Motor premiums down 8% at FBD as personal injury guidelines cut claims costs

Insurer’s pretax profits down 14% as volume of claims increases

Pretax profits at insurer FBD fell more than 14 per cent to €18.9 million in the six months to the end of June with average customer premiums remaining “relatively flat” across its portfolio, largely due to the introduction of the personal injuries guidelines last year. The Irish insurer was also impacted by a €15 million hit on its investment returns.

On Friday, the company said the premiums it charged private motor insurance customers in the first half of 2022 fell by an average of 8.1 per cent over the period while commercial motor insurance premiums fell 3.3 per cent. This, FBD said, reflected “the expected reduction in claims costs as a result of the new personal injury guidelines and an improvement in underlying claims experience”.

FBD’s average commercial business and farm premiums, meanwhile, increased by 6.2 per cent and 2.2 per cent respectively. The insurer said this was because the value of the property insured had increased due to construction cost inflation, although this was “offset” by the reduction in claims costs due to the personal injury guidelines.

Overall, FBD’s gross income from premiums increased 3.3 per cent compared with the same period in 2021.

Claims volumes, meanwhile, increased 5 per cent in the year to the end of June and injury notifications increased in line with this, the company said.

Motor damage notifications have also increased 29 per cent as cars returned to the roads and traffic volumes rose to pre-pandemic levels.

But while the average cost of injury settlements remains lower than before the pandemic, FBD said the average cost of property claims had increased 17 per cent in the first half due, in part, to inflation and further expected increases in construction costs.

Motor damage claims costs, up 12 per cent over the period, also “continue to experience high inflation”, the insurer said, with the cost of parts, paint and labour on the rise.

FBD also said its portfolio of fixed income assets – including corporate and Government bonds – had incurred losses of €15 million due to “significant interest rate increases and spread widening”.

FBD chief executive Tomás O’Midheach said the results were positive against “the difficult economic backdrop”.

“Investment markets had an exceptionally challenging first six months to the year, the increase in inflation and resultant higher interest rates is impacting our returns and reducing the valuation of the FBD bond portfolio,” he said.

“Spreads have also widened which increased bond yields further. A positive side to this is the higher reinvestment yields that will now be available to us in the future.”

Mr O’Midheach also said the introduction of the personal injuries guidelines “appear to be having the desired effect of lowering costs for minor injury claims justifying the premium reductions given to our customers”.

However, he said FBD awaited the outcome of a number of legal challenges to the guidelines.

Ian Curran

Ian Curran is a Business reporter with The Irish Times