Rising Insurance Costs. Understanding why they are going up.

There have been a considerable number of press reports in recent months relating to increasing insurance costs. It started with Motor Insurance and it’s gaining traction across other classes of insurance, notably Employer’s and Public Liability Insurance. This has implications for insurance buyers for both personal and business insurance.

According to a recent article by Ciara O’Brien of the Irish Times a report by the global ratings agency Standard & Poor’s (S&P), has projected insurance costs in Ireland could rise by 15% before mid-2017. Car insurance premiums have increased by an average of 28% over the last year and up to 50% in some cases, the S&P report says they may go even higher. In addition to the impact of Brexit in the longer term, increasingly high court awards coupled with the associated legal costs will drag on insurance profitability.

(REF: Irish Times, Ciara O’Brien)

According to a Department of Finance report on the Cost of Motor Insurance, released in January 2017, some of the factors giving rise to uncertainty in the current claims environment included:

  • Court jurisdictional limits: Insurers reported to the Department of Finance that increases in permissible awards has the potential to result in a significant increase in average awards – the limits increased as at February 2014 from €6,000 to €15,000 for District Court awards and from €38,000 to €60,000 for Circuit Court personal injuries awards.
  • High awards for personal injury claims:That a number of stakeholders have referred to high awards given for certain soft tissue injuries in comparison to other jurisdictions and have linked to this, inconsistent application of the Book of Quantum.
  • That the cost of the personal injury element of claims is estimated to make up three quarters of the overall cost of motor claims.
  • That there was growth in the number of new personal injury cases in the Courts from 2010 to 2015. The data was extracted by the Department from the Courts Service Annual Reports 2010 to 2015 and included Employer’s Liability, Public Liability, Motor Liability and Medical Negligence cases.

The Department’s working group, who were responsible for compiling the report, have also recommended a further examination of the effect legal costs are having on personal injury settlements.

 

Keeping Costs At Bay. A look at what steps to take to keep insurance costs under control.

At Glennon we use a structured approach regarding premium negotiations with insurers and will work with our clients to complete detailed preparations, which we outline in this article, to help reduce insurance costs or to mitigate rising premiums.

Fail to prepare, prepare to fail!

This maxim is as true in the insurance world as it is in the business and sports worlds.

What are the practical steps?

  • Commence initial preparation and information gathering 3 months in advance of renewal.
  • Collate any claims data and make sure that this is current and up to date.
  • Challenge insurer’s reserves on claims.
  • Investigate claims which are unlikely to recur and endeavour to have them ignored in the negotiations.
  • Ensure, as your broker, that we have all of the information we need to outline to the insurer how and why a claim occurred – particularly if there are mitigating factors.
  • Identify risk management initiatives employed with particular emphasis on those which help to eliminate the likelihood of a claim reoccurring and ensure insurers take them into account.
  • Prepare a detailed presentation for insurers to reflect as many positive features as possible.
  • Schedule adequate time for this process.

By following these preparatory steps we can maximise potential competition for your business between insurers.

We seek to ensure that your risk is presented to the insurance market in the most positive way. This means insurers should consider your risk more favourably and therefore provide you with more competitive premiums, policy terms and conditions.

All this seems very simple but it is surprising how many insurance buyers don’t adequately plan for this process. The outcome of the process is often in direct proportion to the time and effort put in i.e. less time given to preparation = probable increased premium. A planned approach with adequate time = an increased likelihood of a positive outcome.

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