I move:
That Seanad Éireann approves the following Order in draft:—
Sale of Goods and Supply of Services Act, 1980 (Section 51) (Insurance Brokers) Order, 1984
a copy of which Order in draft was laid before Seanad Éireann on 29th November, 1984.
Sale of Goods and Supply of Services Act, 1980 (Section 51) (Insurance Brokers) Order, 1984: Motion.
The Prices Advisory Committee on Motor Insurance, who were established in November 1981, submitted a report to the Minister in January 1983 entitled "Report of Inquiry into the Cost and Methods of Providing Motor Insurance, 1982". In this report, the committee made numerous recommendations about the various aspects of motor insurance which they examined. One of these areas was the work of insurance intermediaries, particularly brokers.
The committee found that many members of the public who deal through brokers were not particularly aware of the insurer with whom their insurance had been taken out and considered that they were actually insured by the broker. Many of these policyholders were unaware of exactly how much their premium was since the amount shown by the broker frequently included a handling charge or service charge or both. The PAC considered that brokers' clients were entitled to know (a) how much their insurance premia were costing them and (b) how much the broker was charging for his services. They recommended that a broker, in billing his client, should show the premium charged by the insurance company separately from any charges imposed by the broker. The Government approved the implementation of this recommendation.
While it had initially been envisaged that the requirement to identify service charges would apply only to motor business, indications were received about the imposition of charges on other forms of insurance, and it was accordingly found necessary to extend the scope of the order to cover all non-life insurance business.
As life assurance premiums are paid, in most cases, by direct debit and no complaints had been received in regard to this area, it was not considered necessary to extend the order to cover life assurance business.
The order as drafted requires insurance brokers — as defined in the order — to segregate and show any charges they are making separately from the amount payable under the policy. The amount payable under the policy of non-life insurance includes the levies applied under the Finance Act, 1982, and the Insurance Act, 1964. Thus what will be required to be shown is the amount the policyholder is required to pay for his insurance separately from the amount of service charges applied by the broker, or the amount of any other charges, fees or amounts whatsoever.
"Insurance broker" is defined widely in the order to include all insurance intermediaries.
There has been a general welcome for the order from those I consulted. I know that there have been fears expressed by one broking body as to the consequences of the order, but I must stress that what is involved here is a basic measure of consumer information. Policyholders are entitled to know what they are paying for. The order does not prevent brokers making service charges, but it does require them to disclose any such charges. I would hope that full co-operation will be received in implementing the order.
The order will be enforced by the insurance division of my Department. The penalties for breach of the order are set out in section 6 of the Supply of Goods and Services Act, 1980 — £500 or six months maximum on summary conviction, £10,000 or two years maximum on indictment. I trust, however that given a sensible attitude on all parts, it will not be necessary to invoke that section of the Act.
I am somewhat disappointed with this draft. I see it as not being necessary at this time. There is no organisation in the professional field — solicitors, doctors and accountants — being charged in the specific way that the Minister now sees fit to charge insurance brokers. The measure is totally anti-insurance brokerage. We know that in 1969 the insurance companies reduced the commission rate from 10 per cent on motor insurance to 5 per cent. Of course 5 per cent is a totally uneconomic rate for any organisation to work on, hence the reason for a charge. If this draft is passed, it will simply mean that in many cases when the customer receives his bill from his insurance broker he will go direct to the insurance company and bypass the insurance broker. Many of them will not pay the fee.
This is an insignificant measure. The Minister is putting the cart before the horse. I agree that something is necessary. What is clearly necessary is suitable, appropriate registration of insurance brokers. Unless we have that, we are dodging the main issues. We all agree that the consumer must be protected. But in so far as the insurance industry is concerned, I again repeat that the Minister is putting the cart before the horse. Surely registration is the answer. If there was registration all the points of concern to the Minister of State at that Department could and would be organised and controlled. Insurance brokers have had meetings with the Minister of State. It is a pity that he did not continue discussions with them with a view to appropriate registration and say to them at the end of the day what he is saying here. This is premature. I appeal to the Minister, even at this late hour, not to proceed with it but to adjourn it and go for a suitable registration of brokers, which will deal with the problem in toto.
The members of the professional insurance brokers' associations, IBA and CIBI, are very responsible people. Why should they be penalised for the action of what might be described as a few rogue insurance brokers? They are people who have professional indemnity bonds, who are totally qualified in the insurance industry, who know exactly the business of insurance, trained people who have set themselves up as experts in the field of insurance to advise their clients to get the best rates possible, to help in claim settlements and so on. Yet they are to be penalised because there are some rogue insurance brokers who are charging higher fees than they should. Why penalise the genuine fellow? Why not go for registration and control every aspect of the industry?
Mr. Cluskey, when he was Minister, was concerned about the question of bonding, so that if a broker went out of business there would be a fund for him, similar to that for the tour operators. If there was registration, bonding would form part and parcel of whatever proposals the Minister sought, in agreement, having had discussions with the brokers' organisations.
If the Minister is concerned about the consumer, he should look further afield than this insignificant measure because it defintely is not doing anything for the consumer. If the Minister wants to do something for the consumer in the field of insurance, I suggest that he make strong representations to the insurance companies to give a 10 per cent commission rate on motor insurance. Surely it is time, as a Minister with responsibility for insurance, that he brought his counterparts together, the Minister for Justice and the Minister for the Environment and said to them, "Let us talk about aspects of insurance in your particular Department". Why not abolish the jury system, which is affecting the insurance industry in a way that was never, ever thought possible? We read recently of three insurance companies who are on the verge of pulling out of Ireland because of the jury system operating here. Not alone are juries determining the amount of the award but also determining liability. Insurance companies are suckers, they are caught for every penny once they go into the High Court. In 99 per cent of cases an award is given and usually it is substantial. There is no way that insurance companies can continue to make a profit, even a minute profit, because of our jury system. Employer's liability, public liability insurance is almost impossible to get for any heavy risk. For any heavy risk, premiums are being shot up to 100 per cent, 200 per cent, and varying figures up to 400 per cent. Why not have discussions with the Minister for Justice in that area and endeavour to eliminate the jury system and thus bring premiums down to a realistic level?
When we spoke here about the Road Traffic Act we asked the Minister of State at the Department of the Environment to increase the uninsured driver's fine to £1,000. He said it should be left at £350. The insurance companies pleaded with him to increase it to £1,000. The Minister would not listen. He was forgetting that in the mid-sixties, out of the goodness of their hearts, and to protect the good name of their industry, the insurance companies set up the Motor Insurers' Bureau. They have been funding that bureau since. This year the figure expected to be paid out is something in the region of £40 million. Surely the companies who are paying that kind of money, who are concerned about their industry in that way, should be listened to. I thought it very wrong that the Minister would not agree to an amendment in the Seanad to increase the maximum fine to £1,000. It was a gesture. What would happen tomorrow morning if the insurance companies said there was no further obligation on them and they were pulling the plug on the Motor Insurers' Bureau. I am not requesting that they do so, but they could do it and the Government would be left to pick up the tabs.
What about the famous 2 per cent levy for the PMPA which is not just applying now to motor premiums but is eating into the old age pensioner's household policy or fire policy? The old age pensioner probably never owned a car in his life, yet he is being penalised for the wrongs of one motor insurance company. Not alone that, but the PMPA are in direct competition with the insurance companies. It is known that they are cutting rates left, right and centre. The Minister might argue and look at the Chair and say perhaps that is not relevant. I am arguing that this is totally relevant, that the whole insurance industry, if we are thinking of the consumer, must be examined and looked at. It is as simple as that.
Going back to the draft, I accept that we have rogue insurance brokers who are charging fees far in excess of what they should but what is this legislation going to do about it? Is it not a fact that this draft is simply asking brokers to itemise their figures? If they show a figure of £200 gross premium plus a fee of £50 they are complying with the draft and therefore complying with the law. What follow-up has the Minister on that? Perhaps he might comment on that.
I think that this is piecemeal legislation. It is not dealing with the maverick broker. It is not dealing with the problem of the insurance broker in the area of life insurance, for example, who is telling his client he will have so many extra millions of pounds at the end of the term of insurance. It is doing nothing in the area of control. It is not doing anything at all in respect of what I would regard as the public good. There will be no proper supervision in this area. Certainly it is not tackling the issues of the insurance industry in the area of brokerage and in the area of insurance companies themselves.
If the Minister is serious about this problem he would again consider seriously — and I plead with him to do this — the question of registration. That would surely be doing the right thing. That would surely be answering the calls that were made in the O'Connor Report which dealt with controls of insurance brokers and agreed that qualified insurance brokers should be paid. I ask the Minister at this late hour not to proceed with this order, to postpone it until such time as he has a proper registration of insurance brokers. The insurance brokers, those who are members of the insurance brokers' profession and of the bodies that represent them, will only be too happy to talk to the Minister. They have already spoken to the Minister. I think it was 12 months ago when one of them met the Minister and I do not think they heard from him since.
The Minister should meet the insurance brokers' organisations, talk to them about registration, iron out the problems in this regard and not put the cart before the horse as he is doing in this case. Registration is the answer. It will solve all the problems in this area. I plead with the Minister to adopt this course. The consumer must be protected. Anything that we do should naturally be in the interest of the consumer. Again, I pose the question: why should the Minister penalise all the genuine brokers for a few rogue brokers? I hope that the Minister will grant my request and perhaps postpone this matter until a more appropriate time. Certainly it is premature at this point in time.
I would like to say a few words in support of the order. The main burden of what Senator Fallon has said is to urge that this order be not made today on the grounds that it is merely a piecemeal measure. We have the old proverb that half a loaf is better than no bread. Very often a corner of a loaf is better than no bread at all. While many of us might agree with what Senator Fallon has said, that there are many other things that should be done besides what is in this order, I do not think we should allow that factor to blind us as to what is in this order.
I have, over many years in this House, talked on a number of matters on the basis that the public have a right to information. I would like to say that I think the right to information is a citizen's valid right. I will, as long as I am in this House, defend it. That is the key point. That is the kernel of what is in this order that is being proposed today by the Minister of State. He is suggesting that in regard to this matter the public have a right to information. I agree, of course, with Senator Fallon that it would be a good thing if the public had a statutory right to information in a lot of other things, in regard to a lot of other professional fees where there is confusion. If an order or a proposal comes into this House in regard to giving the public a right to information on these matters is will certainly secure my personal support.
It may well be that there could be a very distinct improvement in the area of insurance and of non-life insurance generally by the registration of brokers. I am quite prepared to listen to this case whether it is propounded by Senator Fallon or by the Minister of State. It may well be that that is the road that we should take. That should not stop us taking the action that is proposed to us today.
Senator Fallon also said that we should take an alternative approach, that we should go to the Minister for Justice and suggest that there should be a change in the jury system. This is a very large proposal. To ask that this small thing which is concerned with the right of information on the part of the policy-holder should be held up and put into cold storage before we enter into a long debate about the scope of the jury system in this country does not reflect a balanced point of view. In connection with this matter my information is that the situation is changing. While it might have been true two or three years ago that the amount of damages and awards being made by juries were over-large, my information is that the trend is all the other way. My information is that the counsel for plaintiffs against insurance companies are now trying to settle before cases go to the jury because a reaction has set in against what was definitely a period of over-large jury awards. I hesitate to say that because a number of Members of this House are not only members of the Bar but appear from time to time in insurance cases and I would hate them to think that I was endeavouring to make expert judgment on this.
What we are faced with here is a small, net issue, a very clear recommendation. If we look at the report of inquiry into the Cost and Methods of Providing Motor Insurance which was laid before us on 30 December 1982 — I am referring to the document that bears the Parliamentary number PL 1323 — it states in paragraph 4.6:
Many members of the public who deal through brokers are not particularly aware of the insurer with whom their insurance is taken out and regard themselves as being insured with their broker. The broker's formal reward for his services takes the form of commission which the company allows him on the premiums he collects, the standard rate in motor insurance being 5 per cent.
It goes on later in the same paragraph to say:
A third form of income has made its appearance in recent years, and many brokers as well as receiving commission out of the premium quoted by the insurance company, add on top of the gross premium a further handling charge as additional remuneration for their services. It would be necessary to examine individual cases to form an opinion as to whether this additional charge to the client is justified. What is certainly objectionable is that in many cases the fact of there being such an additional charge is not revealed to the customer, to whom there is quoted a single sum which he may take to represent the insurance premium but which in reality covers both the premium and the broker's handling charge.
Paragraph 4.6 goes on to say — and I heartily concur with what it says —:
The client is entitled to know what he is paying for the broker's services and we recommend that a broker, in billing a client, should show the premium charged by the insurance company separately from any charges made by the broker, preferably by giving a copy of the company's quotation or renewal notice to the client along with the total bill.
That is the net point of what the Minister of State has proposed to us. I believe that we have a tendency in this country, whether it be in large matters or in small, to cover up, to distort, to obfuscate the real cost of things. We would be better off in large things and in small to make sure, whether it is the decision in regard to a large investment policy or the payment of non-life insurance, that we know what the real cost is and how that real cost is made up. We have a right to know what the components are. A bill that we receive in regard to non-life insurance should be transparent in the sense that it is absolutely clear how much is being paid for every aspect of that. I agree with Senator Fallon that there are many other areas in which this principle also applies. Let us today agree to apply it in the area of non-life insurance and let us continue to press the Minister and other Ministers responsible to apply it in other places also.
I wish to support Senator Fallon's argument with regard to this motion. I would query the fact that the Minister is more concerned with the commission paid to the broker than attacking the fundamental problems of high cost motor insurance. I would like the Minister to let the House know what he has, or his Department have done to implement the recommendation of the inquiry into the cost of motor insurance. Could the Minister tell us if a commitment was given in the Dáil that the Government and the Minister would act, and act swiftly, to implement the recommendations of this inquiry body?
We should be tackling the real problem of the high cost of insurance premiums. High cost insurance is the main reason why a large percentage of people driving today are driving uninsured cars. I agree with the Leader of the House that the public have a right to information; they have a right to assess the profitability or lack of it of the insurance company. They have a right to know where their money is going or what percentage of the insurance company's money is indiscriminately disposed of through court action where in many cases awards have been given much in excess of what would be an agreed standard.
There is also the problem with regard to insurance brokers. It is too easy to become an insurance broker but at the same time the Minister is asking us to adopt a motion which will be mainly concerned with the commission paid to a broker which would be in the region of 5 per cent minimum, probably 10 per cent maximum. Legislation was promised to deal with insurance and insurance brokers generally. This is piecemeal legislation to tackle what the Minister sees as a problem but which has not been questioned to my knowledge. If this motion is adopted today insurers will be paying their premiums direct to the insurance company thus eliminating the broker. But what will happen in the event of a claim? Where will the broker fit in? Who will act for the insured person? We could also be penalising qualified brokers as against brokers with very little experience. This motion should be withdrawn. I ask the Minister to tackle the real problems of insurance in general.
I have some sympathy with some of the views expressed by Senator Fallon in so far as they relate to the necessity for a legislative review of the insurance industry in general and an examination of the problems which beset that industry both in the life and non-life areas. I also have considerable sympathy with the point of view of the Leader of the House, Senator Dooge, in so far as he indicates that it is better to deal with one small area of the problem as it is before us now and not to wait until such time as a very substantial review would take place of the whole insurance industry before making any change whatsoever.
My criticism of the order, therefore, is not on the basis of whether or not it limits the access to a jury assessment for damages or any other such matter. My examination of the order is restricted to whether or not it achieves the purpose which it intends to achieve. Nobody can suggest that the recommendation of the committee of inquiry should not have our enthusiastic support, the Prices Advisory Committee of the motor insurance industry. It should have our enthusiastic support. The extract from the report read by Senator Dooge should be sufficient to convince us that there is a necessity that the general public would be informed as to the amount of money which they are paying for the service of providing insurance brokerage. That is right and proper. My experience — and I have considerable experience of dealing with insurance brokers — is by and large that they are very efficient people who perform an excellent service, but there is a value on their service just like anything else. They should be open to the same scrutiny as any other professional group with regard to the level of charges imposed in respect of the services they provide.
My criticism of the draft order is that it fails totally to achieve this purpose. It seeks to tackle only one of the many problems which confront the individual when he or she is deciding the amount of money to pay an insurance broker. In so far as it does this I welcome it, but it only requires the insurance broker to identify in respect of all non-life insurance any service or additional charge which he might be making in respect of the policy. This is proper, but the average policy-holder will not be aware of the rate of insurance commission which his broker will be getting in addition to that. This can vary very substantially depending on the type of insurance. It can be as low as 5 per cent — a crazily-low figure in my opinion — in the case of motor insurance. In respect of other insurance, for example, marine insurance, it could be as high as 17½ per cent, and there could be a variation within an individual class of insurance business between one company and another. This is not adding very much to the store of knowledge of the person who takes out insurance.
The report quoted by Senator Dooge states that the person taking our insurance is entitled to know what he is paying for the broker's services. This order is not going to achieve that. It is merely going to identify the additional charge which the broker considers necessary over and above the commission which he will be getting from the insurance company. It puts no obligation on the insurance broker to identify what percentage of the premium he is going to get in commission. Therefore, armed with this additional information, which I consider to be welcome, the insurance user is not going to know how much money the broker is making out of the transaction, what his rate of profit is.
If a person goes to a solicitor for his services ultimately the solicitor will say that he will charge £500 or £1,000 for that service. The same applies to a member of the bar or a doctor, but in relation to insurance services the user is not aware of the commission the insurance broker is getting. Therefore, this order is only identifying any additional charge. These additional charges, as Senator Fallon quite rightly said, came about because of the unrealistic rate of commission which was being given in respect of each motor insurance premium. In my view 5 per cent was unrealistic for the type and level of service which is necessary in the processing of these matters.
This order does not tackle or solve the problem of letting the person know what he is going to have to pay for the services, and it is a defective order for that reason. I object to it, not because there is too much information, but because there is too little information. It is not sensible that the policy-holder will not know what he or she is paying for the insurance broker's services. I am not objecting to the level of commission in respect of non-life.
Another reason I have for objecting to the order is that it fails to tackle the obscene rates of commission which are charges in the life area. There are absolutely crazy levels of commission charged in the life area without the knowledge of the policy-holder. These rates of commission can range from 50 per cent of the premium to 100 per cent of the premium in the first year, or as near 100 per cent as makes no difference. The order fails to tackle that. Why is the order not drafted in such a way that you have to show in respect of both life and non-life policies, the service charge — already in the order — and the rate of commission? That is all that is necessary.
It appears that I am being heckled by the acting Leader of the House. If the Senator could raise his voice so that I could hear him then I could answer him, but if he mumbles I cannot answer him.
I do not want to disappoint the Senator, but I was not talking even to myself about him.
The Senator should not have been talking at all.
The Senator likes to be Leas-Chathaoirleach also.
I think that is most unfair. That should be withdrawn.
I can assure Senator McDonald that my ambitions are far higher than being Leas-Chathaoirleach.
An Leas-Chathaoirleach
I certainly think that should be withdrawn.
(Interruptions.)
The reason I think that this is an inadequate order is that it fails to tackle the problem which Senator Dooge identified as being necessary. One of the conclusions of this committee to which he referred was the necessity to enable the user of the broker's services to be in a position to say what he is paying for the broker's service. It clearly fails to do so because, as I said, in respect of the life or non-life insurance area it fails to identify the rate of commission applicable to an individual policy. The rate of commission is all that is necessary, and most people can work that out themselves.
In respect of the life assurance it fails to make any provision whatsoever. The rip-off in the life assurance area is in the rate of commission on the first year's premium rather than in any service charge. If the Minister was going to do something which was necessary — and I believe it is — he should have done it properly, and he should have done it in such a way that members of the public could identify what they are paying for the broker's services. They could then shop around from broker to broker and take into account, not only the cost, but the standard of service which they are getting. It is not always the person with the cheapest rates who will give the best service in the long run. Insurance brokerage is a very skilful business, but it is important that people should know what they are paying for this skilful service.
I congratulate the Minister on having the courage to take a step in the right direction, but, having taken that step, he has not gone far enough. There are adequate powers for the Minister under section 51 of the Sale of Goods and Supply of Services Act, 1980 to make a further order instructing that in any such written document, as is specified in this order, the rate of commission payable to the insurance broker would be clearly shown.
At least this order is unusual in that it is being criticised not only for what is in it but also for what is not in it. Most orders going through the House almost go "on the nod" and that is not really the ideal way. The debate so far has been quite interesting. My experience in the area of insurance is purely that of one of the ordinary people who pays for the minimum cover which one gets away with. Perhaps that is not altogether true, but I find that very many people have great difficulty in securing adequate cover and that without the aid of insurance brokers it would prove extremely difficult for them. For that reason I would hope that there would be no damage done to that industry. I do not know how extensive it is but there are categories, especially younger people, who have not got the experience of shopping around and they find it very difficult to get cover. More often than not the cover is offered to them at outrageous rates.
Since so many divergent views have been expressed here, perhaps the Minister might consider deferring it until a later sitting so that the House might get an opportunity to reach a better consensus. I am amazed at the number of problems that crop up in the insurance field. There are two youth employment schemes in County Laois and both of them are experiencing tremendous difficulty in securing adequate cover. I do not know whether that aspect comes under this order before the House, but the entire area of insurance seems to be one that would need comprehensive legislative review. It is an area where the advice of experts would be needed to know exactly whether one is covered or not, because there is so much small print that needs to be teased out and that needs to be understood and explained. That is a problem, and I would hope that at some stage the Minister and his Department would be able to refer to it and perhaps give the insurance paying public greater opportunity and greater protection under the Act. Since the last Insurance Act went through the House there have been many changes in society and people are not able to take the risk.
Before noon today, I listened to a programme on Radio Éireann. People who were driving cars without insurance were interviewed and gave the reasons why they were not insured. They said they could not afford insurance. If one cannot afford to tax and insure a car, in my view one cannot afford to have a car. There should be a very clear attitude towards that. The penalties for driving without adequate cover for third parties who may be injured should be stepped up so that they will prove to be a deterrent. Some might think that the few who pay motor insurance premiums will continue to fork out £60 million or £100 million a year to pay the bill for the people who completely disregard the law in this instance.
I would agree with the speaker who said that the Department of Justice should be involved in the review. I would hope that if the Minister cannot see his way to defer this motion this evening he would bring in in the New Year as a matter of urgency comprehensive legislation to give support to people who need to be insured if they want to continue with their normal lives. It should not be prohibitive. The loading of young drivers, especially those who have not had accidents, from the beginning is bad policy. Perhaps that aspect is not covered in the motion. I should have known better than to have been talking while my colleague Senator O'Leary was speaking. I want to assure the House that I was not commenting on what he was saying. I would like to apologise to him.
I thank the Senators who contributed to the debate. In relation to Senators Fallon and Lynch, I am somewhat surprised at their opposition to what is essentially a matter of consumer information. We are all anxious to ensure where at all possible that the consumer will get as much information as possible about matters affecting his or her life. Indeed in this regard it is an important aspect of life that insurance is now such an expensive part of household budgets. I am somewhat taken aback and surprised at the anti-consumer position being taken by——
I think that is a very unfair statement. I made it quite clear that I am not anti-consumer. I am saying it should not be done piecemeal like this.
It is unfair that the Minister should not be allowed to make a statement.
I am saying that it is unfair of the Minister to make that statement.
It is a matter of consumer protection and consumer information. The order is being made for the benefit of the consumer, the policy holders, and I am somewhat astonished at the attitude being taken by the Opposition to this motion. I was also taken aback by a second aspect of the Opposition's comments. They said that I am not taking sufficient action in the insurance area, when here I am in fact carrying out a recommendation of the Prices Advisory Committee Board of Inquiry. I am being criticised for so doing. Their attitude here is somewhat contrary to logic, and I can assure the House that I am very concerned about the many problems facing the policy holders in insurance, not only motor insurance but also the non-life and life sectors.
I wish to point out that the measure being moved here today has the support of the insurance companies operating in the Irish market. I would also like to state that the brokers' organisation were given the opportunity to comment on this proposal when the Government's decision on the Prices Advisory Committee Report were published in October 1983. I specifically asked for their views on the proposals during a speech to the National Insurance Brokers' Association in March of this year. The association made its views known to me at two meetings with the Department in July and October of this year. Its views were fully considered but they were not acceptable to me because they were directly contrary to both the recommendations of the committee and to the Government's decisions on the matter.
Senator Fallon thought the order was unnecessary. He suggested that 5 per cent is an inadequate commission on motor policies. He thought a service charge was necessary because this claimed a low level of commission. He then suggested that the public would deal directly with insurance companies if they were aware of the brokers' service charge. Surely the public are entitled to know if a charge is being levied on them. That is all that this order seeks to do. It is to inform the policy-holder about such service charges. It does not outlaw service charges. I do not think that any responsible insurance broker should object to this. Insurance brokers generally perform a very good service to the community. Their primary function is to act on behalf of consumers to ensure that customers are getting the most competitive price on their insurance. That is their legitimate role and it is for that that they are recompensed. It is very important that that role should continue.
Senator Fallon referred to the fines for uninsured driving. The maximum fine now goes to £1,000. This is a result of the Road Traffic (Amendment) Act passed in July of this year. He also referred to the control of the level of premiums as opposed to the disclosure of charges as provided for in this order. The control of the level of premiums is a matter for the National Prices Commission to examine under the Prices Acts. This order in relation to charges simply complements that control.
Senator Lynch thought I was paying too much attention to this issue as opposed to implementing recommendations of the PAC. This, of course, is one of the recommendations. The various other recommendations are also in hand or have been implemented. I accept that action is required not only in my Department but in the Departments of Justice and the Environment.
The most notable action that has been taken is the increase in the fines for uninsured driving, the greater Garda vigilance in relation to this offence and the setting-up of the Motor Insurance Advisory Board which I announced last week. I feel that that board would be of great assistance in advising me of the various problems in motor insurance.
I fully recognise that the draft order addresses only one aspect of the role of insurance intermediaries and the relationship between intermediaries and customers. The aspect which is dealt with in the draft order is, however, an important one. I am doing it now rather than waiting for a more general comprehensive scheme for the regulation of insurance intermediaries. The question of commission payments to intermediaries is not dealt with in the draft order for a number of reasons. Commission payments are included in the basic premiums charged by the insurance companies and therefore can very considerably between different insurance policies. The payment of the commission forms part of the contract between the insurer and the intermediary rather than between the intermediary and the policy-holder. However, the cost of commission payment is of course ultimately borne by the policy-holder.
My responsibility as Minister in charge of supervising insurance companies is to the policy-holders. I am therefore anxious to achieve the most reasonable level of commission payments in all areas of insurance. This is the case for non-life insurance as a mechanism of the Prices Acts, and all applications for approval of increases in insurance premiums are looked at and any excessive commission levels are disallowed.
The order before the House represents only a small part of the general plans for the regulation of the activities of insurance intermediaries. This general question was raised by a number of Deputies. Following consultation with various interested parties in this matter, my Department are currently putting together proposals aimed at protecting the public by bringing about a situation of legally binding standards for intermediaries. When legislation is introduced we will be able to address this area very comprehensively. It will be appreciated that I cannot enter into any details in regard to the possible provisions of such legislation as these are, of course, matters for the Government to decide on. I would stress that the introduction of the proposed order represents the first move in the introduction of a system of regulation of the activities of insurance intermediaries. It is my hope that legislation giving effect to the regulatory scheme can be introduced as soon as practicable in 1985.
Senator O'Leary referred to commissions in the last insurance period. I recently indicated that legislation would be brought in to ensure that commissions will be at reasonable levels in that segment of the industry. A number of attempts have been made to achieve agreed levels of commission payments within the life insurance industry. A few companies have not gone along with these arrangements and I am making my views known to them. If excessive commission rates are paid on life assurance policies the powers provided for in the new legislation will be used. The House will be clear, therefore, that I do not intend to remain silent or inactive on the whole question of commission rates or on regulation of intermediaries.
The order before the House I would consider to be reasonable, a step in the right direction. It is to inform consumers of the cost of insurance policies to them. It is only a first step. I fully realise that the whole area needs to be addressed widely, from the report of PAC on motor insurance to excessive commissions in the whole insurance area and to dealing with the registration, etc. of intermediaries. These questions will be addressed at the proper time and in the most comprehensive manner possible. This order is not an anti-broker order and I object to it being described as such. It is an order informing policy-holders of what they are being charged for their policies and therefore it must be seen as an order in the consumer protection area.
An Leas-Chathaoirleach
I will allow Senator Fallon to put a question, but we cannot have a further discussion.
I support the view of the Minister regarding legally binding standards and so on that he will introduce in the future. My point today is that this draft should wait until the registration of brokers is being done. Has the Minister considered what this draft will do to the number of jobs in brokers' offices around Ireland? I believe that there will be a huge drop off of jobs. At the moment you have close on 2,000 employees in insurance brokers' offices. I believe that will be reduced significantly. I also feel that——
An Leas-Chathaoirleach
I cannot allow you to make another speech.
I want to make it clear that I am not anti-consumer. I accept the principle behind the draft but I am saying it should be done as a total package, not in the piecemeal way it is being done today.
Senator Lynch rose.
An Leas-Chathaoirleach
We have discussed item No. 2 and the Minister has replied. There are rules in this House and they will have to be adhered to.
In my short contribution with regard to the right of information to the public, I stated categorically, and quoted and supported the Leader of the House, that the public have a right to information. I specifically named areas where the public have a right to information, and the Minister in my opinion was quite wrong in what he said. What the Minister failed to say——
An Leas-Chathaoirleach
You are back making another speech. Would you put one question to the Minister? I will ask the Minister to reply, but I cannot allow——
In view of the fact that 12 per cent of the cost is used in administration and the broker cannot survive on 5 per cent commission and carry the burden of administrative cost, can the Minister give us a guarantee that if this motion is passed there will not be mass unemployment in this sector?
I am not at liberty to enter into discussion on the operations of intermediaries or to enter into discussion on their costs. I refute any suggestion that this order would result in serious unemployment in the broking industry. The primary reason this motion is being moved today is as a result of the recommendations of the PAC and as a result of what we did in the Department. It is an essential and constructive move in relation to informing policy holders of the cost on their policies.
I must reiterate that it is a consumer information move which has been recommended and I am very surprised that the Opposition party are taking a different approach to it. The position is illogical and not sustainable.
Question put.
The Seanad divided: Tá, 28; Níl, 14.
Tá
- Belton, Luke.
- Browne, John.
- Bulbulia, Katharine.
- Burke, Ulick.
- Connor, John.
- Conway, Timmy.
- Daly, Jack.
- Deenihan, Jimmy.
- Ferris, Michael.
- FitzGerald, Alexis J.G.
- Fleming, Brian.
- Harte, John.
- Higgins, Jim.
- Hourigan, Richard V.
- Howard, Michael.
- Howlin, Brendan.
- Kelleher, Peter.
- Kennedy, Patrick.
- Lennon, Joseph.
- McAuliffe-Ennis, Helena.
- McDonald, Charlie.
- McGonagle, Stephen.
- McMahon, Larry.
- O'Brien, Andy.
- O'Leary, Seán
- O'Mahony, Flor.
- Robinson, Mary T.W.
- Ryan, Brendan.
Níl
- Fallon, Seán.
- Fitzsimons, Jack.
- Hillery, Brian.
- Honan, Tras.
- Hussey, Thomas.
- Kiely, Rory.
- Killilea, Mark.
- Lanigan, Mick.
- Lynch, Michael.
- Mullooly, Brian.
- O'Toole, Martin J.
- Ross, Shane P.N.
- Ryan, William.
- Smith, Michael.
Tellers: Tá, Senators Belton and Harte; Níl, Senators W. Ryan and Fallon.
Question declared carried.