Volumes of new business fall a fifth.

Domestic non-life gross premiums in Ireland fell 5.8% to €3.6bn (£2.9bn) in 2007, according to the Irish Insurance Federation’s (IIF) annual report.

The report also warned that the situation for Irish insurers had worsened significantly in 2008, with the volume of new business dropping by one fifth.

In his introduction to the report, IIF president Michael Leahy said: “Customers have reaped the benefits of recent reforms. But insurers have had to cope with a range of cost pressures and margins are now wafer thin.

“The one-off effect on cost projections and pricing of revaluing outstanding claims reserves to take account of expected cost savings associated with the government’s insurance reform programme is now well and truly over.

“Claims frequency has begun to rise again and, although the system for adjudicating them is now much more cost efficient, Irish personal injury claims still attract the highest damages awards in Europe.”

The report also said that rates in Ireland’s main non-life insurance classes were still falling. The cost of motor insurance in Ireland has halved in real terms since April 2003, if an allowance for general price inflation of 18% is taken into account, making motor insurance now effectively cheaper than at any time in over 25 years.

Complaints made to the IIF’s Insurance Information Service fell by 6%, to 750, the third successive year in which such complaints dropped. As in the past, motor insurance was the main subject of complaints.