Business

Irish insurers’ profits from business coverage rebound from ‘lost decade’ of consistent losses

Central Bank of Ireland data show declining claims costs relative to premiums earned

Almost 25% of all claims were settled in 2022 under personal injury guidelines introduced by the Judicial Council the previous year.

Joe Brennan
Thu Apr 4 2024 - 00:07

Irish insurers rebounded in 2021 and 2022 to profitability levels not seen in a decade covering public and employers’ liability and commercial property for businesses as claims costs fell relative to premiums earned, according to Central Bank of Ireland data.

Public liability (PL), employers liability (EL) and commercial property are typically sold as a package in the Irish market to businesses ranging from corner shops to large pharmaceutical companies.

This segment of the insurance market had posted consistent operating losses between 2012 and 2020, with the extent of the shortfall peaking at 14 per cent of total income in 2020, when the Covid-19 pandemic triggered a raft of business interruption claims.

However, the sector rebounded to operating profits equating to 9 per cent of income in 2021, the highest level since 2010, before expanding further to 14 per cent, or €176 million, in 2022, according to figures from the National Claims Information Database, published by the central bank.

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The increase occurred even as the spectre of inflation pushed up building material costs for property claims in 2022.

The data goes back to 2009 and shows that the EL, PL and commercial property sector barely broke even as a whole over the 14 years.

Average premiums earned for all package policies rose 8 per cent in 2022 to €2,781, tracking headline inflation, following a level of stability over the two previous years and a 32 per cent jump between 2013 and 2019.

However, some industries were hit much worse than others by premium hikes over the two years through 2022. The average across accommodation and food service companies jumped 24 per cent during the period, while those in administrative and support services endured a 34 per cent increase. By contrast, premiums across the financial and insurance sectors declined 37 per cent.

“The cost of doing business in this country is already too high. This report proves what we already know — despite all the reforms the Government introduced, and despite the decrease in the volume and cost of claims, our insurance premiums continue to rise,” said Flora Crowe, a grocery store owner and board member of the Alliance for Insurance Reform.

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Almost a quarter of all claims were settled in 2022 under personal injury guidelines that had been introduced by the Judicial Council the previous year.

Minister of State for Financial Services Jennifer Carroll MacNeill highlighted that the report has not captured the impact of amendments last July to the Occupiers’ Liability Act 1995, which aims to balance a property owner or business’s responsibilities with those of customers.

“Businesses now know with confidence that the issue of ‘slips, trips and falls’ has been legislated for and the market has become more fairly balanced for all,” she said. “This new environment will help deliver major benefits to businesses in the future when it comes to securing more favourable insurance cover at renewal time.”

The Minster also said she expects premium inflation to ease as general inflation has come back from a peak.

The latest report shows that there is relatively little to be gained for personal injury claimants settling through litigation, rather than through the Injuries Resolution Board (IRB).

The average compensation for EL cases settled through the IRB was €26,366, with legal costs mounting to €1,459 last year. The average litigated cases settled below the €150,000 threshold resulted in compensation of €33,704, with legal costs coming to €22,758. Litigated cases also typically take longer to resolve.

The average IRB-settled PL case resulted in compensation of €21,439 and a legal bill of €1,804. The average litigated case below €150,000 settled at €24,910, with legal costs of €22,938.

Meanwhile, Hazel Rock, head of insurance services at Brokers Ireland, said an imminent Supreme Court ruling on a challenge to the constitutionality of the personal injuries award guidelines “will be an important decision, whichever way it goes”.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times

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