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Irish Insurers Cross-Subsidizing Loss-Making Portfolios From Car Safety

Irish general insurance companies have been relying on car owners to cross-subsidize their loss-making non-motor portfolio.

This was among the “uncomfortable truths” The Irish Times revealed in a recent business commentary in line with the Central Bank’s release of its second annual data on public liability (PL), employers’ liability (EL), and commercial property insurance on Wednesday.

According to the news publication, the three lines – usually sold as a package deal – have been loss-making since 2015, which is an “unsustainable business model in anyone’s book” if it weren’t for insurance companies “effectively relying on motorists to cross-subsidize their loss-making books.”

Insurers in Ireland posted a €128 million operating loss in 2020 on PL, EL, and commercial property coverage, while motor insurance generated €163 million in profit, the news outlet noted.

“Of course, the profits being generated by motor insurers since 2017 followed a period of heavy losses in the middle of the last decade, as personal injury costs spiraled and the industry proved that it was woefully unable to price risk properly,” it added.

The Irish Times cited figures from the Central Statistics Office (CSO) showing that motor coverage costs have decreased by 42% since 2016, after soaring 70% in the previous three years, but only a fraction of the slide in Personal Injuries Assessment Board (Piab) awards has been passed on to consumers. The reason? A rise in claimants rejecting Piab awards in favor of litigation.

However, the “real key” to bringing down EL, PL, and commercial property insurance costs, according to the news outlet, lies in Minister for Justice Helen McEntee’s plans to amend the country’s laws to “balance a property owner or business’s duty of care with the personal responsibility of customers or members of the public.”

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