Employers and small businesses face increases of up to 50 per cent in insurance premiums for liability and commercial property insurance in the coming months. Business groups say companies would fail and thousands of people would lose their jobs if the wave of increases flagged yesterday by the Irish Insurance Federation was applied.
Mr Pat Delaney, of the Small Firms' Association (SFA), said small businesses were already facing a crisis of "Armageddon" proportions because of increases in insurance premiums applied this year.
"Forget economic downturns, job losses and reduced tax returns, if this situation is not resolved there will be very few companies in a position to trade next year."
Mr Brendan Butler of employers' confederation IBEC said the impending increases would be a body blow to businesses that have suffered several major setbacks in the past 12 months. "Because of the economic slowdown, it is not possible to pass on these costs and we just cannot see how companies will be able to absorb them," he said.
The Irish Insurance Federation claims rates in the liability insurance market have been inadequate for many years leading to huge underwriting losses - proportionately worse even than the widely publicised problems in motor insurance underwriting. These losses have been sustainable in the past thanks to a trend of strong investment returns, which began to unravel 12 to 18 months ago.
Last year, the loss in the Irish liability market was £37 million (€47 million), after taking investment income into account. The number of new employers' liability claims notified to insurers in 2000 was 10,175, an increase of 10.5 per cent on the previous year.
Mr Delaney called for a Government inquiry to determine why Irish commercial insurance costs are three to six times the levels in other EU states.
"The issues of frequency, level of awards and legal costs must be investigated fully, otherwise vast sectors of Irish business are facing wipe-out," he said. Mr Butler said reform of the legal structure was now a critical priority.
Mr Michael Kemp, of the Irish Insurance Federation, said a Government inquiry would not reveal anything not already known. He blamed a number of negative factors in the domestic market for the increases, saying these problems had been significantly exacerbated by major capacity and cost problems in the re-insurance market worldwide following last month's terrorist attacks in the United States.
"The inflationary pressures on commercial insurance rates include continuing high claims inflation in personal injury cases and negative court decisions for insurers on the calculation of compensation awards this year," Mr Kemp said.
The federation blamed spiralling repair and rebuilding costs for pricing increases on property insurance, together with an increase in the frequency and cost of severe weather losses over the past few years. The collapse of Independent Insurance was also a factor, it said, reducing capacity in the Irish market.
Responding to the federation announcement, the Minister for Science, Technology and Commerce, Mr Noel Treacy, said he accepted the basis of the reasons given by the organisation for the projected increases. However, he said he was dismayed that they would lead to increases of the order mentioned. He urged the insurance industry to ensure that it was doing everything possible to deliver insurance to its customers at a reasonable cost.
According to the Department of Enterprise, Trade and Employment, the Government intends to establish a personal injuries assessment board to reduce the cost of delivering personal injury compensation. An implementation group is "at present considering how that might best be done".
Mr Delaney said that fresh increases in premiums would only result in under-insurance and closures. Mr Kemp suggested it was time for an informed public debate on the affordability of the compensation system.
