FBD Holdings plans to increase motor insurance rates by about 9 per cent over the next year as it seeks to return to profitability, according to its chief executive, as the industry grapples with a surge in insurance claims costs in recent years
Ireland’s only publicly quoted insurer reported on Friday that its first-half narrowed by 96 per cent to €3.65 million as it hiked premiums by an average 7 per cent and avoided having to set aside further reserves for claims from previous years. Its loss last year was driven by an €88 million such provision. FBD shares soared 12.2 per cent to €6.90 in early trading in Dublin, its highest level so far this year.
"We've seen 18.7 per cent [rate increases] in the motor book in the last 12 months. I'd say there's something close to half that to go again over the next year," chief executive Fiona Muldoon told The Irish Times.
Ireland’s insurance industry has been in a state of turmoil in recent years as companies failed to raise enough from premiums to cover rising costs and expenses.
Recovering economy
Motor claims have been rising as more cars take to the roads in a recovering economy, court awards have been increasing, and insurers have been less able to rely on investment income to cushion the blow, as they grapple with record-low global bond yields.
Motor insurance premiums rose more than 38 per cent across the industry in July, according to the Central Statistics Office.
With various Government and industry initiatives underway to identify and tackle the cause of claims and cost inflation, Ms Muldoon said a priority should be set on resolving who ultimately picks up the tab for failed insurers, particularly in light of the recent collapse of Gibraltar-based Enterprise Insurance.
The MIBI, an industry-funded body that deals with claims against uninsured drivers, is currently appealing rulings by the High Court and Court of Appeals that have landed it with the bill from the collapse of Malta-based Setanta Insurance in 2014, with €90 million of claims outstanding.
FBD believes the Insurance Compensation Fund is the correct vehicle for the payment of claims resulting for the insolvency of a company in the industry.
“Transferring the liability on to the MIBI will only serve to increase the cost of premiums for all policyholders,” FBD said.
Strengthen legislation
Ms Muldoon said that the Personal Injuries Assessment Board legislation needs to be strengthened to give PIAB powers to compel co-operation from both sides of a claim “so that every settlement is not adversarial, with two sets of lawyers and two sets of experts”.
“At the moment, the courts only have to have regard to PIAB. That’s not sufficient,” she said.
Insurers also need to work harder at detecting and tackling fraud, with better data sharing within the industry and stronger internal processes.
FBD’s combined ratio, a keenly followed figure that measures insurance losses and expenses against premiums earned, fell to 101 per cent from 140 per cent for the whole of 2015, signalling the company is on the verge of returning to underwriting profitability.
The group said it continues to target a ratio below 100 per cent by the fourth quarter of this year and that it is “firmly on track” to return to full-year profitability next year.
Aside from motor insurance, commercial rates for employer and public liability have also risen sharply in recent times, with more increases on the cards.
However, rates on lines of insurance on homes and to farms have been more restrained. Rates on farm accounts have risen by a “mid-single digit” per cent on average in the past year, with “modest” further increases planned for the next 12 months, Ms Muldoon said.
