Rose Conway-Walsh (Mayo, Sinn Fein)
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116. To ask the Minister for Finance if his attention has been drawn to rising home insurance costs; his view on whether these increases are fully justified based on increased construction costs; and if he will make a statement on the matter. [47762/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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At the outset, it is important to note that neither I, nor the Central Bank of Ireland, can direct the pricing or provision of insurance products, as this is a commercial matter which individual companies assess on a case-by-case basis. This position is reinforced by the EU Single Market framework for insurance (the Solvency II Directive).

The Government is keenly aware of the impact that insurance costs can have on many groups – including homeowners - and has therefore prioritised insurance reform via the Action Plan for Insurance Reform, applying a whole-of-Government approach to its implementation. Work is progressing well to implement these important reforms, with the focus now on implementing the outstanding actions to increase both the affordability and availability of insurance for all groups, including consumers.

In terms of delivering the Action Plan, the Central Bank’s ban on price-walking in July has been a key development in terms of helping to tackle consumer insurance costs, including those for the home market. This is a form of dual pricing whereby customers are charged higher premiums relative to the expected costs the longer they remain with a provider. This pro-consumer ban is a balanced approach that will now protect customers who prefer to stay with their current home insurer from being subject to a ‘loyalty penalty’, while still allowing others to benefit from ‘switcher’ discounts from providers who may also seek to compete on price.

Nevertheless, I am aware that home insurance costs may be rising for some consumers. Data from the CSO for August 2022 shows that the price of ‘insurance connected with the dwelling’ rose 4.2 per cent month-on-month and 9.8 per cent year-on-year. This compares with an annual decline of 11 per cent for motor insurance over the same period. 

A key driver of home insurance is the property rebuild cost (or reinstatement value), which is based on the total cost to reconstruct the property. Based on the July 2022 ‘Tender Price Index’ from Society of Chartered Surveyors Ireland – the rate of construction price inflation?was 14.0 per cent in the 12 months to June 2022. In addition to increasing labour costs, over the past year the cost of construction has risen substantially, driven primarily by a confluence of external factors impacting upon the supply and cost of input materials including: Brexit; COVID-19 and the war in Ukraine. As construction costs generally increase, rising rebuild and repair costs can also be expected to impact upon home insurance premiums.

According to the Competition and Consumer Protection Commission, many insurance companies automatically index the amount of buildings and contents cover when they renew a home insurance policy each year, thus helping a policyholder to avoid being under-insured. Linked to this, the Central Bank of Ireland last week published the findings of a Thematic Review into the issue of under-insurance in the home insurance market. It noted that under-insurance in this area has increased from 6.5 per cent in 2017 up to 16.5 per cent in 2022. The Central Bank has issues a "Dear CEO" letter to the industry and will be engaging with providers to ensure consumers are well informed and protected in this regard. The advice is policyholders should regularly check the amount of cover they have to make sure they are adequately insured.

Finally, even though home insurance prices may currently be impacted by construction inflation, it is still important for policy holders to compare with other provider to ascertain if they can get a better consumer-focused deal by switching.