Insurers in the Republic clawed their way back to a small profit covering public and employers' liability and commercial property in 2019 after six years of premium hikes, led by a doubling of the costs for firms in the arts, entertainment and recreation sectors, according to Central Bank data.
However, the €29 million operating profit for the industry for the year, equating to just 3 per cent of gross earned premiums, was flattered by insurers making €72 million of income from investment portfolios.
The long-awaited publication on Wednesday of the National Claims Information Database (NCID) figures on these three areas of insurance – typically sold as a package to businesses ranging from corner shops to large drug companies – shows that the employers' liability line has remained consistently loss-making since 2014.
The three areas combined were loss-making as a whole between 2015 and 2018, even as premiums rose. This contrasts with a similar report on motor insurance last year showing industry profits in that segment had swelled to €142 million in 2019, or 10 per cent of income, even as car premiums had been on the decline for more than three years following a spike earlier in the decade.
The latest report highlights how generally advantageous it has been for injured parties to take the legal route to settle a claim, particularly in employers’ liability cases.
Litigated employers' liability settlements, accounting for most of cases, averaged about €70,000 over the period, almost double the value of Personal Injuries Assessment Board (PIAB) settlements and nearly triple the average direct settlement. Legal costs for a litigated settlement averaged €35,268, compared with €902 for the PIAB route.
Legal costs
Still, there these figures were skewed by larger cases. The data showed that there was little or no financial benefit for injured parties going the legal route in the vast majority of employers’ and public liability cases, which settled for less than €150,000. However, the legal costs were a multiple of cases settled through PIAB.
"It is clear that personal injury litigation is the mother lode of many Irish solicitors' income, at the expense of plaintiffs, policyholders and society," said Peter Boland, director of the Alliance for Insurance Reform.
The market overview predates the Covid-19 pandemic and the setting in April of Judicial Council guidelines for public-injury awards, aimed at eliminating the benefit of resorting to the courts and, ultimately, reducing claims costs and premiums.
The average premium for package policies fell by 16 per cent between 2009 and 2013, before surging by 24 per cent in the subsequent six years to 2019, delivering an overall 4 per cent increase in the space of a decade.
A breakdown of premium changes between 2013 and 2019 showed that the cost of the average package manufacturing and construction policy rose by more than 60 per cent, while wholesalers and retailers, on the whole, saw their costs rise 31 per cent.
Premiums for firms in the arts, entertainment and recreation sectors doubled over the period – areas of the economy that have also borne the brunt of Covid-19 restrictions.
Still, the premium hikes have not been enough to justify continued presence in the market for some insurers.
The Alliance for Insurance Reform highlighted last month that 21 sectors are currently struggling to get coverage or have been reduced to one provider. These range from adventure centres to bouncy-castle operators, festivals and other events.
"As the figures show, the employers' liability, public-liability and commercial property insurance markets have been and remain very challenging markets for insurers in the last decade," said Moyagh Murdock, chief executive of Insurance Ireland. "The main driver of this challenge is the volatility and unpredictability of the personal-injuries claims environment up to now, which in turn leads to volatility and unpredictability in insurance premiums for SMEs."
