The Insurance Federation warns there will be no cuts in motor insurance without major changes in sector. Dominic Coyle reports.
Despite the lower underwriting loss in motor insurance, yesterday's figures showed that 2001 was the first year in recent times that the three major non-life sectors all recorded net operating losses.
Sharp rises in motor insurance premiums may have cut the losses suffered by the industry but motorists are unlikely to notice a fall in premiums without further meaningful reform, according to a factfile published by the Irish Insurance Federation (IIF) yesterday.
The annual report of the state of the industry - put together by the federation - holds out the hope that rises in motor insurance premiums could moderate as underwriting losses fall.
But the federation, which represents the industry, warned yesterday that there would be no noticeable reduction in rates without the introduction of a Garda traffic corps and the implementation of the Motor Insurance Advisory Board recommendations.
It also called on the legal profession to stop standing in the way of the setting-up of a personal injuries assessment board.
Despite the lower underwriting loss in motor insurance, yesterday's figures showed that 2001 was the first year in recent times that the three major non-life sectors - motor, property and liability - all recorded net operating losses, allowing for underwriting, commissions, investment returns and management expenses.
The situation in the liability side of the business is grim for businesses already buckling under the weight of massive premium increases and a sharp reduction of options as insurance groups exit the market.
According to the IIF, the cost of claims in 2001 was still 120 per cent of the premiums brought in by the business - before allowing for commissions and other costs associated with the sector. IIF president Mr Ian Stuart acknowledged that there had been significant increases in the cost of employers' and public liability insurance "in the light of the failure of the liability market to produce returns on capital acceptable to shareholders over a number of years".
But he warned that premium increases "will continue until profitability is restored".
Ms Dorothea Dowling, chairwoman of the Motor Insurance Advisory Board, which has recently proposed more than 60 reforms of the private motor insurance business, said the factfile figures meant very little in the absence of the raw data behind them.
"Without seeing it, I could not comment on what is in it, but in any case, it is the raw data that provides the true picture and we have only been given the data for 2000 in recent weeks." However, she questioned figures showing a 41.7 per cent rise in motor insurance premiums between 1997 and 2001 at a time when inflation rose 15.3 per cent.
"I think, if you ask the motorist in the street, they will tell you their premium has gone up by more than that," she said.
The data in the factfile confirm that insurance premiums overall rose by 19.5 per cent per annum between 1997 and 2001 at a time when annual inflation rose by an average of 3.2 per cent per annum.
The IIF says the rise in premiums more closely matches the pace of economic growth - GDP rose by 14.6 per cent annually over the five-year period.
Premiums per head of population actually fell in 2001, according to the figures, by 0.5 per cent to €2,708 from €2,721, but this is largely accounted for by a 5.7 per cent fall-off in life premiums.
On the non-life side, including motoring and liability insurance, premiums rose 19.9 per cent in the 12 months.
Irish people pay more than others for insurance cover. Comparative global figures for 2000, the most recent available, show that, in dollar terms, premiums per head of population in Ireland amount to $2,552, compared with $1,839 in the European Union, $945 for Europe as a whole and $1,165 in America
On the life side, premiums in 2001 fell as the economic downturn started to bite, with pension business in particular seeing some retrenchment.
The figures show that in the run-up to the new regulatory regime, agents tied to particular insurers were winning a larger share of the business, while the new business written by brokers and by insurance companies themselves fell off.
Insurance companies also seemed to gamble on a recovery in stock markets in 2001.
Having cut the proportion of their money in equities in 2000 to 53.6 per cent from 56.5 per cent in 1999, insurers ploughed 60 per cent of their funds into the markets in 2001 - the highest for the five years reviewed - in the hope of a market bounce which failed to materialise. As a result, investments grew at a lowly rate of 2.7 per cent over the year - well below inflation.
The amount invested in Ireland fell again, continuing a trend that began with the arrival of the euro. In 2001, only 53 per cent of funds were placed in Irish investments, down from 75.3 per cent in 1997.
