Noel Ahern (Dublin North West, Fianna Fail)
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Question 146: To ask the Minister for Finance if he will report on statistics on price increases in insurance rates; and the action he proposes to take to control same which seem difficult to understand or appreciate in these deflationary times. [41549/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am aware that there has been an increase in 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. While the Financial Regulator does not maintain statistics on price increases in the insurance sector, it has provided some background as to why insurance prices have increased in these deflationary times. It has advised me 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.

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 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.