As somebody who has dealt with contracts in a litigation environment, I should comment on this Bill. The Bill is based on a 2004 Law Reform Commission report. Many of the proposed reforms are non-controversial and they are very welcome.
I compliment Deputy Pearse Doherty on bringing it forward. It rebalances the contract of insurance away from the insurance companies that are in the dominant position. To restrict their wriggle room is extremely important. While it is an excellent Bill, section 7 is a worry. I say this genuinely. It abolishes the concept of insurable interest. It means that in future, a claim by a consumer under an otherwise valid insurance contract cannot be rejected by the insurance company simply because the consumer did not have an insurable interest in the subject matter of the contract. Insurable interest may well be a difficult concept to pin down, but I think we all know it when we see it. It is the term used to describe the policyholder's connection with the subject matter. For example, I can insure my own house against fire because, if my house goes on fire, I will suffer loss. However, if I insure Deputy Michael McGrath's house against fire, I am either just placing a bet or I am preparing for arson. I have no insurable interest in his house and so, if I insure it, the policy is void under the law as it now stands. There are admittedly difficult cases at the margins and the rules about insurable interest may well, as the Law Reform Commission argued, have developed in a way that is confusing and sometimes illogical. However, there is a principle at stake here. The concern of the courts has been that insurance contracts can involve a high degree of moral hazard and should never resemble gambling or wagering. The Law Reform Commission considered but rejected the option of reforming the law on insurable interest. Instead it recommended what is here in section 7, namely, its abolition.
I have to raise two issues, otherwise I will be asking myself in 12 months' time why I did not. They deserve serious consideration. One is the general policy question arising from the connections, and differences, between insurance and gambling. The second relates to a specific rule that prohibits parents from insuring the lives of their underage children for an amount that bears no relation to any expenses they may incur. On the first issue, a wager and an insurance policy are clearly similar in that there is a sum paid to another party, with the possibility of a much larger payback depending on a future event that may or may not occur. The difference, however, is that with a wager placing the bet creates the risk, while an insurance policyholder is being protected against a risk to an interest which he already possesses, independently of the contract. In other words, whether or not one has an insurable interest is at the core of the distinction between a wager and a bet. The Law Reform Commission disagreed but it was not definitive on this point. The commission instead argued that while the approach of the common law and earlier legislation reflected the prevailing attitude in the 18th century that such activities were a significant social evil, in this State in the 21st century, gambling is now seen as an economic activity to be regulated in much the same way as other comparable activities such as financial services, including insurance. The commission argued that the Gaming and Lotteries Act 1956 is thus now regarded as an unsuitable legislative framework. It pointed to the fact that in 2013 the Government had published the general scheme of a gambling control Bill, to provide a system of regulation that aimed to "achieve an appropriate balance between, on the one hand, encouraging commercial gambling (including casinos and online gambling) and, on the other, protecting vulnerable consumer gamblers". It said that the 2013 scheme proposed that gambling contracts would be in future legally enforceable, replacing the long-standing ban on enforceability of wagers. The commission concluded that:
Gambling is now recognised as a legitimate activity with significant economic benefits which can be dealt with through statutory regulation. These matters are seen as consumer protection matters rather than moral hazard issues and attest to the fact that any insurable interest requirement, as a legislative proxy for counteracting socially undesirable contracts of speculation, has no part to play in modern Irish law.
Although making gambling contracts legally enforceable was indeed provided for in the 2013 scheme, it is important to highlight that this proposal has not yet emerged in Bill form, let alone become law. There is a Gaming and Lotteries (Amendment) Bill 2019 currently in its final Stages, but that Bill does not make any amendment in this area of law. There is a cart and a horse here. In other words, a vital development that the Law Reform Commission presumed would be in place before its own report was acted on - as Deputy Pearse Doherty has done through the present Bill - has not in fact occurred. Nor do I believe, incidentally, that there is any reason to presume this or any future Oireachtas will in fact legislate to make gambling contracts enforceable or legislate with a view to encouraging commercial gambling which includes casinos and online gambling. I do not believe it will ever happen. It is too soon to say the Oireachtas agrees with the commission that the 18th century views on gambling as a significant social evil are outdated and that gambling should be instead viewed as a legitimate economic activity with significant benefits.
We are amending insurance law by removing the requirement for an insurable interest in an insurance policy. However, we will have retained the rule, in section 36 of the 1956 Act, that says that gambling contracts are still legally unenforceable. What will be the law? Does either the sponsor of the Bill, Deputy Pearse Doherty, or the Minister have a view as to the legal effect of enacting this Bill while section 36 of the Gaming and Lotteries Act remains in force? The Law Reform Commission did not have a view on this, because it presumed that section 36 would have been repealed by the time their proposals came to be considered. Even though the requirement for insurable interest is removed from insurance law, is there not a risk that an insurance policy taken out on a subject matter in which the policyholder has no insurable interest will continue to be considered a wager under the Gaming and Lotteries Act? We pass law reform measures to clarify the law. Passing this measure, in these circumstances, just makes the law more obscure.
With the latitude of the Leas-Cheann Comhairle and the House, the second point relates specifically to children. The Life Insurance (Ireland) Act 1866 introduced the rule that life insurance cannot be taken out where the policyholder has no interest in the life of the person insured. The law recognises that an individual has an interest in insuring his or her own life, the life of a spouse and, in some cases, the life of an employee. The law has never recognised that parents have an insurable interest in the lives of their underage children. This is not just down to a purely economic argument that the death of a child is not measured in terms of financial loss. It is based on the reality that children are vulnerable and, if they are more valuable dead than alive, then they are vulnerable to being killed if there are insurance proceeds to be claimed from policies on their lives. The law has prohibited not just life insurance but also payments from benevolent societies, trade unions and so on, to parents on the death of minor children, except to cover reasonable funeral outlay and expenses. This Bill proposes to disapply the Life Insurance (Ireland) Act 1866. It seems there will be no longer any requirement for the policyholder to have an insurable interest in the life of the person whose life is insured. In other words, there will be no requirement that the policyholder would suffer any financial loss as a result of that death. We must remember that life insurance policies are not an indemnity under which one claims compensation limited to the actual financial loss suffered. Instead, life insurance policies are entered into for lump sums. It seems there will be now no limit to the amount for which one could insure the life of a dependent minor child. What is more, as I read it under this Bill, I still could not profit by insuring another person's house against fire, because the indemnity rule would still limit me to a claim for the economic loss I suffered on its destruction. However, life insurance is not governed by the indemnity rule. Even though I as a perfect stranger could not insure another person's house, I could insure another person's child. Why is that a good thing? Most parents would be appalled at the notion that we are changing the law here to allow strangers to speculate on the lives of children. Any parent who discovered such a policy would, I think, notify the Garda. They would regard it either as a most distasteful bet or as a threat. Why should we change the law so that, as a result of transactions entered into by parents or by strangers, a child who is a financial burden when alive becomes a financial asset when dead? Usually, we change the law on foot of popular demands for change. Who has called for this change? What interest group is behind it? What need does it meet? It seems to me to be a step that is worrying. The scrutiny report on this Bill stated, "In respect of life assurance, if someone is prompted to murder to recover a life assurance policy, they are unlikely to be deterred by "insurable interest"." That is quite clearly missing the point, with respect. The point is that no one can be prompted to murder to recover a life insurance policy if such a policy is not permitted in the first place.
I ask the Minister of State to consider those points. It is an excellent Bill but I am genuinely worried about section 7. It may have consequences which are definitely not anticipated or intended by Deputy Pearse Doherty or by the Minister of State. Perhaps it might be worthwhile to run it through the Office of the Attorney General to see what he thinks, particularly in the context of a measure that the Law Reform Commission anticipated would have been implemented prior to the passage of this Bill, which would have dealt with this anomaly. I say this in a constructive way and congratulate the Deputy on the Bill progressing at the speed it has.