Vol. 472 No. 3
16 Kathleen Lynch asked the Minister for Enterprise and Employment the progress, if any, he has made in respect of introducing regulations compelling insurance companies to disclose all their charges to customers; and if he will make a statement on the matter. [23157/96]
36 Mr. M. McDowell asked the Minister for Enterprise and Employment the plans, if any, he has to ensure that insurance companies and agents inform prospective customers regarding all commission charges. [23204/96]
I propose to take Questions Nos. 16 and 36 together.
I recognise the importance of proper transparent and full disclosure by insurance companies and insurance intermediaries of all relevant information including all charges levied by investment product suppliers and intermediaries against clients' investments in their dealings with policyholders and prospective policyholders. I am aware that market pressure and a greater level of awareness among consumers has contributed to a revision by some insurers of the way life insurance products are structured and sold so that persons taking out life assurance policies are clear as to the long-term nature of such policies and aware of the implications of their early encashment. While I am hopeful that such market changes will permeate throughout the insurance industry, nevertheless the interests of consumers in this regard must be protected under Statute.
My Department has been engaged in extensive consultations with the insurance industry and other appropriate bodies in regard to drafting regulations to provide for effective disclosure of all relevant information in this regard, to enable the policyholder to make a fully informed decision when taking out an insurance policy. The issues surrounding disclosure should not be solely manifested in commission levels. Information in relation to early surrender or encashment values, illustration of benefits, nature and type of policy, premiums review, sales remuneration and status of the supplier of the product is equally important as is proper provision of all other relevant information prior to completion of the proposal form. These general principles should also extend to non life insurance products.
It is also important that any new regime maintains in existence a strong, vibrant independent financial advisory sector. Independent financial advisers are a force for competition and a means of ensuring independence of advice. They are a counter to dominance of financial services by big, powerful companies and can ensure a proper market in financial information.
The proposed transparency measures must be afforded the utmost consideration by all concerned as they will mark a fundamental change in the way insurance products are marketed and sold. In this context discussions and negotiations with the insurance industry and consumer interests have been ongoing. These deliberations, and other recent regrettable developments in the insurance market, have led to a re-evaluation of the thrust of the initial draft insurance regulations. I am confident that this reappraisal will be of long-term benefit to the insurance industry and consumers.
It is my intention to provide as much information as possible to the House in relation to the structural changes which will inevitably occur, both as a result of the evolutionary nature of insurance regulation and the way in which insurance products are marketed and sold.
I agree the insurance industry has grown at a phenomenal rate in the past few years. Prior to its recent expansion, people usually took out car and house insurance and insurance to cover their burial costs. Nowadays people take out insurance to cover old age, ill health and so forth. Will the Minister of State, in the course of his negotiations with the insurance industry, take into account the pyramid selling that is now part and parcel of the insurance industry? Insurance is an extremely complex product and it will be expected to provide an income for the insured following an injury or other circumstance. However, the introduction of pyramid selling in the industry means insurance is being sold by people who have little experience in that sector. Will the Minister of State assure the House this matter will be included in his negotiations with the industry?
The Deputy is right to suggest the evolution of the industry is growing more complex. The purpose of the ongoing discussions with the industry is to ensure a more intelligible and easily understood presentation of what is on offer to the prospective purchaser. That includes information on early encashment or surrender values. I have no doubt consumers will be able to shop around with more certainty and confidence that they understand what is on offer.
