Motor premiums rise again — despite years of promised reform

After years of political promises and reform headlines, Irish motorists are once again watching car insurance premiums creep upward.

According to the Central Bank’s latest figures, more than 2.3 million private motor policies were written last year at an average premium of €623 — up 9 per cent on 2023, even though injury-claim costs have fallen by nearly a third in the past decade.

For years, the political story was simple: premiums were high because injury awards were out of control. But injury claim costs have fallen — from €289 per policy in 2014 to €200 in 2024 — while premiums are rising again. So if the courtroom is no longer the villain, where’s the money going?

The answer lies not in the courtroom, but in the garage. What insurers are saving on injury claims is now being swallowed by the escalating cost of repairing vehicles. Only a few years ago, the average damage cost per policy was about €100; today it is closer to €190. Add supply-chain delays, pricier parts and a shortage of skilled mechanics, and “damage inflation” has quietly replaced injury inflation as the industry’s biggest headache.

Modern cars are safer but vastly more complicated. A cracked headlight or dented bumper often means replacing sensors, cameras and driver-assist systems — and paying a specialist to recalibrate the lot. What was once a small scrape can now trigger a five-figure repair bill.

The legal side hasn’t gone quietly either. The Personal Injury Guidelines, launched in 2021, were supposed to make awards consistent and cut legal bills. While the reforms curbed smaller claims, they have had little effect on the larger, litigated cases that dominate overall costs.

According to the Central Bank’s Private Motor Insurance Report, these litigated cases now account for about 73 per cent of total injury payouts, up from 65 per cent a decade ago — a sign that more disputes are bypassing the Injuries Resolution Board, the State body set up to resolve claims without going to court. Pre-pandemic, a litigated injury claim took about three and a half years to resolve; now it’s closer to five. And the longer they drag, the higher the tab. Average injury compensation to claimants in 2024 was €26,000, down slightly on previous years, yet average legal costs have jumped to nearly €12,000 per claim — up 47 per cent in less than a decade.

The reform path has been anything but smooth. The Delaney v PIAB case briefly rattled confidence in the legality of the new injury-award guidelines until the Supreme Court settled the issue in April 2024. Soon after, the Judicial Council proposed a 16.7 per cent uplift in compensation levels — a move ultimately rejected by Justice Minister Jim O’Callaghan last July, calming nerves but exposing just how fragile consensus on reform has become.

There’s also another, quieter reason why premiums have crept upward — the industry’s own cautious temperament.

After years of shocks — from Covid, to inflation, to legal uncertainty — insurers have become more conservative in how they set aside reserves for future claims. When those reserves later turn out to be larger than necessary, they’re released as profit. That’s exactly what happened in 2024, when insurers reported a 4 per cent operating profit, much of it driven by old reserve releases rather than fresh underwriting gains. Strip those out, and the margins on current business look razor thin.

Put simply, the recent price rises are less about greed and more about sustainable pricing. But they also reveal something deeper: motor insurance runs in cycles. When profits look healthy, competition drives prices down. When costs surge, prices rebound. No reform has ever managed to break that rhythm.

The Central Bank’s report shows where each €100 of premium went: roughly €71 on claims and claim expenses, €8 on commissions, €4 to the uninsured drivers’ fund, €4 on reinsurance, €17 on administration and management, and €4 on tax and interest. Investment income added €8, with release of older reserves contributing €4, leaving about €4 in profit.

For all the political soundbites about insurers “ripping off” motorists, the numbers tell a different story — showing just how modest underlying returns are once reserve releases are stripped out.

The reality is that providing motor insurance is a capital-intensive and high-risk business, exposed to a volatile legal and political environment. It’s no surprise that few new entrants have been tempted into the Irish market to provide competition.

All of which shows that, despite progress, the reform story is far from finished.

The Government’s Action Plan for Insurance Reform set out ambitious goals: greater transparency, lower premiums, and a more competitive market. That plan may have been road-tested — but it’s still not road-ready. The introduction of the Personal Injury Guidelines marked some progress, but the latest figures show that the headline reforms only solved part of the problem.

For policymakers, the motor insurance market is proving harder to fix than a cracked bumper. And far more expensive to ignore.