Costs will continue to rise, warns insurer

INSURANCE costs will continue to rise, a top Irish insurer warned yesterday.

Unless measures recommended by the Motor Insurance Advisory Board are implemented, costs will continue to rise, FBD Insurance chief executive Paul O'Callaghan warned.

"If there is money in insurance, why aren't more people coming into the Irish market," Mr O'Callaghan said.

He also rejected a suggestion in the MIAB report that the sector here was 10 times more profitable than the UK market.

"We are not making money on motor insurance or on public or employer liability insurance. We make money on property, which offsets the losses in the other areas," he said.

"People here get paid three times more on personal injuries claims than in the UK and take the attitude that the insurance company will pay up.

"But sooner or later, that cost makes its way back to the consumer."

For the same reason, the cost of employer liability and personal liability cover was destined to climb, Mr O'Callaghan said.

"Pointing the finger at the insurance sector is all very fine, but unless the other 57 points are also implemented, singling out the insurance industry will have no real impact on the cost of insurance.

"It is now essential that Government implements the remaining 57 recommendations at the earliest possible date, as insurance premium reductions will ultimately depend on the national measures taken to reduce the level of claims settlements and excessive associated costs."

Mr O'Callaghan was speaking at the launch of the group's interim results.

He said that over several years, the group had redirected its business so that it was now split 50/50 between insurance and leisure activities, particularly in the south of Spain, where it is involved in hotel, property and golf tourism.

For the half year ending June 30, FBD increased its net premiums by 24.2% to 114.6million euro.

Its operating profit was up from 12.9m euro to 17.3m euro, an increase of 34.1% over the period.

Earnings per share were up 39.1% to 35.03c, while a dividend per share of 9.10, an increase of 12.3%, has been declared.

Despite the comments about the insurance sector, FBD noted that all of the group's businesses insurance, financial services, property and hotel/leisure contributed to the growth for the year.

Mr O'Callaghan said in view of the state of the insurance sector, FBD would not expand its activities in those areas.

To suggest that the Irish motor sector was 10 times more profitable than the UK motor sector was a distortion of commercial reality, he said.

"The Department of Enterprise, Trade and Employment should have spoken out about that, but then government departments don't do that kind of thing," he said.