Around 60 per cent of the State's small and medium-sized firms have been forced to lay off staff or plan to do so and many companies now have "one foot in the grave", primarily because of rocketing insurance premiums, employers' groups have claimed.

A new survey by the Irish Small and Medium Enterprises Association (ISME) of 3,000 of its members reveals that 18 per cent of respondents have already laid off staff mainly due to higher insurance costs while 40 per cent plan to lay off staff for the same reason.

Both ISME and the Small Firms Association (SFA) say consistent increases in the cost of insurance cover has now become a serious problem for the Irish economy.

They claim urgent action is needed if some firms are to survive and jobs are to be saved.

Both say the legal costs associated with claims must be reduced and the whole claims system overhauled.

They also say consolidation in the insurance industry is an area in need of closer scrutiny.

Mr Jim Curran, head of research at ISME, said consolidation in the Irish insurance industry had led to "cartel-like" conditions in the sector which had allowed insurance companies to hike the cost of cover and "cherry-pick" the firms they want to quote.

"The cost of insurance has increased hugely in the last 18 months and the main reason for that is because of consolidation in the industry," he said.

"There are now just four main players in Ireland; a few years ago there were 12 or 13.

"That kind of consolidation should never have been allowed to happen.

"And we'd be calling on the Competitions Authority to investigate both the insurance and the legal industries to see if cartel behaviour is going on."

The survey by ISME, released yesterday, also found that 96 per of respondent firms had incurred an average increase of 71 per cent in their insurance premiums in the past year.

Of those, just 18 per cent had received an adequate explanation for the higher costs.

More than one in 10 firms had been refused cover, with 80 per cent saying they believed a cartel was in operation among insurance companies.

The ISME surveyed 3,000 firms of which 978 responded.

The SFA yesterday said it had launched a campaign to urge its members to contact TDs and press upon them the seriousness for their businesses of higher insurance costs.

It also called for a Dáil debate on the matter.

The SFA joined the ISME in calling for the early establishment of the Personal Injuries Assessment Board (PIAB) and for an overhaul of the system of injury litigation to increase efficiency. Both are also pushing for a book of quantum to be introduced, which would result in greater consistency in award levels.

They also want an examination of the legal costs associated with claims.

Insurance Industry Federation spokesman Mr Martin Long said his organisation agreed with many of the SFA and ISME's demands.

According to Mr Long, a reduction of legal costs associated with insurance claims as well as the speedy introduction of the PIAB were both of vital importance.

However, he added that the rising cost of insurance was simply a symptom of the current compensation system.

He refuted the suggestion of an insurance cartel in Ireland, saying price rises should not be confused with price fixing.

"The cost of claims comes as a result of a generous and inefficient legal system." he said.

"If you can control the cost of claims, then you can control the cost of insurance."