Businesses face increases of up to 40 per cent in insurance premiums this year. As employer and public liability and motor policies fall due for renewal, companies are being told they will have to pay significantly more to keep insurance cover in place. Increases quoted so far are ranging from about 15 per cent to about 40 per cent.
Insurers claim this reflects the sharp rise in the cost of settling claims. But employers' organisation IBEC says it is "extremely concerned" at the extent of price rises for firms that have had no claims or that have improved their health and safety environment. The Department of Enterprise, Trade and Employment, which supervises the insurers, has advised companies to shop around for cover.
"We are part of the EU single market and people should shop around and ask their brokers to shop around for them outside the Irish market," a spokeswoman said.
But she accepted that the reality of the single market "has not yet really happened to the extent we would like to see", mainly because Ireland is a small market for foreign companies.
The Department had no role in approving premium prices, she said. "In accordance with EU rules, we are constrained from interfering in the pricing and the underwriting."
But she added that the Department maintained a watching brief on prices because of concern about the solvency of insurance companies and about the prices consumers have to pay.
Asked if recent mergers between general insurance companies had facilitated premium increases by depressing market competition, she said: "We are increasingly concerned about consolidation in the Irish market. Given this consolidation and the strength of the economy, there is a danger that prices will rise to what the market will bear. On the other hand insurers have warned us that they are facing accelerating claims settlement costs."
Some insurers had indicated possible price increases of up to 20 per cent this year, she said. But recently the Department had received telephone calls from small and medium-sized business about even higher premium increases, she added. Insurers attribute rising premiums to a sharp increase in the cost of settling claims. They say claims inflation is rising much faster than general inflation for several reasons:
personal injury claims have become more expensive because of better income expectations over time;
a high level of medical cost inflation;
higher court awards; and
a bad winter that has driven up the number and cost of weather-related claims.
The Irish Insurance Federation says premium increases will depend on the claims experience in each individual case. But Mr Mike Kemp, chief executive, added that, overall, "double-figure" increases in liability premiums could be expected because "rates have not been increased in line with claims experience over the last few years".
"There is now a problem which has built up over several years so increases are absolutely necessary for the insurers to stay in business," he said. He rejected any suggestion that consolidation in the industry could be behind the extent of the latest price increases.
"There are still 10 to 12 local insurers available and competing in each of the main areas - Irish companies or branches of foreign companies. And there is full freedom of services, so thousands of EU companies can quote for Irish business," he said.
