Motor insurance: Three examples of why I believe it’s in need of reform

Do you know what the word on the street is as regards motor insurance claims?

It’s this.

If you need repair work to a vehicle that costs €2,000 or less, under no circumstances should you put in a claim. Instead, pay it out of your own pocket.

Reason being that you will end up paying out more than €2,000 in insurance premiums in the years ahead for losing your no-claims bonus.

That was the advice a friend of mine was given when her car suffered damage through no fault of her own. And the friend is not a younger driver, but older, experienced, and with a long history of no-claims

So, let’s spell this out. My friend paid out €550 for her motor insurance that year - a figure that has risen sharply in the past couple of years, and a transaction that is required by law, lest we forget.

And when something bad happened to her car, she still paid out for it herself. The motor insurance company pocketed her money, and will no doubt be seeking an increase for the next year, even with the no-claims bonus intact - just not an increase on the scale of the thousands that led to my friend making her decision to pay her bill herself.

Motor insurance appears to be a licence to print money; to take it in, and not have to give it out except under the most extreme circumstances - and even when you do have to give it out, you make sure you take it back again in the short to medium term.

Oh, and let’s not forget the excess amount on motor insurance - where you agree to pay the first part of any claim, which usually amounts to between €250 to €1,000.

Some business model that. And all with the backing of the legal apparatus of the State.

I’m telling you this: the motor insurance industry in this country appears to be dysfunctional and unfit for purpose, and it is in dire need of Government intervention.

And the above is just one example of the current state of motor insurance.

Want another one?

I know of a teenager who pranged his car - an incident in which nobody else was involved, thankfully.

The bill to repair it was to run into the thousands, and the teenager simply said on no account would he claim for the damage on his insurance. To him, the equation was simple: Either he stumps up himself or the vehicle is a write-off.

This, despite the fact he paid a whopping €2,500 for his first year’s insurance. He knew that a claim in his first year on the road would ultimately be ruinous when he sought motor insurance in the years ahead.

The lad ended up paying €3,000 from his savings and taking the hit.

In the immortal words of Ted Bundy in US sitcom Married With Children: “Insurance is like marriage. You pay, pay, pay, and you never get anything back.”

Want a third example of how our motor insurance industry runs these days?

This one involves another teenager who has just completed a year of impeccable driving on the roads. No accidents, no claims, no penalty points, nothing.

He had paid €2,500 for that first year’s insurance, and went back to the company to look for a quote for another year.

You would think he would be in line for a little reward, wouldn’t you? Certainly, you would assume that the vast sum you fork out in insurance for your first year of driving will never be as high again after a clean 12 months.

No, this lad was told his insurance would increase for the second year. INCREASE!

Perhaps, when the new government is finally formed, someone might take a look at the way this industry is being run.

The extraordinary thing is that the industry was until recently trumpeting great progress in reducing premiums, which was put down to Government reforms and opening the market to bring in more competition. The intervention of covid also had downward effect on premiums.

However, in 2023, motor insurance rose by 2% to €568, and the increase for 2024 is thought to have been at least a whopping 10%.

The latest figures from the CSO showed motor insurance premiums had risen at 15 times the rate of inflation, while the Alliance for Insurance Reform recently warned of higher premiums to come.

The industry has not been helped by large rises in the costs of repairing vehicles, due to global inflation. Recent figures from the CSO show these costs have risen at 10 times the rate of inflation.

However, when it comes to the fees the motor insurance industry charge, the ball is firmly in their court. After all, in 2023, these companies still made combined operating profits of €105m - a figure not to be sniffed at.

The three examples here all show an industry which is rapidly losing touch with its customers, there is an unfairness at the heart of it which opens the industry up to contempt.

One unfortunate consequence of this may be the rising number of uninsured drivers on our roads.

Driving a vehicle without insurance is rightly condemned by all decent people as akin to driving while drunk. However, soaring premiums and a belief that you will never make a claim anyway may be tempting some motorists, especially younger ones, to take the risk.

The number of claims related to accidents caused by drivers who were either uninsured or untraced rose 11% in 2023, and a survey conducted by Peopl Insurance last year found one in five people know someone who has got behind the wheel uninsured.

Paul Walsh, of Peopl Insurance, said he believes the Government should do more to look at what measures could be taken to bring down the cost of insurance for starter drivers.

“More needs to be done to discourage the uninsured driving in this country, as the message has clearly not got to everyone,” he said.

“It is unfair on drivers who rightly pay for their insurance that so many others are flouting the rules and driving uninsured. Ultimately, this costs honest drivers money.”

He is absolutely correct - and we should be wary of providing any excuses for motorists to avoid paying insurance. There is simply no excuse.

What the Government needs to do is to force down the premiums we have to pay, and make it easier for a claim to be made without the driver being ridiculously penalised.

The average premium for comprehensive motor insurance in Ireland now stands at over €600 a year.

In France, it is €534, but they have a third-party option which costs an average of just €156.

For decades in this country, motorists have been fleeced.

This is just another area ripe for reform.