Insurance watchdog dismisses IIF report

The Government motor insurance watchdog has dismissed the findings of an Irish Insurance Federation (IIF) commissioned report on the profitability of the motor insurance market. The report concluded that insurers were not profiteering in the Irish market and that there was no systematic overcharging of policyholders.

The chairwoman of the Motor Insurance Advisory Board (MIAB), Ms Dorothea Dowling, said the report was of little relevance to the work of the Board.

"We will continue to rely on our own rigorous analysis of raw data and will not be relying on anyone else's work. We are not employed by the insurance industry," Ms Dowling said. The MIAB is scheduled to complete its work and report by the end of this year. IIF chief executive Mr Michael Kemp said the report, by Tillinghast-Towers Perrin actuaries, demonstrated that high premiums were not caused by inefficiency or overpricing on the part of insurers, but by high claim costs. A profitability study included in the report showed that the Irish market was more than 10 times more profitable than its UK counterpart between 1983 and 1999. But Mr Kemp said the average annual profit of 4.2 per cent had not provided an adequate return on capital to investors in the long term. Profit levels among motor insurers have declined since 1996 and the industry made a loss in the sector in 1999 and 2000.

Ms Dowling accused the IIF of looking down the wrong end of the telescope. "We are not concerned so much with the profitability of the business; we are interested in how equitable the pricing is between different categories of driver," she said.

The report identified "off-target" pricing in the third party, fire and theft market. It suggested females in the 17 to 25 age category may be paying 12 to 24 per cent too much for motor insurance. Mr Kemp admitted that some pricing was off target, but said some companies may have already taken action on this.

"Although with the benefit of hindsight, some segments of the market appear to have over or underpaid in relation to the risk, this is no more evident in Ireland than in other markets."

He said the premium charged was aligned very closely with the risk calculated for the vast majority of age and sex groups.

Ms Dowling of the MIAB criticised aspects of the report's methodology. However, she said the report confirmed the findings of the MIAB interim report regarding excessive profits being made on the young female category.

She asked why 17 to 25 year-olds had been lumped in together. "That makes no allowance for driving experience, and the claims profile for a 24 year old is quite different to that of a 17 year old."

The report concluded that the market appeared to be fairly well balanced on the comprehensive insurance side. It pointed to male drivers aged over 66 as a group which might be undercharged. Some 67 per cent of the market is comprehensively insured.

Tillinghast's report found that average Irish claims costs were twice those of UK claims. If claims costs were at the same level as in the UK, Irish consumers could save about £210 (€267) per vehicle per year, it suggested.