Headline annual inflation was zero last month as price pressures in the domestic economy remained weak. But there are some exceptions – notably in the insurance sector where the cost of motor cover rose by more than one third in the 12 months to May. And there is little agreement on the cause or the remedy.
The insurance industry blames soaring legal costs and high awards in accident claims. Lawyers insist legal costs have fallen and say the rise in premiums reflects the industry’s imprudent approach to risk management; both in pricing insurance and in underwriting claims. The collapse of two companies – Quinn and Setanta Insurance with huge financial huge losses which will be borne by consumers – bear out that contention.
The Dáil has debated the issue and favours the establishment of a task force, involving the insurance industry, consumers, the Central Bank and key government departments, to clarify why costs are rising so rapidly and to provide solutions. Almost a decade ago, following a similar crisis in the sector, the Motor Insurance Advisory Board performed a similar role. But the Government remains unenthusiastic and Eoghan Murphy, Minister of State for Financial Services, has insisted that a policy review already established in the Department of Finance amounts to a task force and the revival of the advisory board is, therefore, unnecessary.
Whether for car, house or personal health, insurance accounts for a small share of the representative basket of goods and services that make up the consumer price index. Nevertheless, the premiums payable involve substantial outlays for individuals and companies, ensuring that insurance costs in Ireland are an increasing burden.
The Government's ability to influence the situation is limited under European law. It cannot direct insurance companies on the pricing of insurance products. But Minister for Finance Michael Noonan has said the Government could help create a better claims environment "that could facilitate a reduction in claims costs". Unfortunately for consumers, however, that could take time.