Motorists to be hit by 10% insurance hike
Fuel costs are also likely to increase after oil hit a year-high of $80 a barrel yesterday, on the back of growing demand for crude oil.
A survey by accountancy firm Deloitte found 85% of motor insurance companies expect to increase premiums next year. Half expect increases of between 5%-10%, while one-in-five have plans to hike premiums by more than 10%.
Last week, it was predicted householders face hikes of 40% or more in their mortgage protection premiums because so many have been claiming on their policies due to loss of earnings in the recession.
Mortgage protection policies were developed at a time when unemployment was at historically low levels and based on the level of forecasted claims at that time.
But an unprecedented surge in unemployment in Ireland since the beginning of 2008 has led to a dramatic increase in the number of claims submitted under unemployment cover on mortgage payment protection policies.
Claims incurred in the last nine months alone have exceeded all of the claims in the preceding five years.
Meanwhile, motor insurers saw their profits drop sharply to €35.1 million last year, just under a tenth of what they were in 2007. The cost of claims climbed 22% to €1.1 billion.
Despite this, insurance companies surveyed are more optimistic about trading conditions this year than at any point since 2006.
Many feel however that it will be difficult to implement the desired increases as customer loyalty is becoming severely reduced.
The survey also found that two out of three firms have noticed a significant increase in the numbers of policies sold through the internet.
“While consumers may balk at premium increases, it is very likely that insurance companies will pass on the rising cost of claims to customers,” partner with financial services at Deloitte Glenn Gillard said.
“Motor insurance has been one of the most competitively priced financial products available in recent years, leaving little room for companies to absorb additional costs.
“While companies need to continue to focus on internal costs, the greatest potential impact on price will be as a result of stricter enforcement of speeding and drink-driving laws and a crackdown on an emerging fraudulent claim culture.”
The majority of firms felt that although the fall-off in the new car sales would help to keep the average cost of claims down, the frequency of claims is set to rise.
