Motorists face further hike to their insurance

MOTORISTS will be hit with rising insurance costs again next year despite the fact the industry took in €38 million more in premiums in 2001 than it paid out.

The Irish Insurance Federation warned of further rises when launching a report yesterday. But the industry's own report reveals motorists are being made to pay the price for staggering management costs in the insurance industry.

Despite 6,000 less claims being made last year, and premiums exceeding pay-outs by €38 million, the industry still posted operational losses of €17.1 million.

The IIF's chief executive Michael Kemp said the deficit was explained by the added costs of commission and management expenses.

He defended having to further increase premiums in the short term on the grounds the industry paid out €1.42 billion in compensation pay-outs last year, up 5%.

Mr Kemp said any future increase was unlikely to be of the same scale and "may be of a lower order than in the recent past".

He denied any suggestion drivers were being punished for bad returns on underwriting business by insurance companies.

The average Irish driver now spends 40% more than the EU average on car insurance and double what the average US citizen pays.

The Consumers Association of Ireland said the warning about further rises in car insurance premiums was "the worst possible news for consumers".

CAI chief executive Dermott Jewell said: "The vast majority of motorists who have never had an accident get no attributable value for their safe driving. Instead, they are being asked to pay more each year for car insurance."

The IIF's own figures show the cost of motor insurance has risen by 41.7% in the past five years compared to the general inflation level of 15.3% over the same period.

Yesterday's report revealed that the performance of the motor insurance sector improved last year with insurers paying out 0.97 in claims for every €1 earned in premium compared to €1.09 in 2000.

"Not until the cost of claims facing insurers, particularly on personal injury claims, is controlled, will the year-on-year rise in premiums be stopped," said Mr Kemp.

The IIF predicted the Personal Injuries Assessment Board should lead to a reduction of 5-10% in the amount paid out in claims. The Law Society will publish a report today outlining their opposition to the PIAB.

Tánaiste Mary Harney intends to go ahead with her plan, announced last month, to reduce insurance costs. The PIAB will be appointed on an interim basis this month. Recommendations of the Motor Insurance Advisory Board will also be implemented.