Little evidence that insurance price-gouging has returned

But demands that the industry be more transparent about increases are reasonable

The 2017 data doesn’t point to profiteering. Photograph: iStock

The 2017 data doesn’t point to profiteering. Photograph: iStock

 

Michael D’Arcy, Minister of State for Financial Services and Insurance, spoke for many this week when he said he doesn’t trust insurers or hold them in high regard.

But there is little evidence in 2017 data, first reported by The Irish Times in March, that the sector had got back to its price-gouging ways two years’ ago.

It’s true that 17 general insurers saw their profits surge 1,300 per cent in 2017. But it was off a base of €16 million for 2016. And €101 million of the €227 million profits came from income made from investments rather than insurance.

Twelve Insurance Ireland members surveyed for its Factfile 2017 made a combined €31 million profit on motor coverage - an average of €2.58 million each. The return to profit in this business followed four years in which the industry racked up €757 million of losses.

These losses forced the likes of FBD to raise cash from asset and bond sales, and RSA Insurance Ireland to secure a bailout from its UK parent, to ensure they had enough money in reserve to meet regulatory demands and payouts on claims. Policyholders, remember, are paying an annual 2 per cent levy for the failures of Quinn Insurance, Setanta and Enterprise Insurance so far this decade.

The return to profit in 2017 came after a 70 per cent surge in motor premiums over a three-year period to late 2016. It followed a period during which the industry failed to properly price risks being taken on – and soaring court awards.

Household insurance, on the other hand, was profitable for the third successive year in 2017, delivering a healthy €46 million. The case was similar for commercial property.

However, employers’ liability and public liability lines made a combined loss of almost €47 million in 2017, resulting in a negative overall result over five years.

The combined ratio for the industry – or costs and expenses as a proportion of premium income – was 95.9 per cent. A ratio below 100 per cent means insurers are writing business at a profit. A ratio of 90-95 per cent is seen as healthy.

Motor costs have fallen back by about 25 per cent from their 2016 peak, but employers’ liability and public liability coverage costs are soaring, putting an enormous strain on businesses around the country.

Minister for Justice Charlie Flanagan said recently insurers were “profiteering” and rightly demanded that the industry be more transparent about the premium increases. It’s a sector that’s well able to point out shortcomings elsewhere.

But the 2017 data doesn’t point to profiteering. That might emerge down the road.

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