The Tanaiste has warned motor insurers that the Government is unhappy with the price of motor cover and may introduce price controls. Ms Harney said yesterday that she was very worried about the rate of increase in premiums which was four times that of inflation. "I don't believe it is justified," she said.

Speaking at the annual lunch of the Irish Insurance Federation (IIF), the Tanaiste said the Government attached a "great deal of importance" to the work of the Motor Insurance Advisory Board and would give very serious consideration to its recommendations. The board is looking at the cost of motor insurance and its interim report - released under the Freedom of Information Act - found that insurance companies were making significant profits on almost every class of driver and potentially overcharging some groups.

The IIF disagreed with the findings of the board and threatened to withdraw its co-operation. It subsequently funded its own survey of the risks associated with different classes of drivers that it has used to justify premiums.

Mr Harney said that although she could sympathise with the explanations advanced by the industry for rising insurance costs: "You will appreciate that the Government must consider the issue in the context of falling rates of motor and employers' liability claims and the context of the contraction of the number of players offering insurance".

Speaking afterwards, the Tanaiste said she did not rule out the possibility of price controls if market forces did not work.

She added that it was in the best interests of consumers for the Motor Insurance Advisory Board to be afforded time to complete the work it had undertaken.

Responding to the Tanaiste's speech, the incoming president of the IIF, Mr Roy Keenan, said that the industry had nothing to hide. "Any analysis of industry statistics leads very quickly to the conclusion that claims are by far the highest element of insurers' outlay," he said.

Mr Keenan, who is managing director of Lifetime Assurance, said that £57 (€72) of the premium paid for every insured vehicle went to cover the cost of claims against uninsured drivers.

Mr Michael Kemp, the chief executive of the IIF, said that the rate of increase in premiums was related to the increase in the cost of settling claims, which was increasing faster than inflation.