The Minister for Justice, Mr McDowell, is planning a new inquiry into how legal costs are calculated and awarded.
The inquiry will focus on how legal fees for cases are calculated, with particular emphasis on the reported high costs associated with insurance cases.
The inquiry will be separate to the ongoing investigation of the legal profession by the Competition Authority. (This is examining whether there are barriers to free competition in the profession that lead to higher fees.)
Mr McDowell revealed his plans during an appearance before the Oireachtas Committee on Enterprise and Small Business, which is investigating the high insurance costs in Ireland.
Members of the committee claimed that the legal profession had yet to respond in a proactive manner to initiatives aimed at reducing insurance costs.
Some 40 per cent of the cost of insurance cases is made up of legal fees, including medical and other professional reports.
Mr Brendan Howlin of the Labour Party also criticised the "taxation" system, which provides for an independent but third-party review of a case's legal costs by the taxing master, who is an official of the High Court. The taxing master is also a member of the legal profession, Mr Howlin said.
In 2002, the taxing master adjudicated on costs in 446 cases. Some €21 million in costs were claimed, of which the taxing master allowed €16 million.
The committee also heard evidence from four of the country's largest insurance firms. These defended the €500 million profit they made last year, saying that consumers were now enjoying significant reductions in insurance costs.
However, business representatives claimed that many firms had not experienced major reductions in their insurance costs.
The committee heard that the profits of Axa insurance had doubled last year to €118 million, while FBD Insurance enjoyed profit of €90 million, a rise of 257 per cent. Hibernian Insurance's profit rose by 83 per cent to €130 million, while Quinn Direct enjoyed a profit of €130 million.
In response, the firms said they had passed on significant premium reductions to their customers.
Mr Dick O'Driscoll, chief executive of Hibernian, said the firm had reduced premiums by 10 per cent last October, on the first anniversary of the penalty points scheme.
AXA has reduced its premiums by 17 per cent this year, according to its chief executive, Mr John O'Neill.
Quinn Direct told the committee the company had dropped its premiums by between 5 per cent and 10 per cent since last November, while FBD said it would be passing on savings of between €35 million and €40 million in the next 12 months, as a result of the savings.
However, representatives of Alliance for Insurance Reform claimed that the insurance companies were still being "greedy".
Premiums here were still 50 per cent more expensive than in Britain, said Mr John Power of the Irish Hotels Federation.