Bernard Durkan (Kildare North, Fine Gael)
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Question 126: To ask the Minister for Finance if he has inquired into the cause or causes of substantial increases in motor insurance premiums in the past 12 months; his proposed action arising therefrom; and if he will make a statement on the matter. [41258/09]

Bernard Durkan (Kildare North, Fine Gael)
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Question 127: To ask the Minister for Finance the extent to which he has studied insurance costs with particular reference to motor insurance over the past two years; if he will provide an explanation for the steep increases in insurance premiums in this period; her plans to address same; and if he will make a statement on the matter. [41261/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I propose to take Questions Nos. 126 and 127 together.

I am aware that there has been an increase in motor insurance premiums this year. This increase however has to be considered against a backdrop of the continuing stress in the financial markets and the recessionary pressures in the economy which is affecting all financial service providers including the insurance industry.

My Department has been advised by the Financial Regulator that while the non-life insurance market performed well up to the end of 2006, market sources indicate that much non-life business was written at a loss in 2007. This trend continued in 2008, but the companies were still willing to write business at a loss in order to maintain their market share. They were able to do this as a result of the reserves they had built up during profitable years. However, the situation could not go on indefinitely and indications are that firms are now taking action on pricing to underpin their financial positions, including in the motor insurance area.

This position is supported by a report published earlier this year by Standard & Poor's titled 'A Testing 2009 for the Irish Non-Life Insurance Market, Despite Fundamental Strengths'. It provides an insight into the problems facing the industry at the moment. The report envisages a difficult year for the non-life industry as a result of rising claims and continuing intense competition which they say is limiting price increases. They add that this combined with anticipated lower investment returns is expected to hinder profitability.

In the current difficult trading climate, there is a delicate balance to be struck between ensuring the long-term sustainability of the non-life insurance industry and at the same time making sure that the consumer obtains good value for money. I am particularly conscious of the impact of a significant increase in premiums for both the consumer and business and I have informed the industry that it must be a priority for them to ensure that insurance cover is provided as competitively as possible consistent with long term commercial sustainability and viability.

In conclusion, the recent upward trend in insurance prices including motor insurance reflects a range of factors outside the control of the industry. It would not, therefore be appropriate from a policy perspective to seek to intervene in the commercial conduct or decision making of insurance firms in the absence of clear evidence of market failure in respect of which there is scope to address from a national perspective.