Dáil Éireann debate -
Tuesday, 2 Mar 1971

Vol. 252 No. 1

Committee on Finance. - Insurance Bill, 1971: Second Stage.

Minister for Industry and Commerce (Mr. Lalor)

I move: "That the Bill be now read a Second Time."

As Minister for Industry and Commerce, I have powers under the Insurance Acts, 1953 and 1969, to give guarantees with respect to the insurance of risks in connection with the export of goods and in relation to the rendering of design and planning services, the work on which is carried out in Ireland in connection with engineering or constructional works executed abroad.

The purpose of this Bill is to provide for an increase in the aggregate amount of the liabilities which may be assumed by me under the Insurance Acts, 1953 and 1969, for export guarantees covering the insurance of risks in connection with external trade. This increase is made necessary by the recent introduction of a new scheme of export credit insurance. It may be helpful to Deputies for me to say something about this.

Export credit insurance was introduced in this country in 1955, as a result of an arrangement made by the then Minister for Industry and Commerce with a group of Irish insurance companies. The companies provided insurance against commercial risks on their own account, that is, insurance against the insolvency or default of the buyer. They also issued policies on behalf of the Minister covering political risks, these risks being entirely borne by the State; these policies provided insurance against the danger that action by a foreign Government would prevent the goods from being delivered or paid for, as well as against such eventualities as the outbreak of war and so on.

This joint scheme worked very well for some years. It was reviewed several times and improved in some respects, and over the years gave exporters who needed it valuable protection.

In the 15 years since the present insurance scheme was drawn up, Irish exports have, as Deputies know, increased enormously, from £110 million to £468 million a year. Exports are now spread over a much wider range of goods, and are going to much more diverse markets. It became apparent in recent years that the scheme of insurance which suited conditions in 1955 no longer provides the facilities which Irish exporters need now, if they are to continue to expand their trade and develop into new markets, as they must. A working group was, therefore, set up by my predecessor to examine the situation and make recommendations as to the changes or improvements that might be needed. The working group consisted of representatives of exporters, insurers, Córas Tráchtála and Government Departments.

The group confirmed that the old scheme was no longer adequate to meet the present and future needs of Irish exporters. They pointed out that exporters are increasingly diversifying into new and more remote markets, where credit risks tend to be higher than in the well developed industrial countries and where reliable commercial information may be difficult to get. They will be dealing with new and therefore unknown buyers instead of with firms they may have been supplying for years. An increasing share of our exports consists of capital goods, often sold on extended credit terms. These and other factors increase the need for export credit insurance and, since Irish firms must compete with exporters in other countries, the group pointed out that they need the same kind of facilities and at prices which are broadly comparable with those paid by their competitors elsewhere.

In most countries of Western Europe, and indeed elsewhere too, export credit insurance facilities are provided by the State. The working group concluded that it would be impossible for a commercial insurer to provide facilities comparable to those provided by Governments or with Government backing in other countries. They recommended, therefore, that State support should be provided for a scheme covering both commercial and political risks, and that the insurance facilities provided and the premiums should be reasonably comparable with those of other countries. These recommendations were accepted and the new scheme came into effect on 1st February, 1971.

The new scheme of export credit insurance provides, in a single policy, cover for commercial and political risks. This export credit insurance cover is available for exports of goods of Irish origin, whether sold on short term or extended term payment arrangements, and is also available in respect of fees due for design and planning services carried out in Ireland in connection with engineering or constructional works executed outside Ireland. There have been several improvements in the terms and the premium rates are reasonably comparable with those charged in other countries.

The operation of the new scheme of export credit insurance has been entrusted by me to the Insurance Corporation of Ireland Ltd. which, for some time, had been the only company issuing policies covering commercial and political risks and which henceforth will act as my exclusive agent in the issue of export credit insurance policies.

The introduction of a new scheme will result in an immediate increase in the aggregate amount of the liabilities assumed by me under the Acts, since I will be taking on liability for insurance against commercial risks hitherto borne by the Insurance Corporation of Ireland.

It is expected also that the new and improved scheme will attract additional business as exporters realise the support they can get from credit insurance. Deputies will also be aware that, as announced by the Minister for Finance, a scheme of credit at preferential rates for exporters of capital goods is being prepared by the banks. The introduction of this scheme will lead to a considerably increased demand for credit insurance. Because of these factors, the present limit of £10 million on the aggregate liability I may assume will be too low, and I am seeking to have it raised to £30 million.

It will be appreciated that the aggregate potential liability could become an actual liability only if all the risks covered by all the insurance policies issued should materialise. This is, to say the least, an extremely remote possibility. It is, in fact my intention that, taking one year with another, the export credit insurance scheme should be operated without net loss to State funds.

I recommend acceptance of this Bill.

Mr. Donegan

I also recommend acceptance of this Bill. I was here when the late Deputy Norton first invoked the section of the 1953 Act in 1955 providing the export credit which the Minister mentioned. It is true that these insurances are necessary and that all the exporting countries are providing them already. Other countries provide not only export insurances but also export credit over a long number of years for capital goods. When I say "a long number of years" I do not mean decades. I mean a period of, perhaps, three years. At present the British Government will underwrite, through certain credit houses, the purchase of capital goods payable over a period of three years at a reasonable rate of interest. This Bill could have been extended to include that feature also. It was stated by the Minister's predecessor, I think, that this was in their minds. It has been Fine Gael policy for the past five years. We must wait until we take office because what we hear from Fianna Fáil very often does not occur. The extension of credit as well as insurance credit is most desirable and must be looked after.

I do not want to comment on the details of the Bill to any great extent, except to say that, if exporters of goods to this country have this credit, then our exporters should also have it. There will be unknown buyers and there will be diversification of exports. I could tell the House of two experiences I had in my business life. Having succeeded in exporting Irish flake oat-meal to America, I got an inquiry from Hong Kong. I did not avail of the insurance cover there was then, and I sent off the goods to Hong Kong. The gentlemen who imported them are now in prison in Hong Kong as a result of lengthy correspondence between my firm and the police because those gentlemen never intended to pay. They collected the goods and proceeded to sell them for approximately one-quarter of their value.

I had another experience in relation to credit insurance with one of my other, perhaps, more unsuccessful business enterprises. I imported three hogsheads of wine from Israel. There was a barrel of red wine, a barrel of white wine and a barrel of rose wine. The red wine and the white wine were quite excellent and, in fact, were bought in cases even by members of the Press Gallery here until they ran out about a month or so ago. The barrel of rose wine exploded on the quay in Dublin. I was in trouble with the Customs because the wine had exploded and I had imported it and my friends in Israel were in trouble because they had to get me to prove that the wine had, in fact, arrived here to collect their export credit insurance. In the event, they succeeded and they were covered by an insurance rather on the same lines as this.

These things have happened. They can happen in a rather humorous manner although not so humorous for the gentlemen in Hong Kong. Even in my small business I have had experiences which showed me that this Bill is necessary. Perhaps the extension of these measures should have taken place at an earlier date but let us not be churlish about it. We welcome the Bill. Because I did not use the existing provisions I lost money in my private capacity. Therefore, I learned a lesson not to lose it in the future. As spokesman for the Fine Gael Party, I recommend this Bill to the House.

Mr. Coughlan

I also recommend this Bill to the House, but with reservations. I see nothing in this Bill about a clause which is in all insurance policies and I am wondering why the Minister has omitted this most important clause, bearing in mind the fact that we know from our experience that insurance companies will avail of every loophole possible to evade the liability for which they accepted the full premium. There is also the fact that, having accepted liability for certain situations, in the event of a claim arising, the insurance companies can cancel that insurance without any licence good, bad or indifferent, leaving the insured person in the impossible position that he has been rejected by one insurance company and has to go hawking all over the country looking for cover— not only this country but other countries as well.

I have a typical example of that here before me in a case that happened concerning the Wicklow Harbour Authority. A letter was posted from the Insurance Corporation of Ireland Limited dated 11th December, 1970, to the Wicklow Harbour Authority stating:

We have been considering the question of a renewal in this case and have decided we should not invite renewal of the policy. However, in view of the short notice——

—the policy was due for renewal on December 1st—

——we have decided to extend the policy to December 31st and at no additional premium, to give you an opportunity of placing the risk elsewhere.

This is a letter from the insurance company dated 11th December cancelling the insurance and the liability without giving any practical reason and giving them until 31st December, which is 21 days, bearing in mind that the Christmas holidays intervened. This very same situation could arise in any other matter if the insurance companies are allowed, as can very easily happen in regard to this Bill, to introduce the average clauses, which is not mentioned here. The Minister has carefully ensured not to introduce the average clause in any claim that would arise. Insurance company agents are business men trying to get as much business as they can because of the commission. They are in a competitive market. Having paid the first insurance premium on any property the client is advised, as has happened, that the property is under insured and that he should increase the policy and consequently the premium to whatever amount the insurance company think the market and replacement value would be.

In Limerick an insurance company insured property for £58,000. At first the property was insured for £20,000 because that was the purchase price at the time. The insurance company advised that the property was under insured and that another £10,000 should be placed on it. In addition, another premises was insured for £28,000 making in all a sum of £58,000 insurance on the two properties. That was in 1965. The premiums were paid and on renewal day the following year the insurer was advised that he was again under insured. He took the advice of the company and insured his premises accordingly. When the disastrous fire occured——

An Leas-Cheann Comhairle

I was allowing the Deputy to make his point. This Bill amends only one section of the Insurance Act.

Mr. Coughlan

With all due respect, I admit that the Insurance Acts 1909 to 1969, together with this measure, may be cited together as the Insurance Acts 1909 to 1971.

An Leas-Cheann Comhairle

If the Deputy examines the Bill he will see it is just one section which is being dealt with.

Mr. Coughlan

I am dealing with this section because of the omission of the average clause.

Dr. O'Donovan

I think my colleague, Deputy Coughlan, is quite in order. This Bill may deal only with one section but it is a measure to amend the Insurance Acts 1909 to 1969. There is no reservation whatsoever.

An Leas-Cheann Comhairle

The position is that one section of the Insurance Acts is being dealt with in this Bill. This does not open up the general question of insurance.

Dr. O'Donovan

The Title of the Bill surely determines the extent to which the debate may be carried on. This is a Bill entitled an Act to amend the Insurance Acts, 1909 to 1969. It relates only to the Insurance Act of 1963, in fact, but the Title of the Bill I believe justifies Deputy Coughlan in his approach.

An Leas-Cheann Comhairle

It is the subject matter of the Bill which determines the scope of debate.

Dr. O'Donovan

With respect, the long Title of the Bill is the basis on which the debate is carried on. The long Title is comprehensive.

An Leas-Cheann Comhairle

This is a Bill entitled an Act to amend the Insurance Acts 1909 to 1969, but the Bill amends only section 2 (3) of the Insurance Act, 1953.

Dr. O'Donovan

If the drafting had been approached differently your decision would be quite good but the fact is that the measure is a Bill entitled an Act to amend the Insurance Acts 1909 to 1969. Section 2 (3) of the Insurance Act, 1953, relates purely to political insurance. Frankly, I believe the Deputy is quite in order.

An Leas-Cheann Comhairle

I am sure the Deputy appreciates that if the Chair were to allow a discussion on insurance generally, car or any other insurance might be deal with.

Mr. Coughlan

I am not talking about car insurance. Motor car insurance is already covered.

An Leas-Cheann Comhairle

The Chair is limited to the subject matter in the Bill.

Mr. Coughlan

I am basing my argument, with due respect, on the fact that the average clause is not included in this Bill and if a claim arises under this £30 million Bill the insurance company can go to arbitration, as they can do at the present time because of the average clause. It is a very simple matter and I can see why the Minister has side-stepped the issue. He knows that it is coming up tomorrow, I hope, and that we will bring this to finality one way or another. He has not clearly spelled out here that if any person, any exporter, insures up to £30 million that the average clause will not prevail. I want to make perfectly sure here that the average clause as it is applied, and as it has applied so unjustly in this case in Limerick, will not apply here. The Minister has purposely avoided this in his statement here. I want, because of that, to point out to him the necessity for the inclusion or exclusion, one way or the other, of the average clause in this Bill.

An Leas-Cheann Comhairle

As long as the Deputy deals with the average clause so far as exports are concerned the Chair is perfectly satisfied.

Mr. Coughlan

Thank you very much, but I must relate the average clause—it is omitted here—to the way it works in other insurance policies. I hope I know a little about insurance as I spent long enough at it and I know how these people work. You will bear with me, a Leas-Cheann Comhairle, when I refer to the specific case of the Wicklow Harbour Commissioners where, with a stroke of a pen, the company indicated to the Wicklow Harbour Commissioners that they were no longer accepting liability. That means they are rejects. An insurance company, having accepted liability and having accepted the premium when it was profitable to do so, and because a claim arose against them gave, say, 20 days' notice, excluding the Chirstmas holiday period, to the Wicklow Harbour Commissioners so that they had to go in search of coverage having been rejected by the Insurance Corporation of Ireland Ltd. If insurance companies are allowed to carry on in this way, surely the same thing will apply here? This is what I want to see avoided.

I want to go further than that, with your permission, and specify as briefly as I can the position in Limerick. A similar situation has obtained in regard to the Galway Harbour Commissioners. Their insurance was annulled out of hand. I am a member of the Limerick Harbour Commissioners and if we have an accident in the morning the same thing could apply. These people are allowed to take the cream and when the cream is gone and only the skim is left one must then search for some other company to take one on. Everybody knows that having been rejected by one company one would need a four-leaf shamrock to be accepted by another. That is how they work.

I want to impress on the Minister the experience I had with regard to this case in Limerick, where the average clause was introduced. What is meant by the average clause? The Minister does not really know judging by the reply he gave me to a question last week. I quote from column 1981, Volume 251 of the Official Report:

Mr. Coughlan asked the Minister for Industry and Commerce whether he is aware that, because of the operation of the average clause in insurance policies, many people fail to obtain the full sum which they were advised by their insurance company was sufficient for the adequate insurance of their property; and if he will bring in legislation providing that in future such clauses shall be null and void.

The answer I got was:

I am aware that some people fail to recover the full amount of their loss through the operation of the average clause.

So, he admits in the first instance that he knows of this. He goes on:

The effect of this clause is to put on the policy holder the obligation of insuring his property for the full amount of its value,——

What that means nobody knows. He does not know himself.

—by providing that he must bear a pro rata proportion of every claim where the property concerned is insured for an insufficient amount. This is a practice which no doubt will be considered by the Insurance Committee and I should be unwilling to reach any conclusions about it before I have seen the committee's report.

I understand that it is not the policy of insurance companies to take it on themselves to advise people as to the amount for which they should insure their property and that this is a matter for determination by the person taking out the policy.

That is not so.

Dr. O'Donovan

Indeed it is not.

Mr. Coughlan

I am sure the Minister was misled on this issue. If the Minister tells us that an insurer who insures for X amount and when the claim arises for X amount has to take a pro rata proportion of that claim he knows nothing at all about what it means. If an insurance company accept liability and accept the premium on that sum they are in duty and in conscience bound, in the event of a claim, having investigated the case and found it to be an act of God or an accident or anything other than a malicious act, to pay to the last penny the replacement value of the property concerned or compensation therefor but because of the introduction of this average clause—what that means I do not know and the Minister does not know, “average” could mean anything —the insurance companies are allowed to hide behind this clause in order to fool and blind the people. It is taking money under false pretences and it is, I believe, a criminal act. The insurance company which accept liability for any sum of money knowing that in the event of a claim arising they will not pay that sum are committing a criminal offence. The sooner the Minister moves on this issue to save everybody the better.

I cannot see why the insurance companies should get that protection. An unfortunate person who has insured himself is advised by his company that he is under-insured and should increase his insurance, in this case to the sum of £58,000, which he did, having paid maybe three or four renewals previous to this and on every renewal date being told by his company: "You are under insured. Property is becoming more valuable every day. You must increase this." He did increase it until it came to £58,000 and he paid the premiums accordingly. When the claim arose they went to his architect and he advised that the premises could not be erected on the foundations as they stood as a result of the disaster and that he would not submit plans to the Limerick planning authority because they would not be accepted. I quote the letter from the Architect concerned:

I confirm my advice to you that I would not be prepared to incorporate the foundations of the above property in a new construction to replace the buildings destroyed by fire. These foundations, built as they were of bricks and stone in lime mortar on alluvial soil, are very old and in my opinion have deteriorated considerably partly due to the fire and also to the exposure of the elements.

Apart from my advice against the incorporation of these foundations in any new building I must say that I would not be prepared to submit plans incorporating these foundations to the planning section of the Limerick Corporation on the chance that you might get approval.

There is the advice of the man's architect. I want to refer to the average clause in relation to what the Minister has said about this £30 million. Bear with me on this a Leas-Cheann Comhairle.

An Leas-Cheann Comhairle

The Chair has been bearing with the Deputy but a one clause Bill cannot surely open up the whole question of insurance?

Mr. Cluskey

The Title of the Bill gives full latitude.

An Leas Comhairle

It is the subject matter of the Bill.

Mr. Coughlan

I want to know whether the average clause is included in what the Minister has read. There is no word of an average clause in this. I want to point out to him the necessity for including it or excluding it and spelling it out one way or another because of my experience in the John Jennings case in Limerick.

An Leas-Cheann Comhairle

As long as the Deputy keeps to export.

Mr. Coughlan

I am keeping to insurance whether it is export, import or anything else. The average clause is not in this. I know why the Minister has omitted it. I do not blame him for trying to avoid it because it is a hot spud at the moment and will be hotter in time to come. Why has he not included the average clause in this?

An Leas-Cheann Comhairle

If the Deputy will keep to the question of exports, as I have mentioned, the Chair is agreeable.

Mr. Coughlan

The Bill speaks not only of exports but also of insurance.

An Leas-Cheann Comhairle

The Deputy is aware that even a housing Bill would not ensure an entire discussion on housing.

Mr. Cluskey

On a point of order, subsection (2) of section 2 reads:

The Insurance Acts, 1909 to 1969, and this Act may be cited together as the Insurance Acts, 1909 to 1971.

An Leas-Cheann Comhairle

It is not by the Title of a Bill that a debate is circumscribed. It is circumscribed by the subject matter of a Bill and the subject matter of this Bill is contained in a single clause.

Mr. Coughlan

Let me emphasise again the importance of the inclusion or exclusion of the average clause in this Bill. Supposing a claim is raised from £10 million to £30 million, could the insurance company then invoke the average clause? I am anxious to point this out to the Minister. I am only trying to help him.

An Leas-Cheann Comhairle

The Chair is trying to be helpful to the Deputy.

Mr. Coughlan

This is a very important matter. It is all very well to come here and read this through but we know from experience to what ends insurance companies will go in their efforts to avoid their responsibilities. If, for instance, a person insures a new car for £1,000, he will be charged the same premium the second year and the third year as he was charged the first year but if a claim arises he will be told that his car is now three years old and, consequently, worth only about half its original price. The average clause has been omitted purposely from this Bill by the Minister and his advisers.

Dr. O'Donovan

May I submit that the Minister said:

The operation of the new scheme of export credit insurance has been entrusted by me to the Insurance Corporation of Ireland Ltd. which, for some time, had been the only company issuing policies covering commercial and political risks and which henceforth will act as my exclusive agent in the issue of export credit insurance policies.

Deputy Coughlan read a letter from that company which bears out the case he is making. His case is an illustration of what can happen unless an appropriate clause is put into this Bill.

An Leas-Cheann Comhairle

I am sure the Deputy will agree that so far as the debate is concerned it is circumscribed by the subject matter of the Bill as contained in the section.

Dr. O'Donovan

There really are two sections in the Bill. The money section is one of these and subsection (2) of section 2 says that the Insurance Acts are all one.

Mr. Coughlan

That is so. Surely we must include all sections in Insurance Acts as applied elsewhere?

An Leas-Cheann Comhairle

By long standing practice debate is confined and circumscribed by the material contained in the section of the Bill.

Mr. Coughlan

I agree but I am endeavouring to point out to the Minister the loophole in this Bill. In doing that I am indicating what happened in the case of the insurance company concerned when a claim arose. When the Minister is replying I want him to tell us if a similar situation would arise with regard to goods exported. Will the average clause be invoked? Will it be invoked in the case of a person who insures his exports for so many millions and who later has reason to make a claim? Will he be told that he should bear a pro rata amount of the risk? What the Minister said to me last week was that the person himself was as much the insurer as the people to whom he pays the premium. Why should any man pay a pro rata amount when he insures himself to the extent that he is advised by his insurance company? I take it I am to proceed, a Leas-Cheann Comhairle?

An Leas-Cheann Comhairle

The Chair is in agreement with the Deputy up to the point of exports but not in so far as other kinds of insurance are concerned.

Mr. Cluskey

On a point of order, we do not wish to come into conflict with the Chair, but the Minister stated that he is entrusting the operation of this new scheme to this particular company. Surely Deputy Coughlan is entitled to speak about the past actions of this company so as to point out to the Minister that they may not be suitable?

An Leas-Cheann Comhairle

The Deputy has been allowed to make a reference to it.

Mr. Cluskey

Surely he is entitled to develop his case?

An Leas-Cheann Comhairle

As the Deputy is well aware, the Chair is circumscribed by certain well defined traditions of the House and debate on this is certainly circumscribed by the section of the Bill which is there.

Mr. Cluskey

With respect, this particular company was introduced into the debate by the Minister. He specifies this particular company. Therefore, surely Deputy Coughlan is entitled to quote a letter from this company so as to illustrate why they may not be the most suitable company?

An Leas-Cheann Comhairle

The Chair has allowed the Deputy to make that kind of reference.

Mr. Cluskey

If the Deputy had not elaborated, the Minister would not have accepted the point.

Mr. Coughlan

Following the acceptance of that, I come now to the most important point of all. I know that this company should not be accepted and that is why I quote their action in relation to the Wicklow Harbour Commissioners. However, there was a bigger question involved here and that is the right of an insurance company to invoke the average clause. I want to point out to the Minister the consequences involved in the invocation of the average clause. Despite the advice given by a man of repute, an architect of national fame who said that the building could not be replaced on its present foundation and that he would not go to the trouble of submitting plans to the Limerick planning authority because they would not be accepted, the first offer from the insurance company on an insurance policy of £58,000 was £10,000. Mr. Jennings was paying £4,500 in premiums. Then, like the man at the fair, they tried to make a bargain and they increased their offer to £27,000. This was flatly refused. Their third offer was £32,000. This was also refused. Recourse could not be had to the civil court. Why I do not know.

The insurance company did not take into account the cost per square foot of the replacement of the building. The insurer was advised by his architect that the foundations were not stable. I read the letter. The arbitration was held and the arbitrator wrote to this man's solicitor on 7th January, 1970, stating that he did not calculate the cost of rebuilding at a rate per square foot.

An Leas-Cheann Comhairle

The Chair cannot see what all this has got to do with the Bill before the House.

Mr. Coughlan

This has got to do with the underhand way insurance policies operate. I know something about them.

I did not calculate the cost of rebuilding at a rate per foot. It appeared to me the foundations could be used again and I based my award on the evidence of the quantity surveyors called in by the insurance company but with certain upward adjustments which I considered necessary because the quantities had not been extracted from the proper drawing. I adopted the evidence of Mr. Ashton in regard to the allowance of the new for the old and made an addition of ten per cent for professional fees.

That is what the arbitrator said. Mr. Jennings would not accept the award because the arbitrator had not full knowledge of all the facts. He stated that in his letter; he did not assess the replacement value per square foot and he did not take into account the conditions of the foundations. He made an award of £32,000, and award rejected in toto by Mr. Jennings.

Mr. Jennings then consulted Messrs. Nicholas O'Dwyer & Sons, consultant architects of world-wide renown. They advised as follows on 14th August, 1970.

Nos. 127 & 128 O'Connell St., Limerick.

Mr. Kennedy of this office carried out an inspection of the above sites as requested.

The buildings which formerly occupied these sites have been demolished to pavement level and the resultant debris fills the basement of No. 127 and part of the basement of No. 128. Accordingly, it was not possible to examine fully the remaining sections of the basement walls.

However, the following information was obtained:

(a) The remaining walls consist of a front wall, a rear wall, the party wall dividing Nos. 127 and 128 and a central wall between the parallel to the front and rear walls.

(b) The thickness of the walls was generally found to be of the order of 24", though at one place the rear wall was 30" thick.

(c) The walls were generally found to be constructed in rough masonry, though in them were included quantities of bricks, seemingly at random. Lime mortar had been used in their construction, and whilst in some places this appeared to be in reasonably sound condition it was definitely crumbling and in poor condition where it was examined at basement floor level.

An Leas-Cheann Comhairle

The Chair would like to know if the Deputy is using this argument because of the company the Minister is using.

Mr. Coughlan

It is partly "Yes" and partly "No".

An Leas-Cheann Comhairle

The Chair wants to know if it is or is not the same company.

Mr. Coughlan

Is it the same company? I am not enabled to tell you the name of the company and I think it would be unfair to do so.

Mr. Lalor

The Deputy has already claimed he is referring to the Insurance Corporation.

Mr. Coughlan

What I stated is factual. It is with regard to the £30 million.

An Leas-Cheann Comhairle

The Chair rules that, if it is not the company, the Deputy may not proceed on that basis.

Mr. Coughlan

Let me point out the unjust way in which insurance companies treat their clients.

An Leas-Cheann Comhairle

The Chair insists the Deputy must keep to the content of the Bill and the section.

Mr. Coughlan

If that is your ruling I must accept it. Because of the unsatisfactory way in which this matter has been handled I wish to raise on the Adjournment tomorrow the subject matter of Question No. 41 on the Order Paper of 24th February, 1971.

An Leas-Cheann Comhairle

I am sure the Deputy will give notice at the appropriate time tomorrow.

Dr. O'Donovan

I rise to speak because of the manner in which this type of insurance has developed. People who export goods, it is held, have enough risks to run without having to run political risks or monetary risks. Currency might be devalued, and so on. Contrary to what some might wish us to believe, this particular policy was first introduced by the second inter-Party Government— that dreadful government that did nothing right. Export credit insurance was first introduced in 1955. In 1955 the amount was £2 million. In 1969 it became £10 million and now it is proposed to make it £30 million. The proof of the pudding is in the eating. Here we have now the proof of the usefulness of this provision. I agree with my colleague, Deputy Coughlan, that one wants to be assured as to the manner in which this will be operated. The Minister proposes to hand this over to a company which, of its nature, is a kind of side organisation of the Fianna Fáil Party. The directors of it are all supporters of the Fianna Fáil Party and in addition to that, like a lot of other insurance companies, as Deputy Coughlan pointed out, it all depends on how they are going to handle claims. It is very easy for insurance companies—and they very often do this, and it is worse in the case of a monopoly—to argue with an unfortunate exporter who if something goes wrong in relation to his goods—say, for instance, there is a political upheaval in Brazil—cannot be paid for his exports approximately what he lost.

The fact that they are the only company who had been doing this kind of business for some time is no justification for the Minister to appoint them exclusive agents. I have not forgotten the row in this House in 1944 when the then Minister for Industry and Commerce tried to make every exporter insure with this very company and would not allot shipping space to any company on the boats of Irish Shipping unless they insured with this company. I am glad that one firm stood up and was counted and they beat the then Minister and his secretary to the ropes. The secretary was allotting shipping space to himself in the boats at the time. He was chairman of Irish Shipping and he was allotting space to himself to import prune wine. There was a debate in this House for several days on the matter. The leopard does not change his spots. This is the same company. It was honest of the Minister to have come in and told us of this, but it is just as well that we should have long memories. I admire the company that stood up at the time and told the Minister and his secretary what they could do with themselves. They got support in this House from the then Deputy McGilligan, in particular, and there was a cave-in.

I am not saying that this is not an excellent company. That is not the point. They are an excellent company. The point is that it is a different thing for a Department of State to appoint somebody as their exclusive agent in the issue of export credit insurance policies. I hope the Minister will reconsider that aspect and think about allowing any company who are prepared to do this business to do it. The phrase "which for some time" means presumably that there were other companies doing it in the early stages.

There is now going to be an overall cover of £30 million. I see the most serious objection to handling this kind of thing over to a company of this sort which has this kind of long-term background. I am not unaware that insurance premiums can vary greatly. I suppose one of the most successful efforts in this country was the Exported Livestock Insurance Board which was established here in the early part of the war when altogether abnormal premiums—30s per £100—were being charged by Lloyds of London on our cattle. The Minister for Agriculture came into this House and this board was established and they started off by charging 30s per £100 until they built up, in no time at all, a reserve of about £500,000 and then they proceeded to bring it down until it was down to 2s 6d per £100. That was 20 years ago. I do not know what it is today. Even during the war years it was reduced to 5s per £100 because of course no Irish boats were being sunk between here and Britain. It was purely vindictiveness on the part of Lloyds because on the day that Herr Hitler's Government announced that they would regard Irish ships as neutral if they were lit up the under-writers met in Lloyds basement during an air raid and trebled the rates from this country to England because of the German announcement.

If the Minister is appointing these people as his exclusive agents who is going to control the premiums? I am to be taken as being in absolute support of the Bill as on paper but it is this angle that gets under my skin. We were late into this game of insurance against the political or financial risks that are involved in deflation and so on but, as I say, the proof of the pudding is in the eating. The amount was £2 million at that time and this £30 million is a lot more of an increase, related to £2 million, than our exports today are compared with 1955 even though our exports have increased enormously and there is a greater variety of exports and we export to many countries. We are all naturally pleased to see this but there are more complications in this than the Minister's Department realise. The Minister's Department have always been inclined to gloss over things. When I was with the Department of Finance I was constantly fighting with them. They had a completely different attitude from that of the Department of Agriculture who of course had to deal with reality. With the Department of Industry and Commerce anything went. I am afraid that there is an element of "anything goes" in this proposal. This is a small country and very often it is not easy to get more than one organisation to deal with a specialised kind of job. But this is a tricky business, to keep the thing even as between the small fellow, the exporter, and the big fellow, the insurance company. Deputy Coughlan was right, insurance companies are a pretty tricky bunch of people. That has been my experience of them anyway.

It is extremely difficult for anybody exporting goods to know what compensation he will get if the goods are destroyed, not paid for or the man himself goes bankrupt. If he insures them at what the company think is too high a figure they will pay him only what they consider the value of the goods is and if he insures them at a lower value they will say: "You insured them for only that much and we will pay you only that much." The insurance companies have it both ways. They never refuse premiums. They take the premium and pay the insured person on the lesser value. This is not peculiar to the Insurance Corporation of Ireland; it is universal in the business.

Export credit insurance facilities are now quite common. They have been brought about because of a variety of reasons. It is a kind of composite insurance covering devaluation, the bank-ruptcy of the importer, political change in the country concerned and ordinary marine insurance. It does give rise to very awkward calculations at times.

The increase from £10 million to £30 million is an indication of the extent to which these facilities are accepted by our exporters. In the course of his speech the Minister said:

It is expected also that the new and improved scheme will attract additional business as exporters realise the support they can get from credit insurance.

There is no question about that. This is an increase in business. The Minister went on to say:

It will be appreciated that the aggregate potential liability could become an actual liability only if all the risks covered by all the insurance policies issued should materialise. This is, to say the least, an extremely remote possibility.

It is only actuaries who go in for this type of calculation. It is not reality at all, it is a kind of mathematical infinity. The Minister then went on to say:

It is, in fact my intention that, taking one year with another, the export credit insurance scheme should be operated without net loss to State funds

The State is going to be behind the Insurance Corporation of Ireland and the introduction of this principle is extremely objectionable. The State is going to guarantee a private company which is going to make a profit. It cannot but make a profit because if it runs at a loss the State will come to its aid. If it makes a margin the State is not going to grant that margin. The company will be quite free to charge premiums which in ordinary circumstances will always show a profit. We all heard the letter which was sent to the Wicklow Harbour Board from this company telling the board they would not insure them. This kind of thing does go on. Will the company under the scheme be compelled to insure an exporter? Supposing an exporter has a row with the company, takes them to court and beats them on a claim, will the company be in a position to refuse that exporter insurance in the future? Monopoly organisations are able to take sanctions against companies which other organisations cannot do.

This is obviously a most serious aspect of the matter. If an insurer suffers a severe loss and there is a difference of opinion between him and the Minister's exclusive agent, who is apparently signed up for all time, and he is proved right, can they refuse to insure him after that? The Department of Local Government did set up a scheme in connection with motor insurance whereby people who were refused insurance by every company because of bad accident records could go along to this group and get insurance. Certainly they had to pay for it; I do not say they had to pay too much, bad motor car drivers are bad risks, but ships are not normally like that.

Mr. Lalor

Motor insurance is compulsory; this is not.

Dr. O'Donovan

A businessman shipping goods to far off lands has almost no option but to take out this kind of cover. I do not think there is any other way out of it. I welcome the Bill in principle and I welcome the section in the Bill which, as the Leas-Cheann Comhairle has told us, is the only thing in the Bill. I am glad the Minister is extending this business.

Mr. T.J. Fitzpatrick

(Cavan): I have listened to the debate with some interest. The object of this Bill is to amend the Insurance Acts, 1909-1969. If we had time to go through all those Acts section by section we could find a great deal to say on this Second Stage.

It strikes me that section 2 of the 1953 Act is a very loosely drafted section which gives the Minister power to make arrangements with insurance companies in regard to this commercial insurance company risk. It would be much better if the Minister had to lay before the House particulars of the arrangements which he had entered into with these companies. Under section 2 of the 1953 Act he is really given an open cheque.

I want to join with Deputy O'Donovan in saying that I think it is undesirable that an exclusive agent should be appointed to a plum job of this sort. As I see it the insurance company which is trusted with this type of insurance, if we are to accept the Minister's speech as accurate, is really nothing more than an insurance broker. The company will not be undertaking risks to any extent because it will be underwritten by the State to the tune of £30 million. The Minister has told us that barring everything going down at the same time and barring every consignee going bust at the same time that £30 million will never be called on. It is of the utmost importance that we should get the keenest possible premium because the Minister has told us that in the long run this scheme will be operated at no loss to the State.

Debate adjourned.

The Dáil adjourned at 10.30 p.m. until 3 p.m. on Wednesday, 3rd March, 1971.