Dáil Éireann - Volume 678 - 26 March, 2009

Written Answers. - Insurance Industry.

Deputy Andrew Doyle asked the Minister for Finance his views on recent reports that insurance costs are rising at a time when prices generally are falling; and his further views on whether policy changes could play a role in containing these trends. [12552/09]

[979]   Deputy Brian Lenihan: I am aware of the reports referred to by the Deputy. Insurance costs reflect a broad range of factors, including for example, the level of cover, the number of claims, legal and administration costs, the cost of fraud as well as the overall cost level in the economy.

My Department has been advised by the Financial Regulator that while the non-life insurance market performed well up to the end of 2006, market sources indicate that much non-life business was written at a loss in 2007. This trend continued in 2008, but the companies were still willing to write business at a loss in order to maintain their market share. They were able to do this as a result of the reserves they had built up during profitable years. However, the situation could not go on indefinitely and indications are that firms are now taking action on pricing to underpin their financial positions.

In the current difficult trading climate, there is a delicate balance to be struck between ensuring the long-term sustainability of the insurance industry and at the same time making sure that the consumer obtains good value for money. I am particularly conscious of the impact of a significant increase in premiums for both the consumer and business and it must be a priority for insurance companies to ensure that insurance cover is provided as competitively as possible consistent with long term commercial sustainability and viability.

The Deputy will be aware that like all financial service providers, the insurance industry is also affected by the continuing stress in the financial markets and the recessionary pressures in the economy. This is likely to be one of the reasons for increases in areas such as motor insurance.

In conclusion, the recent upward trend in insurance prices reflects a range of factors outside the control of the industry. It would not, therefore be appropriate from a policy perspective to seek to intervene in the commercial conduct or decision making of insurance firms in the absence of clear evidence of market failure in respect of which there is scope to address from a national perspective.