An amendment has been circulated in typescript.
Committee on Finance. - Insurance (Amendment) Bill, 1938—Report and Final Stages
I move the amendment.
In page 9, Section 9 (d), line 25, before the word "it" to insert the words "until the expiration of twelve months from the transfer date," and in lines 27 and 28 to delete the words "before the expiration of twelve months from the transfer date".
The amendment effects purely a drafting change. The wording of the paragraph is somewhat ambiguous in its present form, and the change makes its meaning clear. There was a doubt as to whether the words related to the payment of compensation or the taking of employment. It is purely a drafting amendment.
Would the Minister mind repeating the effect of the amendment?
The amendment was circulated to the House.
The paragraph is as follows:
"It shall not be lawful for any of the said persons to whom compensation is paid in pursuance of the Scheduled Agreement before the expiration of twelve months from the transferred date, to enter into or be engaged in the employment or service of any assurance company..."
That wording is somewhat ambiguous, as the phrase "before the expiration of twelve months from the transfer date" may possibly relate to the taking of compensation rather than entering into employment, and therefore it has been put at the beginning of the paragraph, so that the paragraph will read:
"Until the expiration of twelve months from the transfer date, it shall not be lawful for any of the said persons to whom compensation is paid in pursuance of the Scheduled Agreement to enter into or be engaged in the employment or service of any assurance company."
It is purely a drafting amendment for the purpose of clarification.
There is just one point on which I want to be clear. This section as it now stands does not prevent a person from entering into employment in the insurance business if that person has not received compensation under the section?
That is quite clear.
Amendment agreed to.
Question proposed: "That the Bill, as amended, be received for final consideration."
What is the proposal? There are certain matters which I would wish to raise.
I understand that the Minister suggests that it be taken now.
When will the Fifth Stage be taken?
I understand that the Minister suggests that it be taken now.
Very well.
Question put and agreed to.
Question proposed: "That the Bill do now pass."
On the Fifth Stage, I think there are some matters about which the Minister might tell us. The first is when he expects this agreement to operate, that is to say when he expects the transfer of the several businesses of the four companies to be completed. The second is this: this Bill envisages the creation of two companies. The first company is a company fated to disappear at a reasonably early date, when its work is done, and it will leave in possession of the Irish insurance field one company carrying on by far the greater part of all industrial insurance transacted in this country. I want to know from the Minister whether it is the intention of the Minister for Finance, who is the effective shareholder in this combination, to give the directors of the amalgamating companies any representation on this board at all. Whatever this business is worth, and opinions will vary, those are the men who built it up. Some mistakes may have been made, but they, I believe, will be prepared to stake their reputations that in time those several businesses would have become valuable assets. It would be a profitless business at this stage to enter into an interminable discussion as to what the future might have held for those four companies; whether they would have been successful or not in the long run. The fact is they have chosen amalgamation instead of standing alone, and we can leave it to some to take the view that they would have developed and become prosperous and solvent, and to others to take the view that they would have been unable to meet their liabilities. Those directors were associated with valuable properties, and had command of large funds with all the advantages appertaining thereto, and I should like to know from the Minister if it is the Government's intention to give those men any representation on the board of the new company.
There is one other point to which I want to refer. The matter was raised by Deputy Norton on a previous occasion. He seemed to imply that it was something in regard to which an apology was called for that a citizen of Great Britain should be on the board of those companies. I am aware that the question of nationality and citizenship is at present one of great complexity. That is our own doing. We have to face the consequences of our own doing, and the sooner we as a nation realise that, the better it will be for all of us, and the more careful it will make us when we are waving the patriotic stick over our heads. I want to go on record as very clearly and very emphatically saying that any citizen of Great Britain who comes over here and gives good services for the salary he gets is heartily welcome and ought to be heartily welcome by the Irish people. We bear them no grudge, and gladly avail of the opportunity of returning to Great Britain some of the hospitality which she has given to our people who are doctors, professional men and workers in every walk of life in Great Britain at the present time, and who might find themselves in great difficulties if they were not afforded the opportunity of getting the employment they at present enjoy there. They are giving good value for their money. They owe nothing to Great Britain except the ordinary debt of gratitude for a hospitable reception, but the least our people can do is not to give to any citizen of Great Britain something for nothing, but to extend to them the same hospitality which our people are at present enjoying in their country. So far as I am concerned, and so far as those associated with me are concerned, I desire that there should be no equivocation on that issue. We opposed, I opposed, and I believe the insurance interests of this country opposed strongly the legislation which is now about to pass into law. Our advice was rejected, and I think since then the insurance interests in this country have given ample evidence of the fact of their readiness to accept the decision of the Oireachtas and co-operate with it to the best of their ability. For many of them it will mean laying down responsibility for the insurance affairs of this country, and I am quite satisfied that from all of them this agreement carried through by this Act, as it will shortly become, has their best wishes for success. Let there be no doubt in the mind of anyone, the policy holders are as secure now, and possibly more secure, than the policy holders in industrial insurance companies in Great Britain or elsewhere. The shareholders of these companies have done as well as any prudent financial advisers could have reasonably hoped. They have achieved a security and an asset greater than that which would have been the merest speculation, and I assure Deputy Norton, if he consults prudent shareholders who are familiar with the circumstances of these companies, that while some may say with a very intimate knowledge of insurance business that they would prefer to face the future and take the risk abroad, the majority of conservatively minded shareholders will very gladly take the bird in the hand instead of the potential half dozen in the bushes.
Particularly those who were not in the bushes.
I did not get that. I am not so sure that the Deputy is fair in recklessly slandering institutions to which he has not troubled to give careful thought. It is not the decent thing to do. The Deputy should not make rash observations of a left and backhanded kind, when the same might be said of some of the trade unions about which the Deputy is concerned. It is not the decent thing to do. If he wants to make backhanded allegations, the decent thing is to give those against whom they are made an opportunity of clearing themselves. It is not the thing to slander anonymously persons quite unable to defend themselves when not named. I have a fairly intimate knowledge of all these people, and I do not set myself up as a judge, but I know the difficulties they had to contend with, and their readiness to carry on, if allowed, and their readiness to co-operate as soon as this legislation is made law. I think this House is under some obligation to a body of business men who, with very little assistance, sat down and with their own advisers, and with help and co-operation from the Department— which was not always helpful, as a good many difficulties were created— succeeded in surmounting matters in the draft agreement annexed to the Bill. That was no small task. It was something for which this House ought to be greatful. In these circumstances, as this Bill is about to pass, it is about time the Minister gave those who gave their lives to the building up of the business, now to be amalgamated, some indication as to what the Government's intentions are as to the representation to be accorded them on the board of the permanent company.
As a director of one of the concerns about to be amalgamated under the Bill, Deputy Dillon comes and tells us what fine fellows these directors are——
Deputy Dillon in this House represents his constituents, and speaks in no other capacity.
I am aware of that and I am aware that the Deputy is entitled to speak, but I am entitled to say that Deputy Dillon has an inordinately flowery opinion of those responsible for the Bill, the directors of companies which, in the opinion of the Minister, were actuarially insolvent and are to be amalgamated. Let us be perfectly clear on what we are doing. We were told by the Minister that £500,000 of State money is being put into it in order to underwrite the actuarial deficit of the four participating companies. Everyone knows that State money is to be used for the purpose of putting right the actuarial deficiency which has been discovered in the affairs of the companies. We gain nothing at all by closing our eyes to that fact. As far as I am concerned, my eyes have been wide open all the time, and all the Minister said has convinced me that that was the only remedy which could be applied to the situation.
It is not unusual for Deputy Dillon to pose in this House as an authority, having all the knowledge and all the wisdom. Of course, when one gets to know the Deputy a little better one begins to realise how grotesque his arguments were. I say definitely that £500,000 of State money is being put up to underwrite the actuarial deficiency in these companies. That is what has happened under the Bill. If they were not in that position the State would not find it necessary to intervene with this capital in order to save the policy-holders. It is perfectly true, from the Ministerial point of view, that the approach to this legislation has been made to safeguard the interests of the policy-holder, because, in the long run, if the actuarial insolvency continued, the policy-holders would have to accept the position, either of the companies going into liquidation, and taking portion of the assets, or taking portion of the policies when they reached maturity. It was only to avoid a situation of that kind that the State found it necessary to intervene on behalf of the policy-holders. I recognised all the time that the whole object of State interference was to save and to protect the policy-holders from the possibility of that type of loss. Deputy Dillon tells us that prudent financial advisers counselled accepting that position so as to safeguard the capital of the four participating companies, and get more for their capital now than in the recent past. That is perfectly true. If I was a shareholder in one of these companies, I think I would do so in existing conditions, because in fact there is no real capital left in the participating companies.
That is not true.
There is no real capital left.
That is false. The Deputy does not know what he is talking about.
No real capital is left in the participating companies. How could any capital be left?
Some of the companies are as solvent as the Prudential.
Ah, some—that is how many?
I am not going to go into detail.
All the companies in this arrangement are not actuarially solvent, and in respect of the insolvent company there is no capital left. That is the position under this Bill. There is a prospect that there will ultimately be capital available, but here again let us remember that the shareholders are going to revive that document and give it a value, again because of the intervention of the State in putting right companies which are at present actuarially insolvent.
There is only one other point that I would like to refer to, and again only because Deputy Dillon has raised it. The Deputy has said that I raised a question on the Committee Stage of the Bill as to why a non-citizen of Eire was included in the board of directors of the new company. It was a quite legitimate point for me to raise on that and if, as Deputy Dillon says, the directors of existing companies have devoted their lives to the insurance business and if they, as the Deputy said during his discourse a few moments ago, possess the insurance ability that he claimed for them, surely it ought to be possible to find amongst those who have experience of insurance business in this country five citizens capable of directing the affairs of the terminating company or of the permanent company. One of the persons who will be a director of the new terminating company is not a citizen of Éire but an official, I understand, of a company which is incorporated outside Éire. If Deputy Dillon were an insurance agent and had some actual experience of an insurance agent's task in collecting premiums he would know that one of the most vicious things that has been introduced in the insurance business in relatively recent years has been the block system of collecting insurance. It has been a scheme in the main designed to make agents work harder and harder for what they get as wages. It is an attempt to concentrate business in a particular area and pay a wage for the business irrespective of the task of collecting the money in that area.
Is the Deputy in favour of piece rates?
The Deputy is not discussing piece rates at all.
Could the Deputy object to a fixed wage?
I object to a fixed wage if the object of fixing the wage is to make a man work twice as hard for what he formerly got. What we are going to have under this new terminating company and new permanent company, not so much in the permanent company, perhaps, as in the terminating company, but perhaps in both, is that we are going to have the Prudential system applied to insurance agents in this country, and if the Minister will only consult with insurance agents who are the victims of the block system of insurance which was introduced and pioneered through the insurance world by that company, he will know that the implementation of that system of collecting money and that method of remuneration inflicted very serious hardships on insurance agents.
The Deputy should talk to some of the ordinary people who were victims of the other system.
Under both systems, I think, there were victims, but certainly there were victims in excelsis under the block system of collecting as operated in that instance, and I see in the appointment of this person an official of that company a further effort to apply to this new permanent company and terminating company the same vicious reactionary system that was put into operation in that instance. It is impossible, probably, to expect a person who regards a system of that kind as his own child to change his mind on the system overnight, or to change his mind on the system merely because he is appointed to a post in this new permanent or terminating company. But let us make no mistake about it that the application of the block system of collection is not only going to mean harder work for the insurance agents and less pay in proportion to that work, but it is also going to make it difficult for any company standing outside the amalgamation to pay existing rates while its main competitor is on the block system. That is what we are going to have under this terminating and permanent company. Deputy Dillon may not feel the effects of it or see the effects of it in 12 months. I think after a few years we will see the effect of that thing, and those who will be continued in the insurance business will pay for the application of that principle to the method of collecting contributions under this new scheme.
Deputy Dillon asked me when this amalgamation would come into effect. I cannot give him any more definite answer to that question than to say that it will come into effect as soon as possible. It will come into effect as soon as the necessary formalities have been completed and the valuation of the assets and the liabilities of the amalgamating companies has been concluded. It is my intention, however, that there should be the least possible delay between the enactment of the legislation and the coming into effect of the amalgamation.
Deputy Dillon asked also if it is the intention to give to directors of amalgamating companies representation upon the board of the proposed new company. I can only answer that question by saying I can give no guarantee of any kind that any of the directors of the amalgamating companies will be included in the membership of the board of the new company. The Minister for Finance has the obligation of choosing the number of persons competent to carry on the business of the new company, and in that connection he will no doubt have regard to the qualifications of existing insurance directors but no undertaking of any kind could be given, and I think it would be, in fact, improper for the Minister for Finance, in the circumstances, to tie his hands in any way in the selection of directors for this company.
In the course of the brief discussion we have had here this evening, I think undue emphasis was laid on the question of the solvency of the amalgamating companies in connection with this general amalgamation scheme. I think Deputies should see that there is behind the idea of amalgamating another object to be achieved than the remedying of the position created by the financial weakness of some of the Irish companies. There are advantages, very substantial advantages, to be secured for the ordinary people in this country by eliminating the abuses associated with industrial insurance, of which many people are aware, and which resulted from the intense competition for new business between insurance offices. I have seen circulated between the amalgamating companies a document which purported to show that many of the British offices which are now financially very strong were in no better condition than the Irish offices now are after 20 or 25 years' existence. That is probably quite correct, but the conditions under which these companies amassed great resources and became financially strong were such as to call for the need for fresh legislation. That legislation was introduced here in 1936. We had, in order to protect the public against insurance companies, to impose a whole lot of new conditions on the conduct of industrial insurance business. That fact, I think, has been lost sight of by Deputies, that the primary purpose of the 1936 Act in relation to industrial insurance was to protect the public against certain methods of carrying on industrial insurance business. In the conditions created by that Act, conditions which have also been created in Great Britain by an Act of the British Parliament, the development of insurance companies would inevitably take a somewhat different course from the development of these companies in the past in Great Britain, to which reference was made here by Deputy Norton, and outside by some of the directors of amalgamating companies. The main idea behind the amalgamation scheme is to get unified operation and control of industrial insurance, so that the abuses resulting from competition will disappear.
Deputy Norton referred to the block system. He should find out something about it. He must know, if he knows anything at all about industrial insurance business, that 99 per cent. of the abuses against which we are legislating arose from the system of paying agents upon the basis of the new policies they succeeded in having issued. When the remuneration of an agent depended largely upon his ability to get people to take out new insurance, a position was created in which nobody cared a rap whether these insurances were continued or lapsed. All those abuses existed under that system, and all those abuses called forth the legislation which we enacted here in 1936.
If we are going to get for this new company a different system of operation, a system that is going to be fairer to the people who are insured, then we have to change the method of operation as well and we can substitute a method of operation which will not merely be fairer to the public, but fairer to agents in so far as it will secure for them remuneration on an adequate scale without having to resort to questionable tactics which they have had to resort to in the past if they wanted to make any sort of a living out of the business.
The adequacy of the payment has always been in doubt.
And the adequacy is a matter upon which difference of opinion may exist at any time. But where the adequacy of the payment depended on the ability of the agent to get people to take out new policies, often by very questionable methods, then you had a condition of affairs which had to be ended, and which we have ended by the 1936 Act. When that Act comes into operation, the conduct of industrial insurance business will be put on a different basis, but in order to start it and implement the idea behind it, it is necessary, not merely to put up these legal safeguards against abuses, but to get down to the causes of the abuses. The main cause was the intensive competition in industrial insurance business. That intensive competition we hope to eliminate as a result of the amalgamation. That was the primary idea behind the amalgamation, although it was also necessary because of the number of Irish companies that were not in a substantially strong position.
Question—"That the Bill do now pass"—agreed to.