Inflation is a concept that we have all become reacquainted with in recent years.
Having stayed muted for over a decade, the cost of everyday items started to rise sharply as we emerged from the pandemic and after the Russian invasion of Ukraine.
Thankfully, the headline rate of inflation has come back to more manageable levels in recent months.
Costs are still rising and in certain sectors of the economy, the increases are quite steep.
One of them, it appears, is car insurance.
Reforms were introduced in the sector in recent years which did see premiums coming down, but why are they now going against the tide of general inflation?
CSO figures
According to the most recent figures from the Central Statistics Office, the average cost of motor insurance premiums went up by 9% in the month of July compared to the same month last year.
That's around four times the general rate of inflation as measured by the Consumer Price Index.
It marked the eleventh month in a row of rising motor insurance premiums.
It comes off a period of declining insurance prices which, in turn, followed years of steep increases in premiums which was blamed on the cost of accident claims and the route to litigation by many claimants.
Among the major changes introduced to address this were new judicial council guidelines which significantly lowered the level of personal injury claims that were previously set with reference to what was known as the Book of Quantum.
Reforms were also introduced to the state's resolution mechanism - the Injuries Resolution Board, previously known as PIAB - making it cheaper for insurers and consumers to use because legal costs are significantly lower than proceeding to litigation.
A dedicated Garda insurance fraud unit was also established to tackle exaggerated compensation claims.
Price movement
All of which has had a meaningful effect on insurance premiums.
According to the National Claims Information Database published by the Central Bank, average private motor premiums declined by 20% between the latter part of 2017 and 2022.
It, of course, included the period of the pandemic when claims costs fell significantly owing to a sharp decline in the volume of traffic on our roads.
From the start of last year, however, average premiums started to nudge back up again.
The Central Bank's figures pointed to a 0.5% increase in the average cost of a motor premium in the first half of 2023.
The insurance industry says it must be put in the context of inflation in the rest of the economy which at that time was running at well above that level.
But the CSO inflation figures point to a continuation of this upwards trend in motor insurance cost inflation while the level of price increase in the rest of the economy is abating.
So, what is going on?
Pricey repairs
One obvious factor is the fact that traffic is back at full tilt on most days of the week now and motorists are simply having more collisions.
That means more claims and the industry points out that it's now more expensive to repair damaged cars in the wake of the inflationary environment.
Peopl Insurance, an insurance brand developed in association with the credit union, had signalled this as a possible driver of insurance premiums some years ago.
"The total cost of damage claims settled in the first half of 2023 was 126% higher than the 2015 to 2019 average and this is the main driver for the leap in claims costs," Paul Walsh, CEO of Peopl Insurance explained.
"It is well documented that soaring inflation has led to shortages of labour and car parts worldwide and that this in turn has driven up the cost of car repairs."
While injury claims costs declined in the same period, they only did so by around 20%.
This points to perhaps a more significant factor in offsetting premium increases - the decision by a substantial portion of individuals with injuries to still go via the litigation route when sorting claims.
Litigation
The Central Bank report shows that there is a negligible difference in public liability awards settled through litigation - €23,458 - rather than through the Injuries Resolution Board, where the average award is €23,122.
Via the litigation route, however, legal fees are on average 22 times greater than through the IRB route.
The volume of claims going to the resolution board is increasing - particularly when it comes to motor claims - but around three quarters of claimants are still opting for litigation.
"There is simply no reason not to settle via the Injuries Resolution Board - it is quicker, cheaper and the awards are the same," Tracy Sheridan, owner of Kidspace play centres in Rathfarnham and Rathcoole and Board member of the Alliance of Insurance Reform points out.
"In most cases, the only ones that benefit from settling though the litigation channel are the legal profession."
That is a point that is echoed by Insurance Ireland, the representative body for the insurance industry.
"The litigated channels still accounts for the vast majority of claims costs, despite the fact that litigation is slower and doesn't actually deliver better outcomes for claimants," Moyagh Murdock, CEO of Insurance Ireland said.
"37% of claims settle through litigation, making up 79% of total costs for injury claims in motor insurance. This is adding unnecessary cost into the system and prevents insurers from delivering further benefit to consumers," she added.
Industry profits
On the delivery of benefits to consumers, it must be pointed out that insurers have reported strong profits in recent years.
In 2021, the year in which the new personal injury award guidelines were introduced, motor insurers reported their most profitable 12-month period in over a decade.
That has raised legitimate questions as to how much of a saving they are really passing on to motorists.
The increased cost of claims in more recent quarters has certainly dented that profitability on the motor side but, as the Alliance for Insurance Reform points out, there is little evidence of reductions materialising in premiums for businesses, sports, arts, community and voluntary organisations.
Competition
One important contributor to keeping motor premium increases in check is enhanced competition in the sector.
The recent entry of South African insurer OUTsurance to the home and motor insurance market and the decision by Revolut to offer car insurance products here should, in theory, see premiums coming down on the back of enhanced competition in the sector.
That is not a guaranteed outcome, however.
The reforms that were introduced in recent years are still their relative infancy and may need time to bed in properly before the full benefit is seen.
"More needs to be done to encourage people to use the Injuries Resolution Board because this will ultimately reduce claims costs - and in turn insurance costs for consumers," Paul Walsh said.
Ultimately, however, it is up to consumers to find the best deal on motor insurance for themselves.
That means not simply letting a policy rollover. Despite the introduction by the Central Bank of a ban on 'price walking' - whereby a consumer ends up effectively paying a higher premium by staying with their insurer - it is still worth phoning around when a policy comes up for renewal.
"Not shopping around at renewal will always mean that people pay over the odds for their premium. Loyalty to just one insurer doesn’t pay," Mr Walsh added.