Drivers pay €300 more for cover than two years ago
Sky-high legal fees - now at their highest level in six years, according to government economic advisors the National Competitiveness Council - are a major factor in the rising cost of motor insurance.
Drivers will this year be paying on average €300 more for comprehensive cover than they did just two years ago.
While fraud and lack of enforcement are also major contributory factors to the rising costs, the scale of legal fees being charged has also pushed up premiums by more than 35pc since late 2014.
"The rising cost of motor insurance is a major frustration and one of the biggest consumer issues facing motorists at the moment. We have seen an increase of close to 40pc on average over the last 18 months and for many individual drivers the increase is even worse," said Conor Faughnan (inset), director of consumer affairs for AA Ireland.
Insurers claim that legal costs, coupled with higher-than-expected damages awards, are behind a 30pc rise in car insurance in the past year alone.
The rises reversed years of falling premiums and the insurance industry has argued that premiums were artificially low and reduced to a level that meant insurance companies were losing money.
But that is only part of the problem, according to Mr Faughnan: "Prices were stable and even falling overall for a decade and it is true to say that insurers were losing money. Even so, these increases are not justified. At the moment, we pay for the real cost of insurance, and then on top of that, we pay for unacceptable amounts of fraud, waste and inefficiency in the system."
Rural TD Eugene Murphy believes the Motor Insurance Advisory Board should be reinstated to deal with the issue of rising motor insurance
The Roscommon-Galway TD said: "The recent release of the statistics from the CSO on the sharp rise in insurance costs has come as no surprise to anyone who has recently had to renew or gain an insurance policy. The fact that car insurance has risen by 30pc in the past year and over 50pc since 2011 and is predicted to rise a further 20pc by 2017 is unacceptable to every household and also every business in this State," he said.
The introduction of the Motor Insurance Advisory Board led to a considerable fall in insurance costs in the past and Mr Murphy believes it should be reinstituted.
"As a nation we need to address the rising problem of our 'claim culture'. The fact that our average compensation payout levels are three times higher than our European neighbours is outrageous."
In its report to Jobs Minister Richard Bruton, the National Competitiveness Council stated: "Throughout the recession, and relative to other professions, prices for legal services in Ireland proved extremely sticky and did not adjust downward to the degree that might have been expected, given economic circumstances."
The claims were disputed by the Law Society, which questioned the accuracy of the figures and insisted that legal fees have been significantly reduced.
Mr Bruton has sought to cut back on the level of insurance claim cases ending up in court and met the President of the High Court, Mr Justice Peter Kelly, earlier this year in an effort to get judicial support for new compensation guidelines, known as the 'book of quantum', due this summer.