Insurance Bill, 1935—Recommittal (Resumed).

Debate resumed on amendment No. 133.

Last night we were discussing two alternative methods of dealing with the latest problem. One of these methods is set out in amendment No. 133 and the other is contained in the Minister's scheme in the Bill. I think it may be appropriate at the moment to point out to the House that the abuse of lapsed policies which this is designed to remedy is an abuse upon which has been built a great deal of the prosperity of the great industrial assurance companies of the world. At the time when vast reserves were accumulated abroad as a result of lapsed policies, it must be borne in mind that that was then a perfectly legal proceeding. But it should be borne in mind also when comparing the state of the Irish companies with the great wealthy British and American companies that these latter companies had the advantage of operating freely without any legislative interference in the matter of lapsed policies while the Irish companies from the date on which they were instituted had to proceed on much more conservative lines and had to allow their policy-holders more generous terms than their more wealthy rivals had been required to give them long ago.

Last night we asked the question how an agent could discharge himself from the guilt of negligence under sub-section (2) of Section 61 if he did not make ten separate calls during the ten-week period which must elapse before the insurance company lapsed the policy for non-payment of premium. Short of getting an express letter addressed to the company from the policy-holder announcing that the latter desired to lapse the policy, I do not see how an insurance agent could avoid going ten times and asking the policy-holder if he or she were not prepared to resume payment of the dividend arrears and the dividend now due. I think, however, from the point of view of the policy-holder that is not as satisfactory an arrangement as if the insurance company were required to send the policy-holder a form of notice giving him the limited time in which to resume payment of dividends and notifying him that unless he did resume payment of dividends within that time that this policy would lapse and that he would not lose the premiums that he had paid before because nobody suggests that that would be the case. On the date of the lapse he would receive a paid-up policy in respect of what he had so far contracted.

I want to urge again that while it is admitted that legislation concerning industrial assurance must have as its prime purpose the protection of the policy-holder, owing to the peculiar character of the policy-holders in such contract, we ought not to allow ourselves to be carried away into doing a substantial injustice to a properly conducted business. When the question of a lapse arises the insurance company must prove to the satisfaction of the responsible authority that that lapse did not take place as a result of any negligence on the part of their agents. If my memory serves me right the policy can be revised over a pretty considerable period. In fact, if the policy-holder alleges that he was willing to pay his premium if the collector were to call for it, the policy goes on indefinitely until the time for its completion. But anyone who is familiar with insurance practice will know that agents habitually change their employment and very frequently an agent who is in the employment of one company now, is in the employment of quite another company in 12 months' time and may have passed to the third company in three or four years' time. When that agent ceases to be employed by the first company he has no inducement whatever to come forward and give evidence on behalf of the employer whose employment he left three years ago and with whom he has now no contract at all. The insurance company alleges that by the implied will of the policy-holder the policy has lapsed. The responsible authority asks for proof and that insurance company says "So-and-so was the agent responsible," and the responsible authority says "Produce that agent." If they go and find him they may find that he may be in some other employment now. They ask him to go down to the court to testify on their behalf. He either will not do it or if he goes to the court he says he has no recollection of the transaction at all, that he was handling thousands of claims and policies at the time—he has no recollection. If it were represented emphatically by the policy-holder that the lapse had taken place as a result of negligence on the agent's part, the latter would not be prepared to deny it.

Does not the House see that unless there is some method whereby the insurance company can establish documentary evidence at the time of the lapse that they did honestly take every precaution to ensure that the policy-holder would be clear in his mind as to what the consequence of withholding premiums was, that their position becomes absolutely impossible and that to establish a lapse against a dishonest policy-holder becomes quite impossible for any company no matter how much the right may be on the company's side? Lastly, I believe in a bold policy where a certain job has to be done, but I believe it is useful to learn from experience. The method set out in amendment No. 133 has had ten years' trial in Great Britain. The method set out in the Minister's scheme has had no trial at all. So far as I am aware, the method which has been tried out in Great Britain, which is probably the greatest industrial assurance country in the world, has been eminently satisfactory and no claims have arisen in respect of policy-holders which have not been properly disposed of. With that evidence before us, would it not be a much wiser thing to adopt the tried and proven remedy for overcoming the abuses which we want to make an end of rather than to adopt something which yet remains to be tried out and which may not, in fact, operate as efficiently as the British plan is operating at the present time and has operated over the last decade?

There are many features of this question which Deputy Dillon has not referred to. He stated that the amendment proposes to insert provision for a system which has been in operation in Great Britain since 1923, and which has proved eminently satisfactory there, so far as he is aware. The British Industrial Assurance Commissioner in his memorandum to the Cohen Committee, the report of which Deputies opposite have quoted from frequently, stated that the system of forfeiture is unsatisfactory and leads to innumerable difficulties and disputes. In these circumstances it is obviously up to us to endeavour to devise some other and more satisfactory system, and I think we have provided for that in the Bill.

Will the Minister give me that reference, if he has it?

It is in the British Industrial Assurance Commissioner's memorandum to the committee.

What were the difficulties the commissioner had in mind?

I would refer the Deputy to his memorandum. The main difficulty he referred to was the innumerable disputes it led to between the insurance companies and the policy-holder. Remember what is involved in the issue of lapsed policies. Deputy Morrissey mentioned that 6,000,000 policies lapsed one year.

I stated that of 10,000,000 policies issued in a particular year, 6,000,000 lapsed.

Just imagine what that involves to the companies in the matter of issuing lapse notices, in keeping the records from which the notices can be prepared, and being in a position to prove, perhaps five or ten years hence, that such notice was, in fact, issued, and then to find that the notice was invalidated because it was addressed to John Murphy instead of James Murphy, or because the arrears were stated to be 2/5 instead of 2/4. These difficulties and the disputes arising from these matters were so great that the system adopted under the 1923 Act proved unsuitable and unsatisfactory in Great Britain, and we do not propose to adopt it here.

There is an amendment which has been recommended on the ground that the sole purpose is to require companies to give notice of default before lapsing the policy. There is more than that involved. There is nothing in the Bill to prevent a company giving notice, but we are providing, first of all, that the contract between the insured person and the company shall oblige the company to collect the premiums by sending a collector to call at the address of the policy-holder. The policy cannot be lapsed unless there is a default over ten weeks in the payment of premiums and at any time within the ensuing two years, if the policy-holder proves the failure to pay premiums was due to the fault of the collector, he can revive the policy at full rates on payment of the arrears due. We further provide that the policy-holder, under certain circumstances set out in the relevant section, is entitled to get automatically, without application on his part, a free paid-up policy in the event of his ordinary policy lapsing. Under the existing law and, as I assume, under the system which would operate if this amendment were adopted, that obligation to collect would not be there, and that obligation to give a free paid-up policy automatically would not be there. We have a system which, we think, will get us clear of the abuses. Let us take the class of person whose policy is likely to lapse. Deputy Dillon referred to those who ceased to pay because of some dispute with the insurance company. There are those who cannot pay because their economic conditions have worsened, or because they were induced through the efforts of a canvasser to take out a policy involving higher premiums than they could afford to continue. There are those who are induced by the canvasser to allow a policy to lapse and take out a policy involving a higher premium. There are those who go away without leaving their address and whose lapse notices are returned from the Dead Letter Office. In all these cases the lapse notice is a sheer waste of time and expense.

The only class whom it may be desirable to keep insured are persons who will continue their policies if persuaded to do so by the company's agent and the company's agent may be relied on to do this if the provisions of the Bill are brought into operation. In all such cases I agree the issuing of a lapse notice may support the efforts of the agent. There is nothing in the Bill which prevents the company serving a lapse notice, but we are not making it a statutory obligation on the company to do so. Further, they can have printed in the receipt book in clear language intimation of the conditions under which the policy may lapse and that will be brought to the attention of the policy-holder on every occasion when the premium receipt book is opened; so that, in so far as the function of the lapse notice is to call attention to the conditions, that is amply provided for in that section. I therefore find myself unable to accept the amendment moved by Deputy Dockrell. I think the provisions in the Bill are likely to prove much more satisfactory in operation than the provisions in the proposed amendment.

Apart from the question of the lapse notice, there is one thing the Minister is doing, and that is, he is definitely reducing the period to ten weeks. The period at present, so far as most companies are concerned, is considerably longer. If you take the maximum amount of the arrears period, plus the time given in the forfeiture notice, it will mean 12 and perhaps 16 or 17 weeks in the case of certain companies. The Minister seems to be taking the minimum period allowed at the moment—ten weeks. I would like to hear from the Minister why he has come down with ten weeks rather than with 12 weeks or some other figure. So far as I know, the average period—that is, taking the period allowed for the lapse notice plus the arrears period—would be about 13 or 14 weeks. So far as I am concerned, I am inclined more to the section than to the amendment. I think, however, that the Bill, notwithstanding what the Minister said about the forfeiture notice, would be very much strengthened if we retained the provision to serve the forfeiture notice. The Minister talked about the expense and the difficulties there already, but what additional obligation are you putting on the companies except to collect the premiums?

That is a very considerable obligation.

In practice that is done by every company now.

Yes, but a company is not subject to any penalty if it fails to do it. We are saying now that it is a condition of the contract between the company and the policy-holder that the company must collect the premiums. That makes a very considerable difference, because, obviously, it brings up the question of the circumstances under which a company can get out of a contract. As regards the period, I may point out that under the existing law the statutory period is four weeks. We are extending that to ten weeks.

I was talking about what the practice is. With regard to the other point, I have suggested to the Minister that in practice he is not putting any additional obligation on the company, by making it a statutory obligation, to collect the premiums. In practice they do that. I must say that if the obligation to do that is printed in fairly large type on the premium receipt books——

And in plain language.

——that goes some way to meet my point, because usually what you get on the back page of a premium receipt book is a notice in such small type that you would need a very good magnifying glass to read it, apart altogether from understanding it. At the present time these notices are not either read or understood by a great number of people who take out industrial policies. The Minister also implied in his statement that what is asked here would involve the companies in keeping special records on which the forfeiture notices would be based. Again I suggest to him that is not any obstacle, because, obviously, they must keep records as to the number of weeks that a particular policy-holder is in arrears as well as of the exact amount due. Therefore, the records will always be available, and no special difficulties, I suggest, are likely to arise under the new section as regards serving the forfeiture notices. While, as I have said, I prefer the section to the amendment, at the same time I would be much more strongly in favour of the section if I could induce the Minister to retain the obligation to serve the forfeiture notices.

Amendment No. 135 deals with substantially the same point as amendment No. 133, except that Deputy Dockrell wants to insert a new section, as provided in amendment No. 133, and to delete sub-section (2) of the section. In my opinion amendment No. 133 is not a substitute for sub-section (2) of the section. I agree with Deputy Morrissey that, from the standpoint of the policy-holder, the section would be much better if sub-section (2) were retained, and that there was grafted on to it an obligation to serve the 28 days' notice of intention to lapse on the policy-holder. Amendment No. 133 without sub-section (2) would, I think, definitely weaken the section so far as the policy-holder is concerned, although Deputy Dockrell and Deputy Dillon when speaking in favour of the amendment used the language calculated to give the impression that they were desirous of serving the interests of policy-holders by moving amendment No. 133 and proposing to delete sub-section (2).

I take Deputy Morrissey's view that sub-section (2) has advantages, and that the whole section would have still more advantages if it were made obligatory on a company to serve a notice to lapse. The Minister said that there were certain kinds of persons whose policies lapsed. He seemed to indicate that the lapsing of these was inevitable and could not be avoided under any circumstances. There was the type of case where a person might be induced by a canvasser or collector to continue to pay premiums, but even the Minister was compelled to admit that if a canvasser's efforts tended in that direction they would be assisted by reason of the fact that the company had placed upon it an obligation to issue a lapse notice. I submit that any action which tends to induce a policy-holder to continue to pay a premium is one which ought to be supported in this House, because everybody knows that in the past it is the lapsed policies that have contributed largely to the wealth of insurance companies. A number of insurance companies have been taken out of precarious financial positions by reason of lapses on an extensive scale. It was the policy-holders who helped to rehabilitate those companies financially by reason of the losses suffered as a result of large-scale lapses.

I think, therefore, that any steps which the Legislature may take to encourage policy-holders to continue to pay premiums on their policies is worth while, not merely in the interests of policy-holders but of the community at large. It has to be remembered that the State itself has expense thrown on it when persons who were formerly policy-holders die in impecunious circumstances. In cases of destitution, resulting from such a course, the cost of burial and other expenses have often to be met out of State funds or out of the funds of local authorities. Therefore, I say that every effort which the State makes to induce policy-holders to continue to pay premiums is one which the State is justified in taking so as to ensure that policy-holders will get what they originally arranged to have available for themselves under the contract, and in order that the State will not be asked to bear burdens which are almost certain to fall upon it in cases where policies are allowed to lapse. I think there is a very strong case for imposing on a company or companies an obligation to issue lapse notices and in that way bring home to the policy-holder the possibility that the assurance which he thinks is available for him in certain eventualities will no longer be available unless he continues to pay his premium. To that extent, I think the Legislature would be taking a positive step towards helping to reduce the number of lapsed policies. I think also that the State and the community generally will benefit substantially, provided there is an obligation put on companies to serve a 28 days' lapse notice.

The Minister made the point that such an obligation would cause administrative difficulties to the assurance companies. It may cause them some difficulty to issue lapse notices, but assurance companies cannot be said to be people who are not able to overcome difficulties of that kind. I do not think that whatever administrative difficulties might reside in the issuing of lapsing notices are insuperable and that an insurance company could not overcome the difficulties. It is desirable that the policy-holder should have intimation conveyed to him by the company of the intention to lapse before the policy is allowed to lapse. A provision of that kind would help to avoid the lapsing of many policies which, I am afraid, will lapse unnecessarily if the section is allowed to pass as it stands. The Minister might bear in mind that many persons who allow their policies to lapse often contend that the collector did not call upon them and that they would have paid on such-and-such a date if the collector had called.

The Minister may say that sub-section (2) provides that the policy cannot lapse if due diligence, etc., is shown by the collector. That is true; but there is very little value, in some cases, in giving persons a remedy of that kind because, being poor and having little or no resources, probably not being intellectually equipped for conducting a case against the company, many of these persons because of the difficulty which will confront them in sub-section (2), will not avail of the benefits which, in certain circumstances, are conveyed to policy-holders in that sub-section. The fact that a lapsing notice is provided for will help to ensure that the policy-holder gets a very definite intimation of intention to lapse before the policy is lapsed. It is not at all clear that that would be conveyed to him in the same way merely by putting an obligation on the collector to collect and to display due diligence in the collection. If the Minister does not agree to amendment No. 133, he might consent to meet the matter by accepting amendment No. 135, or the substance of that amendment, or any form of amendment which will impose on the company an obligation to notify the policy-holder of the intention to lapse before the lapsing takes place.

The provisions of Section 62 meet that.

Deputy Norton put very forcibly the advantages of requiring a forfeiture notice to be served. As I understand the matter before the House, the question is whether policies should be forfeited by means of, or after the service of, a forfeiture notice, or whether they should be forfeited after the expiration of a period during which the company are under an obligation to endeavour to collect. It is surely going much further, and perhaps making the whole system incapable of being worked out, if the two systems are to be worked together. I do not understand that the Minister would be prepared to impose on the company the liability, first of all, to serve a forfeiture notice, and also to allow the period of ten weeks to expire during which efforts were being made to collect. The period of ten weeks, incidentally, is different from the period of 28 days provided for in the arrears notice suggested in amendment No. 133 and also in Deputy Norton's own amendment, No. 135. Surely the interests of the policy-holders are best served by giving them explicit notice, as has been said by Deputy Norton, that unless within a period of 28 days, which after all is a very considerable period, they pay, the policy will be lapsed. Surely it is far better that they should be given explicit notice of that kind than that the mere lapse of time, with the periodic attempts to collect made by the collector, should bring about automatic forfeiture.

Under the section the forfeiture notice goes, as I understand—there is to be none. The collector is to call, though the section does not say so, week by week, or to make efforts to collect. I do not think that in any other part of the Bill the standard of care or diligence to be used is indicated. I do not know that in any part of the Bill it is arranged what the collector must do or what the company must do. I do not know what it is considered by the Minister would be due diligence within the meaning of Section 61. Suppose the collector calls to a house where the policy-holder resided and he finds the policy-holder has gone and left no address. What does the Minister suggest are the obligations of that collector, or of the company? Is the period of ten weeks to bring about automatic forfeiture if the collector simply calls week by week at that house, which is empty or in which no person has any knowledge of the policy-holder? Where is he to seek him and what efforts is he to make? It is obvious that the policy-holder is not going to be protected in such a case because the collector can say, "I issued a policy to a particular person at a particular address; he is no longer there; I have called there every week for ten weeks" and the policy is lapsed.

What is his position if the lapsed notice is returned to the dead letter office?

His position is the same, but if the notice goes to the address, the policy-holder has such rights as the contract gave him, if the letter can be forwarded to him by any person. The service of the notice is something definite, whereas the standard of care required is left indefinite. There is another objection to the section, if I might refer to the section while dealing with the amendment, because they are really alternatives. A period of two years is allowed to the policy-holder within which to pay up arrears of premiums and bring the policy into force again, subject, of course, to showing that due diligence was not shown in the efforts made to collect. Is it considered by the Minister that it would be right that such forfeiture should be relieved against if the policy had matured? Because, if so, it would seem that, in many cases, the policy might be allowed to run into arrears and within a period of two years, if the claim matured within that period and had not been met, it would be open to the policy-holder to come along and pay up the arrears of premiums and claim the amount, even though he may have had nobona fide intention to maintain the policy, taking the chance that the claim might fall due in the period. If the claim does not fall due in the period he does not pay the premiums, but if he becomes entitled to a large sum, he pays up the arrears and, in effect, secures for himself something like two years' free insurance. There is a difficulty I suggest raised by the automatic forfeiture on the expiration of the period. I do not know whether I quite understand Section 62, because it would seem from Section 62 that, on the expiration of ten weeks from the payment of the last premium, due diligence having been used, the policy is necessarily forfeited, and that the company have practically no option but to allow the policy-holder to retain the benefit, if afterwards he comes along and pays up the premiums. Deputy Morrissey said, and I believe it to be the fact, that many companies allow their policy-holders a longer period than ten weeks.

That is not prohibited by the section. We refer to it as "not less than ten weeks."

My difficulty is that under Section 62 it is provided that the company is to do certain things when the policy is forfeited. Under Section 61, if the policy is forfeited, then the liability falls upon the company to issue a free paid-up policy and give certain other particulars. Is it the intention of the Minister that, on the expiration of the ten weeks, the company is under the obligations of Section 62?

Not until the policy is forfeited.

At the end of ten weeks Section 62 operates?

Not until the policy is forfeited. We say that the company may forfeit the policy if, after a period of not less than ten weeks, no premiums have been paid.

And must issue a free paid-up policy?

If they forfeit the policy.

The Minister may have answered the difficulty I am raising, but it does seem to me that the policy-holder's interests will not be met if the freedom which is allowed now by companies to policy-holders is to be in any way restricted. It is obvious that if a policy has been kept on foot for a great number of years a company would be slow to forfeit it merely because even ten weeks' premiums fell into arrear. They might allow a much longer period during which they might accept from the policy-holder payments on foot of his arrears. They might recognise that his difficulty, because of unemployment or some other condition in keeping the premiums on foot, merited consideration and might allow a period of 15, 16 or 20 weeks or longer in which to make up his arrears. On the other hand, if a policy has been taken out and premiums have only been paid for two, three or four weeks, it would perhaps be reasonable on the part of the company to be more severe in forfeiting that policy. Does the Minister not think that by fixing this period of ten weeks he is serving the policy-holders badly by removing from the company power to give that consideration to their policy-holders?

When all is said and done, it comes back to this, as Deputy Norton has said, that the policy-holder cannot reasonably expect more than a definite intimation conveyed to him that within the period of 28 days, subject to payment of his arrears, his policy will go. There is no use in attempting to protect a policy-holder against himself. We are not dealing with the man who is falling into arrear by accident, but with the man who is falling into arrear because he cannot maintain the policy or does not wish to do so. Surely he cannot expect more than that he should be given definite notice of a period of time in which he must make his position regular or let his policy go? If the two systems are to be adopted, and an effort made to place them side by side, it will make for great difficulty in operation. Neither of the amendments before the House can stand with the section, because, as I have pointed out, the periods allowed in them are substantially different. Forfeiture is provided for in the case of the amendments in 28 days, while the present section allows a minimum of ten weeks.

While Deputy Lavery was speaking the Minister interjected by way of answer to this very debatable point as to when forfeiture arises, that the Bill only enables a company to make a forfeiture after a certain period. I do not find that phrase anywhere in the section. The Minister, I thought, was quoting; I thought I could put quotation marks around his phrase, that the Bill somewhere contained a phrase that after this period the company may forfeit. That is not the language of the section. The language of the section and of Section 62 is very definitely so phrased as to lead one to a conclusion opposite to that which the Minister draws. Sub-section (1) of Section 61 says that no person who has effected a policy shall incur a forfeiture unless a premium is unpaid for not less than ten weeks. The next sub-section says that where a policy of industrial assurance has become forfeited by reason of the non-payment of a premium payable, etc., and then sub-section (1) of Section 62 says that whenever a policy of industrial assurance becomes forfeited after a particular date by reason of the non-payment of a premium payable, etc. I suggest to the Minister that the phraseology used leads to the conclusion that the forfeiture was to operate automatically after the ten weeks had expired. If that is not the case, and if there is some other view to be expressed through this measure, some different language will have to be used. Anybody reading this Bill and construing these phrases together would come to the conclusion that what was in Deputy Norton's mind, and, I think, in Deputy Lavery's mind, is the correct thought, that after ten weeks' non-payment the forfeiture automatically happens. I gather from the Minister's phrase that that was not his intention.

As between these opposing ideas, because undoubtedly they are opposed and cannot be worked together, of having a policy lapse because a premium has not been paid for a certain period, and not allowing a policy to lapse until notice of a precise nature is given to the person, I think the Minister ought to come down in favour of the proposal in the amendment, if he considers the reasons as stated in the variety of Commissions' reports for lapsing. Both the Committee which examined this matter in this country about 1924 and the Committee which examined it in England in 1934 drew attention to the root evil, and that was what they called the pressure for increase that was thrown upon agents. The Cohen Report does not reveal what would appear to outsiders to be such dubious practices in England as were, and may still be, common here. It simply says that there is undoubtedly a variety of ingenious methods operated upon the staffs by the companies themselves, and operated upon the policy-holder or potential policy-holder by the canvassers in order to get business. In this country, it was stated that the practice had gone to this extent:

"As a general rule, the remuneration of the Collector consists, in part, of a fixed percentage of the contributions thus collected, and, in part, in the retention by him of the whole of the premiums he collects during the first 12, 14 or 16 weeks upon all new assurance which he has been instrumental in effecting"—

these being known as "procuration fees."

The conclusion which the Committee drew from that practice was that after 12, 14 or 16 weeks had gone, there was not the same enthusiasm on the part of the collector to call back again. There is also the interlocking in respect of inducing a policy-holder to change from one company to another. They do not say that there is a practice of that type, but they do refer to what are called ingenious devices utilised by companies on their staffs, and by canvassers on the class to whom this type of insurance appeals. They say that the whole difficulty was due to what is called the pressure for increase, and, so far as I can read the Report, they recommend that as you could not rely on a canvasser to exercise the same diligence, there should be something substituted for that. The Minister's sub-section (2) of Section 61 is an attempt to do that; in other words, it throws the liability on a company if it can be shown that due diligence was not exercised, but no standard is laid down and, in fact, it will be impossible to get a standard. The notice is a precise thing, and it was recommended in the Report of the 1924 Committee in this country. The recommendation was that it should be provided as a condition precedent to the forfeiture of a policy that notice should be given to the policy-holder, stating the amount due and the place where it was to be paid, and giving 28 days in which to pay.

They refer to the other suggestion made, that a longer period of grace should be given, and they recommended against that on the ground that when dealing with people who are inclined to put everything off, you would probably only increase the number of lapsings. If the Minister would read the Cohen Report and McCann Report here, he would find that a very big number of the lapsings occur almost immediately after the policy is taken out; in other words, it means that the enthusiasm of collectors—and it goes much deeper than that, but it is one reason for it—gets people to enter into uneconomic contracts which they are keen to drop after a little while. Those people will not be saved, in any event, but there was another practice of a much more dubious nature alluded to in both reports. It was, that, owing to the particular system on which canvassers or agents are paid, it sometimes became an economic proposition for a canvasser to put dummy people on the books, and to continue to pay small sums for them for a while, in order to get the bonus held out for acquiring new business.

They cannot be saved, but if you take the person who has been induced to make something in the way of a Savings Certificates type of contribution towards a later event, and who has kept on paying premiums on it, he does put off the ugly day of payment, and the only way he can be kept up to the mark is by frequent calling and the display of enthusiasm by the collector.

The Cohen Report decided to try to limit the abuses by certain devices such as the question of the amount that might be spent on management. Whether that is going to be effective here or not I do not know, but it seems that, as between the two devices before us, recognising what the trouble is, and taking it that we are meeting one part of the trouble in regard to expenses, what is left over is surely to be met by bringing the matter directly to the notice of the individual concerned in a precise way than by putting it as an obligation on the company to see that their collectors will display due diligence in calling, the root evil being that they do not, and they cannot be expected to because frequently the terms of their employment preclude them. They have to seek new business and have to leave some of these people on their own. If there is to be a choice between the two, I suggest to the Minister that the Cohen Report, instead of favouring this, is definitely favourable to the other proposal, and the report that was brought here by the only body of people who had evidence publicly supplied to them —or, at least, after public notice had been served—by the companies and their agents and other people interested, recommended exactly what is proposed in the amendment, and I think the merits are entirely with them.

I think the House will agree that it is unnecessary to travel over the same ground before disposing of this matter, but the House should get it into its mind that "lapse," in the old sense of the word, is done away with entirely. The difficulty, however, I submit, is not met, as the Minister seems to think, by the provision in Section 62.

I take it that the Deputy is referring to a written application for a free paid-up policy.

It entitles the person who lapses to a free paid-up policy, and I think it is the unanimous desire of the House that the old lapse system should go away and the free paid-up policy system prevail.

Let us discuss the matter of forfeiture by itself.

I do not think you can do that without having regard to the fact that there is this provision for the free paid-up policy.

Could it not be done in connection with Deputy Dockrell's amendment by the omission from Deputy Dockrell's amendment of the acceptance clause and the insertion of a clause providing for conversion into a free paid-up policy?

No. I think the two systems are alternative systems and that they could not lead into one another.

Well, I am afraid I do not take that view. My opinion is that amendment No. 133 is, in principle, reconcilable with the principle contained in Section 62 and that it could be and should be made reconcilable with it in effect. I think it will be admitted that we are all agreed on the principle of the free paid-up policy instead of the old system of lapse upon which the wealth of many of the companies was built. The Industrial Assurance Committee in Great Britain reported to the effect that they regarded such machinery as is proposed in amendment No. 133 as unsatisfactory, inasmuch as it had given rise to endless disputes and litigation. Can any remedy be evolved to meet the evil we seek to abate which will not leave it open to considerable dispute and litigation? If you compare the precise and easily ascertainable procedure under amendment No. 133 with the vague requirements of sub-section (2) of Section 61, which is going to give rise to the greatest amount of litigation and dispute, is it not worth anybody's time to have a skeleton in the courts or the arbitrator's office on sub-section (2) of Section 61? There never can be a settlement of any dispute without reference to the arbitrator or the courts if sub-section (2) of Section 61 stands, because every decision must bead hoc on the facts stated, and there never can be a clear proof of compliance with the requirements of the statute governing the insurance business.

The last point to which I refer is this: we are bound to protect insured persons' interests effectively for the reasons already stated, but we are also bound, taking into consideration the fact that this Bill is partially designed to preserve the Irish insurance business, to safeguard the interests of the policy-holders' rights in this country by the most economical methods we can devise from the insurance companies' points of view, and we are bound to do so for this reason: that the great companies of Great Britain, with their enormous services, can bear burdens up to a point. They could certainly carry these burdens for a protracted period and never feel them, even though they had made up their minds that, during that period, it was not economic to carry these burdens. The Irish companies, on the other hand, cannot do that, and if we place a burden on the shoulders of the companies which makes the industrial assurance business uneconomic in this country, what is going to happen is that the big British companies, which are already doing substantially more than half the entire industrial assurance business of this country, will continue to carry whatever burden we put upon them until all the Irish companies collapse, and when the Irish companies collapse, the foreign insurance companies can then say to us: "This burden must be taken off from us or we will wind up the entire industrial assurance business in this country and get out." In my opinion, this House should not impose upon the Irish industrial assurance companies a system which is uneconomic, if they have at their disposal an alternative system to remedy the same evils—a system which carried the approval of the McCann Commission, of the Cohen Commission, and which carries manifest approval by the fact that it is operating still in Great Britain 13 years after it was first introduced.

I do not think we should consider the advisability of inserting one or other set of provisions into this Bill with regard to the relation of Saorstát companies to the external companies. Either there is the danger of abuse, which it is our purpose to eliminate, or there is not.

That is agreed.

If there is the danger of abuse, it should be our purpose to try to eliminate it.

That is agreed.

Neither do I think that we can seriously consider imposing upon the companies both sets of obligations. Deputy Lavery spoke against that, and I think he was right; and, apart altogether from the difficulties which the imposition of both sets of obligations would create for the companies, there would be a considerable practical difficulty in doing so, because it seems to me that both things are based on different conceptions of the obligations of the companies. We have at present, in theory, the position that the company is not bound to collect the premiums; that the obligation is upon the policy-holder to pay the premiums, and that, if he fails to pay the premiums under certain circumstances and after a certain period of time, the company can lapse his policy subject to this: that they send him notice that, if he does not pay up in a particular time and at a particular place the amount due by him, the policy is going to terminate. The existing law in Great Britain provides that, under certain circumstances, the person whose policy has so lapsed becomes entitled to a free paid-up policy on making an application therefor and on certain conditions. That is being maintained in the amendment. Apparently the contract between the company and the policy-holder is still conceived as one in which the company has no obligation to ensure that the policy-holder pays his premium by carrying out a collection of the premium. We still have the position by which the insurer is in the position that, if he wishes to keep his policy alive, he must himself take the necessary measures to see that his premium is paid, still having the provision that, if he fails to do so, the company can send notice of default requiring the payment of the premium within a certain time and at a certain place. You have still the position under which application for a free paid-up policy must be made by the insured person. We propose to get away from all this. We are putting it as part of the contract between the insurance company and the person that the company is going to collect the premiums by means of personal visits of the agent to the residence of the insured person. That is the first essential difference between the two positions. That being so, it is no longer necessary, in our opinion, to provide the suggested obligation of giving notice of forfeiture. If a company fails to carry out that portion of the contract, it is the company which has failed and not the insured person, and the right of forfeiture under such circumstances is limited as provided by Section 61 (2). What is the need for sending this statutory notice of forfeiture if the agent is obliged to take all due measures to ensure that the premium is paid? There are two classes of persons concerned — those who let policies lapse through carelessness, and those who let them lapse for other reasons, and who are not likely to be induced to revive them by personal calls by an agent or by the issuing of a notice by the company, the persons in the various categories I mentioned earlier. Some of those may be induced to continue paying the premiums by personal influence exercised by the agent, but they are not going to be induced to do so by the mere receipt of a formal notice from the company. I submit, from the point of view of the insured person, and in the new circumstances, having regard to the new terms of the contract between the insured persons and the company, it is better for them that the provisions in Section 61 should operate than the provisions suggested in the proposed amendment. It is also better for the companies, because the alternative to the adoption of the proposals described in the new circumstances is to place upon the companies a dual obligation, in my opinion.

The question of period has been mentioned. What is proposed in Section 61 and what is intended, is that there must be at least a period of ten weeks before a company can forfeit a policy. It is not proposed to provide that the company must do it at the end of that period. What is provided is that a minimum period of ten weeks must elapse, and subsequent to that the company has the right to forfeit the policy subject to conditions which apply only in certain cases. The present statutory period after which notice of forfeiture can be given is four weeks. It is true that most of the companies allow arrears to accumulate for a much longer period, and it is unlikely that they will change their practice in consequence of Section 61. I think the ten weeks' minimum period is not unreasonable. It is quite a long time, and if a person has allowed premiums to go into arrears for that period it is reasonable to assume that that person does not want to continue the policy or is unable to do so, unless the failure to pay premiums is in some way due to the fault of the insurance company, in which case the provisions of sub-section (2) of the section operate. Taking the two provisions side by side, and examining them I think there is no doubt it is better for the insured person and the company that the proposal in Section 61 should stand unless we are prepared to get back to the system that we proposed to abolish, in which there is on the company no legal obligation to collect the premiums at all. I do not think we should do that. We should have on the company, as part of the terms of the contract, an obligation to collect the premiums, and if that obligation is there, the rest follows automatically and logically from the adoption of that provision, unless we are prepared to take the only other alternative, which I think is objectionable, of putting the dual obligation on the company. That is unnecessary and would involve very considerable difficulties for the companies. Deputy Norton may not object, but it might increase the cost of insurance and otherwise be detrimental to the interests of the persons who do that kind of insurance.

The Minister talks about dual responsibility adding more trouble and expense. No additional trouble is being imposed. In practice every company collects premiums and every company issues forfeiture notices.

There is nothing in the Bill to prevent any company issuing a forfeiture notice if it wishes to do so.

If any of the companies' representatives are here to-day and heard the Minister, even if inclined, they would be convinced that it was almost impossible to continue doing so. The Minister proceeded to say that it would be unfair, difficult, expensive, troublesome, and everything else for the companies, and then blandly told them that there was nothing to prevent them doing so. Of course there is not. We want to keep them doing this. There is, in fact, no additional obligation put upon them by the dual responsibility. The Minister talked as if making it a statutory obligation to collect the premiums was putting a new responsibility on the companies as well as additional expense. It is merely giving statutory effect to what has been carried on by every insurance company engaged in this kind of business. There would be no additional expense to the ordinary company engaged in industrial assurance.

There are advantages for the policy-holder if the insurance company has to notify him of the intention to lapse the policy. The practice of insurance companies in the past of issuing notices before lapsing policies has been advantageous to insured persons and policy-holders. As Deputy Morrissey stated, the Minister's whole speech on the subject has been an incitement to the companies to stop the issue of lapsed notices, because he talked of it as being a burden on the companies, something imposing a hardship on them, something that was going to swell administrative costs, and that the companies should not be asked to undertake that duty. Of course, that is going to happen after the Minister's speech. It might happen, without the Minister's speech, that the companies were going to take the view that there was no need to put this burden upon themselves. The Minister has given them a certificate that it is a burden, that it is costly, and that it will increase the cost of administration, and that the inconveniences are such that the companies will be justified in getting rid of this costly practice.

As soon as the new system comes into operation. They cannot do it before then.

It does not seem so to me. We have a position under the Bill that there is no statutory obligation on a company to issue a lapse notice. During the discussion we got a certificate from the Minister that the practice of issuing such notices is expensive on the companies, that it is cumbersome and imposes a burden which sends up administrative costs, with the result, as the companies probably know, that there is a certain inconvenience about issuing these notices. Possibly they realise that it might save the staffs a good deal of time if they had not to issue such notices. Are they going to take the Minister's advice and to drop the issuing of lapse notices? There is no obligation on them to issue notices under the Bill. As the Minister says, some of them might continue, but as it is expensive, the companies are, of course, going to drop the issue of these notices. It will be on the advice given by the Minister, in the speech just delivered, that they may decide to get rid of these notices because of the cost and inconvenience associated with them. What I suspect will be the normal development following the passage of the Bill is that the lapse notice as such will go and the policy-holder will simply wait for a periodic visit from the canvasser or collector, and if the canvasser or collector cannot produce the necessary change of attitude in the defaulting policy-holder, then the policy lapses. I say that is facilitating the lapsing of policies. The Minister should retain in this section a provision which will continue to impose on the companies the obligation to issue a lapse notice. I do not think that the issuing of a lapse notice is in conflict with sub-section (1), because you could have the over-riding consideration of ten or 13 weeks lapsing period, and, at the same time, require that a person could not be affected even at the end of that period if the lapse notice had not been given by the company. I think the Minister has positively weakened the position of the policy-holders, and is not checking effectively possible losses to policy-holders by discontinuing the provision requiring statutory notice of intention to lapse.

I shall be brief on this matter. I cannot understand the Minister founding his argument on two points which may be a correct statement of law, but certainly is not a statement of the practice. He sets two systems in opposition, one in which the obligation is on the insurer to see that the premium is paid. That may be law, but every line of every report written on this matter for the last 12 years shows distinctly that whatever good arose under the industrial assurance system, comes from the fact that people are got by constant irritating nagging visits to pay the premium. Whatever the legal situation, the Minister can put it on one side. The practice was the call. He further states that under his system it would be incumbent on the collector to call. The defect revealed by the various Commissions which have inquired into this was not the failure to call but the failure to use the same persuasive methods after the first few months, as were first employed to get the individual to take on. The matter of the collector calling was so much a commonplace that it became one of the stock jokes. We all know the jokes about the man from the Prudential, and the variety of domestic disputes for which he was supposed to be responsible. The Minister talks as if the courts are going to be able to decide easily in future on the complicated matter of what constitutes due diligence. Due diligence has to be observed, and the Minister has turned his points about the obligation now put on the collector to call on that particular phrase. In opposition to that you have the clear-cut system recommended by two Commissions—to send notice. There cannot be a great deal of dispute over that. There may be a dispute about people who have left their former addresses. That may happen in a small proportion of cases.

The Minister also says, or appears to understand, that there is an incompatibility between some of the amendments and Section 62. I cannot understand how he thinks that incompatibility arises. Deputy Dockrell puts in the final phrase, that there shall not be an obligation on the company to issue a free paid-up policy except on the written request of the policy-holder. The system in England under later legislation is that the obtaining of a free paid-up policy is on the application of the policy-holder. When does a person become entitled to it under the Minister's Bill? Has there to be a notice of forfeiture issued, and is it only at the particular point fixed in the Bill—that that forfeiture notice cannot be issued until after ten weeks have elapsed? At what point does a person become entitled to this free paid-up policy? Must the company wait and possibly suffer in a great many cases the situation to which Deputy Lavery referred, in which people, who have no intention of paying on the policies, wait until a particular life falls in and then come along and put down money in order to draw a little more, and fall back on sub-section (2) by alleging that due diligence was not observed by the collector?

As far as the free paid-up policies are concerned, the amounts in the main are very small. In the Commission's Report they did not think a great deal of the proposal when it was first mooted. They said that in a great many cases whatever sum a person would be entitled to would be somewhere in the region of 5/- or 6/-, and that could not be cashed for a great number of years. Apart from the danger of the documents verifying title being lost, there was the fact that a person would get tired waiting on the chance of getting 6/- or 7/- afterwards. The Minister, I think, can get over the objection that there is an incompatibility between the proposed amendments and Section 62. There is none at all I believe between the Section and one of the amendments, amendment No. 135. The Minister can disabuse his mind of any idea that there is any incompatibility between that amendment and Section 62. Think of the system there would be if there was no forfeiture until notice of arrears had been served. On the happening of that event, Section 62 floats into line. Surely, that is a good system. It is not a system I imagine which the companies will be particularly keen on, because even although these 6/- and 7/- may not be of great benefit to people, it was the accumulation of such sums over the years, amounting to a million eventually, that formed the pickings for the companies in the old days. Suppose the Minister can get the two sections together, has he not a perfectly good situation—no lapsing until notice has been served, a certain time goes on and then on the happening of that—I am always assuming that Section 62 will disappear and that sub-section (1) of Section 61 will also disappear—the person becomes entitled to a free paid-up policy to whatever amount——

That would be a dual obligation on the companies.

As far as the Minister is concerned, he wants to put an obligation on the companies to make the collector call with something which the court will determine to be due diligence and afterwards serve notice of forfeiture, and after that there may be a free paid-up policy. There is a variety of obligations there on the company.

What I see about the Minister's interjection as to the dual responsibility cast on the company is this: The Minister is proposing to make a statutory obligation something which the company accepts as an obligation and proposes to carry it out. He is proposing then to remove the statutory obligation that is already imposed on the company to serve a notice of forfeiture. That is the thing in a nutshell. He is putting no responsibility on them that does not exist already.

We are transferring the legal obligation from one part of the arrangement to another.

Quite, but the Minister has made no case for removing the statutory obligation to serve notice.

If we put the obligation outlined in sub-section (2) upon the companies, I do not think we should also say that forfeiture must not take place until notice of the intention to do so is issued through the post to the policy-holders.

If you put the other obligation on them you immediately get up against the difficulty that the notice must be in a certain form. A large number of the disputes that have arisen in Great Britain were due to the fact that the arrears were stated to be 2/5 instead of 2/4 or that the name was stated to be James John instead of John James. The notice, for these reasons, was invalidated.

There they have not got the valuable word "prescribed."

You would get these notices invalidated by mistakes of that kind, in any event. I do not think it is desirable or necessary to put on the company the obligation to issue that notice before cancelling the policy. I think sub-section (2) is sufficient. If they do forfeit a policy under Section 62, a free paid-up policy must be issued forthwith.

Is it possible to secure, in putting this amendment, that the later amendments and the section will be preserved?

Amendment No. 133 proposes to insert a new section.

All the other amendments will remain?

Except amendments Nos. 135 and 137, which will be ruled by the same decision.

I want to raise a point on sub-section (2), which confers a protracted period of free insurance on policy-holders who go into arrear. I do not know whether that question might not more suitably be raised on some other amendment.

The only amendment would be the Deputy's amendment to delete sub-section (2).

That has, undoubtedly, been taken with this amendment.

I thought that amendments Nos. 135 and 137 were being taken with this amendment, too.

On the basis that amendments Nos. 133, 135, 136 and 137 go together, I shall raise my point. Sub-section (2) operates to allow a person to pay a premium of 6d., or indeed 1d., under certain circumstances, and thereafter to allege in court that the agent did not exercise due diligence in collecting the subsequent premiums. After 23 months have elapsed and the person insured dies, the policy-holder can walk into the office of the insurance company, pay up the premiums outstanding, and collect the entire amount of the policy. Surely there ought to be some restriction placed on that right similar to the restriction which operates in Section 62 in regard to the right of a policy-holder to a paid-up policy in the event of a lapse notice being served. Surely a person who has paid only one premium ought not to be allowed to pay up arrears after two years and secure the entire amount of the policy, thus obtaining for himself two years' free insurance by paying one premium.

I suggest that, instead of that, a restriction of time should be imposed and that, if the Minister stands on the ten weeks proposal contained in sub-section (2), the company should be entitled to lapse the policy, in accordance with the terms of Section 62, in ten weeks if two years' premiums have been paid; in eight weeks, if 18 months' premiums have been paid; in six weeks, if a year's premiums have been paid; in four weeks, if six months' premiums, or less, have been paid. Otherwise, I think you are going to have a racket started whereby people will speculatively pay up 6d. in the same way in which they put it into a lottery, without the slightest intention of honestly entering into an insurance contract with the company, but having the hope that, at the end of two years, the contingency may fall in and they will put up a mighty good fight in the courts to be allowed to pay the arrears and collect the amount of the policy. While it is right to keep a tight rein on the insurance companies, any practising barrister will tell you that the courts habitually interpret contracts of this kind in favour of the insured party and look with suspicion and extreme disfavour on any suggestion that insurance companies should be released from the letter of the bond. They will accept any explanation from the insured parties if they are the aggrieved persons. In that connection, if a widow comes forward and says that sub-section (2) was not complied with, that the collector did not search her out, that he came on a day or at a time when he knew she would not be in the house, the court would listen to that excuse sympathetically and the excuse would be accepted by the courts to prove that the fault for non-payment of premiums rested on the collector and not on the policy-holder. That means that the policy-holder secures for a period of two years virtually free insurance. I want justice done between all parties, but I do not want a ramp created or conditions imposed upon Irish insurance companies which will make it absolutely impossible for them, who had their origin and have spent their whole existence under stringent insurance legislation, to survive.

I have not been able to relate the amendment suggested verbally by Deputy Dillon to the provisions of the sub-section but, if he puts it down for next Stage, I may have an opportunity of considering it. I do not quarrel with the Deputy's rendering of the section but I should like to point out that the insured person must not merely "make a good fight" in court to show that there was negligence, or failure to exercise due diligence, on the part of the agent of the company; he must prove that to the satisfaction of the court or, if the dispute is determined under Section 67, to the satisfaction of the Minister. Unless he proves that, there can be no action on this sub-section. The period referred to in the sub-section is two years. I am not committed to the term of two years. I think it is a reasonable period but if somebody makes a case for increasing or decreasing that period, I am prepared to consider it.

Would the Minister consider a case for a graduated period?

I do not think so. The Deputy made a suggestion which I could not follow but, if he puts it down in the form of an amendment, I shall have an opportunity of examining it. I shall, however, require to have a good case made to convince me that two years is not the best period.

What is the average amount assured in whole-life policies and what is the average premium? In England it is about 2½d.

It is the same here.

About £14 is the average amount assured here.

Amendment No. 133, by leave, withdrawn.

I move amendment No. 134:—

In sub-section (1), line 43, to delete the word "ten" and substitute the word "thirteen."

The object of this amendment is to substitute 13 weeks for ten weeks. It is provided in the section, as it stands, that the policy will not be lapsed until the premium payable in respect of such policy is unpaid for not less than ten weeks after it becomes due. The object of the amendment is to increase the ten weeks to 13 weeks. I think the Minister is aware of the fact that many companies at present allow periods of grace up to 13 weeks.

That is an answer to the Deputy's amendment.

We will see whether it is or not. In fact, some of the companies allow more than 13 weeks. Now when you put in a Bill that the period of grace is only ten weeks I am afraid that many companies will be inclined to think that ten weeks is an extension of the present phenomenal maximum period so far as they are concerned and may be supposed to reduce the period of grace, in excess of ten weeks allowed at present, to ten weeks. In that way the policy-holder may have his policy lapsed if his premium is unpaid for a period in excess of ten weeks. I do not think it is a very onerous obligation on them to ask them to carry the policy for 13 weeks, particularly in the case of industrial assurance, where periodical employment makes it extremely difficult for people to pay assurance premiums. Supposing a person in receipt of unemployment assistance benefit had a policy and suppose the Minister's Employment Period Order came into operation, say, on the 3rd June and there was no prospect of getting any more benefit until the Employment Period Order finished on the 27th October, you would have the position that the insured person would be unable to pay the premium for 26 weeks.

In that case the Deputy should suggest 26 weeks instead of 13.

I will do that, too, if the Minister considers it more desirable. I think it would be very harsh if policies were allowed to lapse in that way. In that case the fault would be not merely with the policy-holders, but with the Minister, who deprived them of their income. Ten weeks is a particularly short period, having regard generally to the fact that the insurance companies are now being placed in a strengthened position by the State and they ought to be prepared to share the advantage of the strengthened position with the policy-holders. It has been shown in the past that 13 weeks is not unreasonable. The insurance companies themselves by their action have shown that they think it is not unreasonable, and there is no reason why the period should not be extended now to 13 weeks.

As the Deputy states, many companies allow 13 weeks to pass before the policy is lapsed. But the statutory obligation at present is only four weeks and we are increasing that to ten.

Why not make the maximum 13?

In fact the companies allow a much longer period than the statutory period. We say that not less than ten weeks must elapse before the policy shall be forfeited. Under these circumstances it is not to be assumed as a necessary consequence that companies at present allowing a longer period of grace will change their practice.

Has the Minister any reason to think that they will continue the present practice?

What is the present practice?

It varies. The statutory obligation is four weeks, but, as the Deputy says, "good practice" has discarded that.

Is "good practice" founded on the average?

I could not say what the average is.

Amendment, by leave, withdrawn.
The following amendments were on the Order Paper:—
135. Before sub-section (2) to insert the following sub-section:—
(2) A forfeiture shall not be incurred by any person assured in an industrial assurance company by reason of any default in paying any premium until after—
(a) such person has been served with a notice stating the amount due from him and informing him that in case of default of payment by him within 28 days and at a place to be specified in the notice, his interest or benefit will be forfeited; such notice to be sent by post from the registered office of the company to the person assured, and
(b) default has been made by him in paying any premium in accordance with that notice.—
(William Norton; Tadhg J. Murphy.)
137. To delete all words from the beginning of sub-section (2), line 45, up to and including the word "thereof" in line 47, and substitute the words:—
"A forfeiture shall not be incurred by any member or person assured in an industrial assurance company by reason of any default in paying any premium until after—
(a) notice stating the amount due from him and informing him that in case of default of payment by him within 28 days and at a place to be specified in the notice his interest or benefit will be forfeited, has been served upon him by or on behalf of the company; and
(b) default has been made by him in paying any premium in accordance with that notice, and"
and to delete the word "and", line 47, and substitute "(c)".—(Fionán Lynch.)

I want a decision on amendment No. 135.

Mr. Lynch

Amendment No. 137 is on the same lines as this amendment. While I have been in the House I have never yet heard from the Minister any reason as to why he is not adopting the words of the British Industrial Insurance Act of 1923 with regard to forfeiture or alternately the words suggested in the Cohen Committee Report referred to in amendment No. 133, moved by Deputy Dockrell. Presumably the amendment moved by Deputy Dockrell, which is on the lines of the suggestion in the Cohen Report, is founded on the experience of the working of the 1923 Act. I would like to hear some reason why the Minister has adopted neither the provision of the 1923 Act nor the provisions of the Cohen Report.

One good reason was that the British Industrial Insurance Commissioner said that these provisions were unsatisfactory and that they gave rise to innumerable difficulties. When that is the opinion of the Commissioner on the provisions of that Act, there is no reason why we should introduce it into our Bill.

Mr. Lynch

In relation to forfeiture?

Yes, it is "under forfeiture" that he introduced these words.

Surely there is no occasion for bringing in the words "due diligence."

It is quite true that the provisions of the section will only operate where there are disputes. In the great majority of cases Section 61 will operate when the policy-holder allows his policy to run into arrears, and after such a period as the company will allow in the way of grace, or after such a period as the law fixes, the company will forfeit the policy. If the policy-holder has rights under Section 62, that section will secure those rights for him. In certain eventualities the provisions of Section 61, sub-section (2) will come into operation, but in almost every case there will be a dispute between the policy-holder and the company as to whether the section applies. The dispute will be determined by the provisions of Section 67. Possibly no question will arise under Section 61, sub-section (2), unless there is a claim. It is intended, if a claim should arise on the policy, that the company will be obliged to meet the claim if the person who effected the policy will revive it. It is only after such circumstances that the matter will arise at all, because otherwise there would be no point in raising it. It would be only an academic matter. I do not want again to go over the various considerations I advanced against the provision recommended in the amendments in Deputy Norton's and Deputy Lynch's name. I am not putting this section forward as perfect, or as likely to eliminate all disputes between the companies and their policy-holders, but it is our opinion, and we have given the matter considerable care, and, having due regard to all the facts, we believe that this will occasion fewer disputes, at any rate, than the provisions of the 1923 British Industrial Assurance Act.

Will this ensure the object which is at the back of all insurance—that is, insurance proper? The Minister talks as if the avoidance of disputes was one of the desirable aims. Possibly it is, but it is a minor aim. Surely what one should aim at in any Bill of this type is to see that the primary object of insurance is achieved in the greatest number of cases.

That people who come into insurance should be encouraged to stay?

Yes, and pay the premiums.

My submission is that they are much more likely to do that if they are subject to the personal attentions of the company's agent than if they just get a formal notice.

Even though the company's agents, although they continue to call, may not put any pressure on the people concerned? The Minister says he is in favour of that method as against sending them a notice.

At present there is no obligation on the companies to send an agent at all.

I know that, but let me point out that the committee that investigated this matter discovered that, in practice, that particular method had its defects. The primary purpose is to get a person to continue paying over a particular period. Does the Minister think that that will be better achieved by Section 61 (2) and by Section 62 rather than by the notice proposed here, and by Deputy Lynch, plus Section 62? I always keep Section 62 as a bulwark, not as a primary object.

In accordance with Section 62, the policy-holder becomes entitled to a free paid-up policy. Once the policy-holder gets to the position that he becomes entitled to that, if his policy is to be forfeited, I think the company will endeavour to keep him. It will be in the interest of the company to do so.

I do not agree with what was stated, that it pays the company to allow a policy to lapse after a comparatively short period. I think the evidence is to the contrary, that the expenses involved in the issuing of the policy and in the work associated therewith, during the preliminary period, plus the commission paid to agents, may outweigh the receipts of the company during that earlier period. It is only after the policy is in operation for some time that the company derive benefit.

Did the Minister read the short judgment of the Cohen Committee where they said: "We cannot agree with this proposition"? The company made the case that the Minister is making, and I have read out their contention.

There must be some truth in the contention. It may be that they begin to collect a net premium earlier than the companies contend, but there obviously must be higher expenses on the company during the initial stages than at later stages.

The calculation is that at the later point there is one-fifth met by services rendered and four-fifths go into the pockets of the company.

Question put: "That such new sub-section be there inserted."
The Committee divided. Tá, 13; Níl, 64.

  • Bourke, Séamus.
  • Burke, Patrick.
  • Daly, Patrick.
  • Desmond, William.
  • Doyle, Peadar S.
  • Hogan, Patrick (Clare).
  • Keating, John.
  • Lynch, Finian.
  • Morrissey, Daniel.
  • Norton, William.
  • O'Donovan, Timothy Joseph.
  • O'Leary, Daniel.
  • Pattison, James P.

Níl

  • Aiken, Frank.
  • Bartley, Gerald.
  • Beegan, Patrick.
  • Boland, Gerald.
  • Bourke, Daniel.
  • Brady, Brian.
  • Breathnach, Cormac.
  • Browne, William Frazer.
  • Burke, James Michael.
  • Concannon, Helena.
  • Cosgrave, William T.
  • Costello, John Aloysius.
  • Crowley, Timothy.
  • Derrig, Thomas.
  • De Valera, Eamon.
  • Dillon, James M.
  • Dockrell, Henry Morgan.
  • Doherty, Hugh.
  • Fitzgerald-Kenney, James.
  • Flynn, Stephen.
  • Fogarty, Andrew.
  • Goulding, John.
  • Hales, Thomas.
  • Hayes, Seán.
  • Holohan, Richard.
  • Houlihan, Patrick.
  • Keely, Seamus P.
  • Kelly, James Patrick.
  • Kelly, Thomas.
  • Killilea, Mark.
  • Kilroy, Michael.
  • Kissane, Eamonn.
  • Lavery, Cecil.
  • Lemass, Seán F.
  • Little, Patrick John.
  • Lynch, James B.
  • McEllistrim, Thomas.
  • MacEntee, Seán.
  • McGilligan, Patrick.
  • Maguire, Ben.
  • Maguire, Conor Alexander
  • Moane, Edward.
  • Moore, Séamus.
  • Morrisroe, James.
  • Moylan, Seán.
  • Murphy, Patrick Stephen.
  • Nally, Martin.
  • O'Briain, Donnchadh.
  • O Ceallaigh, Seán T.
  • O'Grady, Seán.
  • O'Higgins, Thomas Francis.
  • O'Reilly, Matthew.
  • O'Sullivan, John Marcus.
  • Pearse, Margaret Mary.
  • Rice, Edward.
  • Rice, Vincent.
  • Rogers, Patrick James.
  • Ryan, James.
  • Sheridan, Michael.
  • Smith, Patrick.
  • Traynor, Oscar.
  • Victory, James.
  • Walsh, Richard.
  • Ward, Francis C.
Tellers:—Tá: Deputies P. S. Doyle and Pattison; Nil: Deputies Little and Smith.
Amendment declared lost.
Amendments Nos. 136 and 137 not moved.

I move amendment No. 138:—

In sub-section (2) to delete the word "shown," line 47, and substitute the words "proved to a competent court."

The amendment has been put down with the object of clarifying the section. The word "shown" as used there appears to me to be vague, and I think the insertion of the words I propose would make clearer what, presumably, is intended.

The effect of the amendment would be that every case would have to go to the court. It would mean that if shown to the satisfaction of the court that the agent of the company was "negligent or failed to exercise due diligence," then the company would be obliged to allow the provisions of sub-section (2) to operate. If there is a dispute between a policy-holder and the company it is to be determined in the first instance by the parties, and only in the event of failure to agree brought to the Minister in accordance with the provisions of Section 67.

Amendment, by leave, withdrawn.

Mr. Lynch

I move amendment No. 139:

In sub-section (2) to delete the words "two years," line 52, and substitute therefor the words "one year."

It appears to me that in one year a policy-holder should certainly have time enough to save himself from forfeiture of his policy. He will have, roughly, 15 months from the time he stopped making payments in which to make up his mind in the matter of reviving the policy. Two years appears to me to be rather a long period to allow.

I do not think that two years is an unduly long period to allow for the re-entry of cases coming within the sub-section. It is a matter upon which, as I have already said, I had a certain openness of mind, but on consideration of the facts I consider that two years, as against a longer or a shorter period, seems reasonable. Even if I were to be induced to make a change I would need to have very good reasons advanced for the change. I think that two years is not unreasonable.

When you consider that the premium is payable weekly in the ordinary case, that the person insured is, presumably, reasonably, intelligent and has failed for 52 weekly periods to pay the premium, it must be admitted, I think, that he has had sufficient time to make sure as to what his responsibilities and his rights are. I have already suggested that a period of two years gives a very long period during which a person, even without being fraudulently inclined, may have a free insurance. A person may allow the period to run on and not pay the premium, and then find that it is to his or her advantage to pay the premium because the life falls in before the expiration of the period of two years. If a person is under an obligation to pay a small weekly sum and for 52 weeks has not done so, it cannot be supposed that the policy-holder is not alive to the position, and has not had ample time to get in touch with the company through the medium of the post, even supposing the collector is not performing his duty, and has ceased to do so in this period of 52 weeks. If he has so failed, there is always the post office to be availed of. The address of the company will, no doubt, be within the knowledge of the policy-holder. It will be on the policy or on an insurance book or some other document in his possession, so that all he has to do is to write a letter to the company saying that he wants to pay his premium, and asking that the collector be sent out to collect it. Two years means that the companies must regard all policies as not definitely dead until that period is lapsed. They must be kept on their books as being capable of being revived for that considerable time. I would certainly suggest to the Minister, having regard to the small amounts involved, the small amount of the premium, the regularity with which it has to be paid, the short period within which it must be paid that one year, which is 52 times the length of time within which the premium should be paid, is surely ample. Deputy Lynch suggests one year. I think it might be made even shorter, but I certainly would suggest that one year is more than ample.

I suggest that a middle course should be pursued in this case. What we want, in lieu of the Minister's proviso, is some escalator provision. While two years does seem to be excessive when one contemplates all policies, I think I can satisfy Deputy Lynch that where a man had been paying industrial assurance premiums for thirty years two years would not be too long to give him the right to revive the policy if he were prevented from paying the premiums through some unforeseen and sudden hazard. On the other hand, take the case of a man who has only paid two premiums amounting to about 6d. It seems absurd that he should open a liability with an insurance company which cannot be effectively closed for two years. If we provide that a man who has only paid a small number of premiums will have a comparatively short period of grace, say three months for less than six premiums, six months for any person who has been paying in for six months or a year, 12 months for any person who has been paying between one year and 18 months, and two years for any person who has been paying more than two years, or something along these lines, I think we have arrived at a workable plan. I submit to the Minister that it is an absolutely indefensible theory that by paying one premium of 3d. he can open a liability with an insurance company which the company cannot close definitely for two years. It was on these lines I was arguing at an earlier stage when the Minister said he could not follow my proposal and that if I put down an amendment on the Report Stage he would consider it. Perhaps the Minister now understands what I am getting at. It would be interesting to know if an escalator proposal along the lines I suggest would be acceptable if proposed on the Report Stage.

Now that I have grasped the proposal, I like it less than when I heard it first. In fact, I think a man who has been paying for 30 years regularly is much more likely to comment on the failure of the collector to call than the man who has been paying only for a week or two. This section only operates where there is negligence on the part of the company, where the collector fails to call. We are not dealing with the case of a man who has been paying for a long time and finds himself, through some misfortune, unable to pay his premiums, but with the case of a man whose failure to pay is due to the failure of the company to collect the premium. In these circumstances, I think there is little case to be made for the arrangement the Deputy suggests. The longer a person has, in fact, been paying, the more likely he is to take immediate action if the company's collector fails to call upon him.

There is a lot to be said for the argument advanced by Deputy Lavery for the shorter period. There is, I think, a further argument, that after a period of two years there may be greater difficulty in producing rebutting evidence to meet the contention that the failure to pay the premium is due to the neglect of the collector. If Deputies feel strongly on the point, I am prepared to reduce the period to one year, but not below one year. I think one year is not unreasonable, while I think two years is all right.

We have not yet heard the case for the two years, which the Minister was proposing. What was the case for the two years—where did it come from?

I shall accept the amendment and save a lot of trouble.

Amendment agreed to.
Question proposed: "That Section 61, as amended, stand part of the Bill."

It is necessary at this juncture to say that we stand quite clearly by the proposal contained in amendment No. 133, and are quite satisfied that the section would be a better section if that amendment were in it in preference to the remedy which the Minister has designed and which at present stands in the section. But the Minister and we are agreed upon this, that whatever are the relative merits of amendment No. 133 and his proposal, either would be better than a combination of the two. The House will remember that the amendment of Deputy Norton proposed that we should have neither our proposal nor the Minister's, but the two, which we feel are incompatible, would not work together, and would make an ineffective, cumbersome and expensive instrument for carrying out the purpose which we both have in mind.

One of the Party Whips was put on for the last division.

We have approached the Bill from the point of view that its various complex provisions should be discussed without any regard to Party alignment, which I consider to be a more satisfactory arrangement in disposing of business of this character than if the Party Whips were put on for the purpose of driving people into the Lobbies without regard to their personal views as to the technical difficulties which legislation of this kind presents. But it is necessary for the purpose of record to make it clear that we prefer the proposals in the following order: we consider amendment No. 133 to be the best; we consider the Minister's proposal to be a bad second; and we consider a combination of amendment No. 133 and the Minister's proposal, as contained in Deputy Norton's amendment, to be incomparably the worst proposal which the House has to consider.

Question put: "That Section 61, as amended, stand part of the Bill."
The Committee divided: Tá, 54; Níl, 24.

  • Aiken, Frank.
  • Bartley, Gerald.
  • Beegan, Patrick.
  • Boland, Gerald.
  • Bourke, Daniel.
  • Brady, Brian.
  • Breathnach, Cormac.
  • Browne, William Frazer.
  • Concannon, Helena.
  • Corbett, Edmond.
  • Corry, Martin John.
  • Crowley, Timothy.
  • Derrig, Thomas.
  • De Valera, Eamon.
  • Doherty, Hugh.
  • Flynn, Stephen.
  • Fogarty, Andrew.
  • Gibbons, Seán.
  • Goulding, John.
  • Hales, Thomas.
  • Hayes, Seán.
  • Keely, Séamus P.
  • Kehoe, Patrick.
  • Kelly, James Patrick.
  • Kelly, Thomas.
  • Killilea, Mark.
  • Kilroy, Michael.
  • Kissane, Eamonn.
  • Lemass, Seán F.
  • Little, Patrick John.
  • Lynch, James B.
  • McEllistrim, Thomas.
  • MacEntee, Seán.
  • Maguire, Ben.
  • Maguire, Conor Alexander.
  • Moane, Edward.
  • Moore, Séamus.
  • Moylan, Seán.
  • Murphy, Patrick Stephen.
  • Murphy, Timothy Joseph.
  • O Briain, Donnchadh.
  • O Ceallaigh, Seán T.
  • O'Grady, Seán.
  • O'Reilly, Matthew.
  • Pattison, James P.
  • Pearse, Margaret Mary.
  • Rice, Edward.
  • Ryan, James.
  • Sheridan, Michael.
  • Smith, Patrick.
  • Traynor, Oscar.
  • Victory, James.
  • Walsh, Richard.
  • Ward, Francis C.

Níl

  • Bourke, Séamus.
  • Burke, James Michael.
  • Burke, Patrick.
  • Cosgrave, William T.
  • Costello, John Aloysius.
  • Desmond, William.
  • Dillon, James M.
  • Dockrell, Henry Morgan.
  • Doyle, Peadar S.
  • Esmonde, Osmond Grattan
  • Fitzgerald-Kenney, James.
  • Holohan, Richard.
  • Keating, John.
  • Lavery, Cecil.
  • Lynch, Finian.
  • McGilligan, Patrick.
  • Morrisroe, James.
  • Nally, Martin.
  • O'Donovan, Timothy Joseph.
  • O'Higgins, Thomas Francis.
  • O'Leary, Daniel.
  • O'Sullivan, John Marcus.
  • Rice, Vincent.
  • Rogers, Patrick James.
Tellers:—Tá: Deputies Little and Smith; Níl: Deputies Doyle and Nally.
Question declared carried.
SECTION 62.
(1) Whenever a policy of industrial assurance becomes forfeited after the 31st day of December, 1936, by reason of the non-payment of a premium payable thereunder, the person entitled to such policy shall on such forfeiture become entitled to the free paid-up policy hereinafter mentioned and the industrial assurance company which issued such forfeited policy shall, subject to the provisions of this section, issue as soon as may be after such forfeiture to the person entitled to such policy a free paid-up policy assuring the payment, in accordance with the terms (other than payment of premiums) contained in such forfeited policy, of a sum calculated in accordance with the rules contained in the Third Schedule to this Act.
(2) The next preceding sub-section of this section shall not apply to a policy which is not an endowment or endowment assurance policy issued on the life of a child aged less than ten years unless, before such forfeiture occurs, premiums have been paid on such policy—
(a) for not less than three years where such policy is issued after the commencement of this Part of this Act and assures the payment of money in connection with the death and funeral of a person other than the person effecting such policy and is either an endowment or endowment assurance policy or is a policy for the whole term of life, or
(b) for not less than two years where such policy is issued after the commencement of this Part of this Act and assures the payment of money in connection with the death and funeral of a person other than the person effecting such policy and is an endowment or endowment assurance policy for an original term of less than 16 years, or

Mr. Lynch

I move amendment No. 140:—

In sub-section (1), line 1, to delete the words "as soon as may be after" and substitute the words "within 12 calendar months after the date of".

I wonder how that phrase, "as soon as may be," will be interpreted. My suggestion is that you should make it definite and substitute for that phrase the words "within 12 calendar months after the date of the forfeiture." If the sub-section is allowed to stand, "as soon as may be" might be interpreted to mean in a fortnight, or in a month, and it would put the companies to the trouble of issuing a free paid-up policy. Subsequently the policy-holder could come along and demand a cash surrender value for the policy. If you give a reasonable time, as suggested in the amendment, before the free paid-up policy should be issued, you would obviate that, because if you allow 12 months to elapse, the likelihood is that the persons then would have made up their minds whether or not they required a cash surrender value instead of a free paid-up policy.

The effect of the Deputy's proposal is to allow 12 months after forfeiture before the issue of a free paid-up policy should be issued. The special intention of the section is that, in the case of lapsed policies to which this section applies, the free paid-up policy should be issued as soon as possible, and the interpretation of the words "as soon as may be" is "as soon as possible"; so that the policy-holder should be made aware of his rights. In any event, I think it will help the Deputy to appreciate the significance of the wording of the section and the undesirability of the proposal in his amendment when I point out that free paid-up policy rights are inherent in the terms of the policy, and that those rights would not be voided by any failure to issue the free paid-up policy as soon as may be or as soon as possible. I do not know if I have made that point clear to the Deputy. What I mean is, that the rights to the free paid-up policy are inherent in the terms of the policy and the policy-holder is not deprived of these rights by any failure or delay in issuing the free paid-up policy itself. In these circumstances, such phrases as "as soon as may be" or "as soon as possible" are adequate, I think, to describe the obligations of the company.

Mr. Lynch

But does it place the obligation on the company to issue the policy within any particular period of time, such as, say, two months or three months? My point is that the companies would have the double trouble, possibly, because the policy-holder might not have made up his mind as to whether he desired the cash surrender value or the free paid-up policy.

Of course, it is desirable that the free paid-up policy should be issued as soon as possible, so that the policy-holder may become aware of his rights in that connection.

Mr. Lynch

But if his rights are inherent in the policy, surely he is aware of them?

Oh, there are many things inherent in a policy of which the policy-holder might not be aware, and this is a way of bringing his rights to his notice. In any event, my point is that his rights are there, whether the policy is issued or not.

Amendment No. 140, by leave, withdrawn.

I move amendment No. 141:

In sub-section (2), line 9, to delete the word "ten" and substitute the word "fifteen."

This is really what I might call a fishing amendment. My object in putting it down is to find out what induced the Minister to light on the figures "ten" in sub-section (2), "three" in sub-section (2) (a), and "two" in sub-section (2) (b). The only model for this section is to be found in the Acts of Parliament controlling industrial assurance in Great Britain, and there the figures are fifteen, five, and five, respectively. I have no preconceived view as to the comparative merits of the figures, but I should like to know from the Minister what are his reasons for the particular figures he has here.

The Deputy's amendment is calculated to increase the range of policies under which the benefits would apply, and, while that would be, possibly, quite feasible for the strong companies in Great Britain, it would increase the strain that will be imposed by the section on the weaker native companies in our circumstances here. On that account, I would not accept any amendment of the nature the Deputy proposes. Perhaps we will avoid the necessity for going further into the provisions of this section if I deal on this amendment with some of the general considerations affecting the section which may arise upon this or some other amendments. The present legal position here is that there is no statutory requirement to give, on forfeiture, either free paid-up policies or cash surrender values. The position here is now the same as it was in Great Britain before the 1923 Act was passed.

As Deputy Dillon has mentioned, that Act provided that, after 1928, companies carrying on industrial assurance in Great Britain were compelled, after forfeiture, to give a free policy after the policy had been five years in force, or after three years where the policy was an endowment of insurance for a term of not less than 25 years. The present practice amongst the English companies is to give a free policy after the policy has been two years in force, and, in some cases, after it has been only one year in force. Under the Bill the conditions are that a free policy is to be given, on forfeiture, after the policy has been three years in force, or after two years where the policy is an endowment assurance for less than 16 years. In our opinion these are quite proper provisions, and the interests of the policy-holders require that they should not be weakened. It is true that these provisions will impose a strain upon native companies—upon weak companies generally, but our view is that it is undesirable that industrial assurance business should be carried on by weak companies at all, and consequently we have embodied conditions in the Bill which, we hope, will operate to eliminate weak companies by providing for their amalgamation into larger units, and the support of these larger units by various devices which will make them more efficient and economic and capable of meeting the obligations of this section and providing free policies without undue strain on their resources.

The Deputy, of course, is proposing in this amendment to effect a change which would increase the strain, and I think, in all the circumstances, that is neither desirable nor necessary. On the other hand, if there were a proposal to weaken the statutory requirements, I should also, in the interests of the policy-holders, be strongly opposed to it, and in any event I doubt if it would be of special advantage to the native companies, because stronger companies could take advantage of that position. They certainly could take advantage of that position against the interests of the policy-holders, and, as I have frequently pointed out, our primary obligation with regard to insurance legislation is to protect the interests of policy-holders, particularly in regard to industrial assurance. Under the Act of 1923, there was a certain period of five years before the free policy came into operation. We have not provided for that here, but we have provided in the schedule a graduated period which gives free policies, on forfeiture, in 1937, if the policy is ten years in force, and then graduating it down. With regard to policies issued after the commencement of the Act on the life of another for funeral expenses, the Bill as it stands at present provides that the full provision shall come into force in 1937. I might be prepared to consider the alteration of that date. That date was inserted when the Bill was originally drafted, which was a considerable time ago, as the Bill is having a slow passage through the Dáil. Consequently, the considerations which prompted the insertion of that date, as distinct from a later date, have become weakened, and I might be prepared to consider the postponement of that date to a somewhat later period.

However, in relation to these policies effected on the life of another for funeral expenses in the way I have mentioned, we are not providing for the graduated period to which I have referred, because of the undesirable nature of that class of assurance, and a very large part of the industrial assurance policies issued in the Saorstat are in that class. It is not possible—probably not even desirable—to prohibit persons taking out policies to provide for the funeral expenses of their relatives, but that form of assurance has many objections to it. It diverts money that should be used to provide assurance on the life of the breadwinner, and it lends itself to abuses in the form of gambling upon the lives of relatives.

However, if the companies wish to provide that form of policy, I think they can be reasonably required to submit themselves to the more stringent conditions that the section proposes. I have given this explanation of the general provisions which prompted the framing of the section in the form in which it appears, because it is desirable that Deputies should have it in mind when discussing the various amendments. It did not arise on Deputy Dillon's amendment. My sole objection to the Deputy's amendment is that it proposes to make the provisions of the Bill even more stringent than when we framed them, and they do undoubtedly impose a strain on Saorstát companies. I do not think we should increase that strain. There is no particular reason for doing so, and in the interests of the policy-holders I would have to oppose also any amendment designed to reduce that stringency.

I do not understand how my amendment is calculated to increase the burdens on Irish insurance companies, because sub-section (2) provides that there shall be a paid-up policy given in exchange for a forfeited policy. But the section is said not to apply to a policy "which is not an endowment or endowment assurance policy issued on the life of a child aged less than ten years." I propose to exempt policies issued on the lives of children less than 15 years.

That increases the range of policies to which this provision applies. There are special provisions dealing with the insurance of the lives of children under ten years. In relation to that class of policy "which is not an endowment or endowment assurance policy issued on the life of a child less than ten years", the policy-holder may if he desires get a free paid-up policy and obtain a cash surrender value. I put these policies into that special category to give policy-holders in lieu of free paid-up policies a cash surrender value. It is undesirable to increase the range of policies to which that provision applies.

I say that the substitution of 15 for 10 will increase the range. How would the substitution of five for three affect this? I ask leave to discuss the three amendments together.

Perhaps it will be better to take the amendments separately and then to deal with the general question.

Amendment, by leave, withdrawn.

Has the Minister an estimate, on the average, of the relationship between cash surrender value later referred to and a free paid-up policy?

It is calculated according to the provisions of the Schedule.

The Minister stated that if the class to which cash surrender value relates is extended, a burden is being put on the companies.

It involves a cash payment instead of the grant of a free paid-up policy which may not be claimed on for a long time.

And may never be met. I understand there is a phrase dealing with that in the Cohen Report. A paid-up policy in a great many instances, according to the Cohen Report, can be counted as lapsed, and as a result an uneconomic effort and a profit to the company.

In the main.

I move amendment No. 142:—

In sub-section (2) (a), line 11, to delete the word "three" and substitute "five."

This provides that premiums will have to be paid on the policies for five years instead of three. Perhaps the Minister will explain why he lit on three instead of five.

It is difficult to answer that question except that we considered it a reasonable period. At present it is the policy of strong companies to grant free paid-up policies in the class of insurance to which the paragraph relates, after three years. In some cases they do it after two years.

In England in some cases after one.

Yes. In our opinion the Bill should provide for three years in this connection.

In Great Britain it provides for five years.

Yes. The Deputy is seeking to extend the period to five years, and that would involve policy-holders in a loss which, in our opinion, they should not be called upon to bear. Perhaps the matter can be discussed. I would be strongly disinclined to accept any proposal to weaken the proposals of the Bill in relation to this matter. In all the circumstances, three years appears to be a reasonable period. Various provisions in the section were all fixed deliberately in view of the relevant factors, bearing in mind the obligations that exist to policy-holders on the one hand and the undesirability of being too onerous with weaker companies on the other hand. Taking all the factors into account, we fixed on this period and I am very reluctant to consider an amendment to change it, because there are so many considerations to be borne in mind they might be overlooked in a discussion across the House.

Deputy McGilligan pointed out that in England the period varies, being two years in some companies and one year in others. Has the Minister any information as to the average period fixed by companies operating in Ireland for policies of this character?

There are no statutory rights.

But in practice?

I am not speaking of the statutory rights.

I am informed that in some cases these rights are not given by Irish companies at all.

And English companies operating here are affording Irish policy-holders the same advantages that they offer to English policy-holders.

As a rule. It is the general practice, because I think it is much more convenient for them.

In fact when this Bill comes into force it may not affect the British companies at all, as in some cases they are giving the benefits and in other cases giving better benefits. On some Irish companies it will mean a very substantial addition to the burdens on them.

Undoubtedly, it increases the strain considerably on local companies.

Amendment, by leave, withdrawn.

I move amendment No. 143:—

In sub-section (2) (b), line 19, to delete the word "two" and substitute the word "five."

Does it not seem very hard that the Minister should jump the Irish companies down to two years in (b), and to three years in paragraph (a), while British companies which are restricted by statute are only restricted to five years? They have slowly built themselves up to the position here that they can afford three years, two years or one year. It is common knowledge that the Irish companies cannot give as good terms as the Prudential, and they do not try. When an Irish company goes canvassing for business, if the terms of the Prudential, the Pearl, or the Britannic are put up against them they have no answer. It is common knowledge that the terms offered by these companies are better than an Irish company can offer. Is it reasonable for an Irish Legislature to impose at one slap a much heavier burden on what are admittedly much smaller companies, a far more onerous burden than the great British companies have been asked to bear under the legislation passed in Britain?

I have no doubt that the British Legislature when framing its legislation had regard to practices operating in Great Britain, and we must have regard to the position here. In fact no British company is giving less favourable terms than are outlined here. That is an element of the situation we must keep in mind. We are not imposing under this section the same obligations in all respects that the British Act imposed. We have modified the obligations in one or two respects to the advantage of Saorstát companies. In other respects, the provisions are not as favourable as the 1923 Act would have been, but I think no Saorstát company except a company that is in such circumstances that the amalgamation provisions should be applied to it as quickly as possible, will have difficulty in carrying out its obligations under this section. In any event, I advance the general principle that it is undesirable that industrial assurance should be carried on by a company that cannot bear this strain. If there is a company which finds the strain too great, the sooner it comes under the amalgamation scheme and amalgamates with stronger units, the better, because otherwise we will be unable to maintain industrial assurance on the basis on which it should be kept in the Saorstát.

Let us just consider how the British parties dealt with this. In this country the situation in the year 1934 was that there were 21 groups engaged in this industrial business. Of these eight were companies and 13 were societies. Nine of these groups were registered in the Free State and 12 were registered in Great Britain. Two of these companies, or rather one company and one society, had over 50 per cent. of the business. In 1934 there were 16 companies and 153 societies operating in Great Britain. The premium income exceeded £250,000 only in the case of ten of the companies and five of the societies. In other words, ten of the companies and five of the societies did the substantial end of the business. Amongst the companies who did a substantial end of the business were two who used to give this concession after premiums were paid for one year. Most offices granted a free policy in the event of premiums being discontinued after two years. That was a good practice, but I presume I may add the phrase in the report, that the practice of granting free policies after two years' payment of premiums was certainly a failure. In this country we have one of the groups that granted this concession after a year. Yet the British parties, when they were considering the matter, although they had this multitudinous number of societies, ten of them having a premium income of over £250,000 a year, nevertheless thought fit to slacken what was a good practice and only to impose a statutory obligation after payment had been made for five years. In this country, although we have nothing in the same proportion going into the funds, and we have no information as to how the business is divided, it is proposed to grant this concession after three years. We are imposing much more stringent regulations against a smaller number of people than the British thought fit to make against large companies.

Only in respect of the classes of insurance dealt with in (a) and (b).

One would have to go into further statistical information as to how the business is divided up to follow that up, but on the whole argument I am making here it does seem unnecessary, unless there is some better reason than has so far been given, to impose these burdens in this country on companies who have relatively less business to do. The whole effect of this is to load the dice definitely in favour of the stronger companies, who happen to be the foreign companies. There should be some case made out before imposing such burdens that there is a danger to be apprehended from not imposing the restrictions that are set out here. It is obviously going to be a bit of a strain financially and it is going to affect the small companies much more than the others. I think that point deserves some attention.

The particular classes of insurance dealt with in (a) and (b) are not very desirable forms of assurance.

Whatever an English Minister might say about that, this country, with its grand sweepstake record, should not have very much to say.

Notwithstanding the sweepstake, I say it. In respect to other classes of insurance than these, the provisions of the fourth schedule will operate. As Deputies will see, they provide for ten years, where the forfeiture occurs in 1937, and that is gradually reduced to three years, where the forfeiture occurs in 1944 or any subsequent year. That arrangement is, I think, better from the point of view of the companies than a fixed period of five years, and, as the classes of insurance dealt with are the most desirable classes of insurance business, that is a fact that I think must be taken into consideration. In respect of (a) and (b) we are providing for three years in respect of that class of insurance where the policy is effected by one person on the life of another, where it is for the whole term of the life or is an endowment assurance policy exceeding 16 years. We are providing for two years where it is an endowment insurance policy for a term of less than 16 years. Having regard to the nature of the business and the general considerations which apply in relation to policy-holders, I do not think these periods are unduly short.

The Minister must bear in mind that the big insurance companies do not give better terms because they love the colour of their clients' eyes. They give better terms to beat their competitors. Of course, the big companies are going to give better and better terms, but it is an entirely different thing for the Legislature to step in and state, as a minimum statutory limit, a period substantially less than that obtaining in Great Britain. I take it when the British Legislature was considering this problem, they took into consideration the small provincial collecting societies scattered through Britain. They were better circumstanced than our Irish companies, who are collecting over a widely scattered country. The small societies in England are collecting over a very densely populated industrial area, and are much more advantageously placed than our companies are. Still, the British Legislature thought it was not fair to ask them to come on to the standard of the Prudential, the Liver, the Pearl, or the other companies, with their immense reserves, and they had to leave a certain amount of leeway, depending on the fact that, in the ordinary course of affairs, the big companies, in searching for added business, would go on giving better terms and that the local people would have to depend on local patriotism, just as our companies are depending on local patriotism and extraneous conditions of that kind. It is not fair to set a standard for our companies substantially higher than that being set for companies in Great Britain, and I do not see how the Minister can defend it. It may be an ideal arrangement, or something at which we should legitimately aim, but, at this stage, to say that we can demand of the small Irish companies a higher standard of benefit for subscribers thereto than the British Government can demand from their provincial societies seems to me to be extravagant.

The Cohen Committee recommended a period of two years in respect of all classes of insurance. There is the further consideration that the 1923 Act introduced this principle into insurance legislation for the first time in these countries. That fact was taken into account in determining the provisions of the Act. Regard was had to the strain that would be imposed upon companies which had written policies before they became aware that this provision was likely to attach to them. Consequently, there was in the British Act the provision that the whole thing would not operate for five years, so that companies would have adequate notice of the change and could make the necessary arrangements to meet it. Here that consideration does not apply.

The Irish companies, when they saw the change effected in British law in 1923, assumed that, at some stage, a similar change would be effected in the law here. At any rate, we know that the committee which sat in 1924 recommended a similar change in the law here. The companies had good reason to know some years ago that, when proposals for insurance legislation were brought before this House, they were likely to contain such a provision. I am sure it caused no surprise to them to find those provisions in the Bill. The same situation, therefore, does not exist here which existed in Britain when the 1923 Act was introduced.

The committee to which the Minister referred recommended "a period of years to be prescribed by the Act." Although the Cohen Committee did make a certain specific recommendation, the language used in the body of the report shows exactly what they thought of this matter. They say that it is now the practice of most of the offices to grant a free policy in the event of premiums being discontinued after two years and an estimate prepared for them led them to the conclusion that the owners of the policies lapsing in each year pay in the aggregate not less than £1,000,000 in premiums in excess of the cost of the assurance cover which they receive. After a further examination of that side of the matter, they say that this does not dispose of the matter. As indicated, some companies, they say, grant a free policy if the payment of premiums is discontinued after one year and a life concession is made by the majority of the other offices after premiums have been paid for two years. They describe this grant as a "concession," because, under the Act of 1923, the statutory period after which a free policy must be issued is three or five years according to the type of assurance. Then, they continued:

"But while the policy-owner in these cases is given a document representing, as a matter of arithmetic, a substantial proportion of the reserve accumulated out of his premiums, we are constrained to ask `what is its practical value to him?' After paying, say, 2d. a week for two years on a whole-life policy, effected on a life aged 40, the owner, on discontinuing his payment, will receive a free policy of 6/- or 7/- payable on the death of the life assured. Even if we disregard the probability of the loss or destruction of this `policy' during the many years which, on average, must elapse before it can be encashed, it is clear that an assurance of such an amount is of no real service to its owner. The free policy granted in compensation for premiums paid in the past on a discontinued policy can only be regarded as having a real value if its amount is fairly substantial. In the great number of cases in which a free policy is issued on the discontinuance of premiums within a few years after the original policy is effected, its amount is necessarily trifling and the payer of the premiums is, for all practical purposes, no better off than if his policy had lapsed without consideration. From the point of view of the public, therefore, such policies must be grouped with those of actual lapse as representing a direct waste of economic effort."

While they, also, on the other side of the Minister's argument, set their faces somewhat against insurances on the lives of others and, more particularly, make critical comment on the practice of insuring young children, their remarks seem to me to be vitiated by one consideration. They make the point that people who go in for this type of insurance have not a great deal of money to effect insurance. If the breadwinner referred to by the Minister insures his own life and then goes on, in some sort of gambling spirit, to insure the lives of other people, he has less for the proper type of insurance. But the human factor enters in. Will the man who is prohibited by law from making this type of insurance on the life of a parent or somebody else pay 2d. or 3d. extra per week on his own life? By no means, in this country. If the Minister is driving against that particular tendency, he has no guarantee whatever that he is going to turn the tendency in a more desirable way. Taking all the considerations, one with the other, into account, it seems to me that there will be an outstanding disadvantage if there is a statutory obligation imposed which will work unfairly against certain companies who are not, on the information gives to us, at the point where they should be discouraged any more than the heavier and stronger companies operating from outside.

The two paragraphs only apply to policies issued after the commencement of this Part of the Act.

There are premiums payable for three years and premiums payable for two years, whereas no specific recommendation was made by people who took a certain amount of evidence in this country. They said "for a certain number of years to be prescribed by the Act." The only model we have, though it is not completely comparable, is the statutory obligation on the other side. They had very much the same considerations there as here, and the period there was five years, except in cases of less than 25 years, when it was three years.

Will the Minister look into the matter?

This class of insurance is objectionable from many points of view, and companies which desire to issue such policies should be prepared to accept more stringent conditions than would apply in the case of normal insurance policies. The most stringent conditions imposed in this paragraph are not very much greater than those proposed by paragraph (c), but there should be greater stringency in the obligations attached to these policies. Of course, in respect to the other class of insurances with regard to the provision after 1944, it will be three years as well.

Amendment put and agreed to.
Section 62 agreed to.
SECTION 63.
Question proposed: "That Section 63 stand part of the Bill."

I take it that this section is primarily designed to remedy the conditions, to which references were made last night, in which persons were fraudulently persuaded to transfer themselves from one company to another when in fact the operation was not a transfer at all, but the lapsing of one policy in the old company and the commencement of a new policy with another company.

It obviously makes that transaction illegal if a person represents to the policy-holder that he is transferring the policy to a new company when in fact all he is doing is that he is persuading the policy-holder to lapse his policy and take out a new policy with another company. In such a case does a man offend against the law?

Yes. The section is designed to impede or prevent one company poaching on another company.

The people who do that will be guilty of an offence, but will the transfer so illegally effected or attempted to be effected be a legal or an illegal transfer and will it be inoperative?

The circumstances will be different in the future when free paid-up policies attach to lapsed policies. That introduces a new element which will have a bearing upon the practice of industrial assurance here. It would be perhaps unwise to forecast the changes which will be brought about, but this will considerably alter the position of insurance companies whenever an agent endeavours to induce the policy-holder to allow his policy to lapse and to take out a new policy with another company.

I want to make this submission—this is a bad section because it gives legislative recognition to what is in fact a fraudulent fiction. There is no transfer. There is the taking out of a new policy with another company and the lapsing of the old policy. But the whole fact in this business has been that the collector went to an innocent person and said "Let me transfer your policy to my company." That connoted to the mind of the person who had the policy that he could carry over that policy to the new company— could carry it from one company to another, and that he would be credited by the new company with the amount that he paid to the other company over a number of years. No such transaction can take place. But if we indicate machinery to facilitate this operation which is described as a transfer, we strengthen the impression in the minds of people that it is a genuine transaction. I would be very much inclined, in order to remedy the abuse, which seems to have no redeeming feature at all, to insert a provision to require the insurance company to notify any person who offers himself as a transferee that the operation of transfer is not practicable and that what they can offer is to issue him a new policy as from the date of receiving his notification if he desires to take out a policy with them.

Yes; when the waiting period is over and the provisions are in full operation the situation would be that the policy-holder cannot be transferred as his policy remains in force as a free paid-up policy. There is, however, some necessity to provide the earlier period during which the Bill will operate. By 1944 it will be possible for the Government then in office to repeal the section and to substitute some less elaborate provisions as has been recommended in Great Britain. However, this section will impede one company from poaching on another.

Personally I am not so much concerned between the companies, as between one company and another, but when an attempt is made to carry through a transaction described as a "transfer," instantly the policy-holder should be notified that this is a fraudulent representation and that there is no such thing as a transfer from one company to another. The word "transfer," is a misnomer. I feel that this section is going to give legislative approval to that transaction as a transfer. It is not a transfer at all. Can anything be devised whereby if an agent attempts to carry through this operation he will be required explicitly to inform the policy-holder of the exact nature of the transaction, and to tell him that there is no such thing as an effective transfer in industrial assurance? Why should we give legislative approval to such a transaction?

If there is no such thing as a transfer the section will be completely inoperative.

I think it will, because all the insurance company has to do is to issue a new policy and to say nothing about transferring a policy— not to mention the other policy at all. The insurance company is not making a transfer, and all they are doing is issuing a new policy. There is nothing in the Bill as it stands to prevent their issuing a new policy.

It will undoubtedly become inoperative when the free paid-up policy provisions come into operation, as is the case now in Great Britain. This is a similar section in the British Act of 1923.

I cannot see why we should provide machinery to facilitate a transaction which all Parties in this House regard as fundamentally dishonest. Why should we provide machinery to make such a proceeding legal? Why not go out frankly and say: "We disapprove of the practice: we think it should be ended and if we recognise it by legislation at all, we will only recognise it to make it impossible for the transaction to be carried out"?

If an agent does persuade the policy-holder to take out a new policy that is a transfer and what the section does is to provide that the policy-holder will know what he is doing.

I say now that it may be necessary to define what the Legislature may describe as a transfer—to define if you like this transaction as a transfer and then to say: "It shall be obligatory under sub-section (3) to set out in large print that the operation of the transfer means that the policy has lapsed and that it is now proposed to take out a new policy." Is not that what happens in every country? I want that set out in black print as the first item of information to the policy-holder.

The policy-holder is required himself to sign the document.

Yes, but I want those words to be set out first. The operation of transfer, into which the policy-holder is now invited to enter, in effect means that the policy-holder lapses the policy he at present holds and opens a new policy on the terms set out below with the second company. That is what actually happens, and I venture to say, on the strength of what Deputy Morrissey and Deputy Murphy said, that the vast majority of transferees do not realise that is what is happening. Seeing we are going to define what the operation of the transfer is, and that a document will be served, surely the first information we should serve on the transferee is the exact nature of what he is doing? I suggest that should be set out in defined print for the special purpose of attracting the attention of the proposed transferee.

I do not think that sub-section (3) is going to be the safeguard the Minister seems to think. We ought to face up to what usually happens. The agent of a company may approach a policy-holder, who is paying into a certain company for any length of time you wish. That policy-holder is appealed to on various grounds, very often on so-called patriotic grounds, to transfer from the foreign company to a home company. The policy-holder does not understand that it is not a transfer, that it means lapsing the old policy or the existing policy, leaving the foreign company in possession of whatever premiums have been paid, their responsibility to the policy-holder ended, and the taking out of a new policy with the other company. We know that that has happened, and when policy-holders have been intelligent enough to ask certain questions as to what the position would be, they have been promised in many cases—this has happened and it is well known—immediate full benefit; that is, immediately the policy is issued by the company to which they are asked to transfer they are entitled to full benefit instead of waiting the usual period. We know that in the great majority of cases, if a claim were to arise immediately or within a comparatively short time after the new policy had been taken out, the person would not get full benefit.

Insurance agents working for a particular company, if they are working in a good district and are good agents, persons in a position to command business, are offered better terms. They are approached by the representatives of another company and are offered better terms than they are getting from the company for which they are working; but it is an understood part of the contract that if the agent decides to transfer his services to the other company he will bring as much of the business as he possibly can with him. It is only on that ground that he is offered the new employment. I have a case in mind, a case that occurred ten or 12 years ago or more. The agent had a full-time appointment, salary plus commission, and he was earning what would be probably looked upon as a fairly good wage for an insurance agent. He had a good book, between £13 and £14 a week, industrial business, to be collected. He was offered by another company the same terms as he was receiving from the existing company to take up an open book without a single policy on it. When he asked questions he was told: "Of course, we will expect you to bring as many as you possibly can of your existing clients."

Sub-section (3), in view of the blandishments and blarney of the agent, is not going to convey very much to the ordinary industrial policy-holder. A considerable number of the people do not understand this business and they accept whatever the agent tells them and are prepared to sign on the dotted line without reading the policy or in any way examining it. I would like the Minister to go as far as he can to prevent that. I do not think this proposal in the Bill goes far enough.

This merely provides that the transferred policy-holder will have an opportunity of comparing his existing policy with the new policy before he signs his consent to the transfer. It is believed the granting of a free paid-up policy such as is provided for will make it impossible for a person to transfer. He will let his policy lapse and he will get a free paid-up policy for a smaller sum instead.

The average policy-holder does not understand these things.

He will get his free paid-up policy in any event.

He may not be qualified for a free paid-up policy. I confess it is difficult, but if the Minister can introduce into the Bill anything which will prevent transfers, it should be done, because that leads to far greater abuse than most people imagine. All the abuses do not come to light; only certain cases are heard.

I believe this provision will effectively meet the points raised.

I would like to get this associated with reality in some way. Section 63 will only apply where an assured person carries out what will be regarded as a transfer. A transfer means substituting one for another, getting from one company to another, that being done in a way which will bring all the impact of Section 63 upon that individual. Supposing an individual assured with one company decides on an inducement put up to him by the collector of another company to drop his policy in the first company and take out a new policy in the second, it is nowhere defined that that must be deemed to be a transfer.

That is, in fact, what happens when the transfer occurs.

But there is no definition of a transfer. Where a person paying to one company suddenly ceases and takes out a policy with another, there is no definition that that is deemed to be a transfer. Therefore, it is hard to see when Section 63 will operate. The report from which we have been quoting drew attention definitely to this matter of transfers from one company to another. They say very much what the Minister is saying, that when the recent development of the free policy schemes matured there would be less possibility of what would be called a transfer happening. But they went on, nevertheless, to say that although the application of a section of the 1923 Act had been materially limited and although they thought the section would become still more restricted, the section requires re-drafting to meet the new conditions. They agreed with the Commissioner when he said that if an effort is made to induce a policy-owner to transfer from one office to another, the office in which he is assured is the best advocate of the reasons against transfer and, if they receive due notice of an intention to transfer, the matter may safely be left at that. That, I think, is Deputy Morrissey's point. We are deemed to be dealing with people of low grade intelligence who are going to be played upon by the agent, collector or the insurance company.

The circumstances are not quite the same here as in Great Britain, but if Deputies are pressing that we should adopt the recommendations of the Cohen Committee, I am prepared to give that matter consideration.

If you are going to deal with transfers you have to see that the transfer section is made applicable to the circumstances it is intended to meet. I do not think it does immediately tack on to those circumstances as it is drafted. That may be met by a slight drafting amendment, but even supposing you have it regularised, the conditions here are that the policy-holder must be told and his consent must be got. If a man believes that he is going into a better company than the one in which he has been, is it not better to ensure that somebody will put up the other side of the story to him? He has already been solicited by an agent from No. 2 company, who has prevailed on him that his company offers better terms. If, as the Cohen Committee recommended, it is made compulsory to send notice to the company with which the person was first insured, is it not better to do that than leave it to that company to make a case for their particular insurance continuing? I move to report progress.

Progress reported; the Committee to sit again later this evening.