McCreevy tells insurance sector to reduce the cost of premiums

Insurance companies must take steps to reduce the unacceptable cost of premiums, the Minister for Finance, Mr McCreevy, told the insurance industry yesterday.

The Minister said the Government had delivered on measures such as the Personal Injuries Assessment Board (PIAB) and better enforcement of road traffic laws and now expected an unambiguous response from the insurance industry in the shape of lower premiums.

"Failure to deliver on lower premiums would make it more difficult for the industry to defend itself against charges that the Irish market is not competitive," Mr McCreevy said at the annual lunch of the Irish Insurance Federation (IIF).

Mr McCreevy singled out the publication of communication guidelines, the IIF's anti-fraud campaign and a commitment to implement further recommendations made by the Motor Insurance Advisory Board (MIAB) as welcome developments. "I expect all of these measures will lead to a better deal for the insurance consumer in the form of better information, more suitable products and - crucially and critically - lower premium levels."

However, the incoming president of the IIF, Mr Peter Towers, said the Government, policyholders and others needed to understand that motor and liability insurance premiums would only fall if claims costs reduced.

Mr Towers called on the Government to publish and adopt legislation that will establish the PIAB, streamline the litigation process and introduce greater deterrents to fraudsters.

He added that the best way to reduce costs was through accident prevention and that the Government should view improving safety as an investment.

Mr Towers effectively dismissed the new Personal Retirement Savings Accounts (PRSAs) as a way for people to bridge "the savings gap" between what they are and what they should be putting aside for their retirement.

PRSAs were a step in the right direction, but would not be the cure-all that many people hoped, he said, admitting that caps on charges under the pension products would give rise to industry reluctance to chase the market.

"Some of the restrictions and regulations surrounding PRSAs militate against the active promotion and face-to-face advice that is needed to persuade people to plan for their future," he said.