Irish motor-claim costs up 10% as inflation drives damage expenses

Irish motor insurers estimate that the average claims cost per policy rose 10 per cent to €424 last year, driven by an increase in both vehicle damage and personal injury claims costs, according to Central Bank of Ireland data. The bank’s latest annual report on motor insurance shows that the average cost of damage claims per policy amounted to €197, up 6 per cent on the year, but almost double where it stood in 2019, before the pandemic. Insurers have highlighted in recent years how inflation has driven up the cost of labour and spare parts, while advances in smart technology have added to the complexity of modern vehicles. [ Irish motor insurers still pay 50% more than UK peers for third-party injury claimsOpens in new window ]The average cost of personal injury claims is ultimately expected to amount to €228 per policy in 2025, up 14 per cent on the year, but broadly in line with where they stood before the Covid-19 pandemic. READ MOREWhile personal injury guidelines, introduced in 2021, have been “effective in reducing awards for standard claims, insurers now expect an increase in the number of exceptionally large claims, and in the number of claimants going to court, driving up legal costs,” said the bank.[ Personal injury guidelines result in sharp fall in claimsOpens in new window ]The estimates of costs per policy also take into consideration reserves insurers have set aside for claims relating to 2025 that have not yet settled. The figures are based on the bank’s National Claims Information Database. Minister for Justice Jim O’Callaghan backed down in July last year from asking the Oireachtas to rubber stamp the Judicial Council’s plans to increase personal injury awards by almost 17 per cent, following an inflation spike after the awards were initially unveiled. While the Injuries Resolution Board (IRB) remains bound by the original guidelines, judges have more discretion to potentially depart from the guidelines. Assessing claims for less than €100,000 – which make up 94 per cent of cases – the bank found that the average compensation for a litigated case was €19,600. That’s lower than the average €19,734 award received from going through the less expensive and quicker IRB process. However, legal costs for litigated cases averaged €19,902 – more than the average compensation award – while those for Personal Injuries Resolution Board cases averaged €791. “When average compensation is virtually identical whether these claims are settled through litigation or the injuries resolution board, yet average legal costs in litigation exceed the compensation paid, it highlights the importance of how claims are resolved,” said Tracy Sheridan, a member of the board of the Alliance for Insurance Reform and owner of Kidspace play centres in Rathfarnham and Rathcoole in Dublin. “We need stronger action from Government to encourage more suitable claims to be resolved through the injuries resolution board, ensuring fair compensation without unnecessary litigation costs.”Microsoft president Brad Smith: Ireland is “well-positioned for future of AI”Insurance Ireland chief executive Moyagh Murdock said: “It is increasingly disheartening that the benefits delivered by insurance reform continue to be eroded by excessive legal costs.” The average premium per policy rose 4 per cent last year to €655, bringing the increase from 2022 to 18 per cent. However, the bank noted “encouraging signs” as premiums started to fall in the second half of last year. “This mirrors the trend seen in the [Central Statistics Office] consumer price index for insurance, which has also seen the average price of a premium continue to decrease into 2026,” it said. The ultimate objective of an insurance company is to pay out on all claims and make a profit, the bank said. In 2025, insurers took in more in premiums than they paid out in costs. This, coupled with investment income, is how insurers mainly make profit. The net profit of Irish motor insurers amounted to €89 million last year, equating to 5.7 per cent of gross earned premiums of €1.54 billion.