'Financial mismanagement' by insurers to blame for hikes
Poor business acumen and financial mismanagement in the insurance industry are serious factors driving spiralling insurance premiums, according to the head of the Bar Council.
David Barniville SC laid responsibility for the hikes firmly at the door of the insurance industry.
The comments came as new figures revealed motor insurance rates shot up 35.2pc in the past year. A rise of this magnitude means a premium that cost €500 last year will now be close to €700 this year.
But an article co-written by the Bar Council president in its Bar Review journal railed against claims by the insurance industry that legal fees and the cost of claims were to blame.
It accused the sector of operating a "boom-bust model" between 2012 and 2014, building up unsustainable overheads and following an imprudent approach to pricing and underwriting.
"The costs associated with personal injury claims are usually front and centre when it comes to laying blame for premium hikes, but indications of poor business acumen and financial mismanagement in the insurance sector would suggest that there are other, more serious factors," the article said.
"The spectacular demise of Quinn and Setanta made it clear that insurance companies were competing too aggressively and at the expense of profitability. They simply were not charging enough, resulting in losses of almost €500m in three years - losses which inevitably fell to the consumer."
The comments came a day after Insurance Ireland chief executive Kevin Thompson issued a statement, questioning Bar Council claims that barrister fees had fallen by between 30pc and 50pc since 2008. He said his members had not seen that sort of reduction in their legal costs. The Bar Council says it stands over its figures.
CSO statistics published yesterday showed insurance premiums had jumped by 35.2pc in May compared to the same month last year. The cost of motor insurance has now gone up more than 60pc in two years.
Other insurance costs have also gone up, according to the consumer price index.
Home insurance was almost 10pc more expensive in May compared with a year ago.
Health insurance premiums rose by 6.5pc, as VHI, Laya, Aviva and Glo all raised the cost of premiums in the last few months. Despite the rises in a range of key expenditure items for households, the overall level of inflation was flat in May compared with a year ago.
For the month itself prices were up 0.5pc.
Alan McQuaid of Merrrion Stockbrokers said the cost of services like insurance and education would continue to rise.
"We are not convinced that consumers think that inflationary pressures are as weak as the headline consumer price index numbers suggest."