Insurance windfall to drive down costs

CHEAPER home and car insurance is on the way after figures released yesterday showed the Irish insurance industry had a bumper year last year, with combined profits of almost €750 million.

The Irish Insurance Federation (IIF), which represents the industry, said the combined profits for the 20 non-life insurance companies active in Ireland jumped from €226m to €747m last year, as motor claims fell and general conditions improved.

But the IIF said the sharp increase in profits should be seen in the context of losses suffered by insurers in recent years.

IIF chief executive Michael Kemp said the improved results were good news for both customers and shareholders in insurance companies.

Mr Kemp said personal and business customers had seen significant reductions in premiums over the past year, with motor premiums falling by an average of 22%.

Insurers could not cut premiums if they were loss-making, he said.

"Further reductions in premiums are likely to follow," Mr Kemp said. "This is in light of the implementation of a number of changes under the Government's insurance reform programme with the full support of the insurance industry."

The IIF said the Personal Injuries Assessment Board, which aims to cut the legal costs involved in injured parties taking claims for accidents, as well as improved road safety measures, would bring lower insurance premiums.

The IIF's anti-fraud hotline, which has handled more than 1,800 fraudulent claims since it was set up last year, would also reduce the €100m worth of false or exaggerated claims made each year.

Mr Kemp defended the industry against charges of profiteering.

Insurance was a cyclical business and insurance companies needed good years like 2003 to compensate for underwriting losses of €454m suffered in 2000, he said.

IIF figures claimed profits generated by insurance companies were on a par with other businesses.

The group called on the Government to press ahead with further measures to drive premiums down. These included setting up a dedicated garda road traffic unit, reforms governing civil liability and courts legislation, and greater enforcement of laws governing safety in the workplace.

The IIF welcomed initiatives such as penalty points but warned that traffic laws needed to be enforced to bring about better driver behaviour.

News that road deaths were ahead of last year's levels showed the need for better enforcement, said the IIF. "We still have one of the lowest levels of enforcement of road traffic law in Europe," said Mr Kemp.

Only 4.6% of premium income went towards profits for insurance companies, according to Mr Kemp. About 85% of premiums were used to process claims.

Property insurance generated higher profits as premiums increased in line with higher building costs. The IIF said insurers had suffered no significant claims arising from floods or storms since 2002 but warned a major storm would be "a significant setback" for the industry. It also criticised the Government's failure to bring in a national flood strategy since the 2002 storms.