Car insurers accused of giving false costs data

The government has been urged to fast-track the establishment of a national insurance claims database after concerns were raised over the reliability of data provided by insurers to the Central Bank.

Figures given to the regulator by insurance companies and published yesterday showed a 19 per cent increase in the cost of comprehensive car insurance in 2015 and a 9 per cent rise in third-party fire and theft policies. Official statistics from the Central Statistics Office (CSO) for the same year showed that the cost of insurance surged by more than 30 per cent, however.

Michael McGrath, the Fianna Fáil finance spokesman, said that there was an “enormous discrepancy” between the figures collected by Insurance Ireland, the industry body, and those published by the CSO and accused companies of providing incomplete and inaccurate information. He said that the difference called into question the accuracy and reliability of the data provided by insurers and called for a national claims database to be established as quickly as possible to give a clear picture of the cost of cover.

“The report claims that average premiums for comprehensive cover rose by 9 per cent in 2015 while third-party fire and theft premiums increased by 19 per cent. However, the official CSO consumer price index shows that motor insurance premiums increased by a whopping 30.8 per cent in 2015,” he said.

Patrick Honohan, the former governor of the Central Bank, accused insurance companies last month of repeatedly lying to the regulator to cover up “serious shortcomings or inadequacies” in their businesses. Mr Honohan warned the government in late 2015 that insurers were intentionally providing false information as the cost of insurance soared and requested additional powers to punish companies who misled the regulator.

Irish insurers were raided by the EU competition authorities this month over allegations that companies had fixed prices to keep new entrants out of the market. The industry is also being investigated for alleged “cartel-like” activity by the Irish insurance watchdog.

The figures published by the Central Bank yesterday show a 10 per cent increase in the cost of comprehensive claims and an 11 per cent rise in the cost of third-party claims in 2015.

With premiums increasing by more than 30 per cent over the same period, Mr McGrath said the figures exposed as baseless the industry’s assertion that claims costs justified rising premiums. “Today’s report shows that the average cost per policy to the industry — combining cost per claim and claim frequency — actually fell in 2015 by 4 per cent in the case of comprehensive policies and 6 per cent for third-party fire and theft policies. These statistics do not support the industry’s core message that the number and cost of claims are responsible for rising premiums.

“Since it is clear the industry’s claims do not stand up to scrutiny, the government needs to accelerate implementation of the recommendations of the cost of insurance working group, particularly around the compilation of a national claims database so that we can get a proper handle on the data,” he said.

At the beginning of the year the working group recommended the establishment of a national claims database. After Insurance Ireland expressed concerns over its ability to provide complete information and in light of the time it would take to establish the database, however, the government decided to publish aggregated claims costs metrics and trends within the market on a quarterly basis.

The first report, also published yesterday, showed that premiums fell by 8.5 per cent in the year to the end of May but increased by 70 per cent in the three years previously. In the report the Department of Finance said that it expected the quality of the data and response rate from insurers to improve. It said it had emphasised in discussions with stakeholders that an improvement in transparency was “essential”.

Kevin Thompson, chief executive of Insurance Ireland, said that the level of court awards and associated costs was the “defining issue” in the rising cost of motor insurance.

“Awards, and the cost of settling them, are increasing and it’s time to tackle the root causes. With the Department of Finance report using industry data this is the first time this information has been compiled in this manner and Insurance Ireland is keen that it is used to inform public policy. Insurance Ireland believes other stakeholders should also provide their data to inform policy solutions to the rising cost of claims,” he said.

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Jack Cunningham

I may be young, but I know what I'm doing! Born and raised in the South of the UK, I like cars, money and holidays. Spend most of my time petting my cat and eating bagels.