High cost of Irish insurance premiums a sore point

The controversy over the high level of vehicle insurance premiums in Ireland continues to rage.

The view of many market observers, including the ISME (Irish Small Medium Enterprises) , is that the Irish Motor insurance industry operates in a manner tantamount to a quasi cartel.

The Insurance industry attempted to rebuff this criticism yesterday when IIF Chief Executive, Mr Michael Kemp, said "the main factor is the cost of claims. Claims costs account for 87% of liability and motor insurers’ total expenditure, so the price charged for insurance cover must be heavily dependent on trends in claim costs. Recent reductions in investment returns puts further pressure on underwriters to increase premiums".

He rejected "patently untrue" suggestions that a cartel is in operation in any of the various insurance businesses in Ireland .

Mr Kemp added: "Liability and motor insurance are cheaper in other countries, as ISME point out, but this is because the cost of claims is significantly less in those countries than in Ireland. If it were true that excessive profits were being made, then new entrants to the market would undoubtedly undercut rates."

Mr Kemp suggested that the fact that new entrants to the Irish Insurance market choose not to undercut, of itself bears witness to the difficulties experienced by liability and motor insurers in the current claims environment.

This response reflects growing fears in the IIF that levels of dissatisaction at the high level of Irish insurance premiums are beginning to damage the insurance industry’s image.

An ISME spokesperson reacted by saying "the reference to a cartel in the Irish insurance industry was a carefully chosen term by ISME ,since it reflected the information that we have received from Irish insurance industry insiders. We have a situation where members of SME are reporting 28% premium hikes on the back of a no claims bonus, many enterprises are now going under-insured because they cannot afford to absorb the weight of the latest motor insurance premiums."