Insurance costs for hotels and guesthouse have risen 351 per cent in the past three years, making further increases unsustainable, the Irish Hotels Federation has warned.

Some hotels have been forced out of business and radical reforms are required to save many others, which have seen their competitiveness eroded, federation president Mr Jim Murphy said.

Speaking ahead of a presentation tomorrow to the Oireachtas Committee on Enterprise and Small Business, he said rampant insurance increases are the gravest challenge confronting the tourism sector.

The Tánaiste, Ms Harney, has promised insurance reform through the establishment of an independent personal injuries assessment board - expected to begin sitting next year.

But action is needed now rather than in several months, the hotel federation said.

Mr Murphy urged the Government to address the lack of competition in the insurance sector, claiming this is keeping prices artificially high.

The prevalence of fraudulent claims and disproportionate payouts also needs to be tackled. Pressure should be put on the legal profession to trim fees, which are excessive and driving up costs, said Mr Murphy.

He said: "Despite widespread concern over the rising costs of insurance and uniformity of view that radical reform is needed, it is unacceptable that no action has occurred to improve the situation."

Though hotels are doing their best to remain competitive, the low-margin nature of the sector makes it sensitive to price rises, he said. Following substantial increases, not only in insurance charges but local authority rates, taxes and wages, hoteliers are facing huge losses, he said.

Insurers should be required to consult the insured before settling claims, he added. Mr Murphy claimed that so heavily was the insurance system weighted in favour of claimants, insurance companies routinely settled spurious claims without consulting the other party.