Insights into the Irish motor insurance market
John Lyons, Finance Dublin’s insurance correspondent and an independent non-executive director, looks at analysis from Milliman on the key characteristics and trends in the Irish motor insurance market, and the key players in the sector.
The average net written premium in the Irish motor market has fallen over the last 10 years from about €1000pa per vehicle in 2003 to just over €400pa in 2013 according to Ger Bradley of Milliman.

This and other insights into the Irish motor insurance sector, were to be gained at a recent breakfast seminar hosted by the actuarial consultancy firm. Using data from the INCA service of Risk Intelligence Ireland, Bradley and his colleague Eoin O’Baoighill showed recent trends in premiums, market shares, expenses, claims and profitability. They also looked at some developments that could shape the market in future years and presented the results of a survey of practitioners’ expectations.

The total of net written premiums in the motor market peaked at approximately €1.9 billion in 2003 but has been falling steadily since then and was just over €1 billion in 2013. The fall came despite the number of vehicles licensed continuing to increase until 2008, when it topped 2.5 million, and the fact that it has only reduced slightly since then.

The decline in premium rates came on the back of a steadily falling loss ratio between the accident years 1997 and 2004, when it fell from nearly 120%, to under 50%. Since then the loss ratio has been increasing steadily and it was nearly 100% last year. The 2013 result was heavily influenced by RSA which showed a loss ratio of 189% due to large prior year adjustments. The other loss ratios ranged from 61 for Aviva to 90% for Liberty.

Claim frequencies have been generally falling in recent years but 2013 has shown an increase as vehicle usage has risen again with the economic recovery. A proxy for vehicle use is the average amount of fuel used per vehicle and this fell from over 1900 litres per annum in 2009 to under 1750 litres in 2012 but rose again in 2013 and in the first half of 2014. Average settlement costs for most companies have been trending upwards in recent years; this has also been true for the Injuries Board in 2013.

Despite the rising loss ratios premium increases have been constrained by a very competitive market. Market shares have moved around a bit in the last four years. Axa has remained the largest player throughout, its share increasing from 21% in 2010 to 23% in 2013. Aviva was in second place in 2013 with 16% (down from 19% in 2010), RSA was third with 16% (up from 10%), and FBD fourth with 15% (up from 12%).

Looking to the future the Milliman consultants reported on some developments that will likely have an impact. Postcodes will be introduced into Ireland in 2015 and there will be an estimated 2.2 million unique codes, allowing for rating at a very detailed level. There should be an early mover advantage although some churning can also be expected as people in higher risk areas move to companies that have not yet implemented postcode rating. From comments made the people of north County Louth need not expect any advantage from this initiative. Another significant development is the possible introduction of Periodic Payment Orders (PPOs) and this is the subject of a separate article by Ger Bradley in this month’s issue.

The results of the survey showed that over 50% of respondents thought that premium rates had increased by 5 – 10% in the past year with over 35% putting it at 0 – 5%. The most popular expectation was that claims frequency and average cost would increase by 0 – 5% in 2014. Nearly 50% of respondents think that PPOs will come in during 2015 with 55% thinking they will lead to an increase of 0 – 10% in reinsurance rates and 45% opting for 10 – 25%. More than half of companies expect to be ready to implement rating by postcode by the second quarter of 2015. More than 50% think that telematics will exceed 20% of the market between 2018 and 2020. Over 70% do not expect driverless cars before 2020 but nearly 25% expect the first driverless car claim before 2020.
John Lyons is Finance Dublin’s insurance correspondent and an independent non-executive director.
This article appeared in the December 2014 edition.