This document describes changes to the method of calculating the Irish Consumer Price Index (CPI) and Harmonised Index for Consumer Prices (HICP). This change is for Home Insurance. It describes the methodology change and the reasons for this change.
| Details of Methodology Change | |
| Items affected | Home Insurance (COICOP 12.5.2)[1] |
| Weight of items affected |
0.2% of Irish CPI 0.03% of Irish HICP[2] |
| Date of change | January 2024 |
| Description |
1. Data Source. Changing how data is sourced for this index to web-scraping of data on insurance quotes, with more customer profiles and quotations collected. 2. Index Calculation. Reflecting the price of insurance for all customers, including those not renewing their insurance in the current month, in the calculation of the index. This change smooths out short-term changes in the index while preserving the long-term impact of price changes. |
The CSO collected up to December 2023 monthly quotations for representative profiles of customers from insurance companies. These profiles include relevant details about the home such as its location and value.
A price relative was calculated for each profile where the quotation for the current month was compared with the corresponding quotation for the previous month. The price relatives were combined to compute the overall month-on-month change for home insurance.
Data Source: Web-scraping quotations from insurers allows quotations to be collected for a greater number of more detailed profiles. Increasing the sample of representative customer profiles will lead to a higher quality index.
Index Calculation: The current calculation method treats price changes in home insurance as if applying to all customers in the current month. However, for customers who are not renewing their insurance in the current month, the price of insurance is the same as last month, and any price change will not affect them until their renewal date. The calculation method now takes account of this lag in the full impact of an insurance price change.
There are two changes to the method used up to December 2023.
1. The CSO will get quotations for representative customer profiles from web-scraping, collecting hundreds of representative quotes from each insurer.
2. The CSO will apply an adjustment factor to reflect the fact that changes in the cost of home insurance only affect a customer from their renewal date. This will result in a smoother index than previously, with less sudden monthly increases and decreases, but will not change the longer-term behaviour of the index.
The CSO has simulated the effect of these changes on the index over the years 2022 and 2023. This analysis estimated that if the new methodology had been used in that period, it would have resulted in the following difference in terms of percentage points:
The change in methodology described here will not lead to any revisions to the CPI or HICP.
Once the CPI indices are published, they are never revised.
The HICP can be revised in the case of a mistake or if there is new or improved information. Neither of these is the case with this change in methodology. See the EC Regulation number 1921/2001 for the HICP revisions policy.
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32001R1921&from=EN
[1] Classification of Individual Consumption According to Purpose (COICOP)
[2] The CPI weight is larger than the HICP weight because the CPI basket includes both insurance for the dwelling and insurance for contents, while the HICP basket only includes insurance for contents.