Why Are Car Insurance Premiums on The Rise?

Excerpts from an article that appeared on Allianz Insurance’s blog by Robert McEvoy

The first major reason has been well publicised. Insurance premiums have been subject to many years of under-pricing in the Republic of Ireland and this is the reason why many motor insurers in Ireland have reported losses on their motor insurance businesses in 2014.

Ireland’s return to economic growth and a greater number of road users has also increased the number of claims in the motor insurance market over the last 18 months and this has further compounded any loss-making situations some insurers have found themselves in.

Another factor relates to the Irish insurance industry’s preparation for the introduction of the EU led “Solvency II” directive in 2016; which means in broad terms that insurance companies must hold greater amounts of capital to cover their claims. Motor Insurance requires more capital to underwrite business than other insurance products (such as household for example) and therefore insurance companies have had to adjust their pricing in advance of these new minimum solvency requirements from next year.

The above factors are why customers across the Irish market have seen an increase in their motor insurance premiums this year. The knock-on effect of all this has also been clear; customers are being asked to pay more for their motor insurance and are actively shopping around seeking more competitive insurance prices.

And so they should.

For many years, and particularly since the economic downturn, the relationship between customers and their insurance company has, in my view, been broken. Trust is at an all-time low, and much of this can be attributed to both parties treating the insurance products they either sell or buy as a simple commodity; where price is the ONLY important determining factor of choice.

But let’s exclude price for one moment. The single most important truth of insurance is that customers want to be looked after when they run into problems – it is after all the reason why people buy insurance in the first place.

When a person’s car is damaged, when their home is broken into, when their pet is in pain and needs urgent veterinary care they want to know they can rely on their insurance company to step in and help in these types of situations. Can you rely on your insurance company to help you during these times? Do you have any evidence that the guys who provided you with that cheap-as-chips ‘comprehensive’ motor policy for just €200 are really going to come up trumps when things go bad?

This is a two-way street, however; and a mind-set shift by insurers is also required. The Irish insurance market is no longer one dominated by insurance advisors such as brokers, banks and building societies. Over 50% of the Irish private motor insurance is now estimated to be provided directly by insurance companies where no intermediary is involved.  Therefore, insurance companies need to finally realise and appreciate that their role must change in light of this.

Insurers must start making themselves useful in their customer’s lives, not simply operating as identical, emotionless ‘service suppliers’ who are up for a haggle at renewal time. We must adapt and develop our knowledge and skills to understand what customers actually want and how we can be better when delivering service, building trust, and engaging with our customers.

Brady Burns Insurance Brokers.