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 said the rate of increase in premiums, which will be 15% to 20% this year, was more than three times the annual rate of inflation: "I don't believe it is justified or acceptable".

The Irish Insurance Federation (IIF) has confirmed the latest rise in premiums, but insists the high cost of cover in the republic reflects the cost of settling claims, plus the growing problem of uninsured drivers.

According to incoming IIF 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, 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".

Harney said she didn't favour a price control policy, but that she wouldn't rule anything out.