Motor insurers in the Irish Republic have been warned that the government may introduce price controls, due to concerns about the escalating cost of cover.
Deputy prime minister Mary Harney described the rate of increase in premiums, which will be 15% to 20% this year, as “very worrying”.
She said: “That is more than three times the annual rate of inflation, and I don't believe it is justified or acceptable.”
The Irish Insurance Federation (IIF) has confirmed the latest rise in premiums, but insists that the high cost of cover in the republic reflects the cost of settling claims, plus the growing problem of uninsured drivers. According to the IIF's incoming president, Roy Keenan, IR£57 (£47) of every premium paid goes to meet the cost of claims against uninsured drivers.
However, speaking at the IIF's annual lunch in Dublin, Harney made it clear that, while she could sympathise with the explanations offered, she didn't necessarily accept them.
Later, in a media briefing, she warned that if market forces in the industry didn't deliver price competition on premiums, the government would have to look at “whatever legal steps we can take”.
Harvey said that, in general, she didn't favour a policy of price controls, but added: “I wouldn't rule anything out, because these kind of increases are certainly not justified.”
Harney, who is also the minister for Enterprise, Trade and Employment, reminded insurers that to help cut the cost of settling claims, the Irish government is introducing a Personal Injuries Assessment Board, which will decide cases without the involvement of expensive legal teams. She said that fewer companies were offering cover in many areas of the business and that, with young drivers, the cost of insurance was “so astronomical as to be prohibitive”.
A key factor in deciding what happens next on premiums will be a final report to government from the Motor Insurance Advisory Board, an independent body examining the cost of cover offered by companies.
An interim report from the board infuriated the industry by claiming that insurers were making significant profits on almost every category of driver and potentially overcharging some groups.
Harney said the government attached “a great deal of importance” to the board's work and expected to receive its final report shortly.