Before the debate adjourned on Deputy Bruton's amendment I had just been saying that there were very few companies involved. I had given an undertaking to discuss the matter with the insurance companies as soon as possible to see if we could bring additional uniformity to the accounting periods. Having considered the matter since we discussed it before lunch, I think that is the most sensible thing I could do.
Insurance Bill, 1987 [Seanad]: Committee Stage (Resumed).
Debate resumed on amendment No. 17:
In page 9, between lines 2 and 3, to insert the following:
"(i) the use of uniform accounting periods by insurers to assist in the comparison of the performance of insurers."
—(Deputy J. Bruton.)
Of course, the Minister cannot do anything about the matter if he does not have the power. This amendment proposes to give him the power to do something about it. Before lunch the Minister rejected allegations that he was taking on excessive powers in regard to making consequential orders under an earlier section, now he is being offered the opportunity of taking powers to deal with something which would make the insurance company accounts easier to compare both by his Department and outsiders who must assess them also. The Minister is showing remarkable reluctance to accept this. To my mind he is not reasonable and I do not think he is behaving as he should in regard to the responsible suggestions being made by the other side of the House. If the Minister could demonstrate that some adverse consequences would flow from accepting this amendment, one would have to accept his judgment. The Minister has not said that but simply that he proposes to consider the matter further. If the amendment required him to take certain action and he was not sure whether he wanted to take it, one could understand that, too, but the Minister has not said that either. All he has said is that he will consider the matter but not take the power to do anything about it. To my mind that is not an appropriate attitude for him to adopt. I do not think it is the sensible or intelligent attitude to take. It does not show the flexibility of mind necessary to deal with legislation of this kind, which everybody agrees is complicated.
I do not intend to let the matter rest here and in order to ensure that I have the opportunity of raising it again and also in order to give the Minister an opportunity of perhaps reconsidering his position on the issue — because I feel this is a matter that he could well deal with and perhaps his officials will be able to think a little more on the matter before Report Stage — I propose to withdraw the amendment but I will be reintroducing it on Report Stage.
Amendment, by leave, withdrawn.
Question proposed: "That section 12, as amended, stand part of the Bill."
If the Department already have the power to make regulations under the 1936 Act in respect of any of the matters referred to in section 12, how many times have they used these powers or, are these all new regulation making powers?
I do not have directly to hand the statistics as to the number of times information has been sought and so on but I will see if I can get them before we finish. However, most of the items listed in section 12 are very much part of the existing regulatory framework and are quite often used by the Department to seek information and so on. They are already being used to the extent they are part of the day-to-day regulatory frame work.
Is the Minister saying he has made regulations on these subjects in the past?
The EC directives contain many of these regulations and we have used EC directives on a number of occasions.
Is the Minister saying that he has used the EC Treaty as a means of making these regulations for the past 15 to 20 years and is now for the first time taking power under domestic law to deal with these matters?
We, ourselves have regulations for life and non-life insurance which are derived from EC directives and we have used those on a number of occasions.
Are there regulations in force in respect of the matters referred to in paragraphs (a) to (h) and, in particular, are there regulations in force in respect of paragraph (h)?
There is a number of these regulations in force and being used.
Are there any regulatons in force in respect of paragraph (h)?
There is no regulation in force in respect of paragraph (h).
Could the Minister give me the same information in respect of the other paragraphs?
There are regulations in regard to a number of them. I am told that paragraphs (a) to (f) are enshrined already in regulations but I understand the Deputy wishes to know how often they have been used.
Regulations have been made in respect of paragraphs (a) to (f)?
Yes.
I do not want to rehash old arguments but it is clear as a result of those questions that no regulations have been made on paragraph (h) and I persist in my view that there is no need to take this regulatory power in hand. We have got along fine without it for a long time and it only applies to a very limited category of life policies, namely, with-profits policies. My understanding is that Irish Life are using this type of with-profits policy much less now than they used to. In fact, most of their policies are the conventional type and not the with-profits policies. As Irish Life have survived in their present form since 1936 without the State having to regulate how they distribute their surplus to policyholders as against shareholders I do not know why we need to take power at this point to regulate this by Government fiat.
We have already discussed paragraph (h) and I think I have explained our thinking on it.
It would be more accurate to say the Minister has described his absence of thinking on it.
Question put and agreed to.
SECTION 13.
Question proposed: "That section 13 stand part of the Bill."
I take it that the records are for inspection by the Department only and not by anybody else?
Yes.
In this case that is exclusively our own Department of Industry and Commerce. The EC authorities have no rights of access here.
That is true but this section deals with the keeping of records by companies and not with their inspection, as it were.
The company is given the alternative of keeping the records either at a registered office or at its place of business. Is there any reason to give that alternative? It might be that the registered office could be in some remote place, or some other problem might exist.
I do not see a difficulty. Either the registered office or a place of business is acceptable.
Question put and agreed to.
SECTION 14.
Question proposed: "That section 14 stand part of the Bill."
Has this section been in existence before in other legislation? I take it that it is only necessary now because companies are being empowered to conduct both life and non-life business?
Yes. It has not been in legislation before. The purpose is to ensure that policyholders and shareholders funds are separated. Section 25 introduces the right to amalgamate industrial branch and ordinary branch with the combined funds being liable for all life assurance liabilities of the undertakings. This subsection introduces the requirement to separate the assets representing the combined fund from the assets representing the shareholders fund and requires sufficient accounting and other records to be maintained so that we can identify the assets represented by the combined fund which is the fund being established.
The effect will be that the asset representing the combined fund may only be used for the purpose of life assurance business and that a transfer out of that fund can be made only after a surplus has been established in an actuarial investigation. What we are trying to do is to isolate and protect policyholders' funds as far as possible. The 1986 regulations already require life assurance companies to submit separate returns in respect of policyholders and shareholders' assets and liabilities, but the essence of what we are doing is to ensure that policyholders' funds and shareholders' funds are separated.
Is that really what section 4 says? So far as I can see it does not seem to refer to the separation of actual assets or funds. All it says is that an account should be kept showing the life assurance items or funds. The funds could be mixed with other funds and it would not be in breach of section 14 as long as an account was kept separately. Does the Minister intend to ensure that life funds will be kept in a completely separate account rather than just having them mixed, with some book arrangement under which one could list the funds under the various life assurance policies?
The Deputy is right in that the section does not require a separate bank account to be established. Perhaps my phraseology was not tight enough in explaining it. When I say that policyholders' and shareholders' funds are separated, I mean that one can identify separately the assets backing policy holders' funds. The important thing here is that in relation to policyholders' funds we can accurately identify the assets, gilts, property, cash and so on backing the liability to the policyholders. We are talking about separate accounting here, not necessarily separate bank accounts. I want to be clearly able to identify the assets which represent the fund which belongs to the policyholders. This touches on what we were talking about earlier today. As the Deputy appreciates, the shareholders' funds are entirely separate to be dealt with only after the assets backing the policyholders' funds have been clearly identified and whatever surplus is decided by the company to distribute to policyholders is a matter for shareholders.
There are two separate groups in insurance companies which are essential — policyholders and shareholders. We want to make sure that at the end of the day, shareholders get shareholders' funds and that policyholders' funds are clearly seen to be separate.
The Minister says that there are two categories but is he quite accurate there? Should there not be three categories, the policyholders' funds, life assurance business funds and other insurance business as distinct from life assurance business? What escapes me is the great benefit of simply having separate accounting of funds unless hand in hand with that we required the physical cash and investments to be kept separate. If we have them en bloc and if we have to have a first call then by life assurance policy holders, it will not be possible to identify or break them up. If the intention is to protect the policyholders and their life assurance policies surely we would have to have those assets maintained separately.
The Deputy is misunderstanding something. Life companies cannot do general insurance so there is no need for three funds. A life assurance company cannot insure motor cars and so on. Life companies do life assurance only. Therefore, there is only one policyholders' fund. Up to now there was a kind of averaging system where companies would average out which assets backed the policyholders' funds and which were available for shareholders of the company. We are trying to specifically make sure that the assets which back policyholders' funds can be clearly identified. If someone takes out a with-profits policy, the company takes in that money and invests it. We are trying to make sure that what it has invested in cumulatively, is visible. That would probably be gilts, property and various types of modules and so on. It is important that for every penny a person puts into a life policy with or without profits, the assets which back that investment are visible. To do otherwise would be extremely dangerous. Once we are satisfied that policyholders' funds are fully backed by assets everything else after is a matter for the shareholder.
If there is difficulty in trying to keep the assets separated and clear, is the Minister satisfied that the liabilities end of things is not even more hazy, and how, if the whole thing is grouped together, is the Minister isolating those?
We are into terminology here and it is also took me a while to come to grips with this terminology. In insurance companies "liabilities" is actually the term used for the money due back to policyholders. If I pay a life assurance premium that is a liability of the insurance company. It is a liability back to the policyholder in that they owe the policyholder the combined benefit. Similarly, if one goes into a bank and puts up a deposit, that is not an asset for the bank but a liability for them. It takes a while to come to grips with that terminology.
That would only be an endowment policy. It would not apply to term insurance.
Yes, it would. If one takes out a policy, the insurance company owes one, therefore that is their liability. When talking about assets here I am talking about what the insurance company does with the money. The insurance company takes the money and goes out and buys gilts for example. It is those gilts that are the assets of the policy holders' funds, so that one knows that that fund backs the policy one just bought.
Is the liability then considered to be what the person has paid in, because it might not necessarily be what the policy is worth and what will be paid out? How is it rated? Is it rated on what the person has paid in total or what they think the fund is worth at that time, because there could be a big difference in a large number of policies and the size of the fund?
The premiums which are paid into the company would technically be a liability of the insurance company. It can be a difficult area because liability is normally associated with something entirely different.
Would the full figure one would pay into the company be considered in total to be the liability or is a different figure put down because the fund may not be valued? There is a risk element involved and I want to find out how they value the difference and which figure they use. Do they use the gross income figure or what they think the net payment will be at any given time?
One of the difficulties I have in giving the Deputy a straight answer is that this is where actuaries come in. They put a certain valuation on the liabilities and the assets. We are very much into actuarial land here, an extremely complicated area. Section 14 (b) (ii) says that every undertaking authorised to carry one life assurance business shall maintain such accounting and other records as are necessary for identifying the assets representing the fund and the liabilities attributable to that business. Assets would be attributable to the business, which would probably be gilts and so on, and liabilities would also be attributable to the business, which would include premiums owed or whatever figure the actuaries come up with would be due.
Is that totally within the realm of the actuary?
Yes, there is an actuarial valuation at the end of the year because assets change in value and so, too, do liabilities. It depends on life spans and things like that.
Would that include actuarial calculations on each policy as to the likelihood of the death of a person so that a premium sum would have to be paid? Does that aspect have to be gone into to calculate the liability?
I want to be careful what I put on the record about how an actuary does his work because obviously this is a difficult area. I am told an actuary ascribes an actuarial valuation to a class of policies or group scheme more so than to an individual policy, or whatever the working method of the actuary is. I am happy with the principle which provides that when policyholders hand over their money to insurance companies, the company will keep a separate record of the assets which back that money and a separate record of the liabilities which that money brings the company. That liability may not perhaps be the exact premium but it is some actuarial measure of it.
Question put and agreed to.
SECTION 15.
I move amendment No. 18:
In page 10, subsection (7), lines 15 and 16, to delete "the European Communities (Life Assurance) Regulations, 1984 (S.I. No. 57 of 1984)" and substitute "the Regulations of 1984".
This amendment tidies up the phraseology used.
Is the Minister saying that there are Regulations other than European Regulations? Is that why he put down the amendment? I am slightly confused why the reference to European Communities is being dropped. What Regulations is the Minister talking about? Is there a wider range than just the European Regulations?
There are no other Regulations and in the definition section we define what we mean by these "Regulations". It is only necessary here to refer somewhat fleetingly to the "Regulations of 1984" rather than use the whole title. They are defined in the definition section of the Bill.
Amendment agreed to.
Section 15, as amended, agreed to.
SECTION 16.
Question proposed: "That section 16 stand part of the Bill."
Is section 16 a re-enactment of existing powers?
We are formalising what is existing administrative practice.
Question put and agreed to.
Section 17 agreed to.
SECTION 18.
I move amendment No. 19:
In page 12, subsection (2) (d), line 17, before "departure" to insert "adverse".
Under this section the Minister has power to intervene in cases of doubtful solvency and he can make directions of a sweeping kind as to the conduct of an insurance company. One of the grounds on which he may do this is if it appears to him that there has been a substantial departure from any proposal or forecast submitted to him by the company.
On a literal reading of that provision, the Minister could make an intervention if a company had exceeded their forecasts in terms of doing better than they had expected to do in the forecasts they had made. To my mind that is not the intention of this section and that should be made clear. I put down this amendment to make it clear that what is in mind is a substantial adverse departure, not just a substantial departure, from any proposal or forecast. I hope the Minister can accept the amendment on the basis that it more fully expresses what I am sure is intended.
It makes some sense to have the power to intervene in cases of doubtful solvency in either case, adverse or the opposite, for the reason that additional funds in, say, a very positive departure from the business plan originally submitted and cash flow agreed could mean the company taking on business which perhaps they should not take on. They could be engaged in activities designed to tackle the market in a particular way and take on additional business, and there may be a case in which the solvency of the company could be rendered doubtful. I think the Deputy could envisage situations where companies taking on additional business and departing from the forecast on the positive side could ultimately be dangerous to the solvency of the company, and in those circumstances we would wish to intervene.
Amendment, by leave, withdrawn.
Section 18 agreed to.
SECTION 19.
I move amendment No. 20:
In page 12, subsection (1), lines 48 and 49, to delete "(except where standard or pre-determined rates do not apply to the risk in question)".
This amendment allows the Minister to fully monitor policy conditions and premium rates in the marketplace.
Amendment agreed to.
I move amendment No. 21:
In page 13, subsection (3), line 5, after "prescribe" to insert "including the size, readability and type face of any written information intended to be capable of being read by potential customers".
The Minister may require insurers to display information on policy conditions and rates so that people know what they are letting themselves in for, so to speak. Under the Consumer Information Act, powers exist not only to require certain information to be given but also to require that it be given with a certain degree of legibility in terms of type size and so forth, to get away from the abuse of small print by companies selling to ordinary consumers, where people have to exercise a great mental effort to know exactly what they are agreeing to by reading very densely printed material. This would extend such a power clearly to the insurance area by allowing the Minister to require companies to print certain information in a certain type face or size of type so that people clearly would be able to read it and would have what was relevant drawn to their attention in a way that would not be concealed by the use or abuse of small print. In contracts of insurance, in particular, this is very important. Later Deputy Taylor will bring forward amendments to this Bill to deal with certain abuses of small print by companies where they have relied on minor non-disclosures of information about previous claims to justify refusal to pay out, say, a fire policy. This was the case in Keenan and Others, a recently reported case of 1987.
To my mind, the power should exist to require that the material be in large print so that people can see clearly what they are agreeing to and what they will be obliged to do if they are to sustain a claim against the company. The Minister should have the power to regulate the size of the print used and require clarity in printing of certain categories of information. I would hope the Minister will accept the amendment on that basis.
I strongly support Deputy Bruton's amendment. It is quite clear that intending policyholders should have drawn to their attention in a proper manner what it is they are letting themselves in for. Indeed, I wish it was going further and covering advertisements for business by insurance companies, and I believe life conditions should be set out. In supporting the amendment, might I inquire what section covers the sanction in the event of any company's failure to comply with a requirement that the Minister might issue under section 19? Could we have that detail?
First, section 53 of the Sale of Goods and Supply of Services Act 1980, already gives the Minister for Industry and Commerce these powers. I do not think it necessary to duplicate them here. Deputy Taylor is inquiring about the part of the Bill that permits us to empower section 19.
Yes.
It is sub-section (3).
My information is — and I have asked parliamentary questions about this matter — that the section in the Sale of Goods and Supply of Services Act to which the Minister refers has never been used by any consumer. The reason is that the Department have been so busy with substantive legislation that they have not got around to using some of the regulation-making powers that they have taken on themselves in the legislation. They have not done anything, for instance, about small print in insurance contracts. If the Minister is going to use the existence of the unused provision in the Sale of Goods and Supply of Services Act as a reason for not accepting this amendment, then he should at least give a commitment of some kind that he will use the existing powers to deal with the abuse of small print, particularly in liability insurance cases where there is a risk that people will not realise they can lose the right to claim, as Deputy Taylor will be outlining in detail later, by failure to disclose relatively trivial information.
The Minister should take the power to require companies to highlight any conditions of that kind which are potentially adverse to the consumer and which the consumer might not normally have drawn to his or her attention. If the Minister would give me an assurance that he would be prepared to discuss this specific issue with the Director of Consumer Affairs and the Consumers' Association with a view to examining how the existing provisions of the Sale of Goods and Supply of Services Act would be used to protect the consumer more effectively against the abuse of small print, then I would be more than happy to withdraw my amendment. I acklowledge it may well be legally superfluous, but certainly not politically or socially superfluous.
Section 19 (3) in reality appears to say nothing. It says that the Minister may require insurers to display or provide information on their policy conditions and rates in such manner as may be prescribed. That is precisely what a policy does, a policy has the small print and the conditions. I do not see that it adds a great deal unless as the Minister insists, and Deputy Bruton requests — it is done in a particular way and is clearly drawn to the attention of the unfortunate member of the public who has to cope with these things and is at a great disadvantage in dealing with insurance companies. I cannot quite recall the wording of the provision in the Sale of Goods and Supply of Services Act the Minister is talking about, and perhaps he could read it to us to refresh my memory.
First, we receive many complaints on insurance matters in the Department of Industry and Commerce but we have had remarkably few about the size of print and the layout of the documents. I thought we would have had more. I share Deputy Bruton's objective of ensuring that nothing is hidden in the famous small print. However, that small print, from our experience, in getting larger so the problem does not appear to be as great as it originally was. I shall give the undertaking to Deputy Bruton to discuss the better use of the Sale of Goods and Supply of Services Act with the Director of the Fair Trade Commission as soon as possible.
Section 53 of the Act has as a marginal heading "Size of type in printed contracts and other documents". The section is as follows:
(1) The Minister may by order prohibit, in relation to goods or services generally or in relation to any specified class of goods or services, any seller of such goods or supplier of such services in the course of a business from making use of any printed contract, guarantee or other specified class of document unless it is printed in type of at least such size as the order prescribes.
(2) In subsection (1) references to printing include type-writing, lithography, photography and other modes of representing or reproducing words in visible form.
(3) A person who contravenes an order under subsection (1) shall be guilty of an offence.
I am fairly satisfied with that section. I take Deputy Bruton's point and will discuss the matter with the Director.
Have any orders been made under that section?
No. they have not.
They have never been made, despite the fact that this section has been law for the past ten years. As Junior Minister I was responsible for having that section inserted in the Sale of Goods and Supply of Services Act. It is one of the few sections in our legislation that does not appear in, and is not directly copied from, the equivalent British legislation. The British do not have such a power, but we have.
We have not used it.
I happened to be in Canada in 1976 and discussed the matter with a number of official legislators in that country, where such powers do exist and are useful. I discussed it with a number of legislators in that country who told me it was found to be useful and that is why it was subsequently incorporated in the Act which was brought into force by a Government of which I was not a member but which was drafted by the Government of which I was a junior member. I had hoped that the Minister would use this section fully and effectively to deal with the abuse of small print in insurance contracts. I hope the Minister will report to the House in due course on the results of his discussions with the Director of Consumer Affairs.
I fully support the Deputy's objective and I will do two things. I will again draw to the attention of the company the existence of this section in the Sale of Goods and Supply of Services Act and ask them to take full account of it. We will have discussions with the Director of Fair Trade and I am confident that those measures will result in a considerable improvement.
That will be good.
Section 19 (3) relates to information on their policy conditions. What document or documents does that cover? Does it cover the policy alone, the proposal form or both?
Policy conditions and rates will be displayed on the proposal form in the first instance because at that point you are deciding whether to go ahead. Does that answer the question?
Yes.
Advertising will also contain conditions and rates but the main document is the proposal form.
The proposal form would be required to show the rates and all the conditions in the policy?
The policy document issued would refer to the policy proposer and would be firmly based on the proposal form but the policy of insurance would be effected arising out of a particular proposal for insurance.
Amendment, by leave, withdrawn.
Section 19, as amended, agreed to.
SECTION 20.
I move amendment No. 22:
In page 13, subsection (5), lines 32 and 33, to delete ", as respects directors and holders of managerial posts,".
This amendment is of a purely technical nature as the words are superfluous to the meaning of the section.
Amendment agreed to.
Amendment No. 23 has been ruled out of order as it involves a potential charge on the Revenue.
I am sorry my amendment has been ruled out of order but I am reluctant to quarrel with Deputy Higgins, especially when he is in the Chair.
Acting Chairman
Thank you but it is irrelevant who is in the Chair.
It is parochial triumphalism.
Amendment No. 23 not moved.
I move amendment No. 24:
In page 13, between lines 36 and 37, to insert the following subsection:
"(7) The Minister shall, as soon as possible after the coming into effect of this Act, publish an outline of the criteria under which he will make judgments on the qualifications and experience of directors, managers and agents under this section.".
Under this section the Minister will make decisions about the qualifications and experience of directors of insurance companies. In all other areas of commerce there is no rule which says that somebody who has not got a degree and a smart suit and comes from the right part of town cannot become a company director and do relatively well in business. In this case the Minister's advisers — a very reputable body of men and women — will decide on whether a particular person has the qualifications and experience to be a director of an insurance company. It has all the unfortunate potentialities of élitism that one could ask for, that the Department of Industry and Commerce would decide who should be a director. The Department, like all Departments, act on the basis of precedent and where a precedent is not available they act on the basis of caution.
It will only, therefore, be where somebody has exemplary qualifications and experience, so obvious that nobody could quarrel with them, that that Department would ever take a chance of allowing him or her to become a director of an insurance company because if somebody young and not qualified in a particular academic discipline were to become a director of a company and something subsequently went wrong, the Department would feel extremely embarrassed that they had allowed this individual to become a director. To avoid that accusation at all costs the Department will tend to adopt an extremely conservative approach as to who may be a director of an insurance company. That means in effect that area of commerce will be closed to newcomers because of the unusual powers the Department are taking to themselves.
I am not sure — I would be interested to know — if such powers exist in other jurisdictions. They certainly do not exist in respect of other areas of commerce. I do not know if the Central Bank lay down rules about who may be a director of a bank. For instance, a farmer was appointed as a director of one of the major banks and nobody asked whether he could be appointed. Did the Minister have to consent to his appointment on the basis of his qualifications and experience? I am afraid that if this happens the Department will say that the only people who may become directors of insurance companies are those who worked in insurance companies for the last 25 years and who have a third level degree. That unduly narrows the number of people who might become directors of insurance companies and is undesirable.
For that reason I ask the Minister to explain how he proposes to use this power by accepting the amendment. This amendment would require the Minister to publish the criteria on which he would judge whether particular directors are suitable or not. If this power is going to be exercised then people should at least know, and the Minister should have to think out for himself and write down on paper, what the actual criteria are going to be on which the level of experience and qualifications required for the position of director of an insurance company would be terminated. That is the purport of the amendment and I hope the Minister will accept it.
I also hope that he will be able to give in the House some assurances in respect of the exercise of this power. We would not want to see ordinary people of initiative who might have something useful to contribute as a member of a board of directors being prevented from becoming members of a board of directors because a Department have adopted an unduly conservative approach. Obviously, a Department might want to have some power to say that all members of a board of directors should not be from a particular background so that the board would function in a fashion where the skills of the different directors complement each other but that is not what this is about. It would allow the Minister to adjudicate on the qualifications of particular directors individually. This is rather an extensive power to be taking and ought to be explained more fully.
Deputy Bruton calls the power to be taken under this section extensive. That is perhaps an understatement; "draconian" might be a better word to apply to it. I wonder if the section has been thought through sufficiently. Deputy Bruton in his amendment asks for the Minister to publish as soon as possible the guidelines on which he would make directives under the section but I would have thought that the terms of the directives ought to be included in the section. That would have been a better way of going about it. I do not know how this section is meant to be interpreted. The word "qualifications" is used but I do not know what this word means. Deputy Bruton spoke as though it meant a third level degree but there is no evidence to suggest that it means that. It could mean anything that the Minister decides. We all know what the word "experience" means, but as to what number of years constitutes experience would vary from person to person.
The thought that struck me on reading the section is that a person who is eminently well qualified, who might have the best degrees in the world and a lot of experience, who would be fine within the terms of the section, might fall down completely on another matter. He could be thoroughly dishonest and fraudulent of intent. I wonder therefore if this is the best way to go about it. This section not only relates to a director or chief executive but any management position of responsibility. This makes the provision very wide-ranging. It is not by any means confined to directors. A significant number of levels of administration could be caught by this section right down to ordinary managerial level.
Where is the provision which would enable a candidate to be heard and to make representations or would the decision be made behind closed doors? I thought we were supposed to be moving towards open government. We now have data protection legislation in place and people are supposed to know what is going on. One could visualise a person, up and coming in an insurance company and going for an appointment, finding himself blocked with no reason being given and with no opportunity of being heard. Would he even know that the matter had gone before the Minister for his consideration, what was said and how it was put? This is all very strange. I would have thought that it would have been more appropriate to give some independent tribunal or some independent person the power to determine an issue of this nature rather than to the Minister. I am aware that provision has been made for an appeal to the court but appeals are always on a different basis from a first hearing. This could have very serious implications for a person who might not have the opportunity to put his case or to be heard.
The Minister seeks a protection in sub-section (6) that nobody else in this wide world who has responsibilities can avail of quite so simply. Deputy Bruton tried to remedy this as I tried to do in an amendment on a later section relating to the discharge of the Minister's functions not only under this section but under all other sections of the Bill but that amendment was also ruled out of order for the same reason as it could impose a charge on public funds. Quite frankly, I find this a bit strange and I object to the Minister seeking to take extensive powers and including a provision which would allow him if he exercised those powers wrongly, badly, negligently, without foundation——
Or maliciously.
He thereby puts in very neatly a disclaimer of any responsibility or liability to compensate a person who may be wronged. Who in the wide world can do this? There ought to be a general principle that if a person takes powers and responsibilities they ought to be obligated to discharge those powers in a proper, careful and prudent manner. That should apply in the case of everybody, to the doctor who undertakes an operation, to the solicitor who undertakes a law case, to the architect who examines a house, to the dentist who attends to a person's teeth and to every skilled occupation which carries responsibilities not to mention the taking of draconian powers.
Concomitant with that there is the provision in law that if one fails to discharge those functions and powers in a proper, prudent and careful way, with the result that one does damage to somebody, one pays but it appears that the Minister is a very special person, judging by the powers he proposes to take. The old saying goes, every power and every responsibility also has its liability attached to it or should have. If the Minister gravely wrongs a person, which can happen on occasion, or if he maliciously does so —a fortiori if he does so maliciously — through carelessness, negligence, by not paying proper attention or relying on wrong information, without having it checked, with the result that a person loses his job, reputation or prospects that person would have no claim. The Minister seeks to include such a provision in the Bill. It is entirely wrong in principle that any person should give himself vast powers of control over people and to then say that if they make a bags of it, too bad, that a person will not be able to sue them as there is a provision in law which will allow them to exonerate themselves. No matter how much of a mess they may make of it and no matter how careless or malicious they may be they will not have to pay up as they make the law and are slotting into the law a nice cosy condition to provide for this eventuality. It is a bit much and I resent it. I think it is wrong.
We are trying to ensure that the supervisory authority, the Department of Industry and Commerce, have means to satisfy themselves that the companies are being run by people with experience and knowledge. It would not make sense for a supervisory authority not to have adequate powers to supervise. Certainly there is no intention of interfering, being a busybody or having a veto on every personnel decision a company makes. That is not the intention behind this. A great deal of this is existing practice in that companies already supply us with full lists of directors and managers and there is very full co-operation between the supervisory authority and the companies. That co-operation is very much there and I could not see what is in this section being used, except in extremely exceptional circumstances.
If somebody else should be supervisor then that person should have the powers, but as long as the Minister is the supervisor of the industry, only in very exceptional circumstances which I cannot see arising very often may a company have a board structure in which, say, there is no insurance experience of any sort or an individual with a criminal record is being appointed to an insurance company board. We are talking about a multibillion pound industry which employs thousands of people, and all this provides is that the supervisor of that industry is able to object to an appointment. If a supervisory authority has serious reservations about a person it is important that they have the power to object to that person because not to do so and still carry the name of supervisor would put them in the position of knowing something was wrong and having little power to do anything about it. For that reason the provision is here.
If the Minister objects to an individual then obviously, as Deputy Taylor says, that person can go to court. It is important in dealing with this question of loss of office to remind ourselves that subsection (7) provides specifically that the appeal may be heard in chambers. To that extent somebody's good name or reputation would not be put in danger.
This is to make sure the companies have a balance of experience and the supervisory authority have the facility to ensure that that expertise is on board in each company.
Where is the reference to chambers?
Section 20 (7) provides that the appeal may be heard in chambers.
Was this amendment made on Report Stage? I have not an up-to-date copy of the Bill.
It is in section 20 (7).
There is no subsection (7) in my copy.
The Deputy can accept my word for it. It is there.
A number of factors leave me to wonder about the draftsmanship of this section. The Minister is talking about a person who might have had a criminal record. You could not say a person who had enormous experience in the insurance business and who had the highest qualifications — doctorates, insurance studies from the university of this, that and the other — was not well qualified or did not have enormous experience. He might have a criminal record, but nothing is said in the Bill about criminal records. it is strange that the one word which would cover that kind of situation is not in the section — that word is "suitability". I wonder why. The section talks about qualifications and experience; it does not talk about suitability. That word is not in the draft.
There is another strange factor when it comes to the appeal in subsection (7). It provides that an undertaking may appeal to the court against a direction under the section. In other words, it is the company who can appeal but the person who is being disbarred, who has lost his office or is not getting his office, is given no powers as far as I can see. It is as though he is a non-event, yet his livelihood could be at stake for some reason not known to him. Why is no right of appeal given to the aggrieved person? One would have thought he should have a right of appeal to make representations. I have some doubt whether it would even be constitutional if it purported to take away the rights of a person to have access to the courts on a matter that affects his livelihood. That could have constitutional implications. I do not think this has been well thought through. If the Minister is undertaking these tasks, he should do them properly, but he should be amenable if he gets them wrong.
I will remind the House about the existing experience. We are already given a list of directors and senior personnel when an insurance company apply for authorisation. To the best of my knowledge and advice we have never had occasion to query any of the large number of people on those lists. We have never had an occasion to query the qualifications or expertise of members or raise any worries with the companies——
The Minister must have been closing some insurance companies.
——about individual directors or members. We have always had that list. We have always been notified of such appointments and we have never had occasion to raise queries with the companies about them. There may have been one or two isolated cases but in a general sense I am informed we have not had to raise those queries with them.
Queries are not always necessary.
I take the point about the undertaking. It is the undertaking in one sense that is being aggrieved, because the company will wish to appoint a person but they will be prevented from doing so by the Minister.
But the person will not get the job.
The person may or may not have recourse to the company, but I do not know that for certain. In many cases it will be more practical too because generally the company will be in a better position to take a case or go to court.
I am not saying the company should not have the right as well.
I took the view that because the company's wish was being thwarted, it was up to the company to try to get their wish.
It is the company's wish but a person's career.
The power in question will be exercisable only when it is proposed to appoint somebody. The Minister might come to the conclusion under subsection (2) in respect of a director who had been there for ten years that this director was not suitable and he would direct the company to do a whole range of things that are set out in section 18, like refraining from taking on new business, limiting his premium income to a specified amount, refraining from making investments of a specified class or description, realising certain investments, maintaining assets within the State and taking any further measures as might be specified in the direction.
All of those things could be required of the company for no other reason than that one individual was on the board. Clearly that is putting the spotlight in a big way on that individual. If a company start doing some of the things referred to in section 18 it will be obvious to their competitors and others in the business that they have changed their whole conduct of business. People will ask why and, in the small town atmosphere in which we operate here, it will not be long before it is known that this is being done because company A has individual B on its board and individual B, it would appear, is not well liked in the Department.
I am sorry to interrupt the Deputy but, as it is now 5 o'clock, I am required to put the following question in accordance with an order of the Dáil of this day.
On a point of order may I give notice that, in view of my inability, because of the time constriction, to move amendment No. 31, I will withdraw it at this stage.
A Cheann Comhairle, may I have your indulgence for a moment? It is important in view of what Deputy Taylor said. I am interested in the Deputy's argument about the individual and would not like the provisions of the Bill to militate against him. Therefore what I will do within the next few hours — if we have an opportunity — is ascertain whether we can include an individual's right to take a case under the provisions of subsection (7). If I can do that as neatly and quickly as possible, I will this evening. However, if it proves administratively impossible or if my legal advice within the next few hours is strongly against it, unfortunately I will not be able to, but that is the best undertaking I can give the Deputy.
The Minister might consider including the word "suitability" as well as "qualification".
I should also like to assure Deputy John Bruton that, while I cannot accept his amendment, I will give some consideration to having made known, to the relevant people in some format, the guidelines or criteria that would be used in such circumstances.
The question is:
That the amendments set down by the Minister for Industry and Commerce to Part II of the Bill and not disposed of are hereby made to the Bill and in respect of each of the sections undisposed of in the said Part, other than sections 27 and 33, the section or, as appropriate, the section as amended, is hereby agreed to.
Is that agreed? Agreed.
Not agreed.
May I put the question then?
We can submit all of these amendments again, can we not?
On Report Stage.
I made that point just for the record.
Question put and agreed to.
SECTION 36.
Question proposed: "That section 36 stand part of the Bill."
This new section — amendment 35 — provides that, where the High Court sanctions the amalgamation of two more insurance companies, or the transfer of insurance business from one company to another, the court shall provide for the effective transfer of the property and liabilities involved. I take the view that the sanction of the High Court of the amalgamation or transfer of insurance business — I am just checking, a Cheann Comhairle, we are on section 36, Government amendment No. 35?
Yes. For the information of the House perhaps amendments Nos. 35 and 36 ought be discussed with section 36. Does the House agree?
Agreed.
On a point of order, a Cheann Comhairle, it seems to me that amendment No. 35 is in the name of the Minister, which is the one we are on, is it not?
Yes, Deputy.
Amendment No. 35 is in the name of Deputies Keating and Cullen, is it not?
No, amendment No. 36.
Therefore we are on amendment No. 35, section 36. Would I not be right in submitting to you, a Cheann Comhairle, that it would not be in order to take that amendment because we have now concluded Part II of the Bill and are on Part III. Is that not so?
Yes, we are on Part III now.
If I might draw your attention to amendment No. 35, a Cheann Comhairle, you will see that it begins:
In page 20, before section 36 but in Part II, to insert the following new section:
How can we insert a section in Part II when we are on Part III?
Perhaps I can help. My understanding is that the Order of Business with which we are now proceeding was that agreed by the House today.
That is just it.
That is the answer to the Deputy's question.
No, no.
That is how the Chair is proceeding.
We can go ahead with these amendments.
Perhaps the Minister could clarify the matter.
This new section 36 belongs to Part II of the Bill which we have disposed of. I do not want to be technical about it but that would appear to me to be the position, that this will now appear in Part II of the Bill.
I do not want to be difficult. I am just pointing it out in the interests of the order of the House. If the House now wishes to make a new order to rectify that position, I have no objection.
Amendments Nos. 35 and 36, please, to be discussed on section 36.
I had been making the point that I take the view that the sanction of the High Court to the amalgamation or transfer of insurance business has always had the effect of transferring all the assets and liabilities, including liabilities to policyholders of the transferor company to the transferee company. While the most recent case law supports this view it has come to our attention that earlier case law is inconsistent and might give rise to doubt in the matter. In turn this could raise doubts as to whether we have fully implemented the relevant EC directives which require member states to provide that a scheme of transfer, once approved by the competent national authority, shall affect directly the policyholders concerned.
This section is intended to put the matter beyond doubt by simply providing that, where the court has sanctioned a transfer or an amalgamation, it shall, by order, transfer the relevant property and liabilities, and that any such order shall be effective in making such transfer.
This section also provides that details of the agreement and the court order be provided to the Minister.
I am sorry to interrupt the Minister but it appears to me that we had earlier disposed of amendments Nos. 35 and 36 and that we are now on the section, that is section 36.
The House has just agreed that we would deal with these amendments——
We had just agreed that a few moments ago.
——even though technically they are on Part II.
The amendments were tabled to the Bill as circulated and the Bill, as circulated, included section 36 which we are now seeking to amend. I do not see a problem in continuing. The Minister has made his contribution and this is a fairly important element of the Bill.
If the House is satisfied, so be it.
May I make a few observations on this section and explain to the House why I consider it to be so important? I have listened to the Minister of State explain why this amendment is being introduced. Nevertheless it is a new, very comprehensive amendment, on the part of the Government. I want to ask the Minister some questions in relation to one specific set of circumstances. I will be happy if he gives an assurance in that respect but I need to have that assurance. Otherwise we would not be happy with the amendment and would be opposing it vigorously.
Section 36, as proposed by the Government, if agreed now, would allow a company — and I am thinking here in particular of the PMPA, which would be one of the companies at the heart of this Bill, one that is of immediate and pressing importance — to be dissolved without winding it up. Therefore, without winding it up, having no automatic reference to creditors and anybody else with a claim, seems to me potentially to leave the door open for a very dishonourable course of action. I am thinking particularly of the PMPS creditors, that is those people who over many years invested sums of money in good faith in the PMPS and were then left high and dry, such sums of money totalling in the order of £8 million or £9 million. Surely it is not the intention of the Government to suggest that they would, almost covertly, give carte blanche to a provision which would allow creditors of the PMPS to be denied what is certainly their moral and, probably, their legal entitlement. That would be the effect of the section proposed by the Minister. However, if the House accepted the broadly similar proposal from Deputy Cullen and myself the result would be different though nevertheless achieving the principal target of compliance which, I understand, is at the heart of the Minister's concern.
The question of the PMPA is a vexed one and, as the Minister of State will know, some of us have been trying to get information about it for some weeks. I do not wish to make a song and dance about this but there is an issue involved. If the Minister will say publicly that it is not the intention nor will it be the eventuality that the PMPS creditors will be let go by default I will be relatively happy. However, I believe in my heart that section 33, which the House agreed to — in our case we objected to it but due to the order of the House we had to go along with it — and these sections are specifically facilitating an eventuality with which I do not thing any right-thinking person could agree. I am certain the Minister will agree with my broad view on that.
In principle my party have no objection to the sale of the PMPA. Indeed, I wish those negotiations every success but I trust that the sale will be pursued and monitored by the Government with a view to ensuring that the decent thing is done, that those with genuine liabilities — assuming they can be proved — will be paid. Many of us condemn, companies in the private sector which evade their responsibilities by using the up to now outdated company law mechanism of establishing companies, running up bills and then simply dissolving themselves and moving on to fresh fields and pastures new. I want an assurance from the Minister vis-à-vis the PMPS creditors. I am not asking for an assurance that the State will pick up the tab and it is important to stress that. That is sufficient potential in the capacity of the liquidators of the PMPA and the PMPS, and the Minister's officers, to be able to devise a mechanism which will facilitate the expeditious sale of the PMPA, if that is the Government's wish and I have no doubt it is, and deal with the moral and legal entitlements of those creditors who have been defrauded.
Does the Minister envisage at any stage that the levy which motorists are paying due to the debacle of the PMPA will be lifted, particularly if there is to be some revenue generated from the sale of the PMPA? It is not appropriate to raise the question of jobs in the PMPA at this stage but the issues of the levy on the people paying motor insurance and of the creditors are germane to this section. I would be grateful for some assurances from the Minister of State in regard to them.
This new section will not in any way affect the position of the PMPS which is a matter for the courts. The PMPS claim against the PMPA is a matter between the court appointed administrator of the PMPA and the court appointed liquidator of the PMPS and is at present sub judice, I understand that the question of the impact of a sale on the action taken by the PMPS has been raised in court and that as a result the administrator had agreed to inform the liquidator if he decides to sell the business of the PMPA. That is a matter for the court to deal with and as I have no function in it I do not wish to comment further. In regard to the levy, there is nothing in the legislation dealing with a reintroduction or an abolition of the levy and, as such, it does not arise. It is a matter for other legislation.
The Minister is misinformed in relation to the broad cloak of sub judice that he seeks to wrap around his answer in this respect.
I am sure the House will have regard to the aspect of the matter which the Minister of State has referred to as sub judice.
I have been painstakingly conscious about that matter over the last number of weeks when trying to elicit information on this but I have to say that either the Minister of State is being disingenuous or is simply ill-advised, with respect to everybody involved. I have a letter from the liquidator of the PMPS indicating that the only issue that is sub judice is the precise relationship between the PMPA and the PMPS. There is no suggestion that many aspects of the broad controversy, that is the sale of the PMPA which the Minister is blithely proceeding with, negotiations being well advanced, are being impeded. The discussions relating to the sale of the PMPA and which are at this moment proceeding have not been impeded.
I will not facilitate the passage of a Bill which allows asset stripping of a major company, like the PMPA, when I am not able to get either assurances or basic information in regard to it. The Chair's office last week — I have no fault to find with the courtesy extended to me by that office at any time — was misinformed and ruled out of order questions by me on this issue on ill-advised grounds. The matter which was the basis for the rejection was not true. I do not intend to read into the record the letter I have in my possession but it is available for Members who wish to see it. The PMPS liquidator has advised me of what is sub judice and he is a person who is living with this day-to-day. I have also taken independent legal advice on this. The sub judice matter, therefore, is peripheral to the issues I am raising.
Will the Minister of State say if the passage of this section will facilitate the sale of the PMPA and the disposal of its central assets without reference to its liabilities or, in this case, without reference to the PMPS depositors' claims? That is a straight question to the Minister of State.
I have given the Deputy my assurance that this section does not affect the rights of the PMPS vis-à-vis the PMPA. I should like to remind the Deputy that it is a matter for the court, and not the Government, to decide whether business should be transferred and how that might be transferred and disposed of.
I will rephrase my question because the Minister of State has not answered the one I put to him.
I have to be extremely careful in this area.
That makes two of us. I have the same obligation in regard to sub judice as the Minister of State but the Government are responsible for law and that is what we are seeking to implement. I did not ask the Minister what claim or rights the PMPS have because I am aware that they have the same rights to the court as any other organisation. However, there will not be much point in pursuing an empty shell. Will the passing of this section facilitate the disposal of all of the assets of the PMPA?
I cannot envisage that; it is a matter for the courts. I cannot envisage a court permitting unwise disposal of assets in this insurance company which is under the protection of the courts. The only comment I should like to make is that I could not envisage a court considering it wise to permit the unusual or large-scale or unnecessary transfer of particular assets. I am reluctant to use the word the Deputy put on the record; it would be unwise of me to do so. The courts have the final say on whether assets, representing the business, should be disposed of.
Is the Minister of State suggesting that a court decides on the day-to-day disposal of assets within the PMPA? Is that not a matter for the liquidator? Is it not a matter for him to frame his negotiations and, in the event of this section being passed, to dispose of whatever he wishes with the broad blessing of the court who will not intervene unless called on to do so? Am I correct in that assumption?
This amendment states that the court shall have the power to transfer the whole or any part of the undertaking and of the property or liabilities of any transferor company. It further states in an order made under this section that the court may vest in the transferee company those liabilities which shall by virtue of the order be transferred to and become the liabilities of the transferee company. The same applies to property.
We have to decide what criteria this House should lay down to guide the court in coming to a conclusion as to what are the appropriate properties and liabilities of a company to be transferred and which properties and liabilities should be retained, given that the section clearly envisages the possibility that some may be transferred and some may not. Unfortunately, the amendment put forward by the Minister appears to be silent on this subject. It is essentially saying that the court, wherever the court sanctions an amalgamation, has carte blanche in regard to this matter.
Given that it is an issue of public policy that we are deciding, that is not appropriate. My understanding of the Constitution is that it is not the function of the courts to decide public policy. Public policy is a matter for the Government through this House. We cannot say that we have a difficult decision and cannot decide it and hand it over to the courts to decide on the distribution of liabilities and assets as between different claimants in a matter of public policy. There is no basis in law or jurisprudence on which the court can make such a decision. They do not have anything to guide them. It is not an issue of liability or anything of that kind; it is simply an issue of public policy as to whether or not it is the view of the House that the assets of a particular company, which have been contributed to by a levy collected from all motor insurers, should be available to compensate those who deposited savings with a company which was associated with a company which got into trouble.
There are two schools of thought about this. There are some who would say that if people deposited money with a particular society associated with a company giving very competitive motor insurance, and did so of their own volition, that those who were insured with other motor insurance companies have no particular responsibility to compensate those people. It is not even a matter related to motor insurance; the matter ultimately related to the safety or otherwise of particular savings institutions. The use of a motor insurance levy to build up the assets of a company so that that company's assets may be available to claimants against a subsidiary is not what that levy was set up and imposed on motor insurers for in the first place.
There are others who would say that this is a legitimate point of view, that many people concerned were induced to make these deposits because of the way in which the motor insurance market was conducted at that time, the way in which a particular motor insurer was allowed to conduct his business at that time or was not at least prevented from so conducting his business at that time, and that it is reasonable that money collected by way of levy from other motor insurers should be used to indirectly provide a possible source of compensation.
If the Minister is taking the view that this is a matter for the courts, I do not see how the courts are going to decide this point. I must confess I am not so sure how the Oireachtas is going to decide it either because it is not a very easy decision; but if we are going to delegate it to the courts, the Oireachtas should at least set out some schedule of criteria under which the courts would decide the issue so that the public policy elements, the general concepts of fairness that we want to see established, would be set out by us rather than the whole dreadful problem being simply thrown over to the courts for them to decide.
I hope I am not being unfair because this is a very serious matter, but it seems to be, to some extent, what the Minister is doing in this amendment. I do not envy him the job he has to do in this area, but I feel that the amendment does not really meet the case. I would ask the Minister to respond carefully to what has been said by Deputy Keating and, to some extent, by myself.
I have tried to be as helpful as I can but I am circumscribed by a lot of difficult areas, some of them very controversial. In regard to the Government deciding public policy, the Deputy is right. It is the Government, through this House, who should make those decisions. Occasionally there are grey areas on which various courts in the land make decisions which could be called public policy and that is something that is part of our system.
I would like to suggest that perhaps Deputies are reading too much into this amendment. Let me try to put it as simply as I possibly can. I should remind Deputies that in any sale of an insurance company a court agreement would be necessary. I am not pointing the finger at any particular insurance company, what I am trying to do here is to make sure that whenever the shares of an insurance company are sold, it will be possible to transfer the assets and liabilities with the company. When I came across this first I was as flabbergasted as the faces of the Deputies opposite seem to suggest they are, but a legal point has been raised here — and the Attorney General agrees with it — that in the event of a sale of an insurance company, one may be able to transfer the shares and sell the company but one may not be able to transfer the business. That has never been challenged but it has raised serious legal doubts.
What we are trying to do in this amendment is simply to ensure that if the court decides to approve an amalgamation or a takeover, the court can go the next step and approve the transfer of the assets and liabilities involved in such takeover. That is extremely logical because a very serious but highly specific legal point has arisen which suggests that it could be put forward, in the event of the sale or amalgamation of an insurance company, that the company could actually be sold but the assets or liabilities in the company could not be legally transferred. That has been put forward. The amendment provides that if the company are being sold the court can ensure that the transfer of the assets and liabilities can also take place. This is a very specific targeted legal point and it is important in the sense of having flexibility and removing doubt in this area.
What the Minister has said may be possible but if there is no obligation to take on the liabilities who will want to take them on? That is the key point here.
It may be a perfectly good insurance company.
It may or may not be that is not the point. Our amendment gives a clear guideline that the court must satisfy itself as to the provision being made for outstanding liabilities — that is what we are trying to get at here — so that the company cannot be asset stripped and sold off and the liabilities just left to one side. Surely that is a reasonable amendment. What are the Minister's views on that?
To reiterate the point, we go all the way with the Minister of State in introducing an amendment which will ensure that there is clarity on what the sale may encompass. The word "may" is an enabling word. The people now in negotiation for the PMPA are not interested in liabilities. I would not be interested in liabilities. The fact that after this Bill is passed they may take on liabilities is interesting but very academic. The problem is that there are liabilities. Because of the evolution of this whole issue and the way in which it has impacted in terms of public policy and the rights of the people involved, bearing in mind the long history of this company and their satellite company, the PMPS, it seems there should be an expressed commitment, if not in the Bill then by the Minister here today as a token of good faith, that the specific liability of the PMPS depositors will be acknowledged. The fact that it may be is neither here nor there. The Guardian Royal Exchange or any other organisation interested in acquiring the PMPA, if they have anything at all between their ears and undoubtedly they have, will say: "Thanks, we will take the assets but we are damned if we are going to take the liabilities". That is what any of us would do.
As Deputy Cullen has said, our amendment is identical to the Minister's except it adds the words which Deputy Bruton has already said would be helpful. These are to provide for the dissolution, without winding up, of any transferor company — which is the same as the wording in the Minister's amendment — provided the court has satisfied itself that provision has been made for outstanding liabilities. It is a reasonable request that there be at least some acknowledgement that a company which are at the heart of these sections will not be able to operate in what I would call a fly-by-night fashion, which fashion it could otherwise operate in and which facility is being extended to it if we do not agree to that amendment or to similar wording.
The position might be clarified if the Minister said that the Government had taken a decision in principle to sell the PMPA, that discussions are on-going at present, which the whole country knows about, and that we do not want to jeopardise those discussions. It would be far better if he would put it on the record that nevertheless there would have to be an acknowledgment in relation to the PMPS depositors. That would put the cards on the table. This issue is not going to go away. It is not one that we should simply sweep under the carpet and pretend does not exist. There is a significant problem of £8 million or £9 million relating to the PMPS depositors. These are virtually all people who have saved a few shillings over the years and put them into the PMPS. They are not big time speculators. They have hung in for the last six years during which time every motorist in the country has been asked to pay money to put right the debacle left in the wake of the PMPA.
We cannot just blithely come in here and naively suggest that this amendment is not about that because it is. It is central to it. I do not care what words the Minister uses. I do not even mind if he does not include it in the Bill — I am sure his draftsmen have greater expertise in this area than I have — but if he says today that it is the Government's intention that in the event of the PMPA being sold and the case not being proven, that is the PMPS establishing their right, the Government support the right of the PMPS depositors to have their claim acknowledged, I would accept that. The fact is that this section as proposed does not even advert to that. That is not acceptable and that is why we have put down this amendment. I would be grateful if the Minister would comment specifically on whether he finds our amendment acceptable and, if not, why not.
I would have to remind the Deputy that the case of the PMPS is with the courts at present.
One aspect of it.
The case is with the courts and I do not intend to engage in a discussion on that company. This amendment is a general one dealing with all insurance companies.
I am asking a specific question and not one about insurance companies in general. Their rights in relation to the sale of the PMPA is not a matter before the courts.
I am aware of the Deputy championing the cause of PMPS depositors. That is legitimate but I would not confuse that crusade——
It is not a crusade.
I would not like to confuse that with this amendment which is a general one dealing with all cases where companies are amalgamated or transferred. It is a very simple net technical point which simply removes the doubt in the transfer or sale of a company, as to whether the assets and liabilities can be transferred. That query has been raised.
We have been over that ground twice already.
I know but the Deputy is not taking it in.
The Minister should not keep on filibustering on this until 6 o'clock. He should answer the essential question. Does the section as proposed allow the sale without reference to PMPS depositors' claims or does it not?
I am not going to be put in the position by the Deputy of specifically commenting on matters which are before the court.
If the Minister will not answer to me he will have to answer to the public. He knows what he is doing and that is——
The Deputy should answer to his public and I will answer to mine.
The Minister has an obligation in this respect.
I am aware of my obligations. The Deputy should be aware that there is a case before the courts concerning two companies and I am not going to be drawn into discussion about it.
I have not raised that at all.
I do not wish to explain the point for a third time but there is a specific reason behind this amendment. Unless it is passed, doubt will remain as to whether, when a company is sold, the assets and liabilities can also be transferred. If the Deputy wishes that doubt to continue he will not accept this amendment. We need this amendment to ensure that that doubt, which has been raised by some legal people and has been endorsed by the Attorney General, is removed to enable assets and liabilities to be transferred in circumstances where the company is transferred.
I support that.
The Deputy supports that.
I support what the Minister is trying to achieve here but does the amendment allow what I have said it allows?
I can assure the Deputy that the very best legal draftsmen have worked on this amendment which is highly technical. The Attorney General's office and the draftsmen fully assure me that the way it is drafted meets that requirement and as far as I am concerned that is the case.
Would the Minister do me the courtesy of not treating me like a complete fool? I have already said that is not an issue as far as this House is concerned. I am asking the Minister one simple question, does the section that he is now putting to the House, and in respect of which he keeps referring to reasons with which we all agree, also allow for the assets of the PMPA to be sold off without reference to liabilities?
Only if a court of the land agreed.
So it does?
It is a matter for the court.
We have now established it can happen.
We have established no such thing. We have established it is a matter for the court and nothing else.
Is this a two-way exchange of views only or can anyone else join in?
We are on Committee Stage and I hesitated to interrupt Deputy Keating and the Minister of State.
Can I take it from the Minister that this amendment applies only to the amalgamation of companies that are in administration under court supervision?
No, it applies to all companies.
It applies to all amalgamations of all companies.
Yes, insurance companies of course.
There have been amalgamations of insurance companies before, I take it.
Yes.
From where has this problem arisen?
I discussed this point earlier. There have been take-overs and mergers in the past and the point has not arisen but it has now been pointed out by legal experts that it could be raised.
Whose legal experts?
The Attorney General's office agrees with it. It could be raised in the future but it has not been a problem in the past. It is purely to put that beyond doubt that the Attorney General's office suggest that we tidy it up. As far as we are concerned it is already there. It does not change existing practice but some legal people have queried whether it would stand up. Deputy Keating says this is what he wishes would happen. This is what the Government wish would happen. Now we are arguing whether the words allow it to happen. My best possible legal advice tells me that the wording of this very lengthy technical amendment is the correct way to go about it. It is simply to put it beyond doubt that the court can make these transfers.
Do I take it that under section 30 — I have not got my copy of the 1909 Act with me——
What a pity.
I left it behind in 1910. May I ask the Minister if all amalgamations of insurance companies must be sanctioned by the court at the moment and in all cases?
Yes.
What are the criteria and the guidance given to a court in deciding whether to sanction a particular amalgamation and why was the court involved at all in amalgamations of insurance companies? Does one have a situation in which amalgamations of two building companies, for instance, have to be sanctioned by the courts, and if so, what criteria are applied? The whole thing boils down here and perhaps it is an argument that could be debated with more light and less heat if one could look not at the arguments which have been made about the PMPS and the PMPA, a subject we all admit is charged with a lot of legal, emotional and personal anxiety, but to look at it more in terms of the abstract criteria that ought to be taken into account. I am not sure that a solution can be found to the problem which Deputy Keating is worried about in this context because there are so many other events that have intervened. That is another day's work. It is important to get this section right.
What about our amendment?
We will come to that.
We are discussing the two together.
I would like to hear the Minister's view on that amendment first before I deliver an opinion on it. If we are taking amendment No. 35, may I ask the Minister if he would indicate how his amendment differs in substance from the amendment in the names of Deputies Keating and Cullen and in what respects, if any, he has problems with the wording used in the amendment? Perhaps that might be a useful way of proceeding rather than getting into deep arguments about the PMPA.
The only problem I have with the Deputies amendment is, first, that it appears to be targeted at a particular case, which I think is probably not wise and, secondly, I prefer to rely — and I think the Deputy would also if he was on this bench — on the formal drafters of technical amendments, such as this, who work with the industry day in day out than on less obvious expertise. That is no reflection on the drafters of the amendment. In general you would agree that Government resources for drafting amendments of a technical nature are very good and I would prefer to rely on that drafting structure than to reply on the alternative. I want to tell the Deputy——
Is that the only reason the Minister objects to Deputy Keating's amendment?
I will come back to that. I want to tell the Deputy in case I misled him — I did not intend to do so — that not all insurance companies, amalgamations, mergers or takeovers have to be sanctioned by the court. Certain classes of insurance are excluded under the 1909 Act.
What are they?
I am informed that all classes, other than motor and fire and accident, are included and must go to court. I apologise if I misled the Deputies inadvertently. We are trying to solve a specific legal point. My best legal advice is that this draft which was very carefully worded is the best way to do it. I am reluctant to depart from the very detailed wording of this section.
We are getting to the nub of it now in that obviously that is the reason this section has to be drafted because the situation is that the PMPA do come before the courts. Is the Minister saying that we should abdicate responsibility in the matter, leave it to the courts and set no criteria for them? Surely it is the function of this House to give some guidelines to the court. What is the Minister's main objection to the difference between our two amendments? He has not dealt with our amendment.
What is the Deputy's objection to my amendment?
There is no guideline in it, it is open ended and up in the air. The court could asset strip the company without any reference to any of the liabilities whereas under our amendment the court would have to take into consideration what liabilities were outstanding.
Is it not better to leave it to the court?
That in itself is not necessary. This is where we legislate from, not in the courts. Is the Minister now suggesting that the courts are to become the prime legislative body of the country?
So far as my amendment is concerned I want to make it clear that it would be the intention that the court should satisfy itself that outstanding liabilities be provided for. That obviously would be the intention of the section. The Deputy's wording of the amendment is unnecessary as I could not see any court contemplating dissolving an insurance company — I am not mentioning any company — unless it was satisfied that the liabilities were provided for.
Why not state that? What is wrong with putting in the guideline?
I am not acknowledging — and I want to make this clear for the record of the House because no doubt it will appear all over the place — or accepting that this section is designed for any particular company.
Why has it not appeared up to now? The Bill went through the Seanad and this provision did not appear but all of a sudden it appeared in the last few days. We all know the reason it has appeared. The Minister knows the reason and it is not a secret. It may be some covert action on the Minister's part but the whole country knows what is going on. We are not, in principle, opposed to it. We are anxious to see it happen but not if it is to be done in such a way as to allow the company to be asset stripped, its shell and the liabilities left to one side and the depositors totally ignored. That is what this section facilitates.
This amendment does no such thing.
It allows this House to abdicate its responsibility in the matter and the Minister is aware of that.
That is pure hype.
Deputy Bruton asked the Minister of State why our amendment would not find approval with him and he gave two reasons. He said, first, that it seemed to be specifically targeted and, secondly, that he was reluctant to depart from his own draftsman's form of words.
It was the Attorney General's advice.
The only difference between the two amendments is that ours seeks to add the words: "provided the court has satisfied itself that provision has been made for outstanding liabilities." I want to assure the Minister in case he did not have a chance to look at our amendment in detail that there is no reference to any organisation group or interest. It is not specific.
What is the purpose of the discussion we have had for the last half hour?
What we are approving is what we have in front of us not the discussion that is taking place here. That is why, with respect, the Minister's assurance that it is not the intention to do certain things is worthless also unless it is provided for here. I am trying to ensure that the Bill reflects the general concensus that I assumed would be in the House in relation to this issue. The Bill is very detailed and technical and unfortunately it will not be hued or coloured by the asides or by this discussion. One of the two reasons the Minister of State gave for not accepting our amendment was that it was specifically targeted. It is not. The amendment is general. In that context it is important to remember that the Minister of State has now corrected himself in relation to Deputy Bruton's earlier query to indicate that there are amalgamations of insurance companies that do not go before the courts.
Certain classes of business.
The point I am getting to is that the courts do not have a function in the case of some amalgamations and as there are no guidelines in the section, it is quite certain that there will be asset stripping in a number of amalgamations. In the cases of the PMPA, the court may intervene, but the court has no function in ensuring that what you and I might deem to be just, proper or appropriate will echo through the decision to dispose of the assets. The Minister's only argument is that the amendment is specifically targeted, which it is not — and I challenge the Minister to show me where there is any specific targeting in the amendment we have proposed——
I took it from the Deputy's speech.
We are discussing the amendment, not the remarks we are making here. It is the amendment that will be included in law. I know that Ministers and Ministers of State like to rely on the parliamentary draftsman and they are quite right to do that most of the time, but there are many of the Minister's colleagues, and indeed the Minister himself, who have been gracious enough on previous occasions to accept amendments, particularly amendments that reflect a view he appears to hold. The Minister has just said it would be the intention not to asset strip in this case and that he would implicitly expect the court to bear that in mind. If that is the case, all I am asking is that the Minister simply put it into law so that the court does not have to make up its own mind and berate the Oireachtas for a lack of guidance on the issue. At the very least, maybe the Minister of State will reflect on the amendment before Report Stage when he will be given another opportunity to consider it.
If the Minister says this we might make some progress. The Minister is either sincere in what he says and he believes truthfully that there will not be an attempt to asset strip or else he is saying something he does not believe in. I do not accept the latter; I think the Minister is genuine about this. I am asking the Minister to accept that he may be wrong and that he may be opening the door to a situation down the line when he might say he did not intend this to happen, and he did not think would happen, but in retrospect the section as proposed by the draftsman allowed it to happen.
Deputy Cullen was right when he said the Bill has been around for some time. I think it is one of the most incredible coincidences of all time that while the discussions vis-á-vis the sale of PMPA are proceeding, this amendment is also floated. I will leave that point aside.
If it is the intention that there be no asset stripping and if the Minister's only objections are that there might be specific targeting, which there is not — and I assure the Minister there is not, and I am quite prepared to accept a form of words from the Minister to do the same task I am talking about — then I suggest there is no reason for not accepting our amendment. It is far more accurate in terms of what we all want to achieve and I appeal to the Minister to accept it.
May I ask a question?
I had hoped to get a reply to my remarks.
Would the Minister be prepared to accept the words "provided the court has satisfied itself that provision has been made for outstanding liabilities" be added to his own amendment to section 36 (1) (d) after the words "the dissolution, without winding up of any transferor company", in other words, that the court would be required to ensure that there was adequate provision for outstanding liabilities. I make the point quite clearly. The acceptance of such an amendment would not prejudge whether there was any liability to depositors in a subsidiary company.
Is that the same amendment as Deputy Keating's amendment?
No, I am talking about an addition to the Minister's amendment.
But Deputy Bruton has made it into the same as Deputy Keating's amendment.
Yes, let us refine to these few words rather than the two acres of text we have to look at. Would the Minister be prepared to accept the idea that the court should satisfy itself that provision would be made for outstanding liabilities? Let me make the point quite clearly that this would have to follow upon a determination that there were actual liabilities. If there were no liabilities, then this section would be of no benefit to people who felt they had a liability but in respect of whom the court had decided that they had not. This is only to ensure that the transfer taking place at a particular time does not deprive people of rights, they had at that time being enforced subsequently. It does not increase their rights in any way; it simply says their existing rights should not be taken away by this section. I think that is the key issue in the Minister's amendment. If the Minister is not happy with the wording of Deputy Keating's amendment, he should find a way of ensuring and assuring that no rights that exist today are being taken away by this section. That is all we want to know. We are not asking the Minister to create any new rights.
There is nothing in my amendment as drafted that interferes with anybody's rights and I must make this point clearly. I appreciate that Deputy Bruton is trying to be helpful but in effect he is suggesting that we add the phrase "the court has satisfied itself", which effectively is Deputy Keating's proposal. There is a suggestion in that that the court would make some decision that it had not satisfied itself about but as I have put on the record already, these words are unnecessary because I could not see any court in the land contemplating dissolving a company unless liabilities are provided for. I am sure any court would fully take into account the liabilities of any company. It is unnecessary to add these words and without the benefit of very detailed legal consultations, I am not in a position to move from my text on this amendment because of its very careful drafting.
If the Minister of State believes that what we are asking him to do will happen anyway, why does he not add some words to ensure — I see the Minister shaking his head, but I ask him to hear me out — the court will at least have the mandate from the Oireachtas for so doing. The court has not been charged with this up to now, and they do not have to do anything of the nature we are talking about. The Minister of State might believe the courts will — and I am not going to comment on court decisions down the years — but if the Minister believes that it is the intention to do as we are asking, why will he not add some words to ensure that it will happen? What is to be lost in doing that? I am quite happy to let the matter sit until Report Stage and give the Minister of State an opportunity to discuss the matter with his advisers and perhaps come up with a further form of words. We do not pretend to have the last word of wisdom on this, although we believe our drafting is good.
As far as I can see, the Minister's assurance is not as valid as it seems because the court could agree to transfer all the assets, but only half of the liabilities. It could also decide under the Minister's amendment to transfer all the assets but none of the liabilities. To my mind, the assurance that the Minister is giving therefore as to the protection of existing rights does not exist because if the court can transfer all the assets but none of the liabilities, then those who have a property right in the liabilities at present could, by virtue of this section, have those property rights taken away. Just as my previous amendment — where I said the Minister could be sued if he acted maliciously — was ruled out by the Ceann Comhairle as creating a potential charge on the Exchequer, there is a potential loss to those who are owed money by an insurance company here because in theory at least the court could decide not to transfer their liabilities to the same company to which they were transferring the assets against which those liabilities existed.
The phrase used here is "provided for". As I said in my assurance, I cannot see any court dissolving a company unless the liabilities are provided for. There is more than one way to provide for liabilities. The court may transfer certain portions of them. There are obviously other ways of providing for liabilities and I am quite happy that this amendment includes the court being satisfied that liabilities in the case of dissolution are provided for.
As it is now 6 o'clock I am required to put the following question in accordance with the Order of the Dáil of this day: "That the sections not disposed of in Part III of the Bill are hereby agreed to."
Question put.
The Committee divided: Tá, 74; Níl, 13.
Tá
- Abbott, Henry.
- Ahern, Bertie.
- Ahern, Dermot.
- Ahern, Michael.
- Andrews, David.
- Aylward, Liam.
- Barrett, Michael.
- Brady, Gerard.
- Brady, Vincent.
- Cowen, Brian.
- Daly, Brendan.
- Davern, Noel.
- Dempsey, Noel.
- Dennehy, John.
- de Valera, Síle.
- Doherty, Seán.
- Ellis, John.
- Fahey, Frank.
- Fahey, Jackie.
- Fitzgerald, Liam.
- Fitzpatrick, Dermot.
- Flood, Chris.
- Flynn, Pádraig.
- Foley, Denis.
- Gallagher, Denis.
- Geoghegan-Quinn, Máire.
- Haughey, Charles J.
- Hilliard, Colm Michael.
- Hyland, Liam.
- Jacob, Joe.
- Kirk, Séamus.
- Kitt, Michael P.
- Kitt, Tom.
- Lawlor, Liam.
- Lenihan, Brian.
- Leonard, Jimmy.
- Leyden, Terry.
- Brennan, Matthew.
- Brennan, Séamus.
- Browne, John.
- Burke, Ray.
- Byrne, Hugh.
- Collins, Gerard.
- Conaghan, Hugh.
- Connolly, Ger.
- Coughlan, Mary T.
- Lynch, Michael.
- Lyons, Denis.
- McCarthy, Seán.
- McCreevy, Charlie.
- Mooney, Mary.
- Morley, P. J.
- Moynihan, Donal.
- Nolan, M. J.
- Noonan, Michael J. (Limerick West).
- O'Dea, William Gerard.
- O'Donoghue, John.
- O'Hanlon, Rory.
- O'Keeffe, Batt.
- O'Keeffe, Ned.
- O'Kennedy, Michael.
- O'Leary, John.
- O'Rourke, Mary.
- Power, Paddy.
- Reynolds, Albert.
- Roche, Dick.
- Smith, Michael.
- Swift, Brian.
- Treacy, Noel.
- Wallace, Dan.
- Walsh, Joe.
- Walsh, Seán.
- Woods, Michael.
- Wright, G.V.
Níl
- Clohessy, Peadar.
- Colley, Anne.
- Cullen, Martin.
- Gibbons, Martin Patrick.
- Harney, Mary.
- Keating, Michael.
- Kennedy, Geraldine.
- McCoy, John S.
- McDowell, Michael Alexander.
- O'Malley, Desmond J.
- O'Malley, Pat.
- Quill, Máirín.
- Wyse, Pearse.
Tellers: Tá, Deputies V. Brady and Browne; Níl, Deputies Kennedy and Colley.
Question declared carried.
We now proceed to deal with section 43.
SECTION 43.
Question proposed: "That section 43 stand part of the Bill."
I should like to put on the record that I am involved in the insurance business as a director and shareholder of an insurance brokerage and I sincerely hope my contribution to this Part of the Bill will be accepted in the spirit in which it is presented and not from a vested interest point of view.
With respect to the Minister, and having spent 26 years of my working life in the insurance industry, this Part of the Bill makes absolutely no sense whatsoever. Despite numerous attempts outside the House to get across a point of view what happens in the business, as distinct from what the Minister is trying to do here, it is the greatest retrograde step to professionalism I have ever come across. I understood this country was preparing itself for 1992——
A Ceann Comhairle, can we have some attention for the Deputy. We cannot hear him because of the noise of the House.
I am very sorry, Deputy. It has been brought to my attention that the conversation in the lobby can be heard in the Chamber and the speech of the Deputy in possession cannot be heard. Let us have the best of order, please.
I understand this country was preparing itself for 1992 and an open market where we would have an opportunity of competing abroad on a professional basis for business and bringing it into this country. What the Minister is attempting to do is to bring us back 30 years to when people operated from a boot of a car selling insurance. Everything in this Part of the Bill will discourage people from advancing in a professional manner and will encourage organisations and companies to compete in the future. I want to give some examples.
Section 43 refers to brokers' qualifications. I have no objection to setting down rules and regulations in relation to brokers' qualifications but I want to give an example of why this provision is so farcical. In many large towns and cities the insurance brokers who have qualified professionally to deal with what one would call general insurance contracts, that is, fire, property and liability insurance, have an ACII or an FCII operating in that field. They are well organised and well respected firms who have been operting for many years in that field and from time to time they may get involved in non-general insurance, in other words, life assurance.
This legislation says that you are an insurance broker if you have more than five agencies or companies in that field. I could illustrate numerous examples of companies that have 20 agencies, with every company operating in this country in the field of general insurance but because they are non-specialist in the life and pensions areas they may have one or two life agencies purely as a convenience for individual clients who may be on their books. Under this section that broker would be both an insurance broker and an insurance agent. I do not know how you can police a situation like that. With the greatest respect to the Minister, this shows complete ignorance as to what is actually happening in the field. I am saying this, hopefully not from the point of view of one with a vested interest. I do not particularly care whether all these regulations are imposed on the particular business in which I am involved because we are big enough to be able to handle them.
Legislation that says that if you have four agencies you are an insurance agent and if you have five agencies you have suddenly become an insurance broker is rather strange. It has nothing to do with professionalism evidently, with what is best for the consumer. If I approached any Deputy as a possible client and told him or her that I was an insurance broker having agencies with every company operating in this country, is he or she, as a possible consumer, in a better position to do business with somebody like that as against somebody who has the opportunity only of placing his or her business with four companies? What is in it for the consumer? Surely what we should be doing here is ensuring that the consumer will get the best of professional advice, that this business will be placed in the cheapest market with the widest possible cover. We are legislating, effectively, to change people from being insurance brokers into being insurance agents. This is because if you are a broker you must have professional indemnity insurance and, in addition, a bond. What advantage is it to the consumer that I could place his business with one of four companies when, if I go down the road, I can place that particular risk with one of 20 companies that will perhaps offer wider cover at a cheaper premium?
I do not understand what we are trying to do here. I can understand that people will act as agents for a particular company, that a company rather than employing people directly will appoint an agent to represent them. That person as an agent sells that company's products and tries to get business on their behalf. There is no mention of qualification or professionalism. No account is taken of the fact that an insurance broker will have an office which is staffed, which will have all the facilities that will benefit the consumer, whose staff will give professional advice and will employ people to help the consumer. If you close down your office and cancel one of your agencies you can operate from the boot of a car and do not have to comply with any of the requirements mentioned in this Part of the Bill. It just does not make sense, from the consumer's point of view and that of the development of the industry. Insurance brokers should be encouraged to go abroad, compete for business and bring that business back to Irish insurance companies. That is what we should be doing. We should be competing and creating employment here. Under this legislation we are encouraging people to drop the name of broker and become agents.
It all boils down to section 43. What is an insurance broker? I do not see how the consumer will benefit from what is attempted to be done here. I have declared my interest. I am an insurance broker and have been in the business for 26 years. I am a director of a company and a shareholder. I am putting that on the record in case anybody should think I was pushing my own interests. I am not; I am presenting the case on the basis of developing an industry that can compete in the future and give the consumer the best advice and best value. I do not want to delay because I appreciate that there is a shortage of time, but I should like an opportunity to speak on later sections.
The insurance broker is defined in the legislation in the definition section as follows:
"insurance broker" means a person who, acting with the freedom of choice described in section 43 (1) (b), brings together, with a view to the insurance of risks, persons seeking insurance and insurance undertakings, and carries out work preparatory to the conclusion of contracts of insurance, but does not include an insurance agent or an employee of an insurer when the employee is acting for that insurer;
That is what an insurance broker is under the Bill as adopted here today.
I have not received any amendments to section 43 from anybody in the House. That is a point worth making. Secondly, the bodies that represent insurance brokers — there are two in this country representing virtually all insurance brokers, although some obviously are not members of either — are NIBA and CIBA. There has been no objection from either of those bodies to the number of five. Section 43 deals with brokers. We shall come to the agents later on because that is a separate question. They have no objection to the provision that a person having fewer than five agencies could not legitimately call himself a broker. If you had five agencies or companies on the life side and five on the non-life side you would probably have something like 65 per cent or 70 per cent of the market. That would entitle you to call yourself a broker because you could offer a range of services.
I totally reject and refute the suggestion that we are not trying to build a brokerage profession here. We have gone to great lengths and have had much consultation over very many months to establish and give a form of recognition to brokers. I should remind Deputy Barrett that in the Bill published by the last Government no attempt at all was made to limit the number of agencies or reduce the number of people operating out of the boots of cars. There was no attempt to deal with the question of setting up professional people as brokers who would offer a wide range of insurance cover. We have made a significant advance on the Bill published by the Deputy's Government. For the first time there is a formal recognition of brokers. It is important that I emphasise that fact.
The Bill says that the Minister, instead of recognising each of the thousands of brokers — which I simply do not have the staff to do and nobody suggested I should attempt to do — recognises the recognisers. That is the sensible way. In other words CIBA and NIBA, the people representing the brokers, are being given a form of recognition. If they certify that people are complying with their rules they will get formal recognition under this legislation as being independent, professional brokers. This is a major attempt to build a professional body of brokers. Let me not put a tooth in it. Many of the brokers would prefer if we wiped the agents off the map altogether. This Bill will provide that agents will have only four companies although many at present have ten, 12 or more. That will reduce the role of agents in the insurance industry. The last Bill made no attempt to do that. It was quite prepared to leave the agents with all the agencies. I strongly refute the suggestion that we are not trying to build a professional body of independent insurance intermediaries and I have resisted the temptation to totally obliterate independent agents because they are necessary in small towns. Indeed, I am sure that many brokers were angry with me for not wiping agents off the map.
For the first time, legislation gives a form of recognition to the insurance broker and insists that he has at least five companies on either side which means he has to give a full share of the market. It is important that those points are considered by the Deputies opposite.
The section refers to people qualifying as brokers by otherwise complying with the provisions of the Act, apart from being a member of a recognised body. Will the Minister indicate how this will work in practice? What procedures will people have to go through to satisfy the provision of the Act other than by being members of a recognised body?
I was impressed by Deputy Barrett's argument. I agree with the Minister and I do not think that Deputy Barrett meant that——
I was deliberately misrepresented by somebody who does not know what he is talking about.
It is the same Bill but the Deputy's party did not tackle it.
Brokerage is not a problem, as the Minister said. The trouble arises in section 48 where agents are raised almost to the status of brokers without having any of the qualifications or restrictions which are put on brokers. Is there a time limit on this part of the Bill?
It will end at 9.30 p.m.
In that case we will have time to debate section 48 because I am particularly interested in it. However, it does impinge on this section in relation to the number of companies. A person is a broker if he has five companies under his belt and an agent can have up to four companies. As I understand it, in the small Irish insurance market up to four companies can give an agent up to 60 per cent or 65 per cent of the market. You might have smaller companies which would yield only 10 per cent of the market but if you have the four right companies you could have 60 per cent of the market. An agent does not have any qualifications and does not have restrictions placed on him and if he gets one more small insurance undertaking he will become a broker. That is where the difficulty lies. Deputy Bruton has an amendment down to reduce the agents to three companies but I would suggest two. If the amendment is accepted, the brokers would have to be brought down to four companies. What happens if an agent may have three companies and a broker must have five?
They just have to get another one.
It is not realised that every proper insurance broker has other companies queuing up to give him agencies.
I do not have the technical expertise in the insurance area and Deputy Barrett's expertise should be available to us. My understanding is that the problem is in the area of the agent which will come up in a later section. Deputy Barrett seems to be dissatisfied with section 43 and, if that is the case, I have not followed the tenor of his reasoning.
The Minister did not reply to me. Deputy Mac Giolla is quite right when he says it is not that important but it highlights the lack of understanding of the problems in the industry. An insurance broker can be professionally qualified in general insurance to deal solely in fire, property and liability. He may have a huge office with a staff of 100 and may not deal with life and pension business except for having perhaps ten policies on his books, which may be with a particular company. If he has 20 or 100 agencies with different companies but only one agency with a life and pensions company he is both an insurance broker and an insurance agent. How will the Minister deal with that? If he is an insurance agent for life and pensions he is an insurance broker for fire liability and property. That is where the misunderstanding arises. A proper insurance broker has companies lining up to give him agencies. The number does not make any difference; if you are a professional insurance broker giving professional advice you must have a premises, a proper staff and so on. At the end of the day an insurance agent will get the same level of commission from the company as an insurance broker, yet a broker will have costs relating to an office, professional indemnity and a bond.
The Bill is discouraging people from becoming brokers and encouraging them to become agents. From the consumers' point of view that is a bad thing because the consumer should be dealing with people who have access to every part of the market. We all know about the scandal in certain building societies who forced individuals to place their business with one insurance company because they were getting a loan from the building society in question. The insurance company were paying 35 per cent commission in one case, more than three times what an insurance broker was getting. The client was not getting the widest cover and the cheapest premium. Is that in the consumer's interest? That will happen here. The small broker the Minister of State speaks about, who may at present have five or six agencies on the general side and five or six agencies on the life side, instead of advancing forward and developing would go backwards as he would not need to have professional indemnity and a bond. I do not see how the consumer would benefit as a result of this.
He would have to have a bond.
I will deal with that in a minute. That is even more ridiculous.
That is incorrect.
Brokers do not hold moneys in bank accounts. The Minister of State has no understanding of how the business operates.
As I see it, it is very difficult to take section 43 in isolation. We also need to refer to section 48. In his opening remarks the Minister of State said that he had received great support from CIBA and NIBA on this matter. The understanding was that agents would have a total of four agencies. The shock came when the Bill was published and it became clear that agents would be allowed four agencies on the life side and four agencies on the non-life side. The problem is that the Minister of State has removed any difference there may have been between what an insurance broker does and what an insurance agent does. He is encouraging a lack of professionalism in the marketplace by removing the incentive for people to be insurance brokers and have professional staff in the services area, and to take the one slight step downwards, which would not hurt them very much, and become insurance agents instead because four agencies would give them 65 per cent of the market, which is sufficient to survive on. This is the argument put forward to me to day by CIBA. The Minister of State has said that he has their support, but he has not because as of——
I did not say that.
The Minister of State was encouraged by their response, and led us to believe——
They have no problem with section 43.
It is fair to say that we cannot take section 43 in isolation from section 48. That is where the problem lies. If we do not raise this point on section 43 we will miss the boat. The Minister of State understands the points being made but he has not given a full answer to the House. I would like him to do so now, and to tell us why he wants to blur the difference between an agent and a broker. He is not putting enough distance between the two categories.
They would be paid the same levels of commission.
This Bill, for the first time ever will make a distinction. The previous Government published this Bill but it did not make any distinction. We are attempting for the first time to put brokers on one stream and agents on another.
I have no objection to that.
The next question is, how do we do this? We must decide on a figure and say that above this figure a person is a broker and below it he is an agent. If we are talking about figures, we also have to look at the percentage of the market. The figure five is generally accepted by companies and brokers as being a reasonable figure, below which one could not sensibly be described as a broker because five agencies on the life side would give a person 71 per cent of the marketplace and five agencies on the non-life side would give a person 47 per cent of the marketplace.
What would the percentage be if one had four agencies?
On the non-life side, the figure would be 40 per cent and on the life side, the figure would be 66 per cent, still substantial figures. I do not think Deputy Barrett is arguing that brokers should have less than five agencies. If we accept that, we should then debate the provision in section 48. If we say an agent can have one agency only — which would get them out of the hair of the brokers, which is what the brokers ultimately want — the question I pose for Deputy Barrett and any interested Deputy, is, what do I call the people with two, three or four agencies? I put this question to the industry. The figures have to be consecutive. If we go for a figure of five for brokers then we must have a figure of four for agents. There cannot be a lacuna in this structure.
It does not work that way.
Deputy Barrett keeps accusing me of not understanding the industry. That is not an excuse for debating this issue with me. It is for the people listening to this debate to decide whether I understand the industry. It is the Deputy's understanding of the industry that is evident, and I respect that, but that does not mean nobody else in this House has any understanding of a particular industry when one studies the figures and looks at the industry carefully. I asked Deputies a question and I will pose it again when we are dealing with Deputy Bruton's amendment which proposes a figure of three, what do we call the people in between? They are neither brokers nor agents.
It is easy to get over that problem.
Tell me how we can get over that problem. I have been living with this problem for six months on a daily basis and I can assure the Deputy that one learns something about the industry in this way. I put this question to all of the interested professional bodies. If we do not have consecutive figures, it would be meaningless. We need to decide on a figure below which a person would be an agent and above which one would be a broker. There cannot be two jumps and a gap in between. We will debate that matter when we get to it. Let me make one other point——
May I answer that point? With respect, the Minister of State is arguing this from the point of view of a vested interest, be it a broker or an agent. Forget about that for a moment and think instead about the consumer. I accept that I am obliged to give proper advice to the public as long as I am a Member of this House. I am not entitled to come into this House and pursue my own personal interest. There would be nothing to stop a member of the public going into an insurance company and placing their business with them without going to an intermediary.
How do I do it?
Let me finish. The Minister of State asked for an answer and I will tell him. A consumer should know that if he goes to an intermediary who is acting impartially on his behalf, the intermediary will sit him down, ask details and advise him on the cover he needs, the cheapest premium and the best company to get cover. That person can either accept that advice or not. He may walk out of that office and go directly to an insurance company, and not go through any intermediary. I am arguing that one either deals with an insurance company or with an intermediary.
It is very important that I regain ground because this is very important. Many things have been said which are not accurate and some things have been said which are not in the Bill. Looking at Deputy Mac Giolla, Deputy Barrett put great emphasis on the consumer——
I hope the Minister of State is not implying that I am using that argument to protect my own interests.
I am not in any way. I assume that the Deputy is looking to other Deputies who have a consumer——
Deputy Mac Giolla asked me for an explanation.
I assume the Deputy is interested in the support of Deputies who have a consumer view of this legislation.
I also have a consumer view, and let that be known.
We all have.
I hope no offence is taken, none was intended. I could argue that what the Deputy is saying is that we reduce the number of agencies to one, two or three. This is what Deputy Bruton's amendment aims to achieve. I could argue from the consumer's point of view that that is reducing competition and removing agents from the system. If we reduce competition and have a nice cosy club of, perhaps, professional brokers, this would militate against the consumer interest. What we are doing is leaving an additional number of agents which the broking bodies would prefer I would take out, because these will provide additional competition and there will be more companies covering more of the market. This would mean that the consumer would have a greater choice in who they want to deal with. This will protect the consumer to a greater extent than reducing the number of agents which is being suggested by the other side of the House. One of the things I would like to nail——
Go the other direction and allow the person with four agencies to have five or six.
I do not see how reducing the number of agents which has been proposed by Deputy Bruton——
Is there any chance we can get down to the amendments?
I am replying to the debate on this section.
I know, but we cannot change this section because there is no amendment to it.
That was the first point I made. Deputy Barrett suggested there were differences between brokers and agents in regard to costs. That is not accurate. Read the Bill carefully. An agent has to have a bond. A broker has to have a bond. Both of them have to have bonds under the Bill.
A broker to become a member of such an organisation has to have certain standards and premises. An agent can operate from the boot of a car.
It is one end of the profession thinking the other end do not have professional standards. That goes on in every profession. I cannot eliminate that by legislation. I cannot legislate for professional standards and rivalry in an industry and the Bill published a couple of years ago did not attempt to do that either. The point is the same costs are laid on brokers and agents, so the suggestion that we are trying to force people to become agents to get some cheap way out of being professional is just not accurate under this Bill. They have got to get a bond and the insurance company are responsible for the agents' professional indemnity ultimately. That argument just is not accurate.
Do agents have to have premises and staff?
Do brokers have to have staff?
Yes, they do. It is implied in the standards of the broking organisations the Minister is building into this Bill.
Where is it in the Bill?
It is a requirement under section 43.
It is not a requirement. The Deputy has not read this Bill.
The debate is becoming somewhat untidy.
The Deputy is factually incorrect on it.
About half an hour ago I asked the Minister a question which related to how people would comply——
The insurance companies will see to it that the broker complies with the provisions of the Bill. Section 45 (1) lays that duty on them.
So where people are not members of one of the broking bodies they will have to satisfy each individual insurance company that they otherwise qualify as brokers.
That is right.
Will there be any appeal against that decision to ensure people who are not members of one of these associations are not frozen out by the companies who might, naturally enough, be doing more business with brokers who were members of the bodies concerned? Is there any way of ensuring that companies do not assist the broking bodies in freezing out individuals who are not members of one of the bodies but otherwise comply with the Bill? Is there adequate oversight by the Minister of the exercise of such a discretion by the companies?
I cannot tell the companies who they can do business with, but in an attempt to police that line in section 43 "and he otherwise complies with the provisions of this Act," I had to find some mechanism. The best I could come up with was that the company in question would ascertain whether a person proposed to be appointed as an insurance intermediary complies with the provisions of the Bill. I put the onus on insurance companies to inquire because I do not think that onus is on them now. I have not provided for any appeal procedure against it.
There is a possibility that there would be people who would fall out with one or both of these organisations representing brokers. They could fall out for personality reasons or whatever and could say, "I am not going to be a member of this body" just as people might say, "I am not going to be a member of a trade union in a business", and they want to ply their trade without being a member of the body. If you leave it to the companies, who after all are private institutions and are not accountable in any way for this power the Minister appears prepared to give to them, to determine this, the insurance companies are going to be in — to use the "in" phrase — a conflict of interest. They are not going to want to fall out with all the brokers who are promoting their business by recognising as a broker some individual whom perhaps one of the broking bodies has expelled, even though in practice the expellee may otherwise comply fully with the provisions of the Bill. I do not think it appropriate to delegate to a private body — the insurance companies are private bodies — the powers of interpreting this legislation as it affects an individual. It would appear that the Minister should be the one who should decide. At least he should be the one to whom there should be the right of appeal in a situation like this. He should be the one to say if the insurance companies have rejected a person and he feels they have done it wrongly, "This man is a broker and you are not entitled to refuse to deal with him on the basis that he does not fulfil the terms of the legislation. He does. If you do not want to deal with him after that, that is OK, but you cannot use that ground as a basis for not dealing with him." The idea that insurance companies could become in some senses courts of law in a matter of this kind is not right.
Do I understand that if a person is a member of a representative body of insurance brokers recognised by the Minister, he does not then have to have five undertakings, etc.? Section 43 (1) (a) reads "...or, not being a member of a recognised representative body, he complies with the provisions of this Act, and...." Does the first part of that mean if he is a member of a representative body recognised by them he does not have to comply with the provision of five undertakings?
He has to comply with the five figure regardless of whether he is a member of a representative body.
How does the Minister explain "or"?
I think I explain it by the use of the commas.
I do not think that is the meaning of the section.
Where the commas are placed the "and" is part of the earlier sentence and not part of the latter sentence. The Minister for Education is here and she can educate me on the use of commas.
Assuming that is correct, after "or not being a member of a recognised representative body," he still does not have to be a member provided he complies with the provisions of the Bill. Is that correct?
By the way, most brokers are not members of representative bodies. I would say a slight majority of brokers are not members. Therefore, we have a huge body of brokers who are not members. In order to give the representative bodies increased stature, help them and encourage people to join the bodies because by joining the bodies they build professional standards among themselves, we give a form of recognition to these two bodies by saying effectively, "If you tell us the people who are your members are keeping your rules and complying with the legislation we accept that from you." That leaves a great number of brokers who are not members. Deputy Bruton has suggested the duty is on Government to police that. He is probably right in a sense but the practicalities are otherwise. We are dealing with a veritable army of brokers who are not members of these organisations and it just would not be possible for any Department of State to check that every one of those brokers individually compiled with the legislation.
Would the Minister agree to put in a power of appeal to him where somebody has been refused capacity as a broker by the insurance companies? At least there should be somebody to whom he would appeal. I imagine in natural justice the aggrieved party would be entitled to this anyway.
I do not think that makes sense. This is a substantial improvement. A company at the moment can say to any broker or agent: "We do not want to deal with you. Good luck.". They do that all the time. If they are now going to police this part of the Bill and suddenly decide they want to use this as an excuse — which is what the Deputy fears — for saying: we do not like the look of that agent, so we will say he is not adhering to the provisions of the Act and, therefore, we will not deal with him——
It is to freeze out all non-members of the bodies.
Yes, but at present they can do so. It is important to make the point to Deputy Bruton that, at present, companies can do that. What is to stop them today from freezing out all nonmembers of bodies? There is nothing at all to prevent them. They do not need the provision of this section as an excuse.
This gives them an excuse.
That they did not have. We do not want to do that, do we?
May I explain this as I see it. I accept that this is not a current problem, it may not be a problem even in 15 years time, but this legislation will be on the Statute Book.
Progress reported; Committee to sit again.