The insurance industry was accused of excessive profit-taking yesterday as new figures showed that profits at non-life insurance companies increased by 65 per cent to €689 million last year, writes Laura Slattery
Statistics published by the Irish Financial Services Regulatory Authority show that in the motor insurance sector alone, insurers recorded profits of €330 million last year, a rise of 55 per cent on 2003. This was achieved despite a 10 per cent fall in the total value of motor premium business written.
The Consumers' Association of Ireland (CAI) attacked the insurance industry for not passing back profits to policyholders quickly enough in the form of sufficiently reduced premiums.
It is feared that insurance companies may now be reticent to pass on further cuts until the knock-on effects of reinsurers' liabilities from Hurricane Katrina become clearer.
The financial regulator's Insurance Statistical Review for 2004, formerly known as the Blue Book, paints a picture of a thriving, highly profitable industry that has made a sharp recovery from the heavy losses incurred during 2000-2002, the period in which motor, property and liability premiums escalated.
The industry bounced back in 2003 with non-life profits of €417 million. The 2004 profits were achieved despite a small decrease in the value of gross premium income in the non-life sector, which fell 0.3 per cent to €7,335 million.
The Irish Insurance Federation (IIF) attributed the increase in profits in the motor sector to a reduction in claims costs arising from the Government's reform programme and its own anti-fraud campaign.
The IIF said policyholders and shareholders were both benefiting from the industry's continued profitability and that motor insurance premiums were now back to 1999 levels.
Chief executive Michael Kemp said motor premiums had fallen by 25 per cent over the past two years and that further cuts had been made this year despite a lack of progress on road safety enforcement. He said the high profits reflected the cyclical nature of the insurance industry.
However, the CAI said consumers were still suffering as a result of dramatic increases in motor premiums from 2000 to 2003. CAI chief executive Dermott Jewell described the 55 per cent increase in profits, despite underwriting a smaller value of business, as extraordinary.
"It just shows how Irish consumers have been taken for mugs for so long," said Mr Jewell.
"This shows that we don't have the competition we need in the industry," he added. "Everybody is entitled to make profits in business but this level of profits while premiums are still high is not acceptable."
Life assurance firms received gross written premiums of €19,345 million in 2004, an increase of 33 per cent on gross premiums in 2003. This means total premium income for both the life and non-life sectors received by insurance company head offices and branches located in the Republic was €26,680 million last year, up 22 per cent on 2003.
The publication of the annual statistics has been brought forward for the second year in a row, following a recommendation by the Competition Authority.
The financial regulator's chief executive, Liam O'Reilly, said this had been done to make the costs and risks of doing business in the Republic more transparent.
"We are conscious of the importance of early publication as a means of ensuring that any potential new entrants, as well as the existing insurers, will have the earliest possible access to market data," he said.
A Competition Authority report published in March identified a lack of timely access to data on insurers' reserves and liabilities as a barrier to entry for potential new players in the market.