THE cost of motor insurance is set to rise by as much as to per cent over the next 12 months with some drivers likely to see an immediate hike in premiums, according to Eureko Ireland managing director, Mr Adrian Hegarty.
Reporting operating losses of £8 million in the general insurance business at Eureko, - the holding company for Friends Provident and Celtic International - Mr Hegarty warned that cheap motor insurance deals could not continue.
Celtic International has already raised its premiums for drivers in the 27 to 30 age group, he said, and is currently reviewing its prices for other groups. "Significant increases in motor insurance costs are inevitable," he said:
A number of its competitors, including the New Ireland group, have also recently signalled an increase in motor premiums.
The group's life insurance business, which is carried out by Friends Provident, performed strongly however, with operating profits up from £2.8 million in 1994 to £6 million. Good returns on investments boosted this performance and helped to reduce the group's total after-tax losses to £0.8 million.
Celtic's direct motor insurance business, through which it sells insurance over the telephone, came under most pressure last year as a greater number of international players targeted the Irish market. According to Mr Hegarty, fierce competition has led to widespread below-cost selling of ear insurance, which, he believes, cannot be sustained for much longer.
Celtic, which was the first Irish company to launch a direct motor business, wrote £27 million in motor premiums in 1995, compared with £26.2 million in the previous 12 months. A 24 per cent rise in the number of claims against the company last year, together with low premium rates, led to substantial losses, it said.
Garda statistics for 1995 and in the first quarter of 1996 also suggest that the claims situation is worsening, according to Mr Hegarty. Official figures for last year showed a 5 per cent rise in the number of accidents and deaths on the road, while a 9 per cent increase has been recorded in the first quarter of 1996. Against this trend, he said prices currently being quoted in the market were "illogical".
On the life assurance side, new business sales at Friends Provident fell from £62.8 million in 1994 to £59 million last year. This drop according to the company is mainly due to a reduction in its sales force last year as part of a reorganisation of its business. Single premium sales were down from £51.4 million in 1994 to £49 million while annual premium sales dropped from £11.4 million to £10 million in 1995.
Mr Hegarty said the company has now been restructured into six individual units, three of which will focus on sales, and has seen an improvement in new business sales so far this year.
The Eureko group, he said, has invested £70 million in Ireland, and is keen to become a bigger player in the market. It is now focussed on gaining a larger share of the life and general insurance market and will actively seek out acquisition opportunities, according to Mr Hegarty.
