Insurers have increased profits on non-life business more than sixfold since 2002 despite a series of reforms in the industry aimed at improving competition, according to an Oireachtas committee report.
The Third Interim Report on Reforms to the Irish Insurance Market, published yesterday, said average motor premiums had fallen by about 20 per cent in the past three years.
But it said, annual profits in the industry on non-life business had risen steeply, from €156 million in 2002 to €518 million in 2003 and €755 million in 2004.
Donie Cassidy, chairman of the Joint Committee on Enterprise and Small Business, which compiled the report, said he understood profits for 2005 would top €1 billion, adding that he would be "very surprised" if this did not produce a further reduction in premiums of around 20 per cent.
Mike Kemp, chief executive of the Irish Insurance Federation, said that if measures already in place "continue to bear fruit", and if further recommendations were implemented, there was no reason why premiums could not fall further. But he doubted if a reduction of about 20 per cent would be available "straight away".
Defending the profits earned by insurers, he said the business was "cyclical", adding: "Companies certainly feel they are passing on a fair share of the benefits from the improved claims environment to policy holders."
But he added: "The shareholders are entitled to something too because they have had to suffer a number of bad years when they were making very significant losses."
The report noted Hibernian and Axa earned the largest profits in motor vehicle insurance in 2004 of €128 million and €117 million respectively. It further stated that "high" levels of personal injury compensation deterred new entrants to the market, and it called for an expert group to inquire into the matter.
"It is difficult for insurers from other countries to relate to a market where award levels are substantially higher than in their own markets."
The committee made other recommendations, including the introduction of random breath testing, promised under the Government's road safety strategy, as a matter of urgency.
Such testing should include all drugs that impaired driving, the report said, adding that if there was a constitutional barrier to random testing "a referendum on the issue should be held".
It noted the Government had rejected its recommendation for speed cameras to be kept out of the hands of private operators but said it was pleased to note that "overall control" of the cameras would stay with the Garda, including influence over where the cameras would be placed.
