Profits made by insurance companies on their motor business increased last year, according to the Central Bank.
In a new report on the private motor insurance sector, the price of the average motor premium also fell.
This latest report from the Central Bank uses data contained in the National Claims Information Database.
It shows the frequency of claims under motor insurance policies fell sharply over the year from 2019 to 2020, partially as a result of fewer people driving during Covid-19 restrictions.
However, over a longer period from 2009, there is still a downward trend.
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Despite a massive 73% increase in the cost of injury claims over the period 2009-2020, over half of which the Central Bank attributes to legal cost, costs per policy and as a percentage of premiums have been going down.
This has helped boost the profitability of insurers' motor business, which the bank says was €163m across the industry last year - a profit margin of 12% compared to an average margin of 3% over the past decade.
The Central Bank's report shows the average motor premium fell by 7% from 2019 to 2020. It has fallen by 16% since its peak in the fourth quarter of 2017. Over the period 2009-2020, the average premium is up by 26%.
The bank breaks down price movements further showing that between 2009 and 2013, premiums fell by 12%. From 2013-2018, they went up by 62% and from 2018 to 2020, they fell by 11%.
The industry paid out rebates worth €42.5m in 2020, due to the Covid restrictions. The average rebate was €17, bringing the average premium to €622 last year.
Covid was evident too in the falloff in injury and damage claims in 2020. Overall, there was a 26% drop in the number of claims per 1,000 policies over the year. The reduction from 2009-2020 has been 59%.
Despite this, the average cost of claims has increased dramatically. The cost of injury claims from 2009 to 2020 have gone up by 73%. By contrast, the cost of damage claims have gone up by only 9% over the same period. Last year, the cost of injury claims went up 18%, while the cost of damage claims rose by 3%.
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In a briefing, the Central Bank indicated the most important element in the increase in injury claims has been legal costs.
The report also notes that over the period 2015 to 2020, the average legal costs as a percentage of compensation claims was 51% for litigated claims, compared to 3% for claims taken through the Personal Injuries Assessment Board (PIAB).
For injury claims of less than €100,000, the average legal cost was €665, or 3% of the average compensation cost of €21,845 for claims taken through the PIAB.
This compares to €15,235 or 65% of the average compensation cost of €23,454 for claims resolved through litigation.
Practice of overcharging loyal customers 'must end'
Meanwhile, the Minister of State at the Department of Finance, has said the practice of overcharging loyal customers must end.
Seán Fleming said that motor insurance premiums have dropped by 8%, so far, this year, which means premiums have dropped by around 15% for most people over the last 22 months.
He said this reduction will continue into next year because legislation is coming into effect to eliminate the loyalty payment.
This is guaranteed to reduce motor and house premiums for those who don't shop around, he said.
Seán Fleming advised consumers to go through PIAB for personal injury claims because the legal costs of going through the courts are far greater.
He told Morning Ireland he is meeting the chief executives of the major eight insurance companies over the coming days to ensure that they pass on the savings that are coming through now, as a result of the personal injuries board, and the savings that will be made next year with the elimination of the loyalty penalty.
ISME surprised that decline in cost of motor insurance was not greater
ISME has welcomed today's Central Bank report, but said it was surprised that the decline in the cost of motor insurance was not greater considering the heavy restriction on movement during the 2020 pandemic lockdown.
It also said the report points to matters of concern including the fact that legal costs continue to represent the majority of the cost of claims and PIAB continues to handle only a minority of cases, with 10% of claims settled in that channel.
ISME also said it can not conclude that litigation in the vast majority of motor claims is in the pecuniary interest of the plaintiffs, yet it continues.
The Department of Justice must bear this in mind as it considers its resource allocations for the Court Service, and future legal reforms, it added.
ISME also said that motor insurance is not a good indicator of progress in Employers' Liability (EL) and Public Liability (PL) insurance for business, sporting and charitable bodies.
EL and PL insurances are purely commercial and are provided by a far smaller number of insurers who exert disproportionate market power because they are so few.
It said that many businesses are facing a "take-it-or-leave-it" premium increase for 2022, while others are not being quoted a premium at all.
The sectors most at risk are nursing homes and homecare providers; hospitality venues; childcare businesses; charitable, voluntary and community organisations; sporting and adventurous activities, especially those catering for children.
ISME said it has written to the Department of Justice on several occasions concerning the stalling of essential legal reforms in this area.
"We simply do not have the time for further procrastination on these legal reforms. Without them, many activities and facilities we value will not be able to remain open in the New Year," it stated.
