Motor insurance firms double profits in 2003, says review

Official figures released yesterday confirmed that motor insurance companies operating here more than doubled their profits last year to €395 million, prompting fresh calls for lower premiums.

The 2003 Insurance Statistical Review released by the Irish Financial Services Regulatory Authority (IFSRA) confirmed the picture painted by the industry's own lobby group, the Irish Insurance Federation (IIF), earlier this year. They show that, after a number of difficult years, the motor and general insurance industry has returned to high levels of profitability.

A detailed analysis of motor claim settlements by 10 large insurers was included for the first time in with yesterday's data. It shows that only between 15 and 34 per cent of claims by value are settled in the year in which they are made. But between 54 and 75 per cent of claims by volume are settled within the year.

The report also compares returns on private and commercial motor insurance business for the first time. In 2003, margins on private motor insurance - net underwriting results as a percentage of net written premium - were 13 per cent, compared to 7 per cent on commercial motor insurance.

Overall, the 66 companies writing non-life insurance in the Republic made underwriting profits of €417 million in 2003. When investment returns are added in, the total figure is €757 million, the bulk of which is accounted for by the 20 members of the Irish Insurance Federation.

Mr Phil Hogan, the Fine Gael spokesman on Enterprise, Trade & Employment, said much of the return to profitability could be attributed to Government-instigated reforms and the industry's failure to pass on savings in the form of lower premiums was "nothing short of immoral and cannot be tolerated".

And the Bar Council said the figures showed the industry had been misleading the people and the Government and was "making enormous profits on inflated premiums".

The IIF responded that premiums were now falling in both the motor and general insurance sector. Mr Michael Horan, the non-life manager at the IIF, said the organisation's own study and Central Statistics Office figures showed that premiums had fallen by around 15 per cent this year.

The figures released yesterday showed that motor insurers' premium income rose 12 per cent in 2003 to €1.79 billion, while the cost of claims incurred fell by 9 per cent to €1.28 billion. Mr Horan said that premiums started falling during 2003 but that the pace of reduction picked up this year.

In a statement, the Bar Council accused insurers of "waging a campaign to scare off accident victims from claiming what is rightfully theirs in a system stacked in favour of the insurance industry".

The figures released by IFSRA also show that liability insurance was profitable in 2003 for the first time in five years. Underwriting losses of €24.3 million were offset by investment returns of €90.5 million, resulting in an overall profit of €66 million.

The other area of insurance most relevant to business - property cover - was significantly more profitable, with profits almost tripling from €80 million to €223 million. Underwriting profits were up almost fourfold from €47.6 million to €185.9 million. Premiums in both liability and property insurance are also falling according to the IIF, although it could offer only anecdotal evidence to support the claim.

IFSRA also published data for the life sector yesterday. The gross value of premiums written (sales) by life assurance companies fell by 1.85 per cent to €14.5 billion, of which €7.9 billion related to Irish business and €6.55 billion to overseas business.