Private Motor Insurance
Statistics
Contents
Executive Summary ... 1
1. Introduction ... 3
2. General Market Overview ... 4
3. Premium Income and Claim Cost Development ... 7
3.1 Premium income ... 8
3.2 Claim Costs ... 9
3.3 Surplus/Deficit ... 16
4. Motor Insurance Market ... 23
4.1 Market share ... 23
4.2 Market Segmentation... 24
4.3 Market Pricing ... 27
Appendix 1 – Background ... 30
Appendix 2 – Data ... 32
Appendix 3 – Primary Tables ... 36
1
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 2008. 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 2009. 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 2002-2004. 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 2008. For comprehensive cover, average cost
1
per policy fell by 11 per cent in 2009, which was the largest annual decrease since 2003. 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 2003. 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 2009.
Average surplus per policy2, 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 2009. 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
3
cent observed between 2001 and 2005. In addition, 65 per cent of third party fire and theft accidents occurring in 2007 were reported as settled as at year-end 2009. 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
3This 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
2006@2009
2007@2009
2008@2009
2009@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
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 2.1.5
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 2009. 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); 1997-2009
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).
5
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 1997. 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 1997. Third party only cover comprises a
small part of the insurance market (1 per cent) with less than 21,300 policies in 2009.6
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); 1997-2009
Chart 2.3: Percentage exposure (third party fire and theft cover); 1997-2009
6
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:
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
17-20,Female,Full 17-20,Female,Provisional 17-20,Male,Full 17-20,Male,Provisional 21-24,Female,Full 21-24,Female,Provisional 21-24,Male,Full 21-24,Male,Provisional 25-30,Female,Full 25-30,Female,Provisional 25-30,Male,Full 25-30,Male,Provisional 31-50,Female,Full 31-50,Female,Provisional 31-50,Male,Full 31-50,Male,Provisional 51-70,Female,Full 51-70,Female,Provisional 51-70,Male,Full 51-70,Male,Provisional over 70,Female,Full over 70,Female,Provisional over 70,Male,Full over 70,Male,Provisional Policy Years Comprehensive
7
3. Premium Income and Claim Cost Development
7This 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 2009. 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. 1997 = 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. 2001 = 100).
7
3.1
Premium income
Chart 3.1 illustrates the significant increase in premium income for both categories of cover between 1997 and 2002. 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 2002. 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; 1997-20098 (a) Comprehensive cover
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).
9
(b) Third party fire and theft cover
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 2005-2007 showed marginal changes as the benefits of lower average costs per claim (Chart 3.2) were offset by higher accident frequencies (Chart 3.3).
Chart 3.2: Average cost per claim, year 1 development; 1997-200910
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 2005.
9
Compilation of data in this format commenced in 1997.
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 A ve rag e c o st p e r cl ai m ( € )
11
Chart 3.3: Accident frequency per 100 policy years, year 1 development; 1997-200910
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 3.4.
10
This data is based on companies that submitted full claims data between 1997 and 2009. Prior to 2001 not all companies submitted full claims data, therefore, a data break exists.
0 2 4 6 8 10 12 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 A cc id e n t fr e q u e n cy p e r 100 p o lic y year s
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; 1997-200910
Average claim costs per policy shown in Table 3.1 illustrates the development pattern of claim costs for each accident year. Accident years 1997-2005 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.
0 5 10 15 20 25 30 35 40 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Lar ge c lai m r ate p e r 100, 000 p o lic y ye ar s
13
Table 3.1: Average claim costs per policy by development year; 1997-200911
Comprehensive Cover
Development Year:
Year 1 Cost Year 2 Cost Year 3 Cost Year 4 Cost Year 5 Cost
Accident Year: 1997 465 537 584 608 623 1998 429 530 569 592 608 1999 410 517 560 579 584 2000 430 525 553 550 550 2001 374 429 435 430 433 2002 352 373 381 385 391 2003 280 301 309 317 325 2004 304 298 310 320 321 2005 320 328 342 343 346 2006 301 314 329 338 2007 323 354 376 2008 374 412 2009 331
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: 1997 453 579 648 688 711 1998 435 574 671 717 754 1999 415 578 648 697 705 2000 424 598 656 697 721 2001 380 504 543 554 560 2002 349 397 425 448 446 2003 259 299 337 355 359 2004 315 352 374 398 405 2005 306 341 376 404 423 2006 320 387 421 442 2007 295 353 403 2008 349 431 2009 318
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 2003. A general upward trend since 2003
11
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 2009. 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; 1997-200912
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 2004. 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 2009. 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 2009. Prior to 2001 not all companies submitted full claims data, therefore, a data break exists.
0 10 20 30 40 50 60 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Per ce n tage o f c lai m c o sts se tt le d
15
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, 1997-2008
It should also be noted that while comprehensive cover settlement rates have also increased year-on-year since 2002, year 2 2008 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 million14; 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 2005. 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 2008. 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
17
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; 2001-2009
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 2008.
0 10 20 30 40 50 60 70 80 90 0 100 200 300 400 500 600 700 800 2001 2002 2003 2004 2005 2006 2007 2008 2009 % A ve rag e su rp lu s (€ )
Table 3.2(a): Summary Statistics by Development Year (Comprehensive Cover); 2001-2009
Year
Dev. Year
Premium
Income Exposure Cost Paid
Estimated
Cost Total Cost Surplus
19
Table 3.2(b): Summary Statistics by Development Year (Third Party Fire and Theft Cover); 2001-2009
Year
Dev. Year
Premium
Income Exposure Cost Paid
Estimated
Cost Total Cost Surplus
Average Surplus
Costs Settled € Years € € € € € %
Third Party Fire and Theft Cover
In the following analysis, average earned premium and surplus/deficit for each market segment is assessed for accident years 2005 to 2009. 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 2009.
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 2009. 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 2009. 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 25-30 age bracket, with full driving licences. The largest percentage increase was for female policyholders in the 21-24 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 2009. The best performing segments in terms of industry surplus have been young policyholders and policyholders with provisional licences. Young male provisional licence holders provide some of the highest recorded surpluses.
16
Table 3.3(a): Premium and surplus/deficit by market segment (comprehensive cover); 2004-2009
€ Average Earned Premium Average Surplus/Deficit Average Surplus/Deficit
Per Policy Year Year 1 Development Latest Year of Development
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Market segment: @2009 @2009 @2009 @2009 @2009 17-20 Female Full 1,394 1,299 1,152 1,026 1,008 830 542 409 154 330 789 416 17 42 330 yrs Provisional 2,027 1,805 1,473 1,297 1,345 1,115 1,025 731 419 491 703 759 518 271 491 Male Full 2,253 2,109 1,848 1,747 1,707 1,140 1,395 1,150 644 804 1,023 953 769 260 804 Provisional 3,121 2,879 2,376 2,121 2,138 937 1,292 980 700 1,059 1,154 724 357 327 1,059 21-24 Female Full 902 825 724 660 643 384 455 343 161 229 365 397 281 145 229 yrs Provisional 1,357 1,203 1,012 892 925 853 701 426 273 343 749 642 301 140 343 Male Full 1,461 1,360 1,222 1,113 1,071 736 909 724 473 456 539 785 642 321 456 Provisional 2,255 2,032 1,691 1,469 1,419 1,463 1,241 744 519 734 1,074 936 385 296 734 25-30 Female Full 645 596 543 498 485 327 290 222 104 159 316 294 197 87 159 yrs Provisional 958 890 790 694 699 494 358 335 174 223 448 348 282 -157 223 Male Full 919 854 785 723 691 515 523 382 217 200 469 499 310 156 200 Provisional 1,267 1,208 1,084 941 912 618 581 452 261 313 463 547 343 185 313 31-50 Female Full 545 490 456 428 430 280 227 168 116 128 277 192 146 112 128 yrs Provisional 749 704 661 596 594 360 314 167 147 147 365 232 63 112 147 Male Full 668 608 569 532 528 337 317 240 145 175 324 269 186 114 175 Provisional 890 849 796 720 712 436 383 293 73 239 336 281 250 -29 239 51-70 Female Full 508 452 416 394 404 277 233 208 168 144 258 224 181 111 144 yrs Provisional 692 638 585 535 540 338 333 273 199 211 324 270 183 182 211 Male Full 613 551 506 475 480 363 312 271 197 236 349 293 224 180 236 Provisional 839 761 704 643 632 465 128 353 335 275 382 125 233 296 275
Over 70 Female Full 517 472 446 425 441 50 257 212 -7 170 7 229 171 7 170
Table 3.3(b): Premium and surplus/deficit by market segment (third party fire and theft cover); 2004-2009
€ Average Earned Premium Average Surplus/Deficit Average Surplus/Deficit
Per Policy Year Year 1 Development Latest Year of Development
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Market segment: @2009 @2009 @2009 @2009 @2009 17-20 Female Full 1,062 984 873 847 823 773 627 602 479 341 786 593 445 424 341 yrs Provisional 1,664 1,454 1,170 1,058 1,130 1,092 969 542 423 412 865 574 300 245 412 Male Full 1,940 1,775 1,615 1,511 1,474 921 1,132 1,038 712 726 14 599 771 287 726 Provisional 2,996 2,606 2,157 1,864 1,914 1,450 1,400 1,072 813 891 816 451 567 382 891 21-24 Female Full 720 652 589 564 552 476 483 360 247 243 412 429 240 153 243 yrs Provisional 1,120 954 783 712 767 782 635 515 266 255 644 465 404 103 255 Male Full 1,282 1,169 1,078 984 918 803 809 745 483 472 673 654 588 343 472 Provisional 2,101 1,742 1,408 1,228 1,231 1,496 1,122 791 632 100 1,227 619 418 465 100 25-30 Female Full 559 516 490 481 465 331 352 323 233 187 261 257 259 120 187 yrs Provisional 865 781 680 620 634 631 545 235 293 383 495 496 199 225 383 Male Full 832 799 759 711 657 544 509 465 318 291 405 380 310 195 291 Provisional 1,342 1,205 1,022 907 885 916 798 632 493 484 827 632 437 367 484 31-50 Female Full 469 428 410 405 416 332 175 220 184 218 312 149 161 219 218 yrs Provisional 708 651 601 557 557 398 320 349 263 327 197 178 267 214 327 Male Full 569 540 523 506 502 352 249 301 230 218 263 204 213 153 218 Provisional 947 876 799 724 715 558 160 400 430 292 418 285 268 374 292 51-70 Female Full 443 394 370 357 373 306 281 189 38 239 268 215 243 116 239 yrs Provisional 602 549 502 454 444 430 266 335 272 316 364 223 311 92 316 Male Full 510 464 433 412 418 331 338 269 108 275 289 308 239 75 275 Provisional 794 709 654 597 574 470 176 365 358 273 487 185 286 369 273
Over 70 Female Full 418 383 369 360 376 312 281 219 242 177 298 -44 250 219 177
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 2009. As a result of this, particularly in the third party fire and theft market, other companies lost market share in 2009. 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
(b) Third party fire and theft cover
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 2009. 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 4.417, which show the
market share of each company by market segment in 2009. 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 2009. 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.
25
Chart 4.2: Market share by company; 2009
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 2009. 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 2009. 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 2009. 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 2009. 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 2009. 0 10 20 30 40 50 60 70 80 90 100
Comprehensive Third party fire and theft
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 2009. 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
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 2007. 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.
27
Chart 4.4: Market share by company; third party fire and theft cover; 2009
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 2005.
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).
Table 4.1: Average premium by company; 2009 AA FF II JJ LL MC PP RR € € € € € € € € Comprehensive 17-20,Female,Full 1,283 1,033 894 970 1,061 1,182 - 951 17-20,Female,Provisional 1,627 1,389 1,272 1,398 1,505 1,423 1,442 1,168 17-20,Male,Full 1,600 2,121 1,775 1,700 1,738 1,334 - 1,658 17-20,Male,Provisional 1,854 2,704 2,441 2,363 2,608 - 2,606 1,906 21-24,Female,Full 918 699 532 708 657 678 647 647 21-24,Female,Provisional 1,047 1,052 770 1,081 1,034 905 711 836 21-24,Male,Full 1,197 1,092 957 1,164 996 1,035 978 1,034 21-24,Male,Provisional 1,315 1,754 1,211 1,824 1,416 1,418 1,130 1,226 25-30,Female,Full 554 608 399 632 497 470 489 513 25-30,Female,Provisional 673 927 595 1,024 827 699 557 693 25-30,Male,Full 710 713 584 875 693 544 656 705 25-30,Male,Provisional 847 1,155 973 1,456 1,061 760 780 841 31-50,Female,Full 501 563 341 606 404 377 416 456 31-50,Female,Provisional 574 658 489 871 722 548 447 626 31-50,Male,Full 560 631 416 710 490 411 535 636 31-50,Male,Provisional 665 747 683 1,117 795 513 650 723 51-70,Female,Full 525 492 324 519 357 367 399 379 51-70,Female,Provisional 579 532 402 666 616 601 396 501 51-70,Male,Full 591 584 371 636 430 394 510 533 51-70,Male,Provisional 664 595 562 841 662 535 569 606 over 70,Female,Full 478 452 391 506 418 417 452 430 over 70,Female,Provisional 491 567 442 614 626 494 469 522 over 70,Male,Full 549 550 438 626 489 450 535 490 over 70,Male,Provisional 532 642 534 735 660 513 634 664
Third party fire and theft
29
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
0 50 100 150 200 250 300 350 400 Stan d ar d d e vi ation ( € ) Age
Female, full licence Female, provisional licence
0 50 100 150 200 250 300 350 400 Stan d ar d d e vi ation ( € ) Age
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:
31
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.
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
33
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
9. Age of policyholder 00 = not available
17-89 = 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/intimated18
1 = occurred before 2009 and notified in 2009 2 = occurred in 2009
14. Claims status indicator 1 = outstanding claim 2 = settled claim
18
35
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
17-89 = 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
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 http://www.centralbank.ie/polstats/stats/motorins/Pages/Data.aspx
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 5th
year of claim cost development in 2009 i.e. 2005@2009
accident year 2006 is in its 4th
year of claim cost development in 2009 i.e. 2006@2009
accident year 2007 is in its 3rd
year of claim cost development in 2009 i.e. 2007@2009
accident year 2008 is in its 2nd
year of claim cost development in 2009 i.e. 2008@2009
accident year 2009 is in its 1st
year of claim cost development in 2009 i.e. 2009@2009
Appendix 4 – Development Tables
Private Motor Insurance Statistics
37
T +353 1 224 2000 F +353 1 894 4616 www.centralbank.ie statsadmin@centralbank.ie
