Private Motor Insurance Statistics. Private Motor Insurance Statistics

Transcription

1 2009 Private Motor Insurance Statistics

2 Contents Executive Summary Introduction General Market Overview Premium Income and Claim Cost Development Premium income Claim Costs Surplus/Deficit Motor Insurance Market Market share Market Segmentation Market Pricing Appendix 1 Background Appendix 2 Data Appendix 3 Primary Tables Appendix 4 Development Tables... 36

3 Executive Summary This annual report on private motor insurance statistics is prepared by the Central Bank s Statistics Department, which is charged with the responsibility of continuing the statistical work of the Motor Insurance Advisory Board (MIAB) 1. The primary objective of the report is to examine the level of accident frequency and costs, and their consequent impact on the allocated premium differentials by driver profile. The report is based on the analysis of policy, premium and claim data for 2009 submitted by the Irish Insurance Federation (IIF) to the Central Bank of Ireland. The downward trend in average premiums was maintained in 2009 with decreases of 2 per cent and 3 per cent reported for comprehensive cover and third party fire and theft cover, respectively, although the declines were not as pronounced as in Since 2002 average premiums have fallen by 40 per cent for both comprehensive and third party fire and theft cover. Accident frequency in 2009 reduced from 8.6 to 7.8 accidents per 100 policy years for comprehensive cover and from 6.5 to 5.9 for third party fire and theft cover. This is the first reported drop in frequency since 2003 for both categories of cover. Average cost, measured on a per claim basis, decreased by 25 per cent for comprehensive cover and 32 per cent for third party fire and theft cover between 2002 and After recording the lowest average cost per claim for comprehensive cover in 2007 since 1999, the average cost per claim in 2009 was below this again. Average cost per claim for third party fire and theft cover has been increasing marginally since 2007, but remains well below previous highs recorded during These increases in 2008 and 2009 suggest a levelling off of the downward trend in this statistic. Meanwhile, average cost for 1 year development, measured on a per policy basis, (also referred to as average cost per policy year) decreased substantially for both cover types in 2009, after recording substantial increases in For comprehensive cover, average cost 1 The MIAB was the body established by the Government to investigate all factors affecting the cost of motor insurance. 1

4 per policy fell by 11 per cent in 2009, which was the largest annual decrease since Similarly, third party fire and theft cover decreased by 9 per cent in 2009, which was the largest annual decrease since a 26 per cent decrease was recorded in These decreases are explained by general reductions in accident frequency and average costs per claim. The number of large claims is also an important cost and risk indicator for the industry and may also contribute to changes in average cost per claim. The downward trend in the large claim rate is probably explained by the reduction in the reported number of serious injury accidents on Irish roads in recent years. However, while results show the year 1 large claim rate has remained relatively stable for comprehensive cover, marginal increases have been reported for third party fire and theft cover in 2008 and Average surplus per policy 2, which is an indicator of industry profitability, reported an increase for both types of cover in 2009 based on year 1 development. This follows substantial reductions in 2008 for both types. For comprehensive cover in 2009, average surplus increased over the year by 21 per cent to 188 per policy. Third party fire and theft cover reported an increase of 5 per cent to 295 per policy over the same period. The upward trend in the number of policies written in the Irish market continued in 2009, with an increase of 1.7 per cent, to 1.84 million policy years reported. Changes in the distribution of insurance cover continued in The number of comprehensive policy years increased by over 53,000, while the number of third party and third party fire and theft policy years fell by just over 23,000. This is the third successive annual fall in the number of third party fire and theft policies. The average premium for female and male policyholders in 2009 was 479 and 593, respectively, equivalent to about a 24 per cent differential. For younger policyholders (under 25 years) the differential was highest while older policyholders (over 70 years) reported the lowest differential. The 2009 results provide further evidence of the intervention of the Injuries Board on the settlement rate of claims. Fifty-six per cent of third party fire and theft accidents occurring in 2008 were reported settled as at year-end 2009 compared with rates of the order of 37 per 2 Average surplus per policy is defined as average earned premium income per policy less average claim costs per policy. 2

5 cent observed between 2001 and In addition, 65 per cent of third party fire and theft accidents occurring in 2007 were reported as settled as at year-end This is considerably higher than the corresponding three year development rates reported between 2001 and 2006 which varied from 46 to 56 per cent. Settlement rates for year 2 comprehensive claims have remained stable in recent years. 1. Introduction 3 This report is based on the analysis of policy and claims data for 2009 submitted by the Irish Insurance Federation (IIF) to the Statistics Department of the Central Bank of Ireland. The submissions are provided annually in raw disaggregated format, listing individual policy and claims records for all categories of cover i.e. comprehensive; third party fire and theft; and third party only. A total of 20 variables are associated with each individual record as described in Appendix 2. The data set has information on individual policies in terms of premium income and the evolution of claim costs over a five-year period. Therefore, each submission contains five files, and for 2009 these files were as follows: 2005@ @ @ @ @2009 These files contain the most recent data available for each accident year. For example, 2005@2009 is a data file describing the 2005 accident year where claim costs are now in their fifth year of development. 4 In the context of the data provided, it is not possible to obtain a comprehensive assessment of all costs and revenues in the industry. The submission does not supply data on additional claims-related costs, including: estimates on the cost of claims incurred but not yet reported (IBNR) to insurers, changes in estimates of existing claims for prior year accidents and contributions to the claims against uninsured motorists paid to the Motor Insurers Bureau of Ireland (MIBI). Other costs not included are distribution, commissions, expenses, reinsurance and taxation. Furthermore, data on 3 The Statistics Department would like to acknowledge with thanks the helpful comments of Cyril Connolly, Statistician to the Motor Insurance Advisory Board (MIAB). 4 In general, approximately 77 per cent of claim costs are settled within five years of the accident. See Appendix 4, Development Tables at 3

6 Policy years Private Motor Insurance Statistics additional income sources are not provided, in particular the investment income from insurers portfolio of assets and reinsurance recoveries. Assessment of ultimate profitability requires this data. However, despite the exclusion of this additional cost and income data, the difference between earned premium income and claim costs (surplus/deficit) can be used as an indicator of yearly market performance. This indicator is also useful in the examination of the relative performance of various market segments. 2. General Market Overview The total exposure by year (policy years) provided in the submission is shown in Chart The upward trend in the number of policies written in the Irish market is apparent with a growth of over 124 per cent between 1997 and Policy years increased from just over 800,000 to 1.84 million over this period. However, in 2008 and 2009, the annual rate of growth slowed substantially, with less than a 2 per cent increase in both years in total policy years. Results show that the number of comprehensive policy years increased by over 53,000 in 2009; while the number of third party and third party fire and theft policy years fell by 23,000 over the year. This is the third successive annual fall in the number of third party fire and theft policies since records were first compiled in this format. Chart 2.1: Motor insurance exposure (all cover); ,000,000 1,800,000 1,600,000 1,400,000 1,200,000 1,000, , , , ,000 0 Comprehensive Third party fire & theft Third party only 5 The exposure to risk is measured in vehicle years (i.e. one vehicle year of exposure equals one vehicle on full cover for one year or two vehicles for six months). 4

7 policy years (%) policy years (%) Private Motor Insurance Statistics Chart 2.2 shows that comprehensive cover accounted for 81 per cent of the market (nearly 1.5 million policies) in 2009 compared with 55 per cent in Chart 2.3 shows that third party fire and theft cover accounted for just under 18 per cent of the market (0.33 million policies) in 2009 compared with 38 per cent in Third party only cover comprises a small part of the insurance market (1 per cent) with less than 21,300 policies in Between 2001 and 2006 the distribution of cover remained relatively stable with on average 71 per cent of policyholders insured comprehensively compared with approximately 27 per cent insured under third party fire and theft cover Chart 2.2: Percentage exposure (comprehensive cover); Chart 2.3: Percentage exposure (third party fire and theft cover); Given the small number of third party only policies, the remaining discussion will focus on comprehensive and third party fire and theft cover. However, all data relating to third party only policies are included in Appendix 3: 5

8 A breakdown of exposure by market segment in 2009 is shown in Chart 2.4. Market segments are defined by the risk factors: policyholder age, gender and licence status (i.e. full or provisional). From the graph it is clear that the largest market segments contain policyholders aged between 31 to 50 and 51 to 70 with full licences. These policyholders are more likely to have comprehensive cover. In general, younger (under 30 years) policyholders report a significantly higher proportion of third party fire and theft cover compared with older age segments. Chart 2.4: Exposure by age, gender and licence status; 2009 over 70,Male,Provisional over 70,Male,Full over 70,Female,Provisional over 70,Female,Full 51-70,Male,Provisional 51-70,Male,Full 51-70,Female,Provisional 51-70,Female,Full 31-50,Male,Provisional 31-50,Male,Full 31-50,Female,Provisional 31-50,Female,Full 25-30,Male,Provisional 25-30,Male,Full 25-30,Female,Provisional 25-30,Female,Full 21-24,Male,Provisional 21-24,Male,Full 21-24,Female,Provisional 21-24,Female,Full 17-20,Male,Provisional 17-20,Male,Full 17-20,Female,Provisional 17-20,Female,Full Comprehensive Third party fire and theft Third party only Policy Years 6

9 3. Premium Income and Claim Cost Development 7 This section presents an analysis of the relationship between premium income, accident frequency and the cost of claims. Motor insurers use statistical models to analyse accident frequency and claim costs within various market segments to assist in the pricing of risk. This analysis indicates the appropriate base premium to levy for the different policyholder segments and is sometimes referred to as the risk premium. In the context of this discussion the concept claim cost development is central. As it can take many years for the full and final costs associated with an accident to be established, the evolution of yearly costs are presented as development years. For example, the initial estimates of total costs associated with accidents in 2007 as measured at year-end 2007 are defined as year 1 development costs. The costs for 2007 accidents as measured at year-end 2008 are defined as year 2 development costs for 2007 accidents and so on. The terminology used takes the form 2007 at year-end 2007 for year 1 development of 2007 accidents, and 2007 at year-end 2008 for year 2 development of 2007 accidents. Claim costs for an accident tend to increase as the development year progresses, because insurers obtain more information on the ultimate cost of the accident. In addition, claim costs increase because a proportion of claims occurring in any given year may not be notified to insurers for up to two years following the accident. These claims are referred to as incurred but not reported (IBNR) and increase the claim costs, particularly for the year 2 development year. The premium and cost indices for comprehensive and third party fire and theft cover by development year are plotted in Chart 3.1. They illustrate how average premiums and costs have changed in nominal terms between 1997 and Problems identified by the MIAB with cost statistics have to a large extent been resolved. Since 2001 the analysis of market data provided by the IIF is based on virtually all companies operating in the Irish market. In order to capture changes between 2000 and 2001 the graphs on the left in Chart 3.1 are based on the restricted market coverage for the accident years 1997 to 2001 with 1997 used as the base year (i.e = 100). The graphs on the right are based on the full market coverage for accident years 2001 to 2009 with 2001 used as the base year (i.e = 100). 7 Complete tables of these results are contained in Appendix 3 and Appendix 4. 7

10 Index (1997=100) Index (2001=100) Private Motor Insurance Statistics 3.1 Premium income Chart 3.1 illustrates the significant increase in premium income for both categories of cover between 1997 and The graphs on the left show that between 1997 and 2001 earned premium income per policy increased by 31 per cent for comprehensive cover and by 42 per cent for third party fire and theft cover. The graphs on the right show that it increased a further 13 per cent for comprehensive cover and 20 per cent for third party fire and theft cover in Between 2002 and 2009, however, the graphs show that average earned premium income per policy fell by 40 per cent for both comprehensive and third party fire and theft cover. The accident year 2009 showed a reduction of only 2 per cent in average premiums for comprehensive cover and 2.7 per cent for third party fire and theft cover. Chart 3.1: Premium index and cost index by development year; (a) Comprehensive cover Premium index Year 1 cost development Year 2 cost development Year 3 cost development Year 4 cost development 8 The graphs on the left contain data on accident years 1997 to 2001, where 1997 has been used as the base year. They exclude companies with incomplete cost data. However, since 2001 all companies submit this data so the index has now been reset. Therefore, the graphs on the right contain data on accident years 2001 to 2009 for all companies, using 2001 as the base year (see Appendix 4, Development Tables). 8

11 Index (1997=100) Index (2001=100) Private Motor Insurance Statistics (b) Third party fire and theft cover Premium index Year 1 cost development Year 2 cost development Year 3 cost development Year 4 cost development 3.2 Claim Costs There are two principal statistics used to summarise claim costs. The first cost statistic is termed average cost per policy year and is used by the industry to price risk. Average cost per policy year is defined as the product of both accident frequency and average cost per claim whereas average cost per claim is independent of accident frequency. Therefore changes in average cost per policy can arise from changes in either frequency and/or average cost per claim. The cost index illustrated in Chart 3.1 is based on average cost per policy year and shows that during the period 1997 to 2003 costs, in general, followed a downward trend. This was explained primarily by a decline in accident frequency of 51 per cent for comprehensive cover and of 49 per cent for third party fire and theft cover (Chart 3.3) over this period. The largest reduction in year 1 cost development occurred in 2003 with decreases of 21 per cent and 26 per cent reported for comprehensive cover and third party fire and theft cover, respectively. Following an increase in the year 1 index in 2004, the accident years showed marginal changes as the benefits of lower average costs per claim (Chart 3.2) were offset by higher accident frequencies (Chart 3.3). 9

12 Average cost per claim ( ) Private Motor Insurance Statistics Chart 3.2: Average cost per claim, year 1 development; ,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, Comprehensive cover Third party fire and theft cover The second statistic is termed average cost per claim. This is calculated as an average of the costs incurred, measured on a per claim basis. This statistic is visually represented in Chart 3.2 which illustrates that between 1999 and 2002 average costs had followed a general upward trend reporting increases of 37 per cent for comprehensive cover and of 44 per cent for third party fire and theft cover. Between 2002 and 2007, however, average costs decreased by 25 per cent for comprehensive cover and by 34 per cent for third party fire and theft cover. This brought the average cost per claim to its lowest level in seven years for comprehensive cover and its lowest level in at least ten years for third party fire and theft cover. 9 After small increases were recorded in both categories in 2008, comprehensive cover recorded a decline in 2009, while third party fire and theft recorded a small increase. While there are many factors that influence the cost of claims, the results suggest that the operation of the Injuries Board is likely to have played a role in the reduction in the legal component of costs since Compilation of data in this format commenced in

13 Accident frequency per 100 policy years Private Motor Insurance Statistics Chart 3.3: Accident frequency per 100 policy years, year 1 development; Comprehensive cover Third party fire and theft cover For the 2007 accident year, the index for year 1 cost development shows that average cost per policy has increased by 7 per cent for comprehensive cover as the impact of rising accident frequency outpaced the benefits accrued from lower average claim costs. However, average cost per policy for third party fire and theft fell by 8 per cent in 2007 as the impact of increased accident frequency is more than offset by lower average costs per claim. In the context of further increases in accident frequency and no further reductions in the average cost per claim, results for the 2008 accident year show a substantial increase in the claim cost per policy for both cover types. During 2009, accident frequency declined, and the year 1 cost development for both cover types also declined. However, average cost per claim decreased during 2009 for comprehensive cover, but increased marginally for third party fire and theft cover. The number of large claims is also an important cost and risk indicator for the industry and may also contribute to changes in average cost per claim. The general downward trend in large claims is probably explained by the downward trend in the reported number of serious injury accidents on Irish roads in recent years. However, there is evidence to suggest that the declining trend in accident frequency has levelled off. The large claim rate (defined as claims in excess of 100,000 per 100,000 policy years) at year 1 development is shown in Chart This data is based on companies that submitted full claims data between 1997 and Prior to 2001 not all companies submitted full claims data, therefore, a data break exists. 11

14 Large claim rate per 100,000 policy years Private Motor Insurance Statistics Results show the rate for third party fire and theft cover at 22 in 2009, increased by one percentage point, while comprehensive cover, reporting 15 large claims per 100,000 policy years, remained at 2008 levels. Chart 3.4: Large claim rate per 100,000 policy years, year 1 development; Comprehensive cover Third party fire and theft cover Average claim costs per policy shown in Table 3.1 illustrates the development pattern of claim costs for each accident year. Accident years show claim costs per policy up to their fifth year of development, accident year 2006 is in its fourth year of development, accident year 2007 is in its third year of development, accident year 2008 is in its second year of development, and finally, accident year 2009 is in its first year of development. 12

15 Table 3.1: Average claim costs per policy by development year; Comprehensive Cover Development Year: Year 1 Cost Year 2 Cost Year 3 Cost Year 4 Cost Year 5 Cost Accident Year: Third Party Fire and Theft Cover Development Year: Year 1 Cost Year 2 Cost Year 3 Cost Year 4 Cost Year 5 Cost Accident Year: For comprehensive cover, average claim cost per policy at year 1 development fell from a high of 465 in 1997 to its lowest level of 280 in A general upward trend since This data is based on companies that submitted full claims data between 1997 and Prior to 2001 not all companies submitted full claims data, therefore, a data break exists. 13

16 Percentage of claim costs settled Private Motor Insurance Statistics was reversed in 2009, with the average claim cost down 11 per cent on 2008 to 331 per policy year. Third party fire and theft cover has followed a similar pattern to comprehensive cover, with average claim cost per policy at year 1 development falling from its highest level in 1997 of 453 to its lowest level in 2003 of 259. Following a general upward trend since 2003, a fall of 9 per cent to 318 per policy was reported in Average claim cost per policy for years 2, 3, 4 and 5 development have, in general, followed a similar pattern with falling average claim costs between 1997 and 2003 followed by general increases in recent years. Chart 3.5: Percentage of claim costs settled, year 1 development; Comprehensive cover Third party fire and theft cover The ratio of estimated costs to total costs (estimated and settled) is an indicator of the maturity of the settlement process. The percentage of costs that are finalised one year after an accident is shown in Chart 3.5. It shows that the settlement rate remained close to 40 per cent for comprehensive cover and close to 20 per cent for third party fire and theft cover up to Since then, however, both types of cover reported an increase in the percentage of costs settled in year 1 development. For comprehensive cover, year 1 settlement rates reached a level of 53 per cent in 2008, but this fell to 49 per cent in Third party fire and theft cover saw year 1 settlement rates increase substantially to reach a level of 44 per cent in 2008, but this declined in 2009, to 40 per cent. 12 This data is based on companies that submitted full claims data between 1997 and Prior to 2001 not all companies submitted full claims data, therefore, a data break exists. 14

17 Percentage of claim costs settled Private Motor Insurance Statistics The general increase in year 1 settlement rates in recent years suggest that the Injuries Board in addition to having a beneficial impact on average claim costs as outlined in Section 3.2 also may have a positive impact on the settlement rate of claims. This observation is further strengthened by the fact that the rate of increase is higher for third party fire and theft claims which contain a higher proportion of legal costs and for which we would, therefore, expect the intervention of the Injuries Board to have had a greater impact. In 2009 the average timeframe from the date of the respondent consenting to the Injuries Board assessing the claim to the date of the award was six and a half months. Prior to the introduction of the Injuries Board, cases took on average 36 months to be resolved through the litigation system. 13 Furthermore, the Civil Liability and Courts Act 2004, which reduces the time for a claim to be lodged to two years following the date of the accident, may also have an impact on the cost development distribution. In addition, since 2006 substantial increases have occurred in the percentage of year 2 finalised costs for third party fire and theft claims. Chart 3.6 shows that up to 2005 the percentage of year 2 costs settled was between 30 to 40 per cent. However 2007 and 2008 years suggest that the settlement rates have increased to over 55 per cent. Comparing claim costs on a percentage settled rather than a year-end basis may become more appropriate in future years if settlement rates are seen to depart from their historical trends. Chart 3.6: Percentage of year 2 costs settled, third party fire and theft cover, See 15

18 It should also be noted that while comprehensive cover settlement rates have also increased year-on-year since 2002, year settlement rates are broadly consistent with previous years. However, as mentioned earlier, the expectation is that the intervention of the Injuries Board would have had a greater impact on third party fire and theft costs due to the higher proportion of legal costs traditionally associated with this cover. 3.3 Surplus/Deficit Summary statistics for each accident year and associated development costs for the years 2001 to 2009 for both comprehensive and third party fire and theft cover are detailed in Tables 3.2 (a) and (b). In the data submission for 2009 a full five years claim cost development for the 2005 accident year is provided. Results show that total premium income in 2005 for comprehensive cover was 747 million 14 ; while year 1 development total costs were 359 million. However by year 5 development, i.e. in 2009, the total cost for 2005 accidents increased to 388 million. The corresponding data for third party fire and theft cover was 358 million for total premium income in 2005; while total costs increased from 133 million in year 1 to 184 million by year 5 development. These results indicate that after five years development, the 2005 accident year recorded a total surplus of 359 million for comprehensive cover; and 173 million for third party fire and theft cover. On a per policy basis this equates to a surplus of 320 for comprehensive cover; and 398 for third party fire and theft cover. 15 The results show that the trend of increasing surpluses reversed for the first time in 2004, with sizeable declines in The decrease in surplus, which was also evident for the years 2006 to 2008, is primarily explained by the reduction in premium income. Chart 3.7 shows that year 1 surpluses stabilised in 2009 after falling between 2004 and The average surplus per policy for comprehensive cover decreased from 584 in 2003 to 188 in 2009 equivalent to a 68 per cent drop. Again, this is explained primarily by 14 Total premium income for a given accident year will vary marginally over time with each data submission. 15 Surplus/deficit per policy (also called average surplus) equals total surplus/deficit divided by the number of policy years (also called exposure years). 16

19 Average surplus ( ) % Private Motor Insurance Statistics decreases in premium income (Table 3.2). Third party fire and theft cover reported a decrease of 60 per cent over the same period, to 295 per policy. Surpluses had declined for five successive years to 2008, after average surpluses in 2003 recorded a maximum of 584 and 746 for comprehensive cover and third party fire and theft cover, respectively. Chart 3.7: Average surplus and profitability differential for comprehensive cover and third party fire and theft cover, year 1 development; Comprehensive cover Third party fire and theft cover % differential The profitability differential of third party fire and theft cover compared to comprehensive cover maintained a general upward trend between 2001 and 2008, but decreased in 2009, when the differential shortened (shown in Chart 3.7). Results show that for year 1 development, the average surplus for third party fire and theft cover in 2001 was about 22 per cent higher than comprehensive cover. However, in 2009 a differential of 57 per cent was reported which was a decrease on the high of 80 per cent recorded in

20 Table 3.2(a): Summary Statistics by Development Year (Comprehensive Cover); Year Dev. Year Comprehensive Cover Premium Income Exposure Cost Paid Estimated Cost Total Cost Surplus Average Surplus Years % 2001@ ,763, , ,067, ,591, ,659, ,104, @ ,652, , ,156, ,225, ,383, ,269, @ ,151, , ,688, ,945, ,634, ,517, @ ,728, , ,385,000 87,294, ,679, ,049, @ ,728, , ,036,000 63,673, ,710, ,018, @ ,247, , ,097, ,358, ,456, ,791, @ ,925, , ,280, ,855, ,135, ,790, @ ,925, , ,934, ,431, ,365, ,560, @ ,925, , ,876,000 97,269, ,146, ,779, @ ,999, , ,502,000 78,670, ,172, ,827, @ ,050, , ,565, ,206, ,771, ,279, @ ,049, , ,630, ,415, ,045, ,004, @ ,049, , ,717, ,470, ,187, ,862, @ ,064, , ,190,000 88,928, ,118, ,946, @ ,064, , ,554,000 69,137, ,692, ,372, @ ,740,000 1,041, ,491, ,307, ,798, ,942, @ ,740,000 1,041, ,635, ,409, ,044, ,696, @ ,742,000 1,041, ,224, ,852, ,076, ,666, @ ,742,000 1,041, ,803,000 92,842, ,646, ,096, @ ,742,000 1,041, ,766,000 64,924, ,691, ,051, @ ,023,000 1,122, ,212, ,900, ,112, ,911, @ ,029,000 1,122, ,342, ,049, ,390, ,639, @ ,030,000 1,122, ,476, ,423, ,899, ,131, @ ,030,000 1,122, ,616, ,753, ,369, ,661, @ ,030,000 1,122, ,727,000 70,556, ,283, ,747, @ ,275,000 1,231, ,384, ,114, ,498, ,777, @ ,774,000 1,230, ,225, ,403, ,629, ,145, @ ,778,000 1,230, ,387, ,799, ,186, ,592, @ ,777,000 1,230, ,490,000 89,358, ,849, ,928, Costs Settled 2007@ ,457,000 1,343, ,344, ,037, ,382, ,075, @ ,456,000 1,343, ,578, ,756, ,334, ,122, @ ,456,000 1,343, ,414, ,092, ,505, ,951, @ ,030,000 1,432, ,879, ,390, ,270, ,760, @ ,030,000 1,432, ,387, ,900, ,287, ,743, @ ,810,000 1,485, ,956, ,724, ,679, ,131,

21 Table 3.2(b): Summary Statistics by Development Year (Third Party Fire and Theft Cover); Year Dev. Year Premium Income Exposure Cost Paid Estimated Cost Total Cost Surplus Average Surplus Years % Costs Settled Third Party Fire and Theft Cover 2001@ ,425, ,950 25,538,384 94,279, ,817, ,607, @ ,832, ,349 59,845,099 98,480, ,325, ,507, @ ,371, ,124 94,562,400 75,445, ,008,000 97,363, @ ,859, , ,124,000 52,875, ,000,000 93,859, @ ,859, , ,158,000 37,905, ,064,000 91,795, @ ,618, ,430 24,390, ,625, ,015, ,602, @ ,296, ,496 52,058,100 90,087, ,146, ,150, @ ,293, ,495 82,108,600 70,172, ,281, ,012, @ ,293, , ,092,000 53,562, ,655, ,638, @ ,312, , ,188,000 31,804, ,992, ,320, @ ,426, ,350 22,093,400 76,787,300 98,880, ,545, @ ,426, ,349 41,994,700 72,026, ,022, ,404, @ ,426, ,349 62,514,400 66,156, ,671, ,755, @ ,439, ,359 82,568,500 52,882, ,451, ,988, @ ,439, ,359 96,573,500 40,269, ,843, ,596, @ ,830, ,288 31,690,100 98,553, ,244, ,586, @ ,831, ,288 53,177,300 92,296, ,474, ,357, @ ,833, ,290 70,318,600 84,093, ,412, ,421, @ ,833, ,290 90,968,800 73,678, ,647, ,186, @ ,833, , ,823,000 53,741, ,565, ,268, @ ,651, ,761 42,496,700 90,790, ,287, ,364, @ ,652, ,761 56,956,800 91,609, ,566, ,086, @ ,652, ,761 87,677,400 75,971, ,649, ,003, @ ,652, , ,331,000 64,920, ,252, ,400, @ ,652, , ,105,000 50,133, ,239, ,413, @ ,724, ,047 50,030,000 94,117, ,148, ,576, @ ,667, ,949 77,974,600 96,338, ,313, ,354, @ ,671, , ,938,000 85,004, ,943, ,728, @ ,671, , ,283,000 64,157, ,441, ,230, @ ,295, ,491 54,656,600 70,814, ,471, ,824, @ ,295, ,492 85,603,400 64,472, ,076, ,219, @ ,295, , ,402,000 59,999, ,402, ,893, @ ,734, ,959 54,009,000 68,911, ,921,000 98,813, @ ,735, ,961 84,999,300 66,711, ,711,000 70,024, @ ,946, ,614 41,992,500 62,680, ,673,000 97,273,

22 In the following analysis, average earned premium and surplus/deficit for each market segment is assessed for accident years 2005 to Surplus is defined as the income available to the insurer after claim costs have been taken into account. In this way the surplus or deficit can be used as an indicator of yearly market performance and as an estimate of the relative market performance of each segment. Tables 3.3(a) and 3.3(b) show three variables by segment for each accident year 2005 to 2009, for comprehensive cover and third party fire and theft cover, respectively. 16 These variables are: (a) average earned premium per policy year; (b) average surplus/deficit year 1 development; (c) average surplus/deficit as at Results for the 2009 accident year show that all segments had a surplus for both types of cover after one year s claim cost development. In contrast with previous years where young policyholders with third party fire and theft cover showed the highest surpluses, young policyholders with comprehensive cover showed the highest surpluses in Male drivers aged between 17 and 20 years with provisional licences and comprehensive cover returned the largest surplus at 1,059 per policy. In contrast, a small surplus per policy of 27 was reported in the market segment comprising male policyholders with third party fire and theft cover aged over 70 years with provisional licences. Developments in average premium income were mixed across categories of policyholder for both comprehensive and third party fire and theft cover in The largest percentage increase and decrease in average premiums was recorded for third party fire and theft insurance. The largest percentage decrease was for male policyholders in the age bracket, with full driving licences. The largest percentage increase was for female policyholders in the age bracket, with provisional driving licences. Tables 3.3(a) and 3.3(b) also show the average surplus/deficit at year 1 development and at the latest year of development for all market segments between 2005 and The best performing segments in terms of industry surplus have been young policyholders and policyholders with provisional licences. some of the highest recorded surpluses. Young male provisional licence holders provide 16 Full cross-classification of the data by age, gender and licence status is provided in the Primary Tables in Appendix 3. 20

23 Table 3.3(a): Premium and surplus/deficit by market segment (comprehensive cover); Average Earned Premium Average Surplus/Deficit Average Surplus/Deficit Per Policy Year Year 1 Development Latest Year of Development @ Female Full 1,394 1,299 1,152 1,026 1, yrs Provisional 2,027 1,805 1,473 1,297 1,345 1,115 1, Male Full 2,253 2,109 1,848 1,747 1,707 1,140 1,395 1, , Provisional 3,121 2,879 2,376 2,121 2, , ,059 1, , Female Full yrs Provisional 1,357 1,203 1, Male Full 1,461 1,360 1,222 1,113 1, Provisional 2,255 2,032 1,691 1,469 1,419 1,463 1, , Female Full yrs Provisional Male Full Provisional 1,267 1,208 1, Female Full yrs Provisional Male Full Provisional Female Full yrs Provisional Male Full Provisional Over 70 Female Full yrs Provisional Male Full Provisional

24 Table 3.3(b): Premium and surplus/deficit by market segment (third party fire and theft cover); Average Earned Premium Average Surplus/Deficit Average Surplus/Deficit Per Policy Year Year 1 Development Latest Year of Development @ Female Full 1, yrs Provisional 1,664 1,454 1,170 1,058 1,130 1, Male Full 1,940 1,775 1,615 1,511 1, ,132 1, Provisional 2,996 2,606 2,157 1,864 1,914 1,450 1,400 1, Female Full yrs Provisional 1, Male Full 1,282 1,169 1, Provisional 2,101 1,742 1,408 1,228 1,231 1,496 1, , Female Full yrs Provisional Male Full Provisional 1,342 1,205 1, Female Full yrs Provisional Male Full Provisional Female Full yrs Provisional Male Full Provisional Over 70 Female Full yrs Provisional Male Full Provisional

25 % Private Motor Insurance Statistics 4. Motor Insurance Market 4.1 Market share The market share, based on exposure, held by each motor insurance company for comprehensive and third party fire and theft cover for 2008 and 2009 is shown in Charts 4.1(a) and 4.1(b). Companies LL and RR have the dominant share of the comprehensive market and third party fire and theft market, respectively. Recent years have seen one major trend in terms of market share; the growth of company RR. After recording a decline in 2008 in market share of 1 percentage point and 4 percentage points in the comprehensive and third party fire and theft insurance markets, respectively, company RR reversed these decreases in As a result of this, particularly in the third party fire and theft market, other companies lost market share in The growth in third party fire and theft share for RR was primarily at the expense of LL which reported a decrease of about 5 percentage points. Company LL also reported the largest drop of 4 percentage points in market share for comprehensive cover with companies AA and PP reporting declines of about 2 percentage points and 1 percentage point, respectively. Companies II, MC, UU and RR increased their share of the comprehensive market. Chart 4.1: Market share by company; 2008, 2009 (a) Comprehensive cover AA FF II JJ LL MC PP RR UU VV

26 % Private Motor Insurance Statistics (b) Third party fire and theft cover AA FF II JJ LL MC PP RR UU VV 4.2 Market Segmentation Comparing the overall market share for each submission (Chart 4.2) with the market share within each segment (Charts 4.3 and 4.4) is a useful visual indicator of the level of segmentation in the market. If each company underwrites policies in proportion to its market share, then each market segment should have a similar distribution of companies. For example, a company with an overall market share of 10 per cent should have underwritten 10 per cent of policies within each segment. Chart 4.2 shows the overall market share for each company in the comprehensive and third party fire and theft markets in Companies AA, FF, UU and JJ report a similar share of each market. However, companies II, LL, MC, PP and VV have a greater share of the comprehensive market while company RR reported a substantially higher share of the third party fire and theft market. The data in Chart 4.2 can be compared to data in Charts 4.3 and , which show the market share of each company by market segment in Company AA has an 8 per cent share of the comprehensive market and a 10 per cent share of the third party fire and theft market in However, it reports lower exposure for females, in general, and very low exposure for females under 30 in particular. 17 Companies VV and UU have a relatively small market share and were therefore not included in this analysis. 24

27 Chart 4.2: Market share by company; VV 80 UU 70 AA 60 FF % II JJ 30 LL 20 MC 10 PP 0 Comprehensive Third party fire and theft RR Company FF maintained its 6 per cent share of the comprehensive market and its 7 per cent share of the third party fire and theft market in Company FF s market share is concentrated in segments with female policyholders under 30 years, particularly for comprehensive cover. It also has relatively large market shares for female policyholders over 70 years of age, for both types of cover. Company II had a 16 per cent share of the comprehensive market and a 6 per cent share of the third party fire and theft market in This company is relatively dominant in the comprehensive market for females between the ages of 25 and 50 years. In contrast this company reports much smaller market share in most of the corresponding male segments. Company JJ reported a 13 per cent share of the comprehensive market and a 14 per cent share of the third party fire and theft market in In the comprehensive market it has a relatively large share of the segments containing policyholders under 20 years. As in 2008, company LL was the most dominant player in the comprehensive market (23 per cent) and the second largest player in the third party fire and theft market (17 per cent) in It concentrates its market share in segments with older policyholders. However, since 2007 it has increased its share of younger policyholders, particularly in younger female segments but as mentioned earlier this company reported declines in overall market share in

28 Company MC reported a 7 per cent share of the comprehensive market and a 3 per cent share of the third party fire and theft market in For both comprehensive and third party fire and theft cover this company generally reports a proportionally higher share of the older policyholder market and a correspondingly lower share in the younger policyholder market. Company PP with a 9 per cent share of the comprehensive market reports just a 2 per cent share of the third party fire and theft market. The market share for this company is, in gerneal, apportioned across all market segments containing policyholders over 24 years. Chart 4.3: Market share by company; comprehensive cover; 2009 over 70,Male,Provisional over 70,Male,Full over 70,Female,Provisional over 70,Female,Full 51-70,Male,Provisional 51-70,Male,Full 51-70,Female,Provisional 51-70,Female,Full 31-50,Male,Provisional 31-50,Male,Full 31-50,Female,Provisional 31-50,Female,Full 25-30,Male,Provisional 25-30,Male,Full 25-30,Female,Provisional 25-30,Female,Full 21-24,Male,Provisional 21-24,Male,Full 21-24,Female,Provisional 21-24,Female,Full 17-20,Male,Provisional 17-20,Male,Full 17-20,Female,Provisional 17-20,Female,Full RR PP MC LL JJ II FF AA % Company RR accounts for a 10 per cent share of the comprehensive market. In contrast, its share of the third party fire and theft market is considerably higher. In 2008, RR s market share stood at 33 per cent, but increased back to 37 per cent in 2009, the same proportion that was reported in It is clear from Chart 4.4 that company RR is particularly dominant in young policyholder (under 30 years) segments for third party fire and theft, where it reports at least a 50 per cent market share in many of these segments. This company is also very dominant in the young, provisionally licenced, male policyholder segments insured comprehensively. 26

29 Chart 4.4: Market share by company; third party fire and theft cover; 2009 over 70,Male,Provisional over 70,Male,Full over 70,Female,Provisional over 70,Female,Full 51-70,Male,Provisional 51-70,Male,Full 51-70,Female,Provisional 51-70,Female,Full 31-50,Male,Provisional 31-50,Male,Full 31-50,Female,Provisional 31-50,Female,Full 25-30,Male,Provisional 25-30,Male,Full 25-30,Female,Provisional 25-30,Female,Full 21-24,Male,Provisional 21-24,Male,Full 21-24,Female,Provisional 21-24,Female,Full 17-20,Male,Provisional 17-20,Male,Full 17-20,Female,Provisional 17-20,Female,Full RR PP MC LL JJ II FF AA % 4.3 Market Pricing Table 4.1 shows details of the average earned premium income per policy for each company for the 48 market segments based on the 2009 accident year. For convenience the two lowest premiums in each segment are highlighted. For companies with less than five policyholders in a given segment, no average premium is presented. An overall examination of the distribution of the lowest average premium for these eight companies shows: Company RR reports some of the lowest average premiums for the majority of policyholder segments under 30 years with third party fire and theft cover. Company PP reports some of the lowest average premiums for policyholders aged between 21 and 30 years for both cover types. Companies FF and JJ report no segments with the lowest average premiums. For company JJ this has been the position since Company AA has some of the lowest average premiums for males aged between 17 and 20 years for both types of cover. Company MC offers some of the lowest average premiums to policyholders between the ages of 25 and 50 for both comprehensive and third party fire and theft cover. Some of these market segments are the largest in the motor insurance market (see Chart 2.4). 27

30 Table 4.1: Average premium by company; 2009 AA FF II JJ LL MC PP RR Comprehensive 17-20,Female,Full 1,283 1, ,061 1, ,Female,Provisional 1,627 1,389 1,272 1,398 1,505 1,423 1,442 1, ,Male,Full 1,600 2,121 1,775 1,700 1,738 1,334-1, ,Male,Provisional 1,854 2,704 2,441 2,363 2,608-2,606 1, ,Female,Full ,Female,Provisional 1,047 1, ,081 1, ,Male,Full 1,197 1, , , , ,Male,Provisional 1,315 1,754 1,211 1,824 1,416 1,418 1,130 1, ,Female,Full ,Female,Provisional , ,Male,Full ,Male,Provisional 847 1, ,456 1, ,Female,Full ,Female,Provisional ,Male,Full ,Male,Provisional , ,Female,Full ,Female,Provisional ,Male,Full ,Male,Provisional over 70,Female,Full over 70,Female,Provisional over 70,Male,Full over 70,Male,Provisional Third party fire and theft 17-20,Female,Full 1, , ,Female,Provisional 1,321 1,292 1,100 1,321 1,227 1,322 1, ,Male,Full 1,353 1,962 1,683 1,638 1, , ,Male,Provisional 1,737 2,461-2,279 2,268-2,559 1, ,Female,Full ,Female,Provisional , ,Male,Full 988 1,053 1,047 1,207 1,019 1, ,Male,Provisional 1,221 1,661 1,343 1,741 1,527-1,219 1, ,Female,Full ,Female,Provisional ,Male,Full ,Male,Provisional 906 1, ,575 1, ,Female,Full ,Female,Provisional ,Male,Full ,Male,Provisional , ,Female,Full ,Female,Provisional ,Male,Full ,Male,Provisional over 70,Female,Full over 70,Female,Provisional over 70,Male,Full over 70,Male,Provisional

31 Standard deviation ( ) Standard deviation ( ) Private Motor Insurance Statistics In 2006 company LL reported the largest number (28) of segments with lower premiums. The 2009 returns, report that this has reduced to just one market segment. This may be a contributory factor to the decrease in market share reported earlier for this company. Company II reports some of the lowest premiums for 35 market segments; 21 of these segments represent female policyholders. The standard deviation of average premium per policy in 2009 for all companies for each market segment for comprehensive cover and third party fire and theft cover is plotted in Charts 4.5(a) and 4.5(b). The standard deviation is a measure of the variability of premiums within a segment. This type of analysis can be used as an indicator of competitiveness. High standard deviation within a segment means that the premium per policy within a segment is highly variable. Therefore, an individual policyholder would receive a wide range of premiums from different companies. The plots show that the variability of premiums generally decreases as age increases. Overall, the lowest variability was recorded for females with full licences and the highest variability was recorded for males with provisional licences for both types of cover. Chart 4.5: Standard deviation of average premiums ( ) within each segment; 2009 (a) Comprehensive cover (b) Third party fire and theft cover Age Female, full licence Female, provisional licence Age Male, full licence Male, provisional licence 29

32 Appendix 1 Background The primary objective of the Motor Insurance Advisory Board (MIAB) under SI299/1984 was to examine the level of accident frequency and costs and their consequent impact on the allocated premium differentials by driver profile. Findings were to be documented in the form of recommendations to the Minister for Enterprise, Trade and Employment. There were 18 members of the MIAB, which was established in September 1998 and was chaired by Ms. Dorothea Dowling. The first report of the MIAB was published in April 2002 and contained 67 recommendations. The subsequent Action Plan to Implement the Recommendations of the Report of the MIAB was published in August 2002 after the Board s 67 recommendations became part of the agreed Programme for Government. Of the 67 recommendations, 11 were originally addressed to the Financial Regulator. The areas covered by these recommendations included: - Transparency; - Accountability; - Public information; - Promotion of competition; and - Consumer protection. Of these 11 recommendations, two related directly to the statistical analysis of motor insurance premiums and claim costs: Recommendation 5: That the central gathering of statistics on motor insurance premium and claim costs by driver profile be formalised by the Financial Regulator, including monitoring by the new insurance regulator of data quality, to ensure that reliable information is available to inform public policy in future years and to improve market intelligence as provided for in EU Regulation No. 3932/92.

33 Recommendation 6: That the Financial Regulator supply regular market-wide statistics on motor premium differentials to the Equality Authority to assist in assessing insurers compliance with the Equal Status Act 2000 and subsequently its proposed extension. The MIAB s term of office ended on 30 September 2004 when the chairperson presented a report to the Tánaiste and Minister for Enterprise, Trade and Employment. The Financial Regulator was then charged with the responsibility of continuing the statistical work of the MIAB. The Central Bank s Statistics Department has compiled the Statistics on behalf of the Financial Regulator. From 2008, the Central Bank s Statistics Department continued in this role but the data is now published by the Central Bank of Ireland, as part of the reorganisation of the institution under the Central Bank Reform Act, This Act created a new single unitary body the Central Bank of Ireland responsible for both central banking and financial regulation. The new structure replaces the previous related entities, the Central Bank and the Financial Services Authority of Ireland and the Financial Regulator. 31

34 Appendix 2 Data Data submission The data in this report is based on submissions from the following companies which were accompanied by written certification from individual insurers on the completeness and accuracy of the data: Chartis Direct Allianz AXA FBD Aviva Quinn Insurance RSA Travelers Zurich The submissions were provided on CD in raw disaggregated format listing individual policy and claims records for all categories of cover, i.e. comprehensive, third party fire and theft and third party only. A total of 20 variables were associated with each individual record in accordance with an MIAB specification as described below. Data quality is of a high standard. Problems identified by the MIAB with cost statistics, gender classification and licence status have, to a large extent, been resolved. Data file specification 1. Company identifier Coded as two character code 2. Policy identifier Unique code identifying the policy 32

35 3. Claim identifier Unique code identifying the claim. The field will be present only for policies which have an associated claim 4. Earned premium income The daily premium multiplied by the exposure in days 5. Exposure The exposure to risk measured in vehicle years (i.e. one vehicle year of exposure equals one vehicle on full cover for one year or two vehicles for six months) 6. Cover Identifies the type of vehicle cover: 0 = not available 1 = comprehensive 2 = third party fire and theft 3 = third party 99 = other (e.g. no road risk, etc.) 7. District This is a three character code: 000 = not available 001 = Dublin area 002 = other loaded areas 003 = rest of Ireland 777 = excluded from the analysis 8. Year of make Year of manufacture (If year of make is after current year it is defaulted to be 0000): 0000 = not available YYYY = year of manufacture 7777 = excluded from the analysis 33

36 9. Age of policyholder 00 = not available = age of policyholder 90 = age 90 or more 99 = non personal 777 = excluded from the analysis 10. Sex of policyholder 0 = not available 1 = male 2 = female 3 = non personal policyholder 7 = excluded from the analysis 11. Inexperience loading 0 = not available 1 = provisional licence loading 2 = inexperience loading 3 = both provisional licence and inexperience loading 4 = neither provisional licence nor inexperience loading 12. Claim/no claim indicator 0 = no claim 1 = claim 13. Occurred/intimated 18 1 = occurred before 2009 and notified in = occurred in Claims status indicator 1 = outstanding claim 2 = settled claim 18 The total of those coded 1 and 2 will give the number of claims intimated in The total of those coded 2 will give the number of claims occurred in

37 15. Date of accident Coded as DD-MM-YYYY 16. Date of last settlement Coded as DD-MM-YYYY 17. Age of driver 00 = not available = age (if driver is not the policyholder) 90 = age 90 or more (if driver is not the policyholder) 98 = driver is the policyholder 99 = no driver involved 7777 = excluded from the analysis 18. Total payments to date 19. Estimated amount outstanding 20. Total cost of claims (payments plus outstanding) 35

38 Appendix 3 Primary Tables The tables in the link below contain the primary results from the analysis of the submission. Since 2001 virtually all companies submit this data. See The tables describe an accident year and its associated costs as at the end of 2009 for all cover, comprehensive cover, third party fire and theft cover and third party only cover. Therefore: accident year 2005 is in its 5 th year of claim cost development in 2009 i.e. 2005@2009 accident year 2006 is in its 4 th year of claim cost development in 2009 i.e. 2006@2009 accident year 2007 is in its 3 rd year of claim cost development in 2009 i.e. 2007@2009 accident year 2008 is in its 2 nd year of claim cost development in 2009 i.e. 2008@2009 accident year 2009 is in its 1 st year of claim cost development in 2009 i.e. 2009@2009 Appendix 4 Development Tables See 36

39 T F [email protected] Bosca PO 559, Sráid an Dáma, Baile Átha Cliath 2, Éire PO. Box No 559, Dame Street, Dublin 2, Ireland 37