The Central Bank has yesterday (14 July) published the first National Claims Information Database (NCID) on the costs of business insurance, which shows that premiums increased by 24% from 2013-19.
The report covers employers’ liability, public liability and commercial property insurance and follows the 2019 and 2020 NCID reports on private motor insurance.
The report points out that liability insurance spans a broad range of business sectors, each of which covers a variety of risks.
It is therefore difficult to provide meaningful data on the overall “average” cost of claims or premiums, as it may not reflect the reality of a specific sector or the size of its insured business, the Central Bank says.
However, while the overall average premium for package policies (86% of policies) decreased by 16% over the period 2009 to 2013, it then increased by 24% from 2013 to 2019.
“…settlements through the litigated channel are significantly higher than settlements through PIAB or direct claims”
Overall, average premium increased by 4% between 2009 and 2019.
The data produced relates to premiums and other income, claims and other expenses, and settlement costs. The report will inform decision-making to push for greater transparency in the market.
Settlements
The data shows that the complexity or severity of the injury claims settled in the different channels can vary significantly but claims settled through litigation cost more and take longer to settle than Personal Injuries Assessment Board (PIAB) or direct claims, on average.
For all claims, settlements through the litigated channel are significantly higher than settlements through PIAB or direct claims.
Settlements with similar average compensation costs (in the <€150k total cost band), show variance in legal costs between PIAB (€1k) and litigated (€21k) settlements.
Insurers’ profitability
For employers’ liability, public liability and commercial property combined, insurers’ operating profit across all years (2009 to 2019) was 5% of total income.
This figure is inclusive of investment income. From 2009-2014 there was an 11% operating profit and from 2015-2019 there was a 3% operating loss.
Underlying insurance business (excluding investment income and ‘other’ business) has been less profitable over this time period.
From 2009-2019, 63% of the total income received has been used to cover claims and expenses related to settling claims.
Mark Cassidy, Central Bank director of economics and statistics, said: “This marks another milestone in the NCID series and is the first time we have looked at this complex area of insurance. This complexity is evident in certain findings captured in the report, particularly calculating an average premium metric that accurately reflects market price movements.
“Today’s report nevertheless provides key information on a number of areas, including costs, claims, and settlement channels. We can see that insurers’ operating profit fluctuated between periods of profit and loss. The data also highlights the considerable legal costs and significant time periods associated with settling injury claims through litigation.
Improve transparency
Cassidy said the Central Bank will continue to publish this data on an annual basis in order to gradually improve the transparency of premium and settlement information for particular sectors.
“This will help to bring transparency to the market for the public, and inform the work of the Oireachtas and wider stakeholders in their consideration of these issues,” he said.
The National Claims Information Database is a repository for aggregate claims data. The purpose of the NCID is to increase transparency around the cost of claims.
Aggregate data
Aggregate data is collected from insurers, including premium and claims data. This allows the Central Bank to publish an annual report containing analysis of the cost of claims, the cost of premiums, how claims are settled, how settlement costs vary depending on how claims are settled, and an analysis of the various types of cost that make up settlements.
The Central Bank began collecting data on employers’ liability, public liability insurance and commercial property insurance in Q4 2020. This data will continue to be published on a regular basis.
