Inflation and higher crash rates see cost of insurance claims spike by 25%

New figures released by the Central Bank of Ireland show that the cost of motor insurance claims in Ireland saw an increase of 25% last year, thanks in part to higher crash rates and inflation.

The total cost came to €751 million, which led to smaller profits across the motor insurance industry. The cost of premiums fell during the same period.

The amount of injury and damage claims increased by 16% and 20% respectively following the pandemic, according to National Claims Information Database (NCID) figures used for the Central Bank report.

Of the €548 million of total settled claims costs reported last year, 54% related to injury claims and 46% related to damage costs. Roughly half of all injury claims settled last year were resolved under personal injury guidelines that were adopted in April 2021 – up from 16% for the previous year.

Only a small number of litigated claims were settled under the guidelines as most cases settled through this channel were filed before the recent guidelines came into effect.

“It is still not possible to determine the impact of the guidelines on claims settling through litigation due to the small number of claims settling through this channel. This is important to note as 77 per cent of all injury costs were associated with litigated claims,” Robert Kelly, director of economics and statistics at the Central Bank, was quoted as saying in the Irish Times.

The average premium earned per policy fell to €568, bringing the total decline from a peak in late 2017 to 22%.

Profit recorded by the motor sector declined to €159 million last year from €176 million in 2021.