State must control rising premiums

CYNICISM rather than sympathy is likely to be the general reaction to warnings from the insurance industry that premiums are set to rise again.

For the third year running, the cost of insurance is continuing its relentless spiral. Hard-pressed motorists, especially young drivers, home and property holders, plus beleaguered employers, many now being put out of business by insurance demands, are facing ever increasing demands for cover.

The public can be forgiven for finding it difficult to comprehend how, despite paying higher premium charges last year, the insurance business recorded a loss of €17 million on motor insurance and €73.6 million on liability insurance. In the non-life sector earnings went up by 20%.

It is hard to reconcile such losses with the fact that premiums are going through the roof.

There is a marked contrast between the insurance climate in this country and the scenario in Europe and America. Ireland is way out of kilter.

In terms of hard cash, the average expenditure on insurance per head of population in Ireland is 40% more than the EU average and more than twice the average in the US.

Feelings of public cynicism towards the industry deepened recently when the Insurance Industry Federation (IIF) denied profiteering in the Irish market, rejecting claims of systematic overcharging of policyholders. This denial followed a report from the Motor Insurance Advisory Board showing the Irish market was more than 10 times more profitable than its British counterpart between 1983 and 1999.

The insurance watchdog found the pricing between different categories of driver to be inequitable, with excessive profits being made on the young female category. It suggested that women aged 17 to 25 may be paying 12 to 24% too much for motor insurance.

According to the IIF, however, Irish claims costs are running at twice those of UK claims. Insurers argue that while the number of accidents here is not as high as elsewhere in Europe, there are more claims and rewards are more generous.

Reiterating that its current difficulties are caused by mounting losses, the industry puts the impending premium rise down to increasing claims costs.

Undoubtedly, much of the blame for this situation is attributable to members of the legal profession whose fees for insurance claims cases are outrageously high.

The increase flagged yesterday by the Insurance Industry Federation heightens the urgency of reforming the industry with the specific aim of reducing premiums down.

Nobody will be surprised to see this initiative strenuously resisted by greedy elements of the legal profession who are now mounting a rearguard action to protect the honey pot of insurance cases. Laughing all the way to the bank, they stand accused of making grossly excessive profits from such cases.

According to the industry, the greatest proportion of increasing claims costs involves legal costs whereas commission and management costs have either decreased or remained the same.

In the short term, there is little doubt premiums will be increased once more. And in the longer term, unless the Government gives real teeth to the board being set up to assess personal injuries, it will become yet another paper tiger and insurance premiums will continue to escalate out of control.