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Dáil Éireann debate -
Wednesday, 18 Oct 2000

Vol. 524 No. 3

Insurance Bill, 1999: Report and Final Stages.

Dr. Upton

I move amendment No. 1:

In page 5, lines 20 and 21, to delete "and the Insurance Acts, 1909 to 1990," and substitute "The Insurance Acts, 1909 to 1988, the Insurance Act, 1989, and the Insurance Act, 1990,".

The Minister agreed on Committee Stage to reconsider this amendment to correct an error in the Insurance Act, 1989, which updated the collective citation of 1909 to 1985 but omitted the 1988 Act.

I have had this matter examined in great detail since Committee Stage. I understand the 1988 Act refers to export credit insurance. It is not intended when the Insurance Acts are referred to collectively that they should include reference to export credit insurance legislation but rather solely to the legislation concerned with the supervision of the insurance industry. Accordingly, this amendment would not be relevant. It would not be appropriate to refer collectively to all these Acts, particularly including export credit insurance in this area because the ramifications of this new Act does not affect export credit insurance. I, therefore, cannot accept the amendment.

Amendment, by leave, withdrawn.

Amendments Nos. 2, 4, 8 to 12, inclusive, 14 and 15 are related and will be discussed together. Amendment No. 2 is consequential on amendment No. 4 and amendment No. 9 is consequential on amendment No. 8.

I move amendment No. 2:

In page 6, between lines 27 and 28, to insert the following:

"(b) by the insertion of the following after the definition of ‘the Companies Acts':

‘"connected person", in relation to an insurer, insurance intermediary or sales employee means:

(a) an undertaking in the same group as the insurer or insurance intermediary; or

(b) any person whose business or domestic relationship with the insurer, insurance intermediary or sales employee might be expected to give rise to a community of interest between them;',”.

I do not understand why these amendments were grouped together.

The Deputy may speak to all the amendments.

I have just received the groupings and I have some difficulty in determining why they were grouped together.

The Minister agreed on Committee Stage to look again at amendment No. 2 for Report Stage. This amendment gives a definition to connected persons. I want a definition included in the Companies Act because this does not exist at present. I hope the Minister of State will address amendment No. 4 which relates to commission payments and sales remuneration. We teased out many issues relating to connected persons, what defines a connected person and how they are related to an individual involved in the brokering business.

Amendment No. 14 relates to disclosure, the monitoring of disclosure and how this would be adjudicated on. This goes back to the debate we had on the issue of equivalence. It is not sufficient for the Minister of State to say there will be equivalence within the legislation. There should be a commitment to this in the Bill so that there is a level playing pitch between the brokers, banks, building societies and so on who also provide insurance. There is also the issue of travel agents, which we will discuss later.

Perhaps the Minister of State will explain why these amendments have been grouped together. These amendments were debated in great detail on Committee Stage.

I thank Deputy Naughten for his contribution and for tabling these amendments. The purpose of the amendments is to provide for equivalence of disclosure in respect of commissions and for the policing of equivalence. The Government is committed to ensuring there is equivalence, that it will be policed and that there will be full disclosure on commissions.

The issue of equivalence was discussed on Committee Stage. The reason the amendments are grouped together is that they are all linked to both equivalence and commissions. Having reflected on the points made by Deputy Naughten and others on Committee Stage, I saw the merit in providing for this in the Bill. I do not propose to accept the amendments tabled by Deputy Naughten in their present form. However, I accept them in spirit and I have decided to table amendment No. 8 which makes similar provision in the Bill. It is the intention to deal with the equivalence in the disclosure regulations. I am now informing the House that I propose to insert a new subsection (2) to section 7, paragraph 43D, to require the equivalence of disclosure as between commission payments to insurance intermediaries and sales remuneration to sales employees.

Deputy Naughten tabled on Committee Stage an amendment to provide for powers to monitor the provisions of this section, with particular reference to equivalence. Having considered the points made by the Deputy at that stage, I have decided to insert a further provision to permit monitoring, not just of equivalence but also of the other provisions in the section. Consequently, I will be moving two amendments, No. 8, which is a very strong macro amendment, and amendment No. 9, which is purely a technical adjustment because we must renumber the section.

I should point out to the Minister of State and other Members that it is in order to address remarks to all the amendments listed in the grouping. When they are formally proposed, I will put the question.

If I understand the Minister of State correctly, the amendment will allow for regulation after the passing of the legislation and it comes back to a detailed debate on Committee Stage about regulation and the lack of control the House has over orders passed by the Minister. The Minister has published the suppliers of life assurance order, 2000, as a consultation order. Given that it has been circulated within the industry, why has it not been circulated to Members? On Committee Stage the Minister of State stated: "I will give the Deputy a detailed opportunity to appraise these regulations." Why has this not happened?

The House has no control to ensure these regulations are reviewed, questioned and debated by Members. Unless an objection is made in the House within 21 days, which is not possible, the regulations are passed. While I accept the points raised by the Minister of State, regulation is an issue of concern that needs to be addressed.

I have tabled amendment No. 8 which clearly provides, in principle, for equivalence. This is a major progressive step based on the Committee Stage debate. We are working on the final draft of the disclosure regulations. I am not aware of any document which has been produced and circulated for consultation entitled suppliers of life assurance order, 2000.

We intend to hold consultations before we finally publish the regulations. They must be lodged in the Oireachtas Library and Members of both Houses will then have the right to query them and will have 21 days to raise objections if they so wish. We are bound to publish them in the newspapers giving adequate notice both to the industry and the consumer.

The regulations are the most relevant area to deal with this matter. They can be amended at any time in the future rather than having to wait for primary legislation. We must respond to changes in the market as we move into an era of e-commerce, e-business and e-retailing. The insurance industry and consumers are moving rapidly forward in this area and we must be in a position to adopt new regulations as required by the market to which society and the Legislature will refer in future. Consequently, the place to deal with this issue is in the disclosure regulations.

I accept the Minister of State's comments and I withdraw the amendments but an article in The Sunday Business Post on 1 October pointed out that a draft of the suppliers of life assurance order, 2000, had been circulated to interested parties. The Minister of State gave us a commitment on Committee Stage that we would be briefed on these regulations before they were published and came into force. It is unfair that he gave such a commitment and a draft of the regulations was circulated. Two Members who tabled amendments on Committee Stage and raised the issue of the regulations were not shown the courtesy of being informed about the circulation of this draft order.

The Deputy is referring to an arbitrary article by an individual. We circulated draft regulations within the industry some time ago. As far as I am aware, the previous Opposition spokespersons received copies of the regulations at the time. They have changed since and are still evolving as the legislation progresses. A final document has not been produced but I give the Deputy a commitment that when it is there will be a briefing session between my officials and the main Opposition spokespersons, particularly Deputies Naughten and Upton, who are dealing with the Bill on behalf of their parties.

Amendment, by leave, withdrawn.

Amendments Nos. 13 and 16 are related to amendment No. 3. All may be taken together by agreement. Is that agreed? Agreed.

I move amendment No. 3:

In page 8, between lines 10 and 11, to insert the following:

"(m) by the insertion of the following after the definition of ‘the Minister':

‘"occupational pension scheme" has the same meaning as in the Pensions Act, 1990;',".

Amendments Nos. 3 and 13 relate to the occupational pension scheme which we debated on Committee Stage. They are self-explanatory and seek to include occupational pension schemes under the disclosure regime. One of the main objectives of the Bill is to ensure consumer protection and provide for disclosure on a level playing field. This relates to the issue of equivalence to which the Minister has agreed.

The group schemes which are defined under section 2 of the 1990 Act and the draft regulations pursuant to section 51 of the 1980 Act, which the Minister proposes to adopt, exempt such schemes from the disclosure regime. Given that group schemes can have as few as three members, consumer protection is not achieved by the exemption of such schemes from the disclosure requirements. Occupational pension schemes should be treated similar to other insurance schemes.

The effect of amendment No. 3 would be to require the inclusion of pension schemes under the disclosure regime. It is our intention that they should be included. I have tabled amendment No. 16 in response to the amendment tabled by Deputy Naughten on Committee Stage and the arguments he made. The purpose of the amendment is to insert a new subsection providing that insurance companies will be obliged by law to provide information to trustees of pension schemes in future when such trustees are required under the Pension Act to provide specified information to the members of the various pension schemes.

It is our intention that the disclosure regulations to be made on foot of this legislation will include disclosure in respect of occupational pension schemes. However, this legislation is not the best vehicle for providing effective disclosure for members of such schemes for two reasons. First, it would not provide for all pension schemes. In other words, by specifying some, others would be excluded and that would be dangerous. Some occupational pension schemes are run by companies other than insurance companies and they are not subject to the provisions of the Insurance Acts. The coverage of schemes would not be fully complete.

Second, while the disclosure regime envisaged in the legislation is designed for disclosure at point of sale, ongoing disclosure is probably more important in terms of pension schemes, especially in regard to existing schemes and, therefore, provision for disclosure to members of pension schemes in the Bill would be limited in its usefulness. The Pensions Board is examining the issue of disclosure.

Amendment No. 16 will ensure that when a disclosure regime is introduced for the members of pension schemes all the necessary information will be available to the trustees of such schemes. To eliminate any doubt about the provision of information in future to the trustees of pensions schemes, I have tabled that amendment and consequently I cannot accept amendment No. 3.

I accept the validity of the Minister of State's argument. I withdraw the amendment and thank him for reviewing the issue for Report Stage.

Amendment, by leave, withdrawn.
Amendment No. 4 not moved.

Dr. Upton

I move amendment No. 5:

In page 8, line 37, before "at any time" to insert "in a case where the information concerned was concealed by the fraud of the defendant,".

As discussed on Committee Stage, as the Bill stands there is a possibility of open ended prosecution in the District Court. This should be limited to fraudulent concealment of information and there should be a specific statement to that effect rather than leaving it open ended.

The amendment to the 1989 Act envisaged in section 4 seeks to permit summary proceedings to be taken against a person accused of an offence under the Insurance Acts either within two years of the offence being committed or within six months of the offence being discovered, subject to an overall limit of five years since the offence was committed. This amendment is deemed necessary in light of the experience of the Department in recent years.

The six months provided in the 1989 Act have proved impractical even when an offence is detected immediately. More time is needed to gather evidence and to prepare proceedings. In addition, unfortunately, in the nature of insurance, it may be more than two years before an offence comes to light. The amendment proposed by Deputy Upton would create difficulties for us in prosecuting offences. For example, fraudulent concealment would have to be proved, thus delaying matters to the point where the provision would be inoperable.

As the Deputy is aware from all the ongoing investigations in which the Department is involved, the position has been advanced in the new legislation. Once information comes to a Minister, an official, the Department, an investigating officer, an inspector or the courts, proceedings can go ahead irrespective of when the matter is discovered. If the amendment was accepted, it would negate the provisions already included in company law. This legislation would be in conflict with those provisions and the amendment would weaken the Bill. Consequently, I regret that I cannot accept the amendment.

Amendment, by leave, withdrawn.

I move amendment No. 6:

In page 9, line 36, to delete "occur.'." and substitute the following:

"occur.

(1C) A person who was carrying on the business referred to in subsection (1) before the commencement of section 5 of the Insurance Act, 2000, shall, not later than 60 days after such commencement, give notice to the Minister, in such form and manner and including such information as may be prescribed, of the person's intention to continue to carry on that business, and subsection (1B) shall apply to a notice under this subsection as it applies to a notice referred to in subsection (1)(b) with any necessary modifications.

(1D) A person who contravenes subsection (1)(b) or who contravenes subsection (1C) and continues to carry on the business referred to in that subsection shall be guilty of an offence.

(1E) The Minister may direct a company in writing to cease carrying on the business referred to in subsection (1) either indefinitely or for such period as he may specify in the direction–

(a) if the company contravenes subsection (1)(b) or (1C),

(b) information that is, to the knowledge of the company, false or misleading is included in a notice of the company under subsection (1)(b) or (1C),

(c) the Minister considers that, having regard to the risks insured or proposed to be insured by the company, the company is under capitalised,

(d) the Minister considers that one or more or the directors or the senior managers of the company are not suitably qualified to direct and manage the business aforesaid of the company,

(e) the Minister considers that the company has not a sufficient number of suitably qualified employees in the State to carry on effectively the business aforesaid, or

(f) the Minister is in possession of information showing that the company has engaged in unlawful activities in or outside the State.

(1F) Where the Minister proposes to give a direction to a company under subsection (1E)–

(a) he shall notify the company in writing of the proposal and shall include in the notification a statement of the reasons for the proposal,

(b) the company may, within 28 days of the date of the notification, make submission in writing to the Minister in relation to the proposal,

(c) the Minister shall, before deciding to give a direction and determining its terms, take into consideration any representations made to him pursuant to paragraph (b).

(1G) Subsections (5) to (9) of section 18 shall apply to a direction under this section as they apply to a direction under that section with any necessary modifications.'.".

This amendment inserts four new subsections in section 5 which deals with reinsurance. The purpose of the new subsections is to give the Minister powers to take administrative steps to deal with any existing Irish reinsurance companies that might be, have been or will be the subject of complaints from either Irish or international sources. This is necessary to protect Irish and international consumers and to protect Ireland's reputation as a well regulated financial services centre.

Subsection (1C) provides a transitional period for existing reinsurance companies of 60 days to return the notice required under subsection (1)(b). Subsection (1D) provides that failure to provide the requisite notice to the Minister while carrying on reinsurance business is an offence in law. Subsection (1E) provides that the Minister may give a direction to a company to cease writing reinsurance business in the absence of compliance with the notification provisions. Subsection (1G) provides an appeal mechanism to companies writing such business.

The purpose of the amendment is to protect consumers of reinsurance products, to ensure that there is a right to deal with reinsurance companies and that the Department can take action at any particular time if information is provided to it.

This positive amendment will enhance the Bill. I wish to raise a point which the Minister might consider. I doubt he could address it under this legislation but it is important to note in relation to the protection of the consumer that there are various levels of regulation throughout the European Union in terms of the insurance industry. If some of the Irish companies involved in insurance and reinsurance decided to establish an e-commerce business, an area for which the Minister of State also has responsibility, they would face varying regulation throughout the European Union. This would create severe financial pressure in terms of the viability of any such project.

Upcoming European Union provisions mean that the legislation in the country in which the consumer is located is the law that must be followed when a product is being sold. There could be variations in the legislation in the 15 EU member states. The number of member states will increase as a result of enlargement and perhaps the Minister of State could talk to his European colleagues with a view to streamlining this area within the EU. This would be difficult because there are varying levels of regulation, such as the most recent provisions introduced in Ireland.

There can be extremes in terms of over regulation or under regulation in other parts of the EU, but perhaps the Minister of State could consider the issue given that he has responsibility for e-commerce. He also has responsibility for the area covered by the amendment which relates to the protection of the consumer. The varying levels of regulation will cause difficulty in the future.

Deputy Naughten's points are positive and relevant. We are moving into an era of e-commerce and Ireland has the most sophisticated legislation on e-commerce transactions in the world. Equivalence between paper and electronic transactions has been provided and it is important to move onto the next stage. I will ask the officials in the insurance unit of the Department, in conjunction with the officials in the e-commerce division, to examine this aspect in detail. Further legislation in this area is being considered and, if it is appropriate, I will include the matter in that Bill. If necessary, I will enter into consultation with the European Commission or the Council of Ministers on the matter.

Amendment agreed to.

Dr. Upton

I move amendment No. 7:

In page 12, lines 27 and 28, to delete ", subject to section 108 of the Insurance Act, 1936, be provided in the English language" and substitute "be provided in both official languages of the State".

Section 108 of the Insurance Act is restrictive. It states that if the insured fills out the proposal wholly in Irish and requests to be corresponded with in Irish, the insurer shall do so. The Bill provides that unless this section is complied with, the insurance shall be given in English. My proposal is that it should be available in both Irish and English. I understand a language equality Bill is due to be introduced and it would be much more appropriate if it was automatically available in Irish and English.

There is much merit in Deputy Upton's proposal and I would like to be able to accept the amendment. However, it is not that simple. The amendment provides that insurers offering insurance in Ireland will automatically have to make documentation available in Irish and English. The existing provision means that documentation must be made available in Irish at the request of the client.

Since 1936 Irish law has required that when a policy holder completes a proposal for insurance in Irish, that documentation from the insurer shall be provided in Irish if the policy holder so requests. The third insurance directive opened the entire European Union market to EU insurance companies. Any new conditions to be imposed on insurers in any part of the European Union would have to be justified. Otherwise, they could be seen as a barrier to the Single Market.

It may be difficult to justify the condition proposed by Deputy Upton since only a small number of people in Ireland are likely to opt for receiving documentation in Irish. We checked with the Irish Insurance Federation and it informed us that, over the past decade, there have been only two requests for documentation in Irish. The Deputy's concerns, which I share, may be alleviated by the knowledge that insurers operating in the Irish market are required to provide documentation in Irish when a policy holder seeks to complete the proposal form in Irish.

As the Deputy is aware, there are concerns about the cost of insurance in Ireland. Due to mergers and acquisitions in Ireland and in the European Union, the number of players in the insurance market is shrinking. This could have a detrimental impact on competition and price. I am, therefore, seeking to avoid any measures that might discourage new players coming into the Irish market. If there are more players and companies in Ireland, there will be greater competition and consumers will get better value. They will have greater choice of cover and the costs will be lower.

As Ireland is an exporter of insurance services, our overall national interest does not lie in introducing new barriers to trade, but in supporting the free operation of the Single Market. The statistical data shows that the demand for this is very small and the law gives the client the right to seek to have the policy in Irish. This should be respected and it would be foolish to enshrine the amendment in the Bill because it could create difficulties and put Ireland into conflict with the European Commission. This might discourage companies from entering the market and we should not create any hostages to fortune. I regret I am not able to accept this very positive proposal.

Dr. Upton

I am disappointed the Minister cannot accept this amendment. I hoped that in light of the language equality Bill it would have been accepted. I do not entirely agree with the advice that it would be prohibitive in market terms at European level. It is a great pity that it cannot be made available both in Irish and English.

What is the situation regarding another EU citizen seeking insurance in this country whose first language is neither Irish nor English? Are they protected under the legislation? Many people from other EU member states are coming here, so is there provision in the current legislation for them to receive on request a copy of the policy in one of the other officially recognised EU languages?

It is a matter for each individual company to ensure that there is a choice of services available to any EU citizen. European consumers have a right to seek any documentation in any language, and it must be provided to them.

Amendment, by leave, withdrawn.

Amendment No. 8 has already been discussed with amendment No. 2.

I move amendment No. 8:

In page 13, before line 1, to insert the following:

"(2) Any regulations made under this section in relation to information about payments in respect of the sale of policies of insurance to be provided to clients of insurers and insurance intermediaries shall be such as to ensure that the requirements in the regulations regarding disclosure of the remuneration of sales employees of insurers shall, in so far as is possible, be equivalent to those regarding disclosure of the payments of commission by insurers to insurance intermediaries.

(3) Regulations made under this section may authorise the Minister to obtain from insurers and insurance intermediaries such information as he may reasonably require for the purpose of ensuring compliance with the regulations.".

Amendment agreed to.

I move amendment No. 9:

In page 13, line 1, to delete "(2)" and substitute "(4)".

Amendment agreed to.
Amendments Nos. 10 to 15, inclusive, not moved.

I move amendment No. 16:

In page 17, between lines 11 and 12, to insert the following:

"43FF.–The Minister may by regulations provide for the giving by insurers to trustees of occupational pension schemes of such information as they may reasonably request for the purpose of their compliance with the provisions of the Pensions Act, 1990".

Amendment agreed to.

Dr. Upton

I move amendment No. 17:

In page 17, between lines 20 and 21, to insert the following:

"(2) The court may decide if it is in the interests of justice to do so that an insurer who fails to comply with a provision of regulations made under this Part may thereby be disentitled to repudiate liability under the contract of insurance concerned, notwithstanding default or omission on the part of the insured.".

When an insurance company fails to comply with the regulations it should be possible for the insurer to be disentitled to repudiate a contract in order that the consumer should not be disadvantaged. Furthermore, a provision should be in place to allow the court to decide whether it is in the interests of justice that the insurer can simply walk away without further responsibility.

Amendment No. 17 seeks to introduce an additional penalty for insurers who fail to comply with the disclosure regime, viz. that they would not be able to repudiate liability in respect of that contract of insurance, even if the insured had failed in his or her obligations. I am opposing this amendment because I fear that it would increase litigation and add to the costs borne by ordinary policy holders. In such cases it would presumably be necessary first to satisfy the court that a failure to comply had occurred. Moreover, in every case where an insurance company was attempting, for good reasons, to repudiate a claim, such a provision would encourage the invention of accusations of failure to comply. In other words, it would be underpinning allegations against companies. All this would have adverse consequences on the costs borne by ordinary policy holders. We could have many vexatious accusations.

However, I have some sympathy with the Deputy's point of view. It would appear that occasionally insurance companies use quite minor oversights by their clients to repudiate full responsibility in the event of a claim. This is one of a number of consumer issues which will merit further consideration once the Insurance Bill and the disclosure regulations are in place, and it is something to which I propose to give attention within the Department.

Dr. Upton

I welcome that proposal from the Minister but I am concerned that the consumer should have that opportunity and that the insurance company would, in effect, have the responsibility to protect the consumer. I thank the Minister for his response.

In deference to the positive proposal by Deputy Upton, I propose to consult the Director of Consumer Affairs on this issue.

Amendment, by leave, withdrawn.

Dr. Upton

I move amendment No. 18:

In page 21, between lines 37 and 38, to insert the following:

"16.–With effect from such date as may be prescribed by the Minister, the functions of the Central Bank under the Act of 1995 and this Act shall be transferred to such authority having functions as the single regulator of financial services as may be prescribed by the Minister".

The amendment proposes that there should be a single regulatory authority. There is, of course, ongoing discussion about the role of such an authority. The Attorney General has chaired the working group which reported on setting up such an authority, but we have not had any forward movement on that issue. I am proposing that there should be such an authority, as recommended by the Attorney General, in relation to the Central Bank and to this Bill.

I support Deputy Upton's amendment. The establishment of such an authority was raised on the Order of Business this morning. The establishment of a single regulator for financial services is causing great difficulty within the Government where a ding-dong battle is going on between the Tánaiste and the Minister for Finance. This matter should be resolved, and eventually it will be. Deputy Upton's amendment has been tabled in the belief that the issue will be resolved by putting in place a financial services regulator. It is important that the financial services which the Bill proposes to regulate should come under the single regulator when that office is established. I support the amendment.

The House will be aware that responsibility for the operation of the single financial services regulator will be promoted by the Minister for Finance through his Department. The intention behind this amendment is to anticipate the appointment of a single regulator. This provision is unnecessary in the legislation. When the final decision has been taken on this issue, and if it requires legislation, it will not be difficult to transfer functions. Any legislation to this effect would, of course, be introduced by the Minister for Finance. The House can be absolutely assured that the Tánaiste, on behalf of the Department of Enterprise, Trade and Employment, the Minister for Finance on behalf of the Department of Finance, and the Attorney General, as the chief law officer of the State, have engaged themselves in this situation. An excellent report has been produced by the Attorney General. Officials in all three divisions of Government are working on this matter and we are confident we will achieve a consensus. It is important that we move forward carefully and deal with this complex issue in such a way that when it is introduced it will have the most profound effect on financial regulation. Any changes that are necessary pertaining to existing law will be included in the proposals we make.

Amendment, by leave, withdrawn.

Carlow-Kilkenny): Amendments Nos. 19 and 30 are related and may be discussed together by agreement. Is that agreed? Agreed.

I move amendment No. 19:

In page 23, between lines 23 and 24, to insert the following:

"(2) Section 2 of the Act of 1995 is hereby amended in subsection (6) by the substitution of the following for paragraph (h):

‘(h) credit institutions which provide investment business services or investment advice.'.”.

Amendment No. 19 amends the definition of a credit institution to be found in the Act of 1995. The previous definition was ambiguous in that it was not clear whether credit institutions would be required to seek authorisation as investment business firms when acting as insurance intermediaries. This amendment removes that ambiguity by clarifying that authorised credit institutions will not have to seek authorisation. Subsequent amendments, which I propose, seek to apply to credit institutions provisions of the 1995 Act other than those relating to, or arising from, their authorised entities.

There is no ambiguity about the disciplines which will apply to credit institutions. In other words, we are clarifying in law the definition of a credit institution. We are removing the ambiguity and we are ensuring that they do not have to seek authorisation, but we are enshrining in law the disciplines applying across this Bill to credit institutions. In particular, the disclosure provisions set out in section 7 will fully apply. In addition, I will also be proposing amendments the purpose of which is to ensure that the provisions of sections 29 and 30 of the 1995 Act will fully apply to all credit institutions.

I propose to speak to amendment No. 30, the purpose of which is to apply the provisions of section 30 of the Act of 1995 to credit institutions. These provisions require an investment intermediary to issue a receipt to clients. This is an important provision which did not exist before. It is necessary to include explicitly credit institutions since, by virtue of the change in the definition of credit institutions, they are technically no longer investment business firms. I hope to move amendment No. 30 later.

Amendment agreed to.

I move amendment No. 20:

In page 25, to delete lines 14 to 51, and in page 26, to delete lines 1 and 2 and substitute the following:

"(2) The Investor Compensation Act, 1998, shall not apply to insurance intermediaries if and in so far as their business relates to reinsurance or advice regarding reinsurance policies.".

This amendment is purely a technical one whose purpose is to exempt reinsurance business from the Investor Compensation Act which is intended to benefit personal investors purchasing direct insurance. Most if not all purchasers of reinsurance are insurance companies and, consequently, the Investor Compensation Act would not be relevant to them.

Amendment agreed to.

Acting Chairman

Amendments Nos. 21 and 22 are related and amendment No. 23 is consequential on amendment No. 22. Therefore, amendments Nos. 21, 22 and 23 may be discussed together by agreement.

I understand amendment No. 29 is also being taken.

Acting Chairman

I am told it is being taken separately.

I accept the ruling.

Acting Chairman

That is fine.

I move amendment No. 21:

In page 26, to delete lines 15 to 22.

I propose to speak to amendments Nos. 21, 22 and 23. The amendment which is being discussed separately, amendment No. 29, inserts new provisions in place of previous provisions in the 1995 Act. The effect of the new provisions is to provide that the information to be provided by intermediaries to clients on their stationery or in advertisements or on first contact with clients will be set out in regulations. This was not done before. This will allow the supervisory authority to take account of the sometimes complex status of intermediaries while ensuring the information to clients is clear and unambiguous.

Section 29 of the 1995 Act in its current form as inserted by section 26 of the Bill could cause confusion. For example, an insurance intermediary will be required to inform the client when first entering into a business relationship and state on its stationery and business forms his or her insurance intermediary category, whether it does life insurance or non-life insurance business or both. Where that insurance intermediary is also a restricted activity product investment intermediary, it must also state on its stationery and on first entering a business relationship with a client that it cannot accept cash. For such an intermediary to comply with all these disclosure requirements may confuse rather than protect clients. Accordingly, in the redrafted section 29 of the 1995 Act, the broad principles which should underpin such disclosure are set out. The supervisory authority is provided with the power to make appropriate regulations of there being such principles while providing clear disclosure of the intermediaries' status to the client.

Amendments Nos. 21 and 22 delete provisions that will now be encompassed in the new section 29. Amendment No. 23 renumbers paragraphs to take account of a deletion and it is purely a technical amendment.

Amendment agreed to.

I move amendment No. 22:

In page 26, to delete lines 38 to 41.

Amendment agreed to.

I move amendment No. 23:

In page 26, line 42, to delete "(3)" and substitute "(2)".

Amendment agreed to.

Acting Chairman

Amendments Nos. 24 and 25 are related and both may be discussed together by agreement.

I move amendment No. 24:

In page 29, to delete lines 4 to 6 and substitute the following:

"(iv) by the substitution of the following for clause (I):

‘(I) taking non-negotiable cheques or similar instruments made out to one of the undertakings mentioned at subparagraphs (i) to (vii) of this subsection or taking cash not exceeding an amount of £2,500 in any one year in respect of all clients, for the purposes of the receipt and transmission of orders, and'".

This comes back to a debate we had on Committee Stage. Amendment No. 25 is a related amendment and either it or No. 24 can be accepted but I do not expect both to be accepted. Amendment No. 25 reads:

"(iv) by the substitution of the following for clause (I):

‘(I) taking cash payment for the collection of outstanding premiums billed by a company as defined under the insurance Acts, and'".

Amendment No. 24 was tabled on Committee Stage and the Minister said he would examine it and return on Report Stage. It comes back to the debate on the definition of cash handlers and non-cash handlers and the RAIPI and IPI designation of a broker. We debated the need for brokers to be able to accept cash.

I have tabled amendment No. 25 which Deputy Perry proposed on Committee Stage. It is an alternative to amendment No. 24 and it allows the Minister of State to consider the collection of outstanding premiums which have been billed by a company. That would allow a broker to collect moneys to ensure policies do not lapse. That provides additional protection for clients by ensuring premia are kept up to date so that they do not lose out. There is benefit for both brokers and people who have taken out policies.

I know representative groups have discussed this with the Minister of State and have suggested another amendment related to the Criminal Justice Act, 1994, which would allow for £700 per annum for annual or regular premium life policies and £1,750 for single premium life policies. I do not mind which of my amendments the Minister of State is prepared to accept but it is important for the protection of the consumer and to ensure that policies are kept up to date so that the consumer does not lose out because the policy is not paid up that one of them is accepted. We highlighted a number of instances on Committee Stage where such situations can arise.

Perhaps the Minister of State would also examine another situation regarding what happens where an elderly person in a rural community has a broker or intermediary calling to his or her house. I highlighted a specific instance. I do not see an amendment tabled to deal with that, but perhaps the Minister of State would review that position. Perhaps he would also look sympathetically on these amendments.

Dr. Upton

I support Deputy Naughten's proposal and it is in the interest of the consumer that it be accepted.

The purpose of these amendments is to permit restricted activity investment product intermediaries to handle limited amounts of cash. I fully understand the concerns that have prompted the Deputies to propose these amendments. I have considered this matter further and at length. I am prepared to consider another amendment which would allow restricted activity investment product intermediaries to handle limited amounts of cash in the circumstances envisaged in section 25G(1) of the 1995 Act as inserted by section 22 of the Bill. I am satisfied the posi tion of the client is secured in the circumstances envisaged since the insurance company will be standing behind the intermediary and, given that we have made it explicit in this legislation that receipts must be issued, that binds the insurance company into underwriting, protecting and standing behind the intermediary.

I consulted at length with my officials. We have deliberated on this over a period and, as a result of what has been said in the House and the representations made to me, I propose to consult again with the Central Bank and the parliamentary counsel with a view to tabling in the Seanad an amendment along the lines proposed by Deputy Naughten and supported by Deputy Upton. Therefore, I oppose adoption of the amendments at this stage, but I give a firm and binding commitment that I will move a further amendment in the Seanad and that, when the Bill is passed there, I will return to this House to have it ratified.

I accept the Minister of State's commitment. He has honoured the commitment he made on Committee Stage. He said he would examine this again for Report Stage. I know it is not an easy issue. However, it would be of benefit to everyone in the industry – brokers and intermediaries – and also to the consumer who would have additional protection. I accept the point made by the Minister of State. I will withdraw the amendment and look forward to his tabling an amendment in the Seanad.

I forgot to respond to the Deputy's question about insurance companies which cease to collect regular premiums, particularly in rural areas. We raised this matter with the insurance companies and the industry. They are happy to agree that when arrangements for the collection of premiums are changed, policy holders will be informed in person and in good time. The industry has given a clear commitment on this issue and I am happy to trust it to adhere to that commitment.

I thank the Minister of State for obtaining that commitment from the insurance industry. In the case I came across the individual collected premiums in my constituency and that of the Minister of State, so I am sure he would have a vested interest in ensuring this protection is put in place. We are talking about a small minority of people and I am glad the Minister of State obtained this commitment. I hope this will resolve the issue so we do not have to introduce legislation. It would be lunacy if we had to do so. The commitment is acceptable and I thank the Minister of State for it.

I, too, hope we will not have to come back to this issue.

Amendment, by leave, withdrawn.
Amendment No. 25 not moved.

I move amendment No. 26:

In page 29, to delete lines 42 to 51, and in page 30, to delete lines 1 to 4 and substitute the following:

"(d) there has not been a failure by–

(i) the restricted activity investment product intermediary or a related undertaking of the intermediary, or

(ii) an officer of the intermediary or the undertaking,

to comply with a condition, requirement or direction imposed by the supervisory authority under this Act that is, in the opinion of the supervisory authority, prejudicial to the proper and orderly regulation and supervision of investment business firms or the protection of investors or both.',".

This is a technical amendment which replaces a text which would have been ineffective because it was expressed in negative terms. The amendment describes circumstances in which a restricted activity investment product intermediary may not be deemed authorised for the purposes of the 1995 Act. The original drafting of this provision was very negative. We examined the wording and put forward this amendment to clarify the position so it will have a binding and understandable effect which is obvious to the consumer, the industry and all those who deal with the insurance business.

Amendment agreed to.

I move amendment No. 27:

In page 30, line 34, after "bonds" to insert ", tracker bonds".

This is a technical amendment which inserts the words "tracker bonds" in section 28 of the 1995 Act. This is intended to ensure symmetry between the definition of an investment product intermediary and the products which producers are authorised to offer through such intermediaries.

In section 25 of the 1995 Act, an investment product intermediary is defined as someone who may offer tracker bonds among other products. Section 28 of the 1995 Act lists the products which a product producer may entrust to an investment product intermediary but tracker bonds are not included. We discussed this issue at official level and have tabled this amendment as it is important to remedy this anomaly.

This is a valid amendment. Tracker bonds are a relatively new product and that is why they were not included in the 1995 Act. I may be contradicting an earlier point I made but what will happen if a new product emerges and brokers are restricted from selling it because it is not specified in the 1995 Act? Can we introduce regulations to protect brokers so they can provide the additional service?

Banks are pulling out of many towns such as Mount Bellew in the Minister of State's constituency and Strokestown in my constituency, and abdicating their traditional responsibility to communities. Banks provided some of these services and would have provided new services in the future. Brokers or investment intermediaries may not be able to provide these services and banks will not be available to local communities so people will not be able to avail of services such as new types of tracker bonds. Is there any flexibility to allow us to provide for new products as they emerge?

Yes, there is such flexibility. Most new products are variations of existing products and on that basis can be deemed to be included in this legislation. We have to take account of the growth in the national and international economies. The insurance industry responds to the opportunity provided by growth in the economy and creates new products. We will have to accept that such new products are deemed to be included but we can amend the regulations at any time if necessary. We would also have to consider amending legislation if necessary. We cannot create impediments to the regulation or operation of positive, practical investment opportunities for citizens or groups so we must be prepared to respond to that opportunity. Any new products are deemed to be included.

By way of clarification, is the Minister of State saying that new products can be approved through regulation or would legislation be required?

A new product which is a variation of an existing product could be covered by regulation.

What of a situation such as that involving tracker bonds?

The legislation covers bonds, tracker bonds and various other products. The word "bond" in any new bond would deem it to be included. However, if a totally new product is introduced which has a serious effect on regulation we might have to consider legislation. By and large any new product is deemed to be included. It may be necessary to introduce legislation in certain cases. However, this could be achieved through the Finance Bill so we would not be caught up in the insurance legislation. The House is obliged to pass an annual Finance Bill to implement the provisions of the budget so it could include an amendment in this regard.

Amendment agreed to.

I move amendment No. 28:

In page 31, line 10, after "in compliance with" to insert "this Act and".

This is a technical amendment which corrects a textual oversight in the original text of the Bill. It is necessary to ensure that the Bill is linguistically and legalistically proper.

Amendment agreed to.

I move amendment No. 29:

In page 31, to delete lines 23 to 27 and substitute the following:

"26.–The Act of 1995 is hereby amended by the substitution of the following section for section 29:

‘29.–The supervisory authority may, if it considers it appropriate to do so, require investment product intermediaries or any class or classes of such intermediaries (including credit institutions when acting as such intermediaries) to disclose in communications (including advertisements) made by them in any form or manner (including electronic communications) and on first entering into an investment business service relationship with a client one or more of the following:

(a) that it is not within their terms of authorisation to accept cash or other funds or securities on behalf of their clients or to act on a discretionary basis in the management of client funds,

(b) their categories of authorisation under this Act and the types of investment business services to which they relate,

(c) the names of the product producers from whom they hold appointments in writing,

(d) any restrictions imposed by product producers on the types of business that those intermediaries may accept, and

(e) any other information that, in the opinion of the supervisory authority, will contribute to the proper and orderly regulation of investment product intermediaries and the protection of the clients.'.”.

This amendment seeks to amend the 1995 Act by inserting provisions relating to disclosure to clients on first contact and will apply, for example, to advertisements and letterheads. The new section 29 establishes the principles which should underpin such disclosure and provides that detailed application will be determined in regulations. The purpose of the amendment is to ensure that disclosure to clients is clear, practical and intelligible.

Amendment agreed to.

I move amendment No. 30:

In page 32, to delete line 27 and substitute the following:

"in it unless the contrary is shown.

(7) In this section, ‘investment product intermediary' includes a credit institution acting as such an intermediary.'.".

Amendment agreed to.

I move amendment No. 31:

In page 32, to delete lines 38 to 46, and in page 33, to delete lines 1 to 5.

This amendment seeks to oppose section 27. I raised this issue on Committee Stage. The amendment relates to tour operators and arises because of the need for equality of treatment and equivalence. Why should there be one rule for tour operators and another for brokers? Both provide a similar travel insurance service, the only difference being that a broker provides such insurance on an annual basis while a tour operator provides it on the basis of individual journeys. However, the commissions can vary dramatically between the two. Tour operators can charge up to 35% commission whereas brokers charge somewhat less. There should be equality of treatment. I oppose this section because there should be equality of treatment between the tour operators and the brokers. We teased out this on Committee Stage. I ask the Minister to accept the amendment.

The effect of the proposed amendment would be to include tour operators and travel agents within the scope of Part IV of the 1995 Act, thus requiring these tour operators and travel agents to be authorised by the Central Bank as intermediaries. They are not investment intermediaries.

Travel agents are subject to a regime of supervision and indemnity bonding which covers their activities in relation to travel insurance in accordance with the Transport (Tour Operators and Travel Agents) Act, 1982. That important legislation was introduced in response to the serious crisis at the time in the travel operators' business internationally which was having a detrimental effect on consumers here. There is, therefore, no necessity to apply the supervisory provisions of the 1995 Act, the fundamental purpose of which was to ensure intermediaries could meet their financial obligations to their clients.

This is something to which I have given a great deal of consideration. It is a matter for the industry to be certain in its publicity, advertising and promotion that there is a choice available to consumers vis-à-vis travel insurance from the industry itself through its intermediaries, brokers and agents, as distinct from the fact that the travel and tour operators obviously must ensure their customers are insured before they leave the country. It would be inadvisable to impose this because we would then include tour operators and travel agents as investment intermediaries, and they are certainly not that. If we were to go down that road, it would have serious consequences. I regret I am not able to accept the amendment.

The Minister has failed to address the point, which I am trying to highlight and which I highlighted on Committee Stage, that we are talking about disclosure of commission in investment intermediaries and brokers but we are not talking about disclosure in this case for tour operators. Why should one set of individuals who sell travel insurance be treated differently? If brokers must disclose the percentage commission they receive on travel insurance, surely tour operators should have to do likewise. It comes back to the issue of equality and equivalence and the issue of disclosure, which is the purpose of the Bill. I do not understand why the same provision cannot apply to tour operators and I would urge the Minister of State to reconsider his decision.

I have some knowledge of the industry having been Minister of State with responsibility for this industry in the past. I understand what Deputy Naughten is trying to achieve and I want to go as far as I can to achieve it. My interpretation is that only Part IV of the 1995 Act does not apply to travel agents and tour operators and the Department believes the disclosure regulations and the code of conduct rules apply to them. I will have another look at that between now and the debate on the Bill in the Seanad. I will copper-fasten in my mind what is the de facto situation. If I find that there is need for some minor amendments, I may introduce them then.

To clarify that, will the Minister of State give a commitment that he will review the matter and that if it is the case that there is a lack of disclosure of commission received by tour operators for travel insurance, he will ensure an amendment is introduced on Committee Stage in the Seanad? Is my interpretation correct?

The Deputy's interpretation is such that I will look at it in detail. I will review the matter and then decide what I will do. I do not want to give a commitment which I cannot not honour. I will review it – I will give that commitment here.

Amendment, by leave, withdrawn.

I move amendment No. 32:

In page 33, between lines 5 and 6, to insert the following:

"30.–Section 37 of the Act of 1995 is hereby amended by the insertion of the following subsection after subsection (2):

‘(2A) Provisions relating to the disclosure of commissions that are included, pursuant to paragraph (e) of subsection (1) of this section, in a code of conduct drawn up under that subsection shall not apply to investment business firms in so far as they are acting as insurance intermediaries.'.”.

On Committee State I stated that on Report Stage I would introduce an amendment to section 37 of the 1995 Act. Section 37 provides that the supervisory authority shall draw up a code of conduct which sets out how investment business firms are to behave regarding their clients. Broadly, they are to act in the best interests of their clients and to disclose specified information to their clients. These provisions apply to all intermediaries, including when they are acting as insurance intermediaries.

One of the requirements of the code is that commissions should be disclosed. However, a rigorous regime of disclosure is provided for in section 7 of the Bill, which would take precedence in any case. This amendment excludes intermediaries from the requirement to disclose commission when they sell insurance since they must disclose commission payments under the disclosure regulations. All other provisions of the code apply to them.

In other words, they will disclose commissions under the disclosure regulations. We will not oblige them to disclose them a second time. That would be unfair and unnecessary. It would create another layer of bureaucracy in the documentation which is not necessary. On disclosing commission once, they will have disclosed their legal obligation. That is only fair.

Amendment agreed to.

I move amendment No. 33:

In page 33, line 10, to delete "25C(2)" and substitute "25C, 29".

The purpose of this amendment is to provide that where an intermediary fails to comply with the requirements of section 26, the supervisory authority shall have access to the powers set out in section 74 of the 1995 Act. In other words, we are tying the two Acts together and that gives the supervisory authority the absolute power where the intermediary has failed to comply with the requirements of section 26.

Amendment agreed to.

I move amendment No. 34:

In page 33, between lines 10 and 11, to insert the following:

"33.–Section 31 of the Act of 1995 is hereby amended by the insertion after subsection (6)(b) of the following:

‘(c) Notwithstanding paragraphs (a) and (b) of this subsection, the supervisory authority may dispense with the require ment to ensure the publication of a notice of discontinuance where the investment product intermediary satisfies it that such publication may be detrimental to the orderly and good conduct of its business or may undermine the confidence of clients in the investment product intermediary or for other good reasons.'.”.

As I highlighted on Committee Stage, there is concern among brokers that the requirement to publish a notice of discontinuance where a product producer terminates an intermediary's appointment may lead to hardship. This is the most common reason for the termination of business. Brokers believe that the publication of the notice may lead to customers erroneously concluding wrongdoing on the part of the intermediary. This error may lead to the loss of business. The supervisory authority should be given the power to dispense with the publication where the intermediary has shown good cause.

While accepting fully the Minister's point that there should be such a publication in some circumstances, it would be detrimental to the business of investment intermediaries if this was the case in every circumstances. It is to allow for the flexibility I described on Committee Stage that this would not be an automatic procedure. We who come from rural Ireland are realists and we know what happens when information like this is published in the newspapers and the bush telegraph starts working overtime. In such cases the story grows arms and legs and goes out of control. No matter what one does at that stage, the business of the intermediary involved could be destroyed as a result. What is needed is a little flexibility in the system. Wrongdoing should be published but where there is a valid argument not to publish, the legislation should allow for flexibility. I urge the Minister of State to accept the amendment.

The purpose of this amendment, as Deputy Naughten has clearly outlined, is to dispense with the need to publish discontinuance notices at the agreement of the supervisor. I understand the motive for the amendment and the sincerity of the case made by Deputy Naughten. Discontinuance of appointments may occur for perfectly ordinary reasons and yet notices may give the wrong impression of the intermediary. However, intermediaries may themselves publish the notice of discontinuance explaining the innocuous reasons for it, if they so choose. On the other hand, the purpose of the requirement is to publish so that consumers can be fully informed. Providing such information to consumers is obviously of overriding importance. Accordingly, I regret that if I was to allow any leeway in this situation, the consumer could be the victim at the end of the day. I cannot accept this amendment.

The Minister of State made the point that the intermediary, when publishing the advertisement, would give the reasoning behind it. What is to stop the intermediary, no matter what the wrongdoing, from putting in an innocuous statement as the reason for discontinuance? It is a valid point, especially in rural Ireland, that this flexibility is provided and that there is a supervisory authority which would decide whether publication has to take place so that a line does not have to be drawn on every occasion.

I am not happy there is enough protection for the intermediary if there is a genuine reason for discontinuance rather than because of wrongdoing. In the majority of cases where discontinuance takes place, there is a genuine reason for it and it is not because of wrongdoing. We are talking about a small number of cases of wrongdoing and, hopefully, it will continue along those lines.

I understand from where Deputy Naughten is coming but if wrongdoing is the test, who will be the arbiter and who will prove it? Will it be the supervisor, the insurance company, the courts or the intermediary? How will we have a de facto conclusion of the situation to allow publication to proceed if we use wrongdoing as a test? That would be a very dangerous situation. If I, as an intermediary, am accused of doing something wrong, I have the right of redress, the right to go to the courts. I can file an injunction and a defence in court. That could take one to three years to hear. However, if I am out of business and somebody has replaced me, the consumers will not be sure whether I am in or out. The new person will be asked where Mr. X, Mr. Y or Mrs. Z has gone? How will we prove the case?

It is better to be clear, to keep it simple and to ensure we have notification. The right is there for the intermediary to add to and to qualify that notification and to publish their own notification, if they so wish. At the end of the day, that is in the best interest of the intermediary and the consumer and it keeps the matter simple, which legislation and politics should always try to do.

I come back to the point again, we are not talking about wrongdoing where it has to be proven. We are talking about the opposite, that is, where there is a genuine reason for discontinuance, publication should not have to take place. We are not talking about where wrongdoing has to be proven or saying that publication must take place. I fully agree with the point the Minister of State made in relation to that but I am talking about the opposite. Where there is a genuine reason for discontinuance, that should be provided for and everybody should not be treated in the same way.

What protection is there where somebody who is involved in wrongdoing has to publish or give notice of their discontinuance but gives a reason other than the wrongdoing? No one will be any the wiser in that situation. That does not protect the consumer because they could buy a product from that individual who may be with another company or an intermediary for another company. That is a disadvantage for the consumer because they will not be aware of any wrongdoing. To ensure transparency and that the section achieves what the Minister of State wants it to achieve, where there is a case of wrongdoing I urge him to consider the amendment.

Amendment put and declared lost.
Bill reported with amendment and received for final consideration.
Question proposed: "That the Bill do now pass."

I thank you, Acting Chairman, the Ceann Comhairle, Members of the House and particularly Opposition spokespersons for their co-operation. We have dealt with this Bill in a very positive and practical manner over a long period. This legislation has not been rushed and has been signalled for a long time. I am confident the commitments I have given will be honoured in Seanad Éireann and we will come back to the Dáil to have them ratified. I thank the officials in the Department, the parliamentary counsel and the Central Bank for their co-operation and members of the industry who made submissions to us and consulted us.

I endorse the Minister of State's sentiments and thank him for his courtesy and patience when taking this Bill. I was thrown in at the deep end on Committee Stage of this Bill.

The Deputy did a good job.

I thank him for his courtesy. We have strengthened the Bill with the amendments the Minister of State accepted. I thank him for accepting amendments or for accepting the principle of amendments by tabling amendments on Report Stage. I take his word that he will look at those two issues again in the Seanad and will come back to us. This is fundamentally important legislation. It is important to ensure proper regulation within the industry and this legislation will form the cornerstone of that in the future.

Dr. Upton

I thank the Minister of State for his support and congratulate him on the efficient way in which the amendments have been dealt with. I look forward to the legislation moving through the Seanad.

Question put and agreed to.
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