Significant hikes in motor insurance for drivers has prompted Finance Minister Michael Noonan to order a review of the sector.
Costs to consumers were rising “very rapidly”, Mr Noonan told the Dáil as he said that the Central Bank and other agencies would help complete the review.
His decision comes after pressure from Fianna Fáil finance spokesman Michael McGrath who, for months, has highlighted the plight of drivers facing hefty rises.
“Somebody who paid a premium of €400 in 2014 will probably pay €650 to €700 after this year,” said Mr McGrath.
Outlining reasons for the insurance hikes, Mr Noonan said the frequency of claims by drivers had been rising, that the amounts claimed had also increased, and there had been a rise in legal costs. He also blamed the increases on a fall of investment, which had prompted companies to hike raise prices.
“Premiums are certainly rising very rapidly,” said Mr Noonan. “There will be a particular focus on motor insurance. Insurance in Ireland has been fraught for some time. The Central Bank has explained that for some time investment income was used by insurance companies to keep premiums lower and to bolster their positions.
“However, investment income has gone down now so the companies are raising their premiums.”
Mr Noonan has refused demands to reconstitute the Motor Insurance Advisory Board, which previously helped cut premiums by as much as 40% over a decade.
Instead, the review would take a number of months, he said. Mr Noonan also went as far as saying the economic recovery was partially to blame for motorists being hit with higher insurance costs.
“I am informed by both the insurance industry and the Central Bank that the frequency of claims has increased over the past year,” he said. “This is associated with improving economic conditions. They also state that the number of large claims has increased.”
However, Mr McGrath insisted that this would not go far enough in protecting consumers. Instead, some taskforce overseeing the sector was needed, he reiterated.
“There is no transparency in the sector,” said Mr McGrath. “Seven out of every 10 claims are settled out of court by insurance companies, with no register or evidence as to consistency with regard to the settlement of those claims. I welcome the fact that departmental officials will examine the sector but I ask the minister to go further and to formally re-establish the aforementioned board.”
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