What’s driving up motor insurance?

Deflation tends to be a much bigger headline-grabber than inflation these days, making it harder for sectors pushing through price hikes to hide behind the mob. So it was for insurance last week in the Central Statistics Office’s consumer price index, which highlighted the soaring cost of health cover in particular.

But there are other villains too, with monthly figures on motor insurance high on the list. Bluntly, the cost of motor insurance to consumers rose by almost 3 per cent between February and March. It seems like a small figure, until one recalls that the average monthly rate of inflation across the economy in March was just 0.7 per cent. On a one-month view, that’s a big difference.

So, what gives? As with all of these things, one-month data can be unreliable and unpredictable, so it is hard to reach any conclusions with certainty. One would have to surmise, however, that the rise might have something to do with changes to the way motor insurance claims are pursued and litigated.

At the start of February, the jurisdictional limits of the lower courts were raised, with the result that the District Court can now make awards of up to €15,000 and the Circuit Court can award up to €60,000 for personal injuries, and up to €75,000 in other civil proceedings. The idea is that when the entire courts universe is taken into account, the changes should make things more efficient, both in the sense of time and cost.

The fear among insurance voices in the run-up to the shift, however, was that it would lead to more instance of disputes making their way into the courts (eyeing the potential for bigger awards), rather than being addressed at the injuries board, which has cost reduction as its raison d’être.

For the record, the Personal Injuries Assessment Board claims to have saved more than €1 billion through the non- adversarial processing of personal injury claims since it was established almost a decade ago. It would be shame if such progress were to be wasted.

It is clearly too early to follow a money or causal trail between the courts shift and the higher costs but that does not mean the figures in coming months should not be closely watched, perhaps by Minister for Justice Alan Shatter in particular.