Motor, property and liability insurance premiums will increase by up to 20 per cent over the next 12 months, the Irish Insurance Federation (IIF) has predicted. At the publication of the 2000 results for the life and non-life markets, senior representatives said the industry was beset by problems with a poor outlook, particularly in the motor sector.
Gross written insurance premiums from Irish business increased by 25 per cent to £8.1 billion last year but that was not enough to prevent overall operating losses in general insurance.
IIF chief executive, Mr Michael Kemp singled out motor insurance as the worst performing sector in the insurance market and warned that further decline in motor results would force insurers to withdraw from that sector. The net underwriting loss in motor insurance increased by 92 per cent to £228 million from 1999 to 2000.
Companies cannot and will not continue to absorb such unsustainable losses particularly in the current environment of falling investment returns.
This continuing negative trend in the motor account may force companies to withdraw from the motor market altogether," Mr Kemp said.
The Government-sponsored Motor Insurance Advisory Board (MIAB) has been monitoring developments in motor insurance costs and is expected to publish its report on the market by the end of the year.
A preliminary report published in March found that insurance companies made profits on almost every class of driver. The IIF disagreed with that conclusion.
The Minister for Enterprise, Trade and Employment, Ms Harney has expressed concern at the high cost of motor insurance and her spokesman said yesterday she would give full consideration to the issue when the MIAB's report is published.
The position in the non-life market was described as far from healthy by the President of the IIF, Mr Roy Keenan. "Compensation awards continue to increase and recent court decisions will require motor and liability insurers to increase reserves substantially," he said.
Mr Keenan warned that the situation was now so serious that there was a real danger of investors who provide capital to the market withdrawing, unless returns improved significantly. He said that any outflow of underwriting capital would affect both the cost and availability of cover.
"It is becoming vital for everyone concerned - insurers themselves, their regulators and other state departments and agencies with power to influence the claims environment - to co-operate in taking urgent action to prevent this eventuality."
Referring to the terrorist attacks on the US, Mr Kemp said that Irish companies would inevitably have to share part of the cost. "Insurers will have to deal with the reaction from the reinsurance community on top of the very hostile conditions that we face in the indigenous market. While the exact insurance cost of the attacks is as yet incalculable, what is apparent is that all sectors of the industry will be affected in some way, especially property, business interruption, health, life and reinsurance."
On ever increasing motor insurance costs, Mr Kemp pointed the finger at the legal profession. "We estimate that 42 per cent of the cost of personal injury compensation is paid in legal fees and disembursements. In smaller cases legal fees can even exceed the compensation paid." Results in the life and pensions market were considerably better, with an increase in earned premiums of 25.5 per cent in 2000 to £5.9 billion. Total premium income on the life side has almost trebled in the past five years.
