Two major insurers in the Republic of Ireland market, AXA and Hibernian, are gearing up for tough action on fraudulent claims, which the industry believes cost at least ¤70m (£40m) last year.

AXA Ireland, which offers motor and home cover, has recruited a former Garda fraud squad superintendent, William McGee, to concentrate on the detection and prevention of bogus claims, and to help in prosecuting those making them. Hibernian is adopting a similar strategy and has advertised for fraud investigators to head a new company office.

According to the Insurance Federation of Ireland, fraudulent and exaggerated claims add 2% to the cost of the average premium.

"That's a very conservative estimate," said a spokesman.

Trade and enterprise minister Mary Harney has already promised that in new measures to be introduced later this year, to curb the escalating cost of premiums, claimants will be obliged to provide sworn affidavits in compensation cases and will face prosecution if these are shown to be false.