Motor insurance prices are becoming a major concern to consumers, with some believing premium rates are escalating out of control.

In fact, the majority of consumer complaints in relation to the insurance industry involve motor insurance, according to the Insurance Ombudsman's 1998 report. That year a total of 936 insurance complaints were received by the Ombudsman. Of these, 242 related to motor insurance but 94 were outside the scheme's terms of reference. The Ombudsman's remit does not include the cost of motor insurance. The report says the majority of complaints relate to third party motor insurance.

Two readers contacted Family Money recently to complain about the numerous and widely-varying prices they were quoted by motor insurers. Ms K from Dublin received quotes from several car insurance companies and says the range was unbelievable.

"For a 28-year-old woman with three years no-claims bonus, full driving licence and no past accidents - for a 1998 car, 1.4 litre engine - in Dublin the quotes ranged from £390 to £777." She wants to know how the companies justify these variations and says: "Surely we are being ripped off?"

According to a spokesman for the Irish Insurance Federation, non-life insurance policies are annual contracts and a renewal represents a fresh contract between the policy holder and the insurer. "The insurer is free to quote £3,000 and the policyholder is entitled to go elsewhere."

The IIF advises that consumers should shop around for themselves or via a broker. The market is very competitive and consumers can take advantage of the range of quotes available, says the spokesman. "If all insurers charged the same or approximate price then one could level a charge of price collusion," he said. This is not the case and it is not true to say insurance products are the same. There are big variations in motor cover, especially comprehensive cover.

Our second reader, Mr F is a 21-year-old driver whose car was stolen recently. He reported the theft to his insurer and after five months, they paid him one-third of the value of the car or £2,000. He bought a new VW Golf GTI and the insurer sent him a renewal price of £2,100.

Two days before his policy was up for renewal the insurer rang him to say the premium had gone up to £3,550, an increase of £1,450. Our reader, who now says he is unable to drive his car because he can't afford the insurance premiums, wants to know if this insurance practice is legal. To the consumer, this may appear a "bait and switch" scheme by the insurer - meaning one price was offered and then just before the policy is due for renewal another one is substituted for it.

The IIF spokesman says although he cannot comment on individual cases, it appears that between the first and the second notice the man's insurer processed the stolen car claim.

Some factors which may cause a rate increase are: loading due to adverse claims experience, loss of no-claims discount due to claim, alteration in rating factors making for a high risk, the new car could have a bigger engine, be worth more or the person may be looking for wider use and or coverage. Another contributory factor may be that the insurer put up rates during the year.

If either reader is still unhappy with quotes received elsewhere, they should contact the Irish Insurance Service (IIS), a liaison service run by the IIF since 1986. The service has no binding powers but is often able to suggest solutions to insurance customers' problems or direct them to the insurer which will provide the lowest rate for their particular category of insurance. Young drivers like our two readers are heavily penalised for motor insurance. High insurance rates for young drivers are the symptom of the problem rather than the problem itself, says the IIF spokesman.

"Young drivers pay more for their motor insurance than anyone else because these drivers, particularly young male drivers below age 25, have a poorer claims experience than other categories of drivers," says the spokesman. According to IIF market statistics for the period between 1992 and 1996, the relative claims cost for non-comprehensive insurance was "97 per cent higher for policy holders aged between 17 and 24 than it was for the 36-40 age group. For comprehensive insurance, it was 66 per cent higher for the 17-24 age group than for the 36-40 age group".

Although the number of accidents here are not as high as elsewhere in Europe, there are more claims for higher amounts. The Irish system for compensation claims is also among the most generous in Europe.

Insurers are actually losing money by providing motor insurance in the Republic. "Motor insurance is a loss-making sector for Irish insurers. In 1997, IIF motor insurance members made a net underwriting loss of over £109 million (#138.4 million). This loss was made because claims together with operating expenses like commission and administration were greater than the premiums earned by insurance companies," says the IIF spokesman.

Despite this, motor insurance is the largest sector in the Irish non-life insurance market. The four companies with the highest motor insurance market share are Guardian/PMPA, Hibernian, Church and General and FBD, a mainly agricultural insurer. Guardian/PMPA is one of the few which covers young drivers. Motorcyclists who, like young drivers, have problems obtaining insurance rely mainly on Norwich Union and some small specialty insurers.

The IIF suggests that young drivers do the following to reduce their premiums:

Join a parent's insurance as a named driver as soon as possible. Knowledge of a driver's safety record is crucial to any insurer. Some IIF insurers offer introductory discounts to young people seeking insurance in their own name if they have been a named driver on another person's policy.

Get your driving licence as soon as possible as full licence-holders pay less than provisional licence-holders.

Take a special 25-hour driving course with a Driving Instructors' Register (DIR) teacher. Once awarded a DIR certificate, drivers are entitled to an introductory discount from an IIF member company.

Choose a modest car and keep it road-worthy. Less powerful cars are less expensive to insure.

Drive safely. The best way to reduce the cost of insurance is to have no claims.