Insurance report shows wide disparity in legal costs
The Central Bank has published data on employers’ liability, public liability and commercial property insurance for the first time.
The information will form part of the National Claims Information Database.
The report highlights a stark difference in legal costs between claims that go through the Personal Injuries Assessment Board and those that are pursued through litigation.
Claims taken through the PIAB have legal costs of around €1,000 while claims taken through litigation average €20,000 in legal costs.
Employers’ liability, public liability and commercial property insurance are overwhelmingly sold as a package to companies and organisations.
The report from the Central Bank finds that the premiums on these packages fell over the period from 2009 to 2013.
But they rose in the following years up to 2019, driven by increases in employers’ and public liability insurance.
However, the average increase over the decade was just 4%.
The report notes there is considerable variation across sectors – and even between firms within certain sectors – and hopes to examine this further in future reports.
Today’s Central Bank report notes that the experience of individual firms within particular sectors will not always be captured by the calculated averages, nor will the experience of firms in sectors where companies have exited the market, like creches.
Over the period 2009-2019, 93% of policies had premiums of less than €5,000. Just 1% of policies had premiums of over €25,000, the Central Bank report reveals.
The price of premiums fell on average in the years 2009-2013 and rose thereafter, mainly driven by employers’ and public liability insurance.
The average price of premiums on insurance packages fell 16% from €2,188 a year in 2009 to €1,828 in 2013. From 2013-2019 the average price rose 24% to €2,269.
The average package premium increase from 2009-2019 was 4%, the Central Bank said.
Over the period from 2013-2019, the cost of employers’ liability rose by 31% while public liability rose by 32%. Commercial property insurance rose by 8%.
The average cost of claims rose over the period from 2009-2015 and then fell from 2015-2019, today’s report reveals.
The average cost of employers’ liability claims rose by 56% to €38,988 from 2009-2015 and then fell by 16% to €32,635 from 2015-2019.
The average cost of public liability claims rose by 48% to €21,154 from 2009-2015 and then fell by 22% to €16,587 from 2015-2019.
Today’s report shows that premium price increases varied greatly across and within different industries and services.
When broken down by broad sector, the Central Bank reports that over the period 2009-2019, companies in the Arts, Entertainment and Recreation sector saw their packaged premiums rise by 105%.
Premiums for companies in Finance and Insurance activities fell 69%.
Manufacturers saw their premiums rise by 61% while construction firms’ fell by 18%. Companies in the Accommodation and Food Service sector saw premiums go up by 19%.
Mark Cassidy, the Central Bank’s Director of Economics and Statistics, said future reports would delve more deeply into what is driving the differing price increases across sectors.
Overall, the report finds there was an average operating profit of 5% of income for the period 2009-2019. This included investment income. Over the same period, 63% of income was used to settle claims.
Liability claims for employers’ and public liability policies were for €150,000 or below in 99% of direct claims and 99% of PIAB cases while they comprised 89% of claimants who went through litigation.
The biggest single percentage grouping is 25% of claims for amounts equal to €15,000 or less.
The report points out that when claim costs are similar, there is a huge difference in legal costs.
The average compensation for claims of €150,000 or less was €28,000 for PIAB cases and €29,000 for litigated cases. However, the legal costs were on average €1,000 for PIAB cases and €20,000 for litigated claims.
Over the years 2015-2019, direct claims accounted for 29% of claims while the PIAB accounted for 14%. Litigated claims were 57% of all claims.