Insurance (Amendment) Bill, 1938—Second Stage.

Question proposed: "That the Bill be now read a Second Time."

Minister for Industry and Commerce (Mr. Lemass)

As the title of the Bill indicates, its main purpose is to confirm and give statutory effect to an agreement made between certain assurance companies for the transfer of their life and industrial assurance business to a single company. The fundamental part of the Bill is the Schedule, which embodies the agreement referred to in the Title: "An agreement made between the City of Dublin Assurance Company, the Irish Life and General Assurance Company, the Irish National Assurance Company, and the Munster and Leinster Assurance Company." These four companies, which are referred to throughout the Bill as "the participating companies," have undertaken to transfer their life and industrial assurance business to the Industrial and Life Assurance Amalgamation Company, a new company, referred to in the Bill as "the terminating company", incorporated for the purpose of consolidating the existing business.

The purposes of the Bill are twofold, however, not merely to give statutory effect to the scheduled agreement but also to enable other companies engaged in either life or industrial assurance business to enter into agreements with the new company for the transfer to it of their industrial assurance or life assurance business on terms closely related to the scheduled agreement.

The Insurance Act of 1936 embodied provisions designed to facilitate an amalgamation of the Irish life assurance offices. In the course of the negotiations which followed the passage of that measure, it transpired that the British offices transacting life and industrial assurance business here were also prepared to accept the principle of amalgamation. The British offices, however, could not commit themselves to an amalgamation scheme until they were in a position to examine and appreciate the terms and conditions of any scheme adopted by the Irish offices, and to see how such of these offices as had deficiencies in their funds would have these deficiencies made good. The agreement, which is set out in the Schedule to the Bill, has now been reached by the four Irish companies and there is every prospect that the principal British offices transacting industrial assurance business here will, by entering into similar agreements with the new company, transfer that business to it.

The Bill, therefore, provides that in addition to the four participating companies, any other company may join in the amalgamation by entering into an agreement with the new company and adopting the provisions of the scheduled agreement, in so far as they may be applicable. Negotiations have been proceeding with the Prudential, the Brittanic, the Pearl and the Refuge Assurance Companies and there is every reason to believe that they will result in satisfactory agreements between these offices and the terminating company. I should say that in all important respects, such as the basis of valuation, the allotment of shares and the provisions for the transfer of staffs, the terms of these agreements will be the same as those set out in the scheduled agreement and the bonuses which the policies of these companies have enjoyed in the past will be guaranteed in the future. Adequate provision will be made by the British companies for these bonuses, and the policies and shareholders of these companies subscribing to the final agreement will not be prejudiced. There will, of course, be no case of the State covering deficiencies in the case of these other companies which are transferred to the new company. Assets equivalent to the full liability will be transferred in each case. The agreements with the British companies will probably require certain legal formalities in the British courts and the passing of this Bill by the Oireachtas here will be important in that connection. The date for the transfer of business will be so fixed as to enable these formalities to be completed and, in the event of any unforeseen conditions arising, the position can be reconsidered.

The amalgamation scheme provided in the agreement scheduled to the Bill embodies three main principles: firstly, that the interests of the policy-holders, including those holding policies with companies whose assurance funds are not actuarially solvent, will be fully safeguarded; secondly, that all companies joining in the amalgamation of business will enter on a common basis; and, thirdly, that the employees of the amalgamating companies will be fairly dealt with. An important feature of the scheme of amalgamation is that the liabilities and assets of the companies will be ascertained on a uniform basis, and that in the case of such of the Irish offices as are unable to transfer assets equal to their ascertained liability, the deficiency is to be made good out of money provided by the State.

When the business of the participating companies has been valued on the basis provided for in the agreement, it will doubtless be found that in varying degrees, the available assets will fall short of the ascertained liabilities. The State is concerned that the policy-holders should not be adversely affected by any deficiencies in their funds and it is for that reason that it is prepared as an essential condition of the amalgamation, to make good any deficiency out of State funds. That principle was recognised in the provisions embodied in the Act of 1936. As I have already indicated, the provisions of the 1936 Act were not wide enough to meet an amalgamation scheme of a character as comprehensive as has now been found practicable, and it is, therefore, proposed in this Bill to repeal Part III of the Act. That Part has served a useful purpose in that it has made possible the bringing together of the companies to discuss and hammer out a concrete and acceptable scheme of amalgamation. As it was proposed that the State will make good deficiencies in the insurance funds of the participating companies, it must see that all proper safeguards exist in the future organisation and conduct of the business. I am satisfied that the provisions embodied in the scheduled agreement and in the Bill contain all the necessary safeguards.

Until the transfer date has been fixed and the liabilities and assets of the participating companies have been ascertained on the basis laid down in the agreement, it is not possible to state precisely the extent of the State's financial commitments. A rough estimate, however, may be given, that the State's liability will be about £500,000. The new company, which will take over the business of the four participating companies and of such other companies as may enter into agreements with it, has already been incorporated. Its authorised share capital is £200,000, divided into 2,000,000 ordinary A shares of 2/- each, and 100 B ordinary shares of 2/- each. No cash consideration will be paid to the amalgamating companies for the transfer of their business. Instead, each company will be allotted a number of fully-paid-up shares, determined by the measure of the particular company's premium income and the degree of solvency of its funds. If it is able to transfer assets equal to its liabilities, then it will be allotted one 2/- A share for each £1 of premium income, the premium income, or good-will, being calculated in the manner laid down in the scheduled agreement.

When the Minister for Finance is called upon to make good a deficiency in the assets of any of the participating companies, the number of shares allotted to that company will be reduced to correspond to its degree of solvency, and the balance of the shares will be allotted to the Minister for Finance. In addition, the Minister for Finance will be allotted whichever is the lesser of 100,000 shares, or 5 per cent. of the issued capital. Those allotments may, perhaps, be described as bonus shares to be issued to the Minister for the benefit of the Exchequer. These shares will go some way towards narrowing the gap between the amount of State money to be put in and the number of shares to be allotted in respect of that money. The Minister for Finance will hold all of the 100 B shares. These B shares carry the voting rights in the company and will give him complete control of it. The company, having taken over the existing business, will confine its operations to working off that business as a closed fund, after which the company will be liquidated.

There may be some desire on the part of Senators to know why the capital of the company is divided into 2/- shares rather than, say, £1 shares. The reason is that the insurance liability on one side of the balance sheet will be equal to the tangible assets shown on the other side, and, in order to balance the item of capital, it will be necessary to show, on the opposite side, a corresponding item for goodwill. The low nominal value of the shares was fixed so as to keep the goodwill figure at a low level in order that this intangible asset might be eliminated from the balance sheet at an early stage in the company's career. It will be appreciated that the amount of the company's capital does not purport to represent the value of the businesses to be transferred to it. The shares are merely tokens by which the equity in the amalgamated company can be distributed amongst the participants.

In addition to the Terminating Company, a further public limited liability company, referred to in the Bill as the Permanent Company, will be incorporated for the purpose of taking a transfer of the staffs, the goodwill, and the new business of the amalgamating companies; secondly, for the purpose of servicing the business transferred to the Terminating Company; and, thirdly and mainly, transacting new business. This Permanent Company will be the operating company. Its authorised share capital will be £200,000, divided into 200,000 ordinary shares of £1 each. All the ordinary share capital of the Permanent Company will be taken up by the Terminating Company, which will continue, until its liquidation, to hold not less than 76 per cent. of the issued shares of the Permanent Company. The Minister for Finance will thus have dual control—directly over the Terminating Company by exclusive ownership of the voting shares, and, indirectly, over the Permanent Company, by his control of the Permanent Company. The Memorandum and Articles of Association of both companies are to be subject to the approval of the Minister for Industry and Commerce. The directors of the Terminating Company, including the first and any subsequent directors, are to be appointable by the Minister for Industry and Commerce, and the first directors of the Permanent Company are to be similarly appointable.

There is an advantage in setting up two companies to handle the amalgamation. Existing policy holders in the several companies will have their contracts transferred to the Terminating Company, which will, from the outset, have assets adequate to meet the claims of these policy holders when they arise. All new policies will be issued by the Operating Company, which, having taken over the staffs and connections of the existing offices, will be in a position to conduct future business with all the advantages of a unified organisation. The funds having been restored to actuarial solvency with the assistance of a State contribution, the Terminating Company will be responsible for management of these funds and for discharging liabilities under old policies as the claims arise. The Permanent Company, on the other hand, will be responsible for carrying on all new business. There will thus be a complete segregation of the old from the new. There will be no duplication of expense, since the staff of the permanent company will service the policies of the terminating company.

In 1936, when the Insurance Bill was being debated in the Dáil and Seanad, I made clear that I would not approve of any scheme of amalgamation which might be submitted under the provisions of that measure which did not recognise the right of employees who depend for their livelihood upon the insurance industry to continue in that industry. The scheme of amalgamation set out in the agreement gives effect to that principle. Under that scheme, the right to employment by the operating company is secured to the staffs of the participating companies, with certain minor exceptions, at rates of remuneration equal to their average earnings during the two years which ended on the 30th June last. The minor exceptions are persons who entered the service of the participating companies after June, 1936, or who were earning less than 20/- per week or are over 60 years of age. These persons may be offered employment but will not have the express right to employment which other employees of the terminating companies will have but, if they are not offered employment in the operating company, they will be entitled to compensation on the scale laid down in the agreement. If any employee of a participating company refuses to accept employment with the permanent company, he will not be entitled to compensation. The agreement contains safeguards against dismissals on account of redundancy and a board of referees is to be set up to whom appeal may be made if any dismissed member of the staff considers that his dismissal is due to redundancy. It is not contemplated that it will be necessary, in practice, to invoke these safeguards but it is, nevertheless, well to have them down.

Directors and executives of the participating companies are in a different category. None of them will be given an express right to be taken over. If, however, they are not taken over by the terminating company or the permanent company, they will be entitled to compensation on the terms provided in the agreement. It is certain that the operating company, binding itself to take over the general body of existing staffs to work the unified block of business, will, for some years at least, have to carry a larger number of employees than would, in normal circumstances, be necessary. However, in fairness to the staffs that cannot be avoided. The position will, no doubt, right itself over a period of years.

I believe the proposals embodied in this Bill mark an important development in the history of Irish life assurance. Contrasting the conditions under which the business has had to be carried out in the past with those which will obtain in the future, it cannot be doubted that the amalgamation scheme will result in the advancement of life assurance and, particularly, industrial life assurance. The operating company will have all the advantages of a unified organisation and I am confident in believing that, with a spirit of co-operation on the part of all concerned, the future holds bright prospects for Irish life and industrial assurance. It is very desirable that the proposals embodied in the Bill should receive legislative sanction as speedily as possible so that the amalgamation may be proceeded with without delay. At the latest, the Bill must be enacted at the end of next month or the agreement scheduled in the Bill will go by default. The main purpose of the Bill is to confirm that scheduled agreement and I trust that the House will see its way to pass this measure.

Professor Joseph Johnston

I am delighted to find something proposed by the Minister for Industry and Commerce of which I can heartily approve. With every confidence, I recommend the acceptance of the principle of this Bill to all sides of the House. It raises, perhaps, in some degree, the question of private enterprise versus public enterprise—a question on which many arguments may be raised. Such arguments are merely a beating of the air unless they refer to some concrete problem of which every aspect is fully appreciated by the people holding the discussion. In other words, it is not possible, nor is it desirable, to hold what we might call doctrinaire opinions about private enterprise, as such, or public enterprise, as such. In certain types of insurance, I think public enterprise can be very wisely extended. There are certain fields of economic activity in which private enterprise is not notoriously successful. That is so in the case of certain types of insurance, especially so-called industrial assurance. Private enterprise there is little better than a business racket. I am not familiar with the precise facts affecting it in this country but the facts with regard to our neighbouring country, England— which is generally held up as an example for us to emulate and follow —are not creditable to the wisdom of that people. There was recently an interesting debate held over the wireless from the B.B.C. station on this subject. Some of you may have listened to that debate. Some of the facts I now wish to put before you were derived from that debate, while others came from equally reputable sources.

It appears that the total premium income of industrial assurance societies in Great Britain is £60,000,000 per year. Of that income, as much as £20,000,000 a year is absorbed in administrative expenses—wages, salaries, commissions to agents and such like. In fact, it would appear that the conditions under which it is carried on are such as to put a premium on the encouraging by agents of unfortunate, ignorant, poor people to take out insurances which they cannot hope to continue, with the result that the policies lapse. Meanwhile, however, the agent has drawn his commission on the first premium. That sort of thing goes on in England and I feel pretty certain that that kind of thing has been going on over here. I do not know precisely how many shillings in the £ of premium income of insurance companies in Eire have been absorbed in a wasteful process of administration under private enterprise.

There are other departments of insurance activity in which the record of private enterprise is not very creditable. According to that wireless debate, in workmen's compensation insurance—a very important branch of insurance—nearly 50 per cent. of the premium income is absorbed in administrative expenses. In the course of that debate, it appears that responsible and influential people on the other side were of opinion that the State might well consider taking over the insurance liability associated with third-party risks in motor accidents. That does not arise in connection with the present Bill but it is a direction in which I personally would welcome an expansion of public enterprise. We can, I think, take credit for the fact that we have gone even further than our British neighbours in putting certain branches of insurance on a sound footing. The amalgamation of so-called approved societies under the National Health scheme, which has taken place in this area, was entirely sound. I am sure that the result has been a substantial economy for all concerned. In the case of our neighbours, it appears that as many as 6,000 approved societies have to do with the administration of National Health Insurance in association with the State and it appears from the statement made in the wireless debate to which I have referred that the administrative costs of National Health Insurance in Great Britain are as high as 2/9 in the £. I should like to know how our administrative costs under our present scheme for National Health Insurance compare with that figure.

There remain other important branches of insurance, for example, the typical life insurance societies who specialise in life insurance proper, and these, according to the figures, had the highly respectable record ratio of administrative expenses to total receipts as low perhaps as 5 per cent. I speak from memory. There is no case, on these grounds, for any attempt to take over the business of such societies specialising in a type of insurance that is related to the life conditions of the better-off classes of society. At the same time, I see no reason why the State should not enter this life insurance business in rivalry with those private companies who have the privilege of choosing their lives, whereas the State, in the nature of the case, must extend equal privileges to all, regardless of the record of health the person seeking life insurance may happen to possess.

I gathered from the statement of the Minister that the State in subscribing £500,000 to the funds of this amalgamated company will be getting, even in the first instance, something tangible by way of value to represent that substantial investment of the people's money. It will get some share of the 2,000,000 two-shilling shares. What precise share depends on the interpretation of the formula contained in the Bill, which I, personally, do not pretend fully to understand. Whatever share the State obtains of these shares, I hope, in the first instance, they will have a substantial value from the Stock Exchange point of view, even though it falls far short of the £500,000. I also hope and believe that in the course of years, with economy in administration, it will be possible for the State to raise the value of its shareholding interest in the amalgamated company to the level of every penny of the £500,000 which the State is now subscribing. I hope there will be no question of abandoning its interest in the proposed company when that desirable result has been obtained. Even after it has been obtained, when the State has turned this, at present, rather doubtful-looking asset into something worth £500,000, I see no reason why the State should not continue to hold a dominating interest in this particular section of the insurance business, and so continue to hold that £500,000 worth of shares, whatever may be their nominal value, indefinitely. I recommend this Bill to the House.

Mr. Brennan

I am afraid I cannot altogether agree with some of the views which Senator Johnston has expressed on this subject. We must all appreciate the desire of the Minister to put the business of insurance on a proper basis, but in considering the present Bill we should, in fairness to the amalgamating companies, remember the abnormal conditions in which these companies operated—conditions which are recalled in the Schedule to the Bill, where specific provision is made for directors and executive officials who were temporarily absent from duty at various periods on most arduous work of national service. It is, unfortunately, true that the anticipations of the founders of some of these companies were not realised, but there is far too great a tendency to decry the work of the pioneers of Irish insurance who went into the business from patriotic motives and who were ill-equipped, financially and otherwise, to enter such a competitive field. It should be remembered, too, that many of these pioneers have to their credit a not inconsiderable measure of success in other branches of insurance.

As the agreement between the four participating companies is embodied in the Schedule to this Bill, which we must accept or reject as a whole, no useful purpose would be served by a discussion on several matters which it might have been desirable to consider in connection with the details of the scheme. There is, however, one matter dealt with by the Bill itself which is sufficiently important to demand our very serious attention. I refer to the fact that not only is the Government to assist in financing the flotation of the new company on a sound basis but apparently the intention is to continue State control of the company for an indefinable period—if not for all time—and to give to it a virtual monopoly of industrial life assurance.

It is true that excessive competition has been largely responsible for many of the abuses associated with industrial assurance but it is also a hard fact that insurance is not a commodity which sells itself and its manifold advantages have to be brought to the notice of the individual before he realises the folly of being uninsured. Uneconomic competition in the past is not sufficient justification for the elimination of reasonable competition in the future and it is to be feared that the stimulus provided by competition, which results in the acquisition of increased business and in cheaper premiums to the community, must be lacking in a State enterprise.

We can examine the experience in other countries and from that experience enunciate, as a general principle which cannot be refuted, the proposition that Government-owned insurance is not successful insurance and this is not surprising when it is remembered that individuals, and not Governments were the pioneers of insurance. In the U.S.A. every State has its own insurance commissioners and at a convention of these commissioners the president of the convention expressed himself in these terms:—

"Government and State insurance has been conducted on an extravagant, arbitrary manner at heavy cost to the Public, for the benefit of the few—not at all in harmony with the ideals of a free people."

I, like the last speaker, listened to the wireless debate a few nights ago but, unlike him, I tried to consider the two sides in that debate. The impression which he got from it was apparently taken from one side only. In the course of the debate the American Labour Leader, Mr. Samuel Gompers, was quoted as follows:—

"So far as I am concerned I have believed in voluntary systems of insurance. I do not believe that the Government of a country should be absolved from performing its customary functions, but I do believe that what the individual citizen could do of his own initiative should be done by him."

Russia furnishes a further example of an unsuccessful and unsatisfactory State monopoly of insurance and even there, contrary to all its preconceived ideas of government, the State has had to seek reinsurance facilities from privately-owned insurance institutions in other countries. Indeed, we need only look to the example of the British Government which endeavoured, through the medium of the Post Office, to sell life assurance and eventually abandoned the project as a dismal failure.

The unduly high expense ratio, the inadequate security offered by some insurance offices, and in particular the heavy lapse ratio became serious blemishes upon the business of industrial life assurance. While legislation was necessary to eradicate these evils, the notable improvement of the position which has taken place in Britain is largely due to the efforts of the more reputable companies— large and small alike—to drive out of the business the undesirable elements which had attached themselves to it. Thanks to our own Act of 1936, industrial life assurance can only be carried on in this country under conditions which provide adequate protection for the assuring public. That Act, having set such a high standard, no Government need fear that individual efforts and reasonable competition will prove other than beneficial to the future development of the business.

Both the Minister and the amalgamating companies are to be congratulated on having reached agreement and this House will, doubtless, implement the terms of the agreement by the speedy passing of the Bill. The sooner the new company gets into its stride the better, and, with expert management, there can be no doubt that the vast amount of work involved in the amalgamation will be competently and expeditiously undertaken and that the foundation of the new enterprise will be securely laid.

We should, however, consider the ultimate possibilities of the company. I can see no reason why its activities should be permanently confined to this country. It may be looking ahead but it is surely the duty of the State to be far-sighted, and I can discover no grounds why the company, once firmly established, should not extend its activities and afford its facilities to our own people in other lands, who would be glad to have such an opportunity of showing their practical interest in the homeland. Not merely Belfast, but-judged by the test of the Irish population—Glasgow, Liverpool and London are amongst the largest Irish cities and, farther afield, New York and Boston are in the same category. A State-owned company could not look for expansion in such centres. It would not be allowed to operate outside its own territory and the State would thereby be deprived of an "invisible export" which might become of appreciable value. This difficulty appears to be realised by clause 21 of the agreement, which expressly excludes from the scope of that document a subsidiary undertaking, operating in Northern Ireland, of one of the participating companies.

Finally, let us consider what is the province of the Government in such a matter. Some people would say that the duty of a Government is to govern and to leave business to look after itself. Another section of opinion would desire that the State should own practically all the important commercial undertakings in the country. The majority, however, would, I think, prefer the middle course. In their view a Government should govern and come in to assist industry and commerce only when the desired objective is of national importance and can be achieved in no other way. It may well be that, for the time being, the scheme can be financed only by the method proposed in Section 5 of the Bill. It is obviously impossible to examine a business proposition without concrete details and, in this case, the extent of the assistance required from State funds cannot be ascertained until the actuarial examination of the amalgamating companies' accounts has been completed. When that stage has been reached the Government, in return for the capital invested, will have a substantial shareholding, and, if it cannot obtain reimbursement of the moneys advanced, it will have to continue as a shareholder. I believe, however, that when a definite proposition can be formulated, private enterprise would be prepared to take up these Government-owned shares and to recoup the State for the liabilities incurred by it in the early stages of the company.

The Bill provides for the fullest Government control of the terminating company so long as it exists, which will probably be for many years, and in the permanent company its share interest will be proportionate to its shareholding in the terminating company. Can the Minister say, at this stage, if the shares to be held by the Minister for Finance or his nominees will constitute a majority holding? If so, my arguments against State ownership would apply. If a minority holding, on the other hand, it seems to me still less desirable for Government funds to be invested permanently without control, and I certainly would not advocate the relinquishment of control unless and until the State's financial liability can be fully satisfied.

I do not know whether private enterprise would look upon these shares as a gilt-edge investment, but I do feel that the capital would be forthcoming for such a proposition just as readily as it has been subscribed for other new enterprises in recent years. The State would then have its money refunded and made available for other purposes; the taxpayer would cease to be interested in an enterprise in which, as a taxpayer, he has no right to be involved, and there is every reason to feel that the company under ordinary commercial control would go steadily forward. As a matter of business, the wisdom of the State in maintaining insurance funds on a subsidy basis is open to misgiving, and I hope that, in the subsequent stages of the Bill it will be possible for the Minister to accept an amendment ensuring that the Government having put the company on its feet, will be prepared to divest the State of needless financial responsibility.

Mr. Tunney

I am disappointed to learn that amendments cannot be moved to this Bill on behalf of those people who have been working in Irish insurance offices, and, from what we have been told by the Minister, those who have been working for foreign offices which are about to be amalgamated. The Minister has stated that the employees are to be fairly treated, but I am not satisfied that the treatment to be accorded to the employees is fair. Take the case of a man who went in to work for one of the Irish offices at the age of 50 years. He is now 60 years of age, and that man goes out with ten months' wages. What is he going to do from the age of 60 years and ten months until he is 70? He has reached an age at which he cannot take up heavy manual labour, and he cannot re-enter the insurance business for a year after he has left the insurance business.

There is no use in closing our eyes to the fact that that man must come on the rates for his maintenance. He has reached an age at which he is not fit to compete with younger men for heavy labour. Employers in this country at present are giving reasonable wages, and I do not blame them when they look for the best, the ablest and the strongest men who will give the best return, and it is not the man of 61 years who has spent ten years away from manual labour who will give that return. I for one am not satisfied that favourable treatment is being meted out to that man. In addition, that man might have been working for ten, 15 or 30 years previously for a foreign office and honestly and conscientiously thought that he was doing a good national service by leaving that office to take up work with an Irish office. These men are not even being reasonably treated, and I appeal to the Minister to bring in an amendment to make it optional to a man to go out, if he so desired. I think it a pity that that man is to be put out at 60 years of age.

There is another man who, I hold, is not being fairly treated—the man who holds a book interest. There are men who held book interests which represented their living. That book interest was their farm, so to speak. They have worked for years and years to build it up and always believed that when they were leaving, they would have something to sell. That man must now go out and must sell against his will, and there is a great difference between a man selling voluntarily and being compelled to sell. He must take whatever is the scale laid down and he is not to receive even average wages. He is to be brought in and employed by the new company at a fair wage. I should like to know who will have the defining of that fair wage. I hold that that man suffers a great loss, because he loses his book interest, and he should come in at the same average wage as anybody else.

I realise that there were difficulties in the way of the Irish insurance offices, but we must give them credit for starting from the bottom and working up a fairly decent business. At least, they did work up a business giving employment to a great number of people at a fairly decent wage, a wage much better than is paid by some of the foreign companies which boast of having millions of pounds. I pay them this compliment, as one who has worked for the Irish companies, they were giving better wages and better conditions of service to their staffs than some of the companies supposed to be possessed of millions of pounds. I had the privilege of working for an Irish office and I can give firsthand information. I am to-day working for an Irish office and we are better paid in that office than the employees of any other company, with the exception of one. That is a collecting society and it is the only company which beats us. It is a great compliment to the Irish offices that they did give a big amount of employment and that they did treat their employees fairly.

With regard to redundancy, the Minister himself has stated that there must be redundancy. If you amalgamate four offices you must have redundancy and we are told that five more offices are going to come in. My vision of the future—it may be wrong but it is my personal view—is that only two out of nine people at present working in insurance will be working in insurance in 10 or 15 years' time. The Minister has done a lot in years past for the revival of industries that will give employment, and I wonder if it is wise to carry out all this amalgamation. I hold that this is more of a closing down of industry, because people must eventually become unemployed. When you have nine offices amalgamating, eight head offices, eight district managers and eight agents must disappear, so that eventually there must be a great amount of unemployment.

I hold that the rank and file of the staffs are not being fairly treated, and there is a great contrast between the treatment to an agent who is 60 years, who gets ten months' salary, and the director who gets five years' salary. That director may be a much younger man than the agent. I am sorry that the Minister, who has proved so good to the working classes during his term of office, while not responsible for bringing forward the agreement, is responsible for putting the Bill through. I, as one of them, am somewhat disappointed that he did not look for more rights for the working classes before he took the responsibility of piloting this Bill through the House. I appeal to him to consider the agent of 60 years of age whom I have described, and also the man who went in two years ago and built up a connection after working hard for those two years, because I think it is very hard on that man, and particularly if he proved himself successful at insurance, to be thrown out now. I have been asked to raise this matter on behalf of the agents, and I appeal to the Minister to consider it. We have been told that the new system of collecting will be different. If the system is different and if there are going to be areas, I am glad to say that the Irish agents are united and are prepared to resist any worsening of their conditions of service. They are determined not to accept from the new company worse conditions than those which they enjoy at present.

Mr. Lemass

I have no intention of decrying the work done by the founders of the Irish companies, although these companies did not, in the event, prove to be as successful as their founders hoped. I appreciate, probably as clearly as anyone could, the very great difficulties with which these companies had to contend and the effect of the competition they had to meet from companies of much longer standing, with immense financial resources, which previously had the whole of the industrial assurance business here to themselves.

It is a matter, I think, for congratulation that some of the Irish companies did not show signs of financial weakness earlier than they have done. But while that is so, we must recognise that there is a great deal of truth in the strictures on the conduct of industrial life assurance business which Senator Johnston expressed. To a large extent, industrial assurance business was carried on by methods which were very unfair to the class of persons who had dealings with the industrial insurance offices. The stupendous growth of great financial organisations in Great Britain was due largely to those methods—methods which called forth a public outcry in due course and led to the enactment of legislation restricting the activities of these companies and prohibiting them from continuing to conduct this business in the same manner as previously. We enacted similar legislation here in 1936 and it became necessary, therefore, for the Irish offices to face the fact that the particular methods by which they had been enabled to carry on previously would not be permitted in the future, and that the much stricter legal code which would apply to their business was going to have a very definite effect upon their prospects of recovering from the financial straits in which they found themselves then: and it has to be recognised that some of the Irish offices were in such a position of financial weakness that action in relation to them had necessarily to be taken.

I do not think that Senators and others who have addressed themselves to the terms of this Bill relating to the compensation of staffs have adverted sufficiently lucidly to the position of the companies which employ these staffs. Many of these workers, who are now being guaranteed a livelihood in insurance business, or, in the alternative, compensation, had, and have, no such guarantee in their existing employment. The companies employing them are actuarially insolvent and, in the interests of their policy-holders, the liquidation of these companies would necessarily have had to take place if this amalgamation scheme had not emerged. The members of the staffs of these companies are benefiting substantially by the fact that this amalgamation is taking place, because it must clearly be recognised that the existing conditions could not have been allowed to continue in any event.

We must primarily have regard to the interests of the policy-holders in these companies. It would obviously be wrong for the Government to allow a position to continue in which the companies were continuing to issue new policies and undertaking new liabilities, when it was known that their assets were inadequate to cover their previously existing liabilities. Apart altogether from the fact that the methods by which that new business was secured were made illegal by the Act of 1936, our primary concern was the policy-holders, and it must continue to be the policy-holders. We are taking over the policy-holders of the amalgamating companies and giving them what they have not got now, or what the greater number have not got, that is, a guarantee that, when claims arise upon these policies, these claims will be met.

The company, to which their policies are being transferred, will have assets sufficient to ensure that every possible claim that will arise will be fully covered. They have not got that guarantee now. It was primarily in the interests of the policy-holders that this amalgamation was decided on because action had to be taken in any event. If action was not taken towards amalgamation and State intervention for the purpose of making good the deficiencies, then action to liquidate the companies would have had to be resorted to. In that event, both the staffs and the policy-holders would have been heavy sufferers.

It may be that time will prove that the amalgamation of industrial assurance business in one company will reveal defects which we cannot foresee now. I feel satisfied, however, from my limited knowledge of the business, that industrial assurance can be carried on on very much better terms and conditions for the public by the amalgamated company, a company which will have a monopoly of the industrial assurance business, than by the competing companies, and that it is well worth trying this experiment, if one may call it so. We would have had to face the position of the industrial assurance business even if we did not feel that amalgamation of the insurance offices was desirable. It might be that if the Irish companies were solvent, and if there was no question of the State intervening for the purpose of protecting policy-holders, that we would not have intervened at this particular stage for the purpose of effecting amalgamation for amalgamation sake, but as we had to deal with the insurance business we felt that we might as well deal with it on a proper basis rather than merely attempt to patch up a situation that required attention. I am satisfied that the proper basis is to eliminate from industrial insurance business the main cause of all the abuses that have been associated with it, and that cause is excessive competition for new business.

I do not think that amalgamation will result in a diminution of the amount of industrial insurance business done, or that there is any ground for Deputy Brennan's fear—that persons only had the advantage of insuring themselves brought to their notice as a result of the activities of privately-owned concerns. I think the amalgamated company will be able to ensure that persons will have the advantage of assurance brought to their notice, and that in any case the volume of industrial insurance business will increase by reason of the fact that so much better terms will be made possible through a reduction in the administration expenses and the other advantages that follow from the operation of a unified business.

It may be, as Senator Tunney said, that in ten years' time you will only have two people employed where nine are employed now in industrial insurance here. If that should happen, I feel that the benefit from that situation will go to the class in the community that requires all the benefits that it can get—those who are employed in various occupations and have to content themselves with the class of life policy known as an industrial insurance policy. The administration expenses at the Irish offices are far too high now. They are much higher than in Great Britain. They vary from office to office. Senator Johnston raised the question about that, and asked for the precise figure. He will find it in relation to each office in the published returns issued by my Department and submitted by the various offices. But there is no doubt that in the case of all the Irish offices at the present time the administration expenses are far too high, and it is because they are far too high that the insurance funds of most of those offices show a substantial deficiency at the present time. It is necessary, therefore, either to increase the premiums —which in the existing competition is impossible—or to decrease the benefits —which is equally impossible—or to decrease the expenses—which is possible. The only way in which the situation can be dealt with is by reducing the administration expenses of offices doing industrial insurance business, and that amalgamation will make possible.

Some fault may be found with the provisions for dealing with the staffs over 60 years of age. I ask Senators to keep in mind that some of the staffs concerned were employed by companies actuarially insolvent, whose existence might be terminated in any event. The number of persons who have got very long service in the insurance business, who are now over 60 years of age and who would be transferred to the new company by the amalgamated companies cannot be very great. I think it will be possible for the board of the permanent company to give consideration to individual cases. I am sure they will do so. I certainly propose to ask them to do so, although it will be entirely a matter for the board to decide on. I do not think that those who entered the employment of the amalgamated companies within the past two years have any claim. A very large number of people enter the employment of insurance companies for a short period and go out again. Even in the most depressed period here, the insurance companies were advertising for hundreds of agents. That was, in fact, part of the system. They were brought in and paid mainly on the basis of new business that they got, and they got that new business from their friends and relations. When that was exhausted they ceased to be agents. Consequently the personnel of the staffs of insurance companies was always changing.

In any event, those who entered the employment of the amalgamated companies during the past two years did so in the light of the knowledge that the policy of the Government was in favour of amalgamation, and that the 1936 Act provided the means of effecting that amalgamation. My undertaking to the Dáil was that I would ensure that an amalgamation scheme, if any, would provide adequately for those who on that date were depending for their livelihood on life insurance business. That we have done, and I think it can guarantee to all such persons a continuation of their employment at remuneration equivalent to their average earnings over the past two years.

A question has been raised as to the intentions of the Government in connection with the ownership of the shares of these companies in the future. May I point out that the actual number of "A" shares to be held by the Minister for Finance in relation to the total number of "A" shares to be issued will not determine the control of the terminating company? The control will rest with the "B" shares, all of which will be owned by the Minister for Finance. In my opinion, the Government should continue to own these shares indefinitely. I do not want to say that no possible circumstance will arise in which the Government would consider it good policy to dispose of these shares, but so far as one can foresee the future now, and to lay down policy for the future now, it is the intention of the Government to retain the ownership of these shares and not to dispose of them to private interests.

One or two other matters were raised which I think can be more usefully discussed on the Committee Stage. If there is any other information concerning the details of the amalgamation scheme or the position of the amalgamated companies that Senators may require, I can furnish it to them when we reach the Committee Stage of the Bill.

Question put and agreed to.

Committee Stage ordered for Wednesday, the 30th November.

Seanad Éireann debate - Wednesday, 23 Nov 1938