Insurance costs continued to rise significantly last month, almost single-handedly driving inflation to its highest level in three years.
Latest figures from the CSO yesterday showed a 0.5% annualised increase in consumer prices in July, although on a month-by-month basis prices dipped by 0.2%. Last month’s annualised inflation rate was the highest since July 2013.
While price areas such as education and restaurants/hotels grew, there were declines in the cost of energy, communications, transport, and household maintenance.
However, the big driver of inflation was a 6.6% annualised jump in the cost of miscellaneous goods and services — largely down to the rising costs of motor, health, and home insurance. Home insurance grew by just over 3% in the month and by 11.2% year-on-year, in July; while motor insurance was up by 0.2% on a monthly basis but by 38.3% on a yearly basis. Health insurance rose nearly 8% year-on-year, last month.
Another traditional riser, private rent, was up by just under 1% from June, but shot up by over 9% year-on-year. Rents are up around 40% in the past five years.
Regarding rents, Philip O’Sullivan, chief economist with Investec Ireland, said the consistent cost rises reflect “the ongoing mismatch between supply and demand in the residential property market” — a rising number of people chasing a diminishing stock of property.
“We would anticipate upward pressure on market rents in the absence of a meaningful expansion of [housing] output,” he added.
Insurance costs, Mr O’Sullivan said, are also likely to continue rising and are reflective of changes in the claims environment.
“If we’re going to have a sustainable and dependable insurance market we need to have a profitable one,” he said.
Insurance costs are also threatening corporate recovery, according to business representative body Isme, which is calling on the Government to prioritise business cost-competitiveness in the wake of the recent Brexit vote.
“We continue to be a high-cost economy, which is rapidly losing any competitive gains made since the recession,” said Isme chief executive Mark Fielding.
“Government has failed to act in the three main areas affecting business costs; insurance, bank interest and charges and legal fees.”
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