future to cover such claims information, recognising that these claims can often be more complex and that this may take time.
Publication of the data has been welcomed by PIAB.
"The report highlights the enormous costs involved in litigation as a mechanism of resolving personal injury claims, particularly when there are low cost alternatives," Chairperson Dermot Divilly said.
"It is clear that the injured party receives a higher proportion of the total cost of settlement amount (92%*) when a case is resolved through PIAB, as opposed to through litigation (67%*)."
While Sinn Féin's Pearse Doherty the statistics as a shocking indictment of the insurance industry.
"It should also serve as a wake-up call to the Government and Fianna Fáil, who have been the first to peddle the lines fed by the insurance industry," he said.