Dáil Éireann Debate, Tuesday - 23 January 2024
219. Deputy Mick Barry asked the Minister for Finance the measures his Department will take to regulate insurance prices that, according to reports (details supplied), are rising rapidly; and if he will make a statement on the matter. [2923/24]
View answerI note that the details supplied relate to a recent media report about an increase in home insurance costs in the context of the latest CSO Consumer Price Index (CPI). As the Deputy will appreciate, neither I, nor the Central Bank of Ireland, can direct the pricing or provision of insurance products, as this is a commercial matter which individual companies assess on a case-by-case basis. This position is reinforced by the EU Single Market framework for insurance (the Solvency II Directive).
Notwithstanding this, I am aware that the cost of home insurance may be rising for some consumers, and that CSO data for December 2023 indicates an annual price increase of 9.1 per cent. However, it should be noted that the rate of increase has declined substantially from its peak in April 2023, when it reached 23.3 per cent year-on-year. While this is still high, it is welcome that it appears to be moderating somewhat.
Many factors influence the cost of home insurance, including rebuild costs, which in turn are impacted by costs such as building materials, energy, and labour. As has been widely documented, many of these have been subject to significant inflationary pressure since 2020.
Indeed, by way of illustration, the latest CSO Wholesale Price Index for November 2023 indicates that the cost of building and construction ‘materials’ rose by 34.4 per cent compared to January 2021. As construction and repair costs have generally increased, this can in turn be expected to pass-through to home insurance premiums.
It is also important to be aware of recent work by the Central Bank of Ireland and home insurance providers to increase awareness of under-insurance, in light of this inflationary environment. In September 2022, the Central Bank published a review which found that rates of under-insurance in the home insurance market increased from 6.5 per cent in 2017 to 16.5 per cent in 2022.
The Central Bank wrote to insurance firms to outline these findings and its supervisory expectations, with insurers then beginning to highlight the risk of under-insurance to consumers. During recent meetings with Minister of State Carroll MacNeill, many insurers noted the subsequent positive engagement by consumers on this issue, which has in many cases resulted in “sums insured” increasing. This in turn sees premiums also increasing. However, reducing under-insurance is a key consumer protection issue, as being under-insured can leave many individuals out-of-pocket in the event of a loss.
Finally, I wish to reassure the Deputy that the Government has continued to prioritise insurance reform with a view to improving affordability for consumers. With respect to home insurance, a significant reform has been the Central Bank’s ban on price walking, which will protect customers who prefer to stay with their current home insurer from being subject to a ‘loyalty penalty’. However, the consistent advice of consumer advocates to policyholders is to always consider comparing or switching providers.
