The Irish Insurance Federation (IIF) has warned that insurers will pull out of the motor market unless claims costs and road accident numbers are brought under control.
IIF chief executive Michael Kemp said motor insurance premiums in the Irish Republic were set to rise 20% over the next 12 months.
The rise follows a 22.2% increase in the 18 months to June. This prompted Irish Enterprise and Trade Minister Mary Harney to say price controls could be introduced.
Announcing the price hike warning, Kemp revealed that losses in the motor insurance sector last year almost doubled, reaching IR£228m (£181m).
Kemp added that unless current trends were reversed, some of the ten companies providing car cover
in the Irish market might hand in their licences and opt out of the business.
Kemp blamed the frequency of road accidents (another 11 lives were lost last weekend alone) and the spiralling cost of claims for the worsening state of the market. More than 40% of the cost of personal injury compensation went in fees to lawyers and expert witnesses, he said.
Kemp appealed to the Irish legal profession to support the cost-saving personal injuries assessment board planned by the government.
“Too often the scale of legal fees seems to be determined by the size of the award rather than the work involved,” he said.
“There is no reason why legal fees in the case of a IR£1m (£794,000) award should be ten times higher than for a IR£100,000 (£79,400) award.”
Kemp also singled out the Irish government's failure to prioritise road safety, particularly the introduction of a penalty point system for driving offences.
He pointed out the government's 2% levy on motor insurance premiums raised IR£20m (£15.9m) per year and this could be used to help fund road safety improvement and traffic law enforcement.
According to Kemp, the Irish Republic is at the top end of the European league for compensation awards, but at the bottom end in terms of the number of road accidents.
He said there were 31.8 road fatalities per 100,000 – almost double the UK rate of 14.5.
Harney declined to comment on the latest predicted increase in premiums.
She said a government-sponsored Motor Insurance Advisory Board, which has been examining costs in the sector, was due to publish its report on the market shortly and she would deal with the issue then.