Amendments Nos. 75, 78 and 79 are related, and amendment Nos. 76 and 77 are alternatives to amendment No. 75 and may be discussed together.
Insurance Bill, 1987: Committee Stage (Resumed).
NEW SECTION.
Debate resumed on Government amendment No. 75:
In page 20, before section 37, to insert in Part IV a new section as follows:
.—(1) A person shall not act as, or hold himself out to be an insurance broker unless—
(a) he is a member of a representative body of insurance brokers which requires compliance with the provisions of this Act as a condition of membership, and that body is recognised as such by the Minister, and he ortherwise complies with the provisions of this Act, or, not being a member of a recognised representative body, he complies with the provisions of this Act, and
(b) he is in a position—
(i) in the case of non-life insurance, to arrange insurance contracts on behalf of his clients with at least five undertakings, or
(ii) in the case of life insurance, to arrange insurance contracts on behalf of his clients with at least five undertakings.
(2) A person shall not act as or hold himself out to be an insurance broker unless he holds an appointment in writing from each undertaking for which he is an intermediary.".
We are turning now to Part IV of this Bill which deals with the regulation of insurance intermediaries. Before dealing with the specific amendments to Part IV, with your permission, a Chathaoirligh, and with the permission of the House, I would like to make a few general remarks which will explain the approach we are adopting.
First, the whole area of insurance intermediary regulation is new in the Irish context and Senators will appreciate that legislation for a new area, particularly a new area as complex as this one, is a very difficult task. Secondly, an adequate and decent standard of protection and advice had to be extended to those who use intermediaries. Thirdly, I had to bear in mind the constraints on Exchequer spending and the necessity to avoid an over-complex and costly system of regulation. Lastly, I was anxious not to upset or to interfere with existing good market practice. I wish to make it clear that the introduction of legislation in no way casts a bad light on the vast majority of intermediaries; rather, however, that the public have to be protected from the unscrupulousness of a very few. I trust Senators will find that the amendments I am proposing meet all of these very important objectives which we have set ourselves.
I will be proposing to make it clearer that insurers' responsibilities for their intermediaries extend both to ensuring that intermediaries comply with the Bill as well as in regard to sums of money paid over by a client to an intermediary. As for intermediaries, apart from the comprehensive bonding and other financial protection measures that will be put in place for their clients, the amendments also propose to ensure that the public are made very much aware of the precise category of insurance intermediary with whom they do business. While the Bill will not enforce a concept of strict polarisation in law, this is nevertheless a process which will probably evolve over time of its own accord. With increased consumer awareness in this area, the public will rely less and less on limited part time operators and will turn increasingly to full time independent professional advisers. The net effect of the changes will be to enhance the protection and level of service given to clients by intermediaries, while allowing time where necessary for the market to adjust smoothly to the scheme of regulation. These are just some general comments.
The three new sections proposed to be introduced by Government amendments Nos. 75, 78 and 79 in effect replace the regulatory structure envisaged under the text of sections 37 and 38 in the published Bill. The fundamental differences between the old text of section 37 dealing with brokers' qualifications and the new text that I am proposing in Government amendments Nos. 75 and 78 are as follows. First, the Minister will be empowered to formally recognise broker representative bodies which require compliance by their members with the provisions of this Act. This is a major step forward. Second, there will be no ministerial recognition of brokers on an individual basis. Insurance companies, whether individually or collectively, will ensure compliance by such non-affiliated individuals with the legal requirements before granting agency appointments or paying commission. Third, before he can act as a broker in either life or non-life insurance, a broker will have to hold at least five written agencies from either five life insurers or five life non-insurers. Power is also being taken to provide that the Minister may, by regulation, require insurance brokers to take out and hold professional indemnity insurance. This requirement was also included in the Third Schedule to the published Bill.
Government amendment No. 79 proposes a new section which deals with the criteria to be applied by insurers in appointing insurance intermediaries and paying them commission. The new section is an expanded version of section 45 in the published Bill. It differs from the existing section 45 in that it allows an insurer to appoint a member of a recognised representative body of brokers as an intermediary, to pay him commission and to rely on such membership as evidence that the broker complies in all respects with the statutory requirements of the legislation. In all other cases the insurer will have to make reasonable inquiries on an on-going basis or cause reasonable inquiries to be made on his behalf, that a person complies with the statutory requirements before appointing him as an intermediary or paying him commission. The new section also differs from the old section 45 in another very important respect. While it continues to reinforce the prohibition in regard to commission payments to unauthorised intermediaries, it nevertheless preserves the long-established and widespread practice of insurance intermediaries sharing commission with legitimate introductory sources of business.
The reason behind the change is as follows. The regulatory scheme envisaged under the old sections 37 and 38 with direct ministerial hands-on type supervision and responsibility for insurance intermediaries would have been very impractical, very costly, very bureaucratic and overly legalistic. The benefit of the new sections is that they place the primary responsibility for regulation where it properly belongs and can more effectively be carried out, that is, in the marketplace between the intermediaries and the companies themselves. The compliance costs on the market will. therefore, be much less while affording similar levels of protection to the public at the same time. This, therefore, is a sensible solution to a difficult problem. This new approach will put the onus on insurers, whether individually or collectively, to make reasonable inquiries regarding the people to whom they pay commission.
The insurers and the broker bodies may, if they wish, act together to set up a centralised clearing house arrangement for members of broker bodies, that is, number of agencies held, type, professional indemnity, bonding, separate bank account and so on. A similar structure can also be put in place by the companies for their insurance agents, thereby eliminating costly and unnecessary duplication of checking procedures at the level of the individual company. The market will be free to introduce whatever procedures it deems most cost-effective and practical to verify compliance with the legal requirements. In my view the new arrangements represent the best of both worlds, that is, self-regulation underpinned by statute.
As to the number of agencies to be held by brokers, the Government amendment provides that brokers may not act as such unless they hold five life agencies or five non-life agencies. Under the present wording of the Bill, an individual could hold five agencies, four of them with life companies and one agency with a non-life company. This individual could still represent himself as a broker in respect of non-life business. A separate threshold for life and non-life business of five agencies is reasonable and necessary, as brokers portray themselves as being independent and in a position to offer real consumer choice. This is as it should be and a minimum level of five agencies will guarantee the necessary measure of independence in this respect in both life and non-life business.
The question of including a provision making it compulsory for brokers to hold a policy of professional indemnity insurance was considered at length, given problems in the recent past relating to the cost and availability of such insurance in Ireland. Accordingly, I now propose to proceed by taking the power to provide that the Minister may, by regulation, require that such insurance be held by insurance brokers. Senators will see this as a substantial step forward. Senators should note that it is my intention that a mandatory professional indemnity requirement will not come into force for two years, following commencement, so as to allow the market time to develop and adjust. This will coincide with the limit on the number of agencies which may be held by insurance agents after that period as proposed by amendment No. 97 to section 41. Officials of my Department have already been in contact with the insurers' representative body seeking assurances and proposing arrangements about availability of professional indemnity insurance for brokers. I can assure the House that no statutory requirement will be imposed if there are grounds for believing that the cover required by law will not be generally available.
Senators will also note that the most important consumer elements of the Third Schedule are now proposed to be incorporated into the main body of the Bill proper. I refer, of course, to aspects such as professional indemnity insurance cover for insurance brokers and solvency verification upon which the availability of bonds will obviously depend. In addition, I should mention the placing of business which will be regulated by the number of agencies held, the wide definition of the tied agency concept in section 43 and the provisions of section 48 which will give the Minister power to draw up codes of conduct for intermediaries.
Finally, as regards commission sharing by insurance intermediaries with introductory sources, it has been pointed out to me by sectors of the insurance industry that to cut across such arrangements would not be in the best interest of consumer intermediaries or, indeed, of the market generally. Accordingly, it is proposed to allow on an exceptional basis the sharing of commission by an authorised intermediary where such sharing is based on an insurance policy placed with an insurer through the said intermediary's agent. It should be noted that this will not result in either a diminution of consumer protection, in that the client will have all the necessary legal protection afforded by the Bill by having his policy taken out vis-a-vis legitimate insurance broker or agent or in an increase in commission payment levels. Insurers will still only be able to pay the maximum level laid down by the category of insurance in question and it will be a matter for the insurance intermediary and the introductory source involved to agree on commission sharing.
The wording of the new sections is fairly clear, but if Senators require a detailed explanation I have no great difficulty with that. This is just a broad explantion of it. If Senators wish to go through the individual sections, we certainly can do that.
First, I want to express my disappointment that the suggested changes we looked for on Second Stage are not in this Bill. What the Minister has now proposed in amendment No. 75 does not meet with my approval or with the approval of the insurance industry generally. It is very difficult for people, perhaps, to live in the real world if they are caught up in theory. The very nature of the amendments being proposed shows that there was very little thought put into the practical implementation of this legislation on the ground.
If we accept the fact that brokers have made a very definite commitment, financially and otherwise, to establishing the appropriate offices, to improving their standards to such an extent that they enjoy the goodwill of the community and that they give a very good and efficient service to the consumer and we are trying to ensure that the consumer will benefit in the final analysis by the enactment of this legislation, we will have to recognise that there are definite deficiencies in the direction the Minister is seeking to go in implementing a Bill of this nature to regulate intermediaries. I would go so far as to say that, if the present wording goes through, in particular amendment No. 75 (1) (b) dealing with the number of agencies an agent can hold or that a broker can hold, it will certainly make the entire implementation of the Bill a farce.
Anybody in the insurance business or anybody who has listened carefully to the arguments put forward by people interested in the welfare of the insurance industry and in the welfare of the consumer and policyholder will tell you that, if you define an agent as somebody who has in the case of non-life five undertakings and in the case of life assurance four undertakings — I think it is four and four that the Minister is presuming——
Four agencies.
Four agencies for each section of insurance and after that anyone with five or more agencies will be defined as brokers. It is not possible to police that arrangement to the extent necessary to protect the consumer and policyholder. Many brokers will reduce the number of agencies they have at present to such an extent that they will then become agents and they will extricate themselves from the improvement of standards and qualifications the Minister is seeking to have implemented in this Bill. I understand perfectly that there must be a contiguous relationship between agent and broker. There is no reason why the vast majority of business in this country cannot be carried on with four agencies in life and non-life insurance. Surveys available to the Minister's Department would indicate that if they had as few as three agencies, they could carry on 65 per cent of the business in life and non-life insurance. That is what we must address here.
We have numerous people who will extricate themselves from consumer bonding — and this will not be to the benefit of the consumer — and from professional indemnity which is what the Minister is seeking to implement through legislation rather than by regulations under the Third Schedule. The Minister is creating a loophole which will be to the detriment of the policyholder if something goes wrong in relation to a claim, whether it be in the life or the non-life area. He is reducing the standard of independent and professional advice, which is essential to the protection of the policyholder.
It is essential that we establish clearly that an agent is a part time operator assisting a consumer on a part time basis, while a broker is a full time independent professional person who has devoted considerable resources towards establishing a very efficient operation. The broker must go to considerable lengths to ensure that he is fully up to date and au fait with every detail of the different policies in the life and the non-life area in the interests of the consumer. I humbly suggest that this is not the case, by definition of the work of an agent. An agent does not carry out the same analysis of detail, The same examination and investigation which are essential in this very technical area of insurance.
Insurance is becoming more technical due to the fact that it is becoming more difficult to get. It is becoming more technical because of the changes in the industrial development and the changes in the types of risk which are being brought forward for quotation from insurance companies. The pressure on insurance brokers to deliver appropriate quotations cheaply and competitively, while at the same time giving the appropriate level of cover, was never as great as it is today. I appeal to the Minister to reconsider between now and Report Stage reducing the number of undertakings an agent can have.
In fact, the Minister said, in the course of an address in Cork, that he was in favour of defining an agent as somebody with no more than four agencies in total. The Minister's Department will probably say that he meant four life insurance agencies and four non-life insurance agencies. I know, and the Minister knows, that during his discussions with various people in the political area and during his discussions with individual insurance brokers he was quite sure of what he meant when he said the total number of agencies an agent could have was four. Perhaps the Minister has changed his mind since then. I understand that this amendment will render completely useless the detail of the legislation we have been discussing up to now. The Minister is seeking theoretically to implement a policy which will be impractical in the day-to-day operation of the insurance business and in the regulations of insurance intermediaries.
I ask the Minister to reconsider it and to submit another amendment on Report Stage to get some degree of sanity in relation to this development.
Throughout the discussion on Second Stage the contributors took some time and trouble to investigate the implications of the Bill. They gave a fairly detailed response on that basis. It might be said that some of my colleagues would be acting in the interests of the broker. That would be unfair. During the course of the Bill and the amendments on different occasions I have supported one side or the other. I supported the Government side very forcibly last week — on one occasion against the proposal of the Opposition. On this occasion I endorse completely and absolutely the proposal made by Senator Hogan.
I looked back today on the Minister's Second Stage speech. When referring to Part IV of the Bill he said: "I will now turn to this part of the Bill, the most innovative part of the Bill." He talked about the provisions etc. and presented them as an exciting development. Similarly, in the explanatory and financial memorandum to the Bill it says that Part IV deals with the new requirements in relation to statutory provisions etc. We had discussion on it and people had varying responses to it but everyone agreed that this was certainly the direction of movement.
I have been very careful to take the side of the consumer, the person at the end of the line buying insurance. I am very interested in the area of consumer protection. It is my honest opinion that the proposal the Minister has put before us today substantially weakens the Bill. In fact, it reduces the effectiveness of the Bill to nothing. Cases have been made here on various points and various amendments. I know nobody who supports that amendment.
As late as yesterday I was talking to a friend of mine, an insurance broker in the town of Dingle, who said that taking these sections out of the Bill will weaken it tremendously, and reduce consumer protection. We will, no doubt, have people using the legislation, trying to bypass the legislation by changing their status from broker to agent, exactly as outlined by Senator Hogan.
I have taken a fairly indepth briefing from different groups on this Bill. I have discussed this proposal before us with these groups. I agree with Senator Hogan that what is happening here will take away the consumer protection. It just means that a broker by reducing the number of undertakings can change from being a broker to an agent. This weakens consumer protection and it also weakens what the Minister had in mind at an earlier stage when we discussed this before. Is it possible not to take a vote on this amendment today, to discuss it a little further and to leave the final decision on this section to Report Stage? I honestly believe that what we are doing here will worsen and weaken the Bill. I appeal to the Minister not to put this amendment today, to let this matter stand over until Report Stage and to deal with it at that time. I urge the Minister to withdraw the amendment.
I share my colleague's concern about these amendments. Senator Hogan had no choice but to move from amendment No. 75 and to include in his remarks amendment No. 97, which deals with the agent. I think that is what Senator O'Toole is also talking about.
I would have to highlight, as Senator Hogan did, what an agent is, what he should be, what the industry expects him to be and what a broker is. A broker, apart from being a member of a representative body and so on and having professional indemnity, is a person who holds himself out to be an expert in placing insurance, insurance generally. He has a staff, an office; he has a telephone bill, a lighting bill and he is giving employment; if he has growth in turnover his staff grows accordingly. He is putting something back into the business life and the whole economic life of the area where he resides and he has a stake in the whole insurance industry. Many brokers are well trained and come from brokers' offices or from companies. Many of them have ACII and FCII examinations completed and they have full academic qualifications. They are people with a love for the industry they are involved in. The obvious reason they are there is because their whole life is their job.
On the other hand, an agent is a person who could be a teacher, a garage owner, a bank manager, somebody very temporary in the business who could not profess to have the same interest or the same degree of love for the business and is, therefore, of a very temporary nature, without a staff or any of the other expenses of a broker. I believed that the whole thrust of this Bill would be to make a clear differentiation between an agent and a broker, to establish once and for all a clear difference in the outlook of agents and brokers. The Bill, with these new amendments, and in particular amendment No. 97, is doing nothing to convince me that we are doing something positive.
The Bill as it stands is disappointing and, like the other speakers, I appeal to the Minister on Report Stage to reconsider all of section 37 and the amendments to it, plus amendment No. 97 and not to take any firm decisions on it today. The industry at large is of the opinion that we are talking about an agent having no more than four agencies. The Bill indicates, and still is, subject to these amendments, that a broker can have a minimum of five agencies. It does not specify life or non-life insurance. What is wrong with, even at this late hour — although it is not late, it is still early days in this debate — leaving it as it is in the Bill? If a broker is in a position to arrange insurance with at least five insurers that to me was sufficient. If it was left like that, in normal simple logic it would follow that agents would have a maximum of four. But in these two sections we are putting an agent, who is by definition a very temporary person, on a pedestal. It is an agents' Bill. The Minister may argue as he likes but I believe that it is an agents' Bill. The unfortunate broker who has put so much into his offices and his business and who has such a good knowledge of his business, is not getting a fair crack of the whip in this Bill or in the amendments that have been put down.
If the Minister has problems, which clearly appears to be the case, he should stall on both of those sections, to examine the Bill in greater detail and come back on Report Stage with amendments that will be acceptable to the industry, to the brokers' organisations and to people generally who have an interest in this Bill. I made some telephone calls this morning around the country about it, explaining what was happening and nobody is happy with the way it is at the moment.
I appeal to the Minister not to proceed with these two amendments, amendment No. 75 and amendment No. 97, until Report Stage, that he examines the Bill in greater detail and comes back to us at that Stage, hopefully, with a new position so that we can all say that while it may not be exactly what we wanted it is coming a long way to meet us. Certainly, as it stands, I am very unhappy with it.
We are at a turning point in this debate. I reject completely that this is an agents' Bill and I would have to do that in the strongest possible terms. I would remind Senator Hogan, particularly, that when this Bill was published there was no limit at all on the number of agents and that was published by the previous Government. That is on the record and indisputable.
In response to demands from a number of Senators I have actually limited the number of agencies an agent can hold. We have corralled the agents and Senators are now complaining that we have not corralled them enough. It is a matter for debate how much one corrals them and how much one keeps them out of the hair of the brokers. That could be debated quite strongly. First, the original Bill, published by the previous Government, did not——
That is no excuse.
An Leas-Chathaoirleach
Order, please. The Minister must be allowed to answer the points raised.
——deal with this question in any way. Secondly, since this Bill came into this House I have brought in sections proposing to limit the operation of agents. That was a principle that was not in the Bill before and it is progress, perhaps not the kind of progress that Senators might want, but it certainly is progress.
In relation to Senator O'Toole's worry about consumer protection, this Bill has changed that area significantly. We have professional indemnity, we have bonding, we have separate client accounts, we have made the companies responsible for the agents and we have imposed bonding across the board. More important — and this is the kernel of this section — by insisting that anybody in the business who wants to be a broker has five of both, we are saying to them that if they have anything less than that — which Senators are arguing for here — then they are not going to have a spread of business to offer the public. Whether they are in the life business or the general business if they do not have at least five on either side, how can they go to the public and offer them a complete spread across the market?
The brokers can.
What I am saying in amendment No. 75 is that to be a broker in the life business one should have five on board.
They have a——
An Leas-Chathaoirleach
The Senator must allow the Minister to make his point.
The point I am making is in relation to consumer protection, and I am addressing it to Senator O'Toole in particular, because I would argue very strongly that the Senators are asking me, in the first instance, not to proceed with amendment No. 75 which says that to be a broker you must have five agencies on the non-life side and five on the life side. That would mean less consumer protection. By insisting on having at least five on both sides I am insisting that they offer the public a wide range of companies and to remove this amendment would be less consumer protection.
You cannot rely on choice only, Minister.
If I did not proceed with this, a broker could have less than five in some areas. This is a practical problem I have and if Senators can help me solve it I will certainly look at it again. Section 37 at present says that one should have at least five insurers. If a person has five, they could have four life companies and one non-life company. To call oneself a broker with one non-life company is not a broker. One is tied to a particular company. That is clearly nonsense and the broking bodies have not addressed that problem sufficiently. There will be no consumer protection unless I make this amendment because what would remain would be that you would have to have five overall, which means that you could have four life and one non-life. How can you protect the consumer when in fact if the consumer turns up at the door of a broker under the old wording he is only offered one company. That is not consumer protection: that is quite the opposite. What I am doing here is opening it up and giving consumer protection.
Those who argue that it should remain at five here in this section of the Bill have the onus on them to find out what happens if that five turns out to be four and one. I have not heard a satisfactory response to that question yet. Senators will get their chance, no doubt.
The Minister is misleading the House.
An Leas-Chathaoirleach
The Minister should have an opportunity of answering the points raised and it is disorderly to accuse the Minister of misleading the House. The Chair will appreciate it if the Senator would withdraw that remark.
May I make a point——
An Leas-Chathaoirleach
Before the Senator intervenes, I must say that it is unusual to make accusations in the House.
It was incorrect information. I will withdraw but by withdrawing my remarks, I am saying that I will get an opportunity to correct the Minister.
Amendment No. 75 to me does not present any problems but what I am saying is that the Minister might consider holding over a decision on amendment No. 75 because both amendment No. 75 and amendment No. 97 are so much related and because amendment No. 97 is the kernel of this part of the Bill, both of the amendments should be held over until Report Stage. They are so closely related that you cannot discuss one of them without the other and therefore you must defer a decision on both of them.
The Minister said that——
I sat down to allow the Senator to respond.
I am sorry, may I continue? The very fact that the Minister is throwing in a red herring here about what was in the previous Bill by a previous Government — they had the same advisers as the Minister had.
Far from midleading the House I informed them of what actually was the situation.
I know, but I would like to give the Minister the actual information and that is that the same people perhaps were advising the previous Minister as were advising the present Minister. Whether it was the situation or not, I can assure him that I would be taking a similar stand to that which I am taking today in relation to this matter. That certainly, is merely an aside in relation to the kernel of the problem we are talking about here.
The Minister mentioned a problem that might arise in relation to a total number of insurers being fixed at five. I agree with the Minister and I would not like to see that happening. I have given the Minister a solution in the form of an amendment to section 41, in which I suggested that there must be an equal number of undertakings given to an agent on the non-life side and on the life side. I certainly realise that there must be a contiguous relationship between the definition of an agent and the definition of a broker. The Minister has been misinformed from this point of view that he feels that if he does not give a sufficient number of agencies to a particular person, such persons will not be able to give the necessary choice to the consumer in order to provide a very wide choice.
The solution to that is very clear in that you reduce the number of agencies that you give on the life and the non-life side to two life or two non-life and with less than that you call them agents. If they are two life or two non-life or less than that, call them agents, because, due to their very part-time and temporary nature, they will not be able to give the necessary wide choice as an agent to the consumer. Therefore, how can the Minister say that the agent is going to protect the consumer in the limitation of advice that they are able to give in the first place? The broker on the other hand is a person who will have a lot more than five agencies. If they are going to have all the qualifications talked about, professional indemnity — and the Minister has not addressed the cost of that yet — consumer bonding and all the various financial inputs that a broker must provide in setting up his office and setting up the staff and the appropriate services that are needed in order to serve the consumer properly, then it is in the broker's interest to have 25 agencies on the life side and 25 agencies on the non-life, if he can get them.
There is no reason why the Minister should be putting up an excuse here today for reducing the number of agencies on the non-life side and on the life side for an agent if the Minister is interested in consumer choice. The broker will then be even in a better position to give the professional and independent service and the type of service that the consumer wants in order to ensure that the proper policy is given in the interest of the policyholder.
If the Minister is going to call this Bill an agent's Bill, which Senator Fallon rightly calls it if the Minister implements this particular amendment, then the Minister is going to limit consumer choice because he is making it attractive enough for a number of brokers at the moment, smaller brokers, to go from the definition of broker under the Bill to the definition of agent and remove them altogether from consumer protection and from consumer choice by reducing the number of agencies they will have. It completely defeats the type of argument the Minister is putting up in relation to consumer choice.
By reducing the number of agencies on the non-life and the life side under the definition of agent and calling anybody over that particular level a broker, the Minister is immediately improving consumer protection and given a great scope of agencies available to the general public in order to make their choice and to get the proper advice from the widest possible range of companies under the broker definition.
The Minister should listen and he should not be totally stone-walling the situation today by saying that it is not an argument that we are putting up, that our argument is hollow. We are here in a non-political way trying to do the best we can in order to meet the needs of the Minister, the needs of the industry and above all the needs of the policy holder and to ensure that the consumer gets the widest possible choice and the best advice possible. We do not want people who have no experience, who are not qualified, who have no training, going out and knocking on the door and flogging a policy indiscriminately under the definition of agent, and there are people who are tied to a particular company. There are tied agents but there are people with one or two agencies that we all know are going around doing the very same thing. What the Minister is trying to do is bring more people out of the definition of broker into that category that I am talking about, in order to give a limited consumer choice to the policyholder. That is something that I would be totally against.
I want to deal with the Minister's point about having the existing provisions of the Bill with the words "at least five insurers" included. In responding to my argument about the lack of consumer protection, the Minister said that a broker could have five insurers to offer but four life and one non-life, and that the customer going in looking for non-life was deprived of choice. I accept the initial point the Minister made but I do not believe that consumer choice equates with consumer protection. Choice is an aspect of protection but you would also have somebody with the best choice in the world — forget about insurers — say white electrical goods — offering seven different kinds of washing machine that were no good whatever and you might have a shop next door offering one market leader. The fact that there is a choice does not immediately mean that there is consumer protection. We will have to agree with each other on that point. However, choice is important; I accept the point.
The Minister has raised a point where he says that restricting it to five means that there is a lack of choice. What is necessary here is to insist that there be a choice. In other words, to insist that at least two of the five be either life or non-life. Maybe that is the amendment that would be necessary to cover that, even though it would still be a more restricted choice than five and five. I accept that point but, speaking about consumer protection, I went to the trouble — I have no connection of any description with either insurance agents or brokers and am not speaking for them — of talking to a number of them. I asked one broker a straight question: "Tell me, as of now, what your protection is? If I come in to you to purchase insurance, what kind of cover have you got?" He told me what he was paying for personal insurance, compensation bond and his annual membership fee to the NIBA of which he was a member. I was astonished and I was delighted to see that kind of protection is there. I think brokers are to be complimented. The Minister said that and we do not disagree on this point.
On all sides of the House there is opposition to this amendment. The Minister is unhappy with the present wording of the Bill. On that basis, surely it is not wise for us to go ahead and push through this amendment today. Could I appeal to the Minister, as somebody who has no involvement with the brokerage business, the agency business, or the insurance business, and say that I would be worried if we took a decision today in the light of this discussion? Could I appeal to the Minister to leave it until Report Stage to make a final decision? It does not delay the Bill as it can be dealt with at that time. I suggest that we should not take a vote on this amendment today and I ask the Minister to take the case that was put and take the points raised, his own points, the consumer choice, my points and the points of other Senators on the question of consumer protection and find some synthesis of the different points of view in a few amendment, if that is what is necessary. I appeal to the Minister not to take this amendment today but to take it back and talk to us on Report Stage.
I appreciate that Senators are trying to be helpful. Senator Hogan said he was approaching it in a non-political spirit and I accept that and I do not wish to inject a political note into it. There are practical difficulties and we are getting to the stage where decisions have to be made and implemented. We cannot have a lengthy discussion beyond what we have already had. This Bill has been around for a long time. We had discussed it up and down, in and out with all the bodies in NIBA, those not in NIBA, IIF and all the various bodies. There is one fundamental principle that is not up for negotiation, that is, that we will have to offer more consumer protection and choice. I note the difference Senator O'Toole makes.
I have sought in this Bill, and still do, to elevate the status of the insurance brokers as an independent professional body. I was very taken with the arguments made by Senator Fallon throughout the Bill that the broker has overheads and tries to run a very professional organisation. Because of those arguments we went back and we put a cap on the agents. There was no cap on the agents at all until we put it in this Bill recently. That is a very strong point to make. What we are arguing about today is how low that fence should go. I wonder whether the general broking community, having got a whiff of the fact that agents were going to be contained, felt they could push that a bit further and further down to a stage where an agent would be a person who has got one each and is put off the map. That is not practical, given the nature of the industry at the moment.
The othe point I want to make is that at some point there has got to be a fence below which people are not seen as independent bodies. Senator Hogan's amendment would I understand pin agents to one and one and then have no minimum figure for brokers — a broker could start at any figure above that. That would not mean that a person who calls himself a broker could have a very small number of agencies on both sides. They could arguably have three on each side. That would be a very small proportion of the total market and would not deserve the title of full independent professional broker and, therefore, the figure five was in the last Bill and is in this Bill and has not been disputed by anybody as being a sensible figure below which you cannot be seen to be a professional independent brokerage offering independent advice. There was general agreement that above that figure you offered such a choice of market that you could be seen to be a broker. If the argument is accepted that five is a sensible figure, then you cannot leave a hiatus. If the figure five is agreed and you say, below that you cannot be seen as an independent professional adviser, above that you can. That has been generally agreed.
You then must face the next decision which is: does that mean that any one below that is something else and the inescapable logic of that is yes? That leaves only one final discussion and that is whether it is five and five and four and four. In addressing that problem Senators have got to ask one simple question: is it the same business or are they two separate businesses? Are the life business and the general business all just insurance business? Or, are these two separate businesses where you should have similar rules applying? If you conclude that they are separate businesses — many Senators have advised me in this debate not to confuse them, that these are separate businesses with their own difficulties, problems and ratios and degree of skill required — you have to apply the same rules to both. If I walk into a company looking for life insurance, if they can offer me more than five companies, they are independent professional brokers. If they can offer me less than that, they are agents. That seems to me to be eminently sensible.
If I want non-life business and they say they have five, that satisfies me that they are independent. You cannot agree on five and then argue with four. If the argument here today is about the figure five, then we are opening up a whole new discussion about whether a person below five can be seen as an independent broker. That would spoil what I am trying to do in this Bill, which is to put the broker on the map. That is one of the key things I am trying to do, to ensure that they have got at least five on either side. They can offer a full range of business and that builds up their professional standing in the community and anybody below that is seen as more part time and not exactly in the same business.
I want to make sure that, when people go to an agent or broker, they know whom they are dealing with. They know that if they are offering less than five, they are dealing with agents. Section 41 of the Bill makes it clear that nobody shall hold himself out to be an agent unless he holds an appointment in writing from the insurer, states on his letter heading and business forms the name or names of each insurer for which he is an agent and he must inform, under the Bill, any proposer of an insurance contract of the names of the insurers for which he is an agent. I ask Senators to address the kernel of this because a promise to come back on Report Stage will only push the problem down a few more days or weeks. It will not change the basis nature of the problem.
I understand Senator Hogan to be saying to me: "Do not put a minimum number on the number of agencies a broker should have before he can hold himself out as a broker". I would have to reject that completely because the whole thrust of the Bill is to ensure that, before somebody holds himself out as a broker, he can say to the public: "I have enough agencies to be able to offer you a big spread in the industry." We have all agreed I think that five is a sensible figure. If we are fighting about five we are back into a new debate and that would be a pity. If we agree on five, then we cannot turn around and argue about four, three or two because five means we must step down to the next number. The real argument is whether it is five and five and four and four. The difficulty with leaving it just five and four on one side, or in total, is that you can get a situation where someone breaks down their five into four and one and that leaves us with a difficulty where that one does not add up completely for us.
The other point I wanted to make, and it is a pity to let it go, is that I have put into Bill a form of recognition for brokers that they did not have. We have done everything possible to build a professional image of brokers. We are putting into this Bill that the Minister will recognise the representative bodies or recognise any brokers who, under the vouching of the insurance company, fulfil all the requirements. We are strongly recognising the insurance broker. We are keeping the agents off his back substantially and we are bringing in professional indemnity and a whole range of protection for the public that gives the broker a great head start. It does not wipe out competition from agents. That is not what I intend to do. I want to ensure that if there are agents people know they are agents and they have to say so on their headbill.
Government amendment No. 97 states that he must state on his letter headings and business forms that he is an insurance agent. That strengthens the Bill. I do not think Senators have been entirely fair about the great step forward this is for the insurance broker in putting him on a professional standing, recognising his formal existence and pinning the agents to a situation where they must say in their letter headings the companies they are acting for and can act for no more than four. If Senator Hogan is telling me that these are all the same businesses, that they are not, in fact, totally separate businesses, then I have obviously grounds to rethink, but if these are separate businesses and he accepts that five is the minimum figure, then four is the inescapable logic.
I do not want to ignore Senators' appeals to think again but, in fairness, I do not see any point in thinking again if we are not going to get clear solutions to this question. There are inescapable logics. If Seantor Hogan is saying to me: "Forget about five"— that is what I think the Senator is saying to me — that is not on because it means that someone who does not have at least five companies can be a broker. That is not consumer protection. That, in effect, is being the company's man. I want to ensure that, before someone puts up his plate as a broker, he can offer at least five companies, which is a large share of the market. If the Senator accepts that that is not negotiable, the rest of it falls apart, but if he wants to negotiate that, we are into a different game altogether.
The Minister has failed to recognise one thing, that is, that if you have four non-life and four life agencies you can do most of the business on the insurance market at the moment adequately. That is what, in fact, the Minister is doing. He is giving the agent the right to do 70 per cent of the business on the life and non-life side which is done each year by four life or four non-life companies.
May I give some information on that because it might help our discussion? If a person has four agencies, the maximum slice of the business he could offer on the non-life side would be 39 per cent.
That is a theoretical piece of information which I have no doubt bears no resemblance to the actual picture of today in the insurance market. As somebody who is dealing with it every day that I am not involved in legislation in this House, I can assure the Minister that if I had four agencies on the non-life side and four agencies on the life side I would certainly be in a great position to do 70 per cent of the business I would want to do. I can tell the Minister this from my own experience.
These figures are from the Blue Book of 1986.
I do not agree with them. Maybe the situation has changed since 1986. I can assure the Minister that there is adequate business to be done by an insurance agent with four life and four non-life agencies at the moment. The Minister is legislating for the fact that he is going to bring about a situation where the smaller brokers in this country will evade their responsibilities by becoming even more professional, by taking out professional indemnity, by upping their standards, qualifications and experience, by becoming agents rather than brokers. That is effectively what the Minister is going to do. Nobody brought up the argument about having four life and one non-life agency or four non-life and one life agency except the Minister.
It is a real argument.
It is not a real argument. We agree with the Minister that in legislation there must be an equal number of agencies on the life and the non-life sides. I totally agree with the Minister but I do not accept that the number of agencies he is seeking to define as a broker or an agent at the moment is in keeping with the practical implementation of this legislation on the ground. There is no way the Minister cannot adequately cope with most of the insurance quotations in the market today by just having four non-life and four life agencies. That is the kernal of the practical implementation of the policy. I fail to see why the Minister does not recognise that if a broker — let us say we agree on two life and two non-life as the definition of an agent — with all the overheads that he now has he will have more overheads as a result of this Bill——
(Interruptions.)
An agent will have some of them but he can work from the back seat of a car. He can work from the sittingroom of his house.
At the moment I am limited.
I am trying to make sure that we tie down the situation to such an extent that we clearly define what is an agent and what is a broker. A broker will go out of his or her way in order to get as many agencies as possible on the life and non-life side if they are going to be dealing with the type of overheads and the type of establishment they will need in order to compete effectively with other insurance brokers or intermediaries in the market place. That surely is in the best interests of the consumer and the policyholder.
The reason we are concerned about the number of life agencies an agent can have is to ensure that the best possible choice and protection are given under the legislation by making sure that most of the people are conforming to the broker requirements put forward in this Bill. If agents are allowed to have up to four non-life agencies and four life agencies, they will not bother getting more than that in order to give a better consumer choice because they will than have to set up appropriate standards and they will have to take out professional indemnity.
What will happen? The company are taking up the cudgels in relation to a policyholder if something goes wrong in relation to a claim in the life or the non-life side at the moment from the definition of agent. I can see the day when companies will be loth to give out agencies to people who will not have the prescribed qualifications, the experience, the necessary professional indemnity, or necessary qualifications to carry out business properly. That is clearly the direction in which the Minister and I would like to see the industry developing, where people's standards are improved, where the consumer will get more protection and more choice and where we can ensure that the legislation the Minister is proposing can be implemented in the work-place and in the marketplace, rather than just theoretically talking about having four agencies in the life and non-life side on letter headings. It will be very difficult to monitor.
I appeal again to the Minister to look at this. It will not make any difference if we leave this matter until Report Stage. To coin a phrase in the insurance industry, a cooling off period is necessary. We should have self-regulation in the implementation of this legislation as well as in the insurance industry. I hope the Minister will consider self-regulation and a cooling off period in relation to this matter also. He could leave it for two weeks because I would like to have the opportunity to discuss it more fully and be given new evidence of what we are talking about in the market-place. We are at one in trying to ensure that there are no loopholes in the legislation and we can make sure that it is possible to implement it practically on the ground rattier than just some theoretical thing we are trying to implement at the moment.
The danger is that if it is five and five and four and four many brokers may opt to step down to the status of agent. This would obviously not be good for the policyholder. Is there any middle ground whereby if we accept five and five and four and four for the agent the Minister could put in another condition that if an agent stepped above two and two he would then have to have professional indemnity but that he would not have to join an association? Could that be explored?
The last point made by Senator Mulroy is valid. The question of brokers who — I am talking about many rural brokers with turnovers of £0.5 million to £1 million who make up the bulk of the NIBA membership. Many of them will be tempted very strongly to revert back to agent status. The Minister has indicated to us that four non-life agencies equals 39 per cent of business. Senator Hogan disputes that figure. I too, was staggered by the figure of 39 per cent. If the Minister checks on the brokers he will find possibly six companies emerging as the companies where most of the business is done. The smaller companies are getting a minimal amount of business. If you take six companies I guarantee that the majority of those have by far the bulk of the business. Therefore, it is logical to assume that the broker or the agent having four of the top companies transacting non-life business can well push that figure up to 75 per cent or 80 per cent. I had discussions with country brokers and they have said the same thing.
I do not think Senator Hogan is very worried about section 75 as it stands. He will almost certainly agree to it. His main concern and my concern is amendment No. 97. Perhaps there may be movement or compromise by the Minister; he may say he will agree on five insurers as distinct from five life and five non-life or he may come down to four and maybe an agent of three. Both are related. You cannot move one without having consequences for the other. We will have a debate on Report Stage. These amendments are the most contentious in the Bill. It might be better to allow further investigation and to put it off until Report Stage in two or three weeks time. The Minister will have to defer section 75 and, consequently, section 97.
I am worried about the agent status of having four and four. I am quite certain that many small brokers throughout the country with £0.5 million turnover will decide they can do most of their business with the four top companies in the non-life business, they will go as an agent and let the insurance company carry the professional indemnity for them and will not have to spend £5,000 to £10,000 taking out a professional indemnity bond. When the insurer has responsibility for the agent, what happens if an agent absconds with a single premium of £50,000? The logical thing would be if you could prove that he had an agency with company X you would go to them and say "well, he has an agency with you, the money was clearly intended for you". Or if he had two agencies you could say: "this money was meant for both of your companies, he is your agent, you look after the consumer, you pay back the £50,000". If it is four you could say: "the four of you split it four ways". Surely one of them would say "Well, he gave us less business". As far as life assurance is concerned, the fewer agencies an agent has the greater control you have on him. Therefore, there is less likelihood of this happening because the company would be doing their business and if it happened the company would have to take responsibility for it.
I suggest as a compromise five insurers or four life and four non-life for the broker and reduce the agent to three life and three non-life. This would limit the whole area of concern. If you give an open country to agents with four agents on both life and non-life they can do practically what they like. I am in favour of a further curtailment of agencies. As a compromise I ask the Minister to leave over sections 75 and 97 for Report Stage for further investigation. These sections are the only real contentious sections in the Bill and it would be worthwhile having a cooling off period.
At the moment agents have complete open country. I am trying to pin them down and we are doing that in a logical way. I listened carefully to Senators and I have tried to listen to the practical suggestions. One suggestion is to reduce the figure five to four.
With the consequence of four to three.
Yes. The Senator is now saying that somebody can become broker with four agencies on both sides. Obviously this is separate business so what goes for life must go for non-life. I did not hear any Senators dispute that. I listened carefully to pick up that trend. These are separate businesses so what applies to one has to apply to the other. If any Senator disputes that I would like to hear about it soon. I am treating them as separate businesses applying the same rules to both sides.
With regard to the suggestion put forward by Senator Fallon, of taking it down to four, that would mean that someone could become a broker offering, at a maximum, less than half the market or about half the market.
I do not accept that.
I am saying that the figures in the blue booklet I am working on indicate that you could then become a broker at a very low stage — you could then become a broker offering less than half of the market. I could not put into a Bill that the State would recognise a broker who offers less than half the market. That is my problem with four which brings us back to the reason five was picked and agreed by most people in the past. As Senator Fallon said — he is accepting the logic of it — if you accept five then you cannot dodge four. I have not heard from Senator Hogan clearly enough his dispute with the figure five. He is still saying that you can be a broker at anything above one and one. I have to reject that.
I did not say that.
An Leas-Chathaoirleach
The Minister should be allowed to speak.
I will re-phrase that. The Senator is saying there should not be a minimum number above which one becomes a broker. If that is what he is saying I could not accept that because that would spoil the whole principle of the Bill which is that to be a broker you must have a certain number. If that is the situation then I am in difficulty. The thing about cooling off is that the Bill has been published since 1986 so I do not know how much longer we can cool off on this. I know that we have moved substantially along the road to showing people that we are trying to build up the broking bodies as professional organisations.
I will respond crisply to Senator Fallon's question about an agent who absconds with £50,000 and who do you chase. Under this Bill it should be acknowledged that we are laying the bonding requirement on agents. First of all, an agent will be bonded on 25 per cent of turnover. That will go some way to protecting the £50,000. Secondly, if that does not catch him on the £50,000, section 44 of the Bill will. It says: "Where a premium is paid to an insurance agent in respect of a renewal of a policy which has been invited by the insurer"— you would know the specific company —"or in respect of an accepted proposal"— you would know the company —"the premium shall be treated as having been paid to the insurer".
It is the large single premium I am worried about.
In the large single premium the bonding will cover that area or 25 per cent of turnover. We can always look at the figures if we want to look at them. The principle is that 25 per cent of turnover could cover it. That is a separate debate about the level of bonding. The fact is there is bonding; there is a figure on it and if it is renewed you know the company, so there is that protection.
Senators have to address the basic question as to whether there should be a figure of five before anyone can be a broker or whether there should not be a figure of five for someone to be a broker. We must settle that question. Everything else is consequential to it. If we do not accept it, the whole debate is open on various areas. If we accept it then the figure of four is inescapable.
Like Senator Fallon I have little difficulty in accepting the definition of "broker" under amendment No. 75 but, as he points out, there is a problem in relation to what is the definition of an agent. The Minister and his Department fail to recognise what is an inescapable fact in the day to day operation of the insurance business. A considerable amount of business can be done by four agencies on the life side and four agencies on the non-life side. That is something the Minister has not addressed. He can give me all the figures he likes in relation to the Blue Book which might indicate 39 per cent——
In the non-life side.
Yes. If the Minister is speaking on the life side is he telling me that with four agencies an agent will not be able to conjure up and corral most of the business he would come up against in quotations he might have to submit, that he would not get up to 70 per cent or 75 per cent of the business he would quote for by those four leading companies? In the non-life side as well because you have a large number of companies who are not quoting at all for certain risks at present you will find the four leading non-life companies garner a significant proportion of that business as well if you quote for it.
The evidence of that is in the renewal of a person's policy. If a person takes out a policy in 1987 with Hibernian and if he wants to renew that policy in 1988 he will not leave the insurance broker's office for the sake of £2, £3 or a very small margin. By and large the leading four non-life companies in the Irish insurance business will garner in a significant proportion of that business in the fire, motor and household business in this country.
The problem we have is not so much in what we perceive as the minimum number of agencies a broker should have, because that would be in the broker's interest with the levels of overheads and expenses that they would have. A broker could not sustain himself or herself as a broker by the imposition in relation to standards, professional indemnity, bonding etc, by just having a mere four or five agencies. A broker could not do that but an agent can because he will not have that expense and the overheads the broker would have. He will not need professional indemnity.
That is a significant cost and the Minister's Department are well aware of that. We will be addressing that in the next section. When all those costs incurred by a broker are taken into account it is in the broker's interest to get as many agencies as he or she can in order to give the best possible consumer choice and the best possible service to the consumer market, to pay for the establishment he must maintain from day to day and week to week.
I realise that amendments Nos. 75 and 97 are inter-linked. I again appeal for a cooling off period to consider it maturely. I do not want to put this to a vote. If I have no other option and if I am not given any re-consideration, if it does not appear that the Minister is prepared to do that today, I have no option but to put it to a vote. I do not like dividing the House on an issue which I am extremely concerned about and when I know in my heart and soul that I am speaking for the practical implementation of this Bill on the ground. It is for that reason that I would not like to see an amendment like this going through without a division.
For the information of the House, the figure of 39 per cent is being disputed on the non-life side. If the Senator has a pencil he can help me do the calculation. The figure should be carefully checked. The total premium income on the non-life side is £637 million. The four largest companies, the Hibernian, Guardian Royal Exchange, ICI and Sun Alliance are the four largest companies on the non-life side, report total premium income of £251 million. That figure as a percentage of £637 million is 39 per cent. They are the declared premium income figures of the companies and of the industry. In fairness to the Senators I want to stress that the PMPA are outside the figure because they are not a broker company as such.
I can only operate on the basis of those kind of figures. If they are being disputed I cannot really operate on hunches in this business. I have to operate on the basis of statistics available to me. The figure on the life side is obviously larger, but again it depends on whether you include one large company or not. On the life side, for example, if you had four agencies you could go up to well over 60 per cent of the market but five would catapult you up to 75 per cent of the market. If you take out Irish life, just to show how important that is, you are down to 31 per cent of the market. If Irish Life is not one of the four on the life side you are down to 31 per cent of the market-place. On the non-life side, I am assuming one would get the agencies from the four largest companies and that would give 39 per cent of the market. If the broker figure changes from five to four I am in a position where I am not guaranteed that brokers offer a majority of the market.
The Minister is specifying that five companies are life and five non-life, but the reality is that a broker has a lot more than that.
I see the point that brokers probably will have more but if we are introducing an Insurance Bill, and I am being asked to define "broker" and officially to recognise brokers and lay all sorts of conditions on them, then we have to make some attempt to say what the minimum figure for a broker should be. I keep coming back to that. If we dodge that central question and leave it to the market-place to find its own level, then I cannot be certain that brokers will have at least five and five and therefore I cannot assure the public that the people they are dealing with as brokers have a minimum number. Should the broker minimum figure be higher than five if Senator Fallon's point is taken that in the market-place they all have more than five? Then why do we not make it seven, eight or nine?
There is nothing wrong with five for brokers, or six or seven. It is a matter of the agents.
If there is nothing wrong with five for brokers — I have not heard Senator Hogan confirm that point yet — then the inescapable logic is that if your accept five you cannot dispute four because you must drop to the next number for agents immediately below five. If you go from five to three, then what happens to people on four? If you come from five to two, what happens to those people on three? They are neither agents nor brokers.
If a person is on four he either becomes an agent with three or becomes a broker with another one. He is encouraged to become one or the other.
The key point, which I think the Senator accepts, is that there cannot be a gap between the two figures. Are we agreed on that?
There must be a contiguous relationship. I have said that four times today.
The figures must be consecutive. I hear the House agreeing on five.
Equally we could agree on four.
According to the figures available to me, I would not be guaranteed that a broker could offer over half the market. I cannot tell the public to go and see a broker who offers less than half the market.
There will be enormous pressure financially on a broker to take out as many agencies as he or she can possibly get in order to get as wide an amount of business as possible into that particular brokerage in order to survive. That is the reality of the day-to-day operation of brokerages, with commissions cut in half over the last year and a half in order to justify reductions in premiums; yet following the reduction of the commissions the premiums went up. That is the way the brokerage industry and the intermediaries who call themselves brokers have suffered over the past two years. That has to be recognised. That is the reason I called a vote on an amendment on the last occasion we discussed this Bill to allow the Minister to increase commissions if they are insufficient.
That is the next stage of development in the insurance industry that could be lurking around the corner if we put on brokers all those conditions in this Bill. They will have to be seen to be getting a fair crack of the whip vis-á-vis agents. We cannot have people operating from sitting rooms in their houses offering policies with the same companies as people who have fully established offices in the centre of town, paying dearly either in rental purchase or rent and having to staff their offices and meet all the requirements laid down for brokers in this Bill. The financial overheads involved in running a business are enormous.
Those financial pressures will not come to bear on agents because there is no particular reason why they should establish themselves in an office. Their only cost will be bonding. They do not have to have an office, any overheads of that nature or any professional indemnity. That is a huge outlay that will be essential for a broker. The Minister is failing to recognise that it will be in the interest of the broker to get as many agencies as he possibly can in order to give the required service to the consumer and the policyholder and make more money for himself at the end of the day. That is the reality of the world today in the brokerage business. We are talking around the issue by talking about a figure of five in relation to brokers. It should be a figure of 15 at least from the point of view of the brokers because they will need that in order to survive. The problem is with the agent. We are talking about four and the Minister admitted——
Wherever you draw the line, you have to have an agent below it and a broker above it. Where do we draw the line?
It should certainly be less than the Minister is proposing. That is why we are asking him to postpone this amendment until Report Stage. In the meantime I will discuss the matter with him and I will give him a figure. We will have a fair compromise by specifying three life and three non-life for an agent, and a broker to have over and above that.
I support the Senators who have spoken with regard to the agents and the number of companies they will have. It is great that we have this Bill. It has been a long time coming and I know there has been a great deal of canvassing and lobbying to get this Bill into the Oireachtas. For a long time there has been evidence that it is necessary to regulate brokers and to recognise their professional standing and the important job they do. We are very fortunate to have in the Seanad such an excellent debate, with very fair, balanced contributions being made by people who are involved in the industry. This is always a very important feature of Committee Stage debate.
What Senators Hogan and Fallon are saying is absolutely right. I have some experience and information about the role of the broker. We must in this legislation have a bias towards the brokers because in recent years they have had a very tough time. It has been extremely difficult for brokers to survive. I am not asking for disproportionate or unfair advantage for them, but they have to bear the expense of a bond, to pay a staff and to maintain more and more sophisticated and expensive offices. These are not required of insurance agents, many of whom have other sources of income. The insurance brokers do a very important and worth-while job. Very often they save money and they save time. There is a need for brokers and we have to ensure the continuation of the brokerage industry. I do not think that will be done with the kind of balance the Minister has in mind.
I ask the Minister to go back to Government on this if necessary. I am sure that is not necessary and the Bill has a long way to go from this House. It has to go to th Dáil yet. The strength of feeling and the very reasonable requests that are being made by NIBA and others in the brokerage industry are fair and I appeal to the Minister to have second thoughts about it and give a commitment that will, if possible, make life easier for brokers in the future.
I want to make life easier for brokers in the future and that is why for the first time we have put into this Bill a limit on agents. That is why we have tried to take the agencies out of the back seat of the car, as was said earlier, and bring them to a place where they can be seen. We have to be very clear about this question of agents not having any overheads or anything like that. The company takes full responsibility for the professional indemnity insurance in the case of tied agents and in the case of agents. The bonding applies to both and that can be reasonably expensive too. The separate client account applies to both. The disclosure requirements on an agent with regard to billheads and informing the client officially etc. lay some additional expense and restriction on the agent. He now has to state publicly on his billhead and to the client that he is limited to a certain number of companies.
There is an impression being created that agents will somehow be happy with this legislation. They are far more unhappy than any brokers. Certainly any agents I have talked to are not at all happy with this. I would not expect that they would be, nor is it my job to ensure that any sector is happy. Rather it is my job to make sure that a person dealing with an insurance intermediary who is a broker can be offered a wide range of choice, certainly more than half the market. An agent is somebody who has a very limited choice, says so in his billhead, has bonding and is holding himself out not to be an independent person but a person with a very limited choice.
I do not see brokers stepping down to agents, as has been said by many Senators. I predict here that the trend will be the other way. Agents will now have these bonding requirements, they will have to keep separate accounts and they will now have to be much more satisfactory to the companies in question because, it is the companies' money they will be risking in terms of the companies' support for them. When they have to say publicly that they are limited to a smaller share of the market than brokers, I will be very surprised if most agents wanting to do the business seriously do not attempt to go the other way and move up to the status of broker, which now has official recognition.
We are seeking to build the broking bodies into good, strong, professional institutions, which is one of my main aims. It is natural when for the first time we make a distinction that those on either side of the line will be upset and worried. I ask Senators to concentrate on the positive aspects here. This is the first time we have made a distinction. We are corralling agents; we are keeping them in a position where they are much more limited, but we are not wiping them off the map. I do not think Senators are asking for that but it could be tantamount to that if we go as far as some Senators want. That is not the way to do our business here. We have to recognise the realities in the marketplace and give the industry time to adjust to them.
I would like Senators to concentrate on the positive aspects. We are doing something brand new here. We are bringing in bonding, separate client accounts, professional indemnity. We are separating agents from brokers. We are formally recognising the status of broker and giving brokers a position where we can help them to build their professional institutions over the years. We are taking a substantial step forward here and I ask Senators to think clearly whether they are not asking me to go too far by saying that I should take the additional step and dump them altogether. Let us consider whether that is a reasonable suggestion. Senators should have a long look at the list of major steps forward in this legislation which put the broker on the map, give consumer choice, give protection to the public and put the agents in a position which is clearly inferior to that of the professional broker.
If Senators accept the balance in the legislation, I appeal to them accept the logic that we are doing what we can, given a very difficult situation. There will be other days when one can go further. This is not necessarily the final item in all of this. It is not necessary to do it all in one swoop. We have put into legislation for the first time ever a clear distinction between brokers and agents and that is a big step forward. It is a major victory for those who wanted that distinction. It is also a major victory for those who wanted agents to be pinned down, perhaps not with nails in all four corners but nevertheless pinned. I ask Senators, particularly those who know the industry, to accept that this is realistic considering the difficulties we face.
The best I can say to Senators in regard to their various representations is to reiterate what Senator Fennell has said about this Bill having a long way to go. It has to go to the Dáil and it will probably have to come back here if there are amendments in the Dáil. We will have plenty of time to see whether some additional modifications are required when the Bill is in the Dáil. As I sit here today the inescapable logic is still there. The best I can offer Senators today is to undertake to discuss with them and with Deputies whether any further modifications or amendments are required. If the Government are convinced that they are required, I will introduce those modifications or amendments. In the meantime I would ask Senators to adopt the Government amendments. I can assure Senators that I will continue to think about the Bill between now and Report Stage. We have yet to have Report Stage in this House and all Stages in the Dáil. It is important that we adopt the Government amendments.
We have not come up with a logical solution today to a very knotty problem. I would ask Senators to consider the long list of positive elements, the major changes, the increased stature of brokers and to set that off against their disappointment that we did not find it possible to go a little further. We are arguing here about one agency. If you balance that one agency against all the positive measures in this Bill, you will see that it is not a bad day's work initially. There is plenty of time to go further if we need to.
I have no worries on amendment No. 75.
Question "That the new section be there inserted" put and declared carried.
Section 37 is to be deleted in view of the acceptance of amendment No. 75.
Amendments Nos. 76 and 77 not moved.
Question: "That section 37 be deleted" put and agreed to.
NEW SECTION.
Government amendment No. 78:
78. In page 20, before section 38, to insert a new section as follows:
".—The Minister may, by regulations, provide that a person shall not act as or hold himself out to be an insurance broker unless he effects a policy of professional indemnity insurance in a specified form, indemnifying him to such sum, in such manner, in respect of such matters and valid for such minimum period as the Minister may prescribe, from time to time, under this section.".
Amendment agreed to.
Question: "That section 38 be deleted" put and agreed to.
NEW SECTION.
Government amendment No. 79:
79. In page 21, before section 39, to insert a new section as follows:
".—(1) An undertaking shall not appoint a person as an insurance intermediary unless, to the best of the undertaking's knowledge and belief, having caused reasonable enquiry to be made he is either——
(a) a member of a representative body of insurance brokers recognised by the Minister for the purposes of section 37 (1) (a), or
(b) a person who complies with the requirements of this Act but is not a member of a recognised representative body.
(2) An undertaking shall not pay any commission payment other than to an insurance intermediary who, to the best of the undertaking's knowledge and belief, having caused reasonable enquiry to be made, is either——
(a) a member of a representative body of insurance brokers recognised by the Minister for the purposes of section 37 (1) (a), or
(b) a person who complies with the provisions of this Act but is not a member of a recognised representative body.
(3) No insurance intermediary or employee of an undertaking shall pay any commission payment other than to an insurance intermediary who complies with this Act, save where a commission payment is made by an insurance intermediary to a person in connection with a policy of insurance placed with an undertaking by the said intermediary.
(4) ‘Commission payment' in subsection (3) has the meaning given to it in section 2 (3) as if the words ‘holder of an authorisation' in that definition referred to an insurance intermediary.".
Amendment agreed to.
SECTION 39.
Acting Chairman
Amendments Nos. 80 to 94, inclusive, may be discussed together.
Government amendment No. 80:
In page 21, lines 15 to 18, to delete subsection (1), and substitute the following subsections:
"(1) If, at any time in the first accounting year, the aggregate of moneys lodged by an insurance intermediary to the separate bank accounts required under section 40 exceeds £25,000, the intermediary shall effect a bond in a specified form, as respects his insurance business, to the value of £25,000 in respect of the remainder of the first accounting year.
(2) Subject to subsection (4), an insurance intermediary shall hold a bond in a specified form—
(a) as respects his non-life insurance business, to the value of £25,000, and
(b) as respects his life assurance business, to the value of £25,000 or 25 per cent. of life assurance turnover, whichever is the greater, by reference to the previous accounting year.
(3) The requirement in subsection (2) for an insurance intermediary to hold a bond shall be regarded as having been discharged where the insurance intermediary holds a bond to the value of £25,000 or 25 per cent. of life assurance turnover, whichever is the greater, by reference to the previous accounting year.
(4) Subsection (2) shall not apply to an insurance intermediary if his turnover does not exceed £25,000 by reference to the previous accounting year and does not exceed £25,000 in any subsequent accounting year.".
In non-life insurance bonding of intermediaries are not required to any great extent to protect consumers, as the effective position is that intermediaries are acting as agents of insurance companies for the purpose of collecting non-life premiums, which they hold in trust on behalf of the companies concerned. In other words, payment of a premium to an intermediary in respect of non-life insurance is accepted in nearly all cases as payment to the insurer. This position is proposed to be copperfastened in statute by section 44 of this Bill, account being taken of the proposed Government amendments Nos. 108 and 112. With most forms of life assurance, once a proposal has been accepted, premiums are invariably paid direct to the insurer and brokers are not involved. Nevertheless, there are some gaps in financial protection for the consumer in the case of some areas of life assurance, for example, where money is entrusted to an intermediary before a proposal is accepted by an insurer. This is where the bonding requirement will improve matters. This arises mainly in relation to single premium investments for the purpose of life assurance business. It is clear from the foregoing that the bond level of £100,000 envisaged under the original section 39 may be either too much or too little. Representations from brokers and others since Second Stage debate in the Seanad in October last have said as much. This has resulted in a proposed differential approach to life and non-life bonding, which is the basis of the changes to section 39.
The main thrusts of these changes are, first, the level of bond required will be directly related to the intermediary's defined turnover, that is the amount of client moneys retained by an intermediary before he passes them on to an insurance company or, in certain circumstances, to the client. This means that the bond level will be more directly related to actual potential exposure for client's money. Second, with the exception of tied agency business, all insurance brokers and insurance agents with an annual defined turnover of £25,000 passing through the new and obligatory separate client bank account will be required to hold a bond.
The wording of the amendment is, I hope, self-explanatory. It relates to the first year of operation of the bonding scheme. The new subsection (2) requires non-life intermediaries to hold a flat bond of £25,000, provided defined turnover is in excess of £25,000 per annum. It also requires life intermediaries to hold a bond of £25,000 or 25 per cent of turnover, whichever is the greater. The new subsection (3) requires that composite intermediaries — persons acting in relation to both life and non-life business — hold a bond of £25,000 or 25 per cent of defined life turnover, whichever is the greater. The new subsection (4) exempts intermediaries with an annual turnover of less than £25,000 from having to hold a bond. This minimum threshold approach is to cater for agents in business in a very small, part-time way, typically those acting on behalf of extended families or friends.
I welcome the fact that the Minister has reduced the amount from £100,000 to £25,000. But again he fails to see the theory being put into practice in so far as there is no such thing as life assurance turnover. The practical implementation of that measure is rendered useless due to the fact that most of the commissions which are paid to life assurance people are paid net. Reference was made to 25 per cent of turnover in relation to life assurance. That is ridiculous in the extreme.
Subsection (4) deals with the insurance intermediary where turnover does not exceed £25,000. Those are the very people we have been talking about and which the Minister is defining as agents. It shows the inability of those people to give the necessary consumer choice. They lack the essential wherewithal to deal with people who are totally committed to the business of giving a wide choice and having proper standards, experience and qualifications to deal with people. The Minister should seek to amend, on Report Stage, the 25 per cent of turnover in relation to life assurance. It does not have any practical significance in relation to the section.
The definition of life assurance turnover means the aggregate of all moneys required to be paid by an intermediary into the separate bank account provided for under section 40.
Senator Hogan raised the problem which this definition and the whole section in regard to the bonding of life assurance brokers can create. For example, the whole thinking behind the bond is to protect the consumer against fraud. If a life insurance broker wishes to pocket the money he has got from his client he can do it in many ways — he can put it in his own personal account. The idea of having a separate bank account would not prevent such a situation occurring. You must remember too, that when you talk about life premiums, you are talking about most of the business being transacted through a banker's order, through staff schemes or possibly a cheque made payable direct to the company. In fact the majority of the money of life brokers will not actually be handled by him. That in itself will create many problems. There are many very large group pension schemes, which are not handled by the broker. They are organised by banker's order direct to the company. It will be very difficult to administer this whole scheme. The 25 per cent turnover requirement appears to be quite onerous. We will need clearer definitions and clearer examples of how this section will operate because I can see that it may, in the years ahead, present problems. It is as well to tackle those problems now if we can, rather than at a later stage.
I take the spirit of the points made. The bonding provisions are there for very good reasons. We started off with a figure of £100,000 but representations were made that this figure was too crude — for small companies it is too much, for big companies it is not enough. That is logical and I took account of it. I decided to try to get a sliding scale on this, so that the bigger you are, the more exposure the public have, the greater the bond. That made more sense than the rather crude £100,000 approach. Both Senators were very helpful in pointing that out to us and we took it on board.
In relation to the specific question that both Senators put to me about life assurance turnover, with respect, it is not a misunderstanding on my part. The Senators are saying that the money in effect does not go to the client's account but that it goes directly. If it goes directly then it does not go into the account, and if it does not go into the account then there is no need for the 25 per cent bond, because the 25 per cent bond is on the account. In fact, that is encouraging the money to go direct. If it goes into the account, then we will put on the 25 per cent; if it does not, then we do not put on the 25 per cent. The 25 per cent goes on to what goes through the client's account. In many ways this encourages the money to be sent directly and, therefore, it gives greater protection.
The bonding provisions cannot prevent fraud. We can only mitigate the consequences of it, but I take the Senator's point.
Senator Fallon raised a point earlier in the debate in relation to a £50,000 single premium bond that one might want to invest. The Minister answered that, but I did not take him up on it. It is more appropriate to the bonding we are talking about now. The £25,000 the Minister speaks about, in the context of an example given by Senator Fallon of a £50,000 single premium bond, if the insurance intermediary gets that £50,000 and goes off to back a horse, or whatever way they want to dispose of it, without signing any proposal form or without getting into direct contact with any insurance company, the £25,000 bond will not cover the unfortunate quasi-proposer in that situation. How does the Minister propose to tackle that?
Regarding the 25 per cent turnover the Minister introduced in relation to life assurance savings, is there a reason why there was no turnover figure mentioned for the non-life area? I would be interested to know the Minister's thinking on that.
On the £50,000 example Senator Fallon quite rightly raised, the only reaction I can give to that is that there is a bond in place for 25 per cent of turnover and it should cover it. It is 25 per cent on the previous year's turnover and it should cover it unless somebody is starting with that kind of business and that would be unusual. He would need to have been making quantum leaps in business, such as having growth rates of substantial percentages, to get left behind. The 25 per cent rate should cover it, but there may be cases where it will not cover it.
On that point, it does not matter what stage a person is at in business, a person could get a bond of £100,000. There are people in society still, the Minister will be glad to know, who have significant amounts of money on which they want to get a decent return. They go to brokers in order to seek advice on it rather than agents, as we are in a good position to advise them properly, or rather than go to the bank managers, who often have difficulties in releasing moneys in order to introduce it to insurance companies, for obvious reasons from the bank managers' point of view and from the building societies managers' point of view. If the insurance bond does not cover the amount of claim, an amount that would be embezzled in that situation, who picks up the remainder of the claim, or does the proposer have to suffer the loss?
You have to pick a figure: that is the only answer to that. When there is a blank sheet in front of you, you have to pick a figure, and the figure of 25 per cent turnover seems to be a reasonable figure if based on the exposure or the cash flow drag at any one time. One should have 75 per cent of one's turnover turning over in cash at any one time, leaving 25 per cent of it hanging around. I understood Senators original worry was that the figure might be too high and, therefore, too expensive and if the loss turns out to be greater who carries it? The answer is obvious; it is not carried, but we pick a figure that is sensible and 25 per cent of one's turnover should be the most that one should be exposed for. We will not cover all cases. We may have to come back in years to come and up that figure substantially.
What is the non-life period?
It is £25,000 minimum, and it is £25,000 composite if you are in both businesses. At all times it is a minimum of £25,000.
Amendment agreed to.
Acting Chairman
Amendments Nos. 81, 82 and 83 cannot be moved in view of the acceptance of amendment No. 80. Amendment No. 84 has already been discussed.
Amendments Nos. 81 to 83 inclusive, not moved.
Government amendment No. 84:
In page 21, line 19, to delete "subsection (1)" and substitute "this section".
Amendment agreed to.
Government amendment No. 85:
In page 21, line 20, to delete "broker's" and substitute "intermediary's".
Amendment agreed to.
Government amendment No. 86:
In page 21, line 21, to delete "or legal".
Amendment agreed to.
Amendment No. 87 not moved.
Government amendment No. 88:
In page 21, line 24, to delete "broker" and substitute "intermediary".
Amendment agreed to.
Amendment No. 89 not moved.
Government amendment No. 90:
In page 21, line 26, to delete "broker" and substitute "intermediary".
Amendment agreed to.
Government amendment No. 91:
In page 21, line 26, to delete "or legal".
Amendment agreed to.
Amendment No. 92 not moved.
Government amendment No. 93:
In page 21, to delete lines 44 to 46 and substitute the following:
"(c) a copy of the bond shall be displayed, for the information of the public, in a prominent position in all premises occupied by an insurance intermediary and in which he carries on business as insurance intermediary, and the bond shall be mentioned in his sales literature and business note paper."
Amendment agreed to.
Government amendment No. 94:
In page 21, lines 47 to 51, to delete subsection (6), and substitute the following subsections:
"(9) The amount or amounts in subsections (2), (3) and (4) may be altered to such amount or amounts as the Minister may from time to time prescribe and a different amount or amounts may be prescribed for different classes of intermediary by reference to turnover or to such other matters as the Minister may consider appropriate.
(10) For the purposes of this section—
‘accounting year' means the year commencing on the date of coming into force of this section and subsequent anniversary accounting years;
‘turnover' means the aggregate of all moneys required to be paid by an intermediary into the separate bank accounts required under section 40 (1) (a) and 40 (1) (b);
‘life assurance turnover' means the aggregate of all moneys required to be paid by an intermediary into the separate bank account required under section 40 (1) (b).".
Amendment agreed to.
Question proposed: "That section 39, as amended, stand part of the Bill."
As the Minister and his officials know, the NIBA organisation have over the past 12 months approximately been asking their members to contribute a figure every month to prepare a recognised compensation fund in the same way as travel agents, auctioneers and others so that they would have a fund. The figures are available and they are growing monthly. By the time this Bill becomes law they will have increased further, obviously. What is the Ministers view on this? The fact that from a very early day the NIBA organisation decided they should anticipate and know what was in the Bill, and work on it immediately, is a tribute to them. I would like the Minister to respond positively and to recognise their efforts in going to the bother of contributing monthly so that they can have what they would regard as a proper consumer bond fund.
In relation to the section, I am glad that the Minister has reduced the amount of bonding from £100,000 to £25,000. On subsection (4) of the new section, amendment No. 80, I am concerned about the fact that we will have now intermediaries with a turnover of less than £25,000 who will have no bonding whatsoever. We are trying to devise and enact legislation in which we are praising ourselves from the viewpoint of protecting the consumer. Here we are, in the life area in particular, whereby the turnover will be invisible in so far as the net payments will be made. The Minister has explained there what he means by encouraging people to pay direct. If the Minister is encouraging people to pay direct and the proposal forms are filled up and some mistakes are made by an intermediary or if bonds are lodged with an insurance company and claims arise, and if there is fraudulent dealing and the bonds do not cover it, then we are not protecting the consumer in the life assurance area. By having a turnover of £25,000 or less, we are effectively saying that the consumer has no protection in this area by the bonding.
There are two points I would like to refer to. First, Senator Fallon's point: the Bill will say that the Minister may by regulation provide that arrangements in relation to the bond shall be entered into only by persons of a class specified. We are providing here for a situation where, for example, neither would have a scheme or an arrangement made. Providing that complies with all the Insurance Acts we can then recognise it under legislation and make the subsequent changes in the scheme, and that is covered.
On Senator Hogan's point, I do not think it is sensible to be getting into figures below £25,000 turnover for a business. I know that they need protection at every level, but this is a business where the sums can be quite large. We selected that figure because it is more policeable. It will cover the vast majority of the business, leaving out of it some very small element of the business. I think it is practical. We do not want to chase every little corner of the business because it would just tie us all down.
Does the Minister recognise the fact that you could have a huge turnover by a life assurance intermediary, but it might show £25,000 or less in turnover in client's account?
There is no problem, because it is going direct.
You are talking about subsection (4), and consumer protection, and even whether it was going direct or not——
It is going direct. The consumer is protected by the insurance company.
Recently there was a High Court case whereby the life insurance intermediary was deemed to be the person responsible for the fact that there was a claim being made on a life assurance proposal because the form was not filled up properly and there was a greater onus.
Professional indemnity.
I do not know the particular case. I do not want to comment on the particular case.
Question put and agreed to.
NEW SECTION.
Acting Chairman
Amendments Nos. 95 and 96 are related and may be discussed together.
Government amendment No. 95:
In page 22, before section 40, to insert a new section as follows:
" .—(1) An insurance intermediary shall keep a separate bank account for each of the following classes of business—
(a) an account in connection with premiums payable to insurers under contracts of non-life insurance, or money paid or payable to policyholders by undertakings authorised under the Regulations of 1976;
(b) an account in connection with premiums payable to insurers under contracts of life assurance, or money paid or payable to policyholders by undertakings authorised under the Regulations of 1984, and
(i) all moneys, other than commission payments and service charges, received by him in connection with either such class of business shall be paid into the appropriate account, and
(ii) neither the State nor any person shall have or obtain any recourse or right against money standing to the credit of such account or accounts in respect of a claim or right against an insurance intermediary until all proper claims against these moneys have been satisfied.
(2) The account to be kept—
(a) under subsection (1) (a) shall be designated in all financial records maintained by the intermediary as ‘section 40—Non-life insurance account',
(b) under subsection (1) (b) shall be designated in all financial records maintained by the intermediary as ‘section 40—Life Assurance account'.
(3) This section shall not apply as respect a tied insurance agent in so far as moneys received by him in connection with premiums payable to undertakings under contracts of insurance or moneys payable to policyholders by undertakings, relate to a tied agency agreement or arrangement entered into by the tied insurance agent.
(4) For the purposes of this section—
‘service charge' means an amount payable, or payable in certain circumstances, by a client to an intermediary in respect of his services in relation to contracts of insurance but does not include any premium or part thereof payable to an undertaking;
‘tied agency agreement or arrangement' has the meaning assigned to it in section 43;
‘tied insurance agent' has the meaning assigned to it in section 43.".
The difference between this new section 40 and that published in the Bill is that, except for tied agency business, all intermediaries, and not just brokers, will have to keep clearly identifiable separate client bank accounts for life and non-life business, and that all moneys received by an intermediary in connection with either class of business will have to be paid into the appropriate account. Commission payments and service charges are, however, excluded for self-evident reasons.
The amount passing through the client account is, therefore, the defined turnover reckonable for bonding purpose, which I referred to earlier. Commission and service charges are proposed to be excluded from the client accounts, so as not to unfairly inflate turnover commission and service charges which are the remuneration of insurance intermediaries rather than exposed clients' money and need not, therefore, be bonded.
It should be noted that the new section avoids the use of the word "claims". The insurance industry represented that insurance companies do not, under any circumstances, make claims cheques payable to intermediaries. Consequently there should be no circumstances in which an intermediary would be in a position to lodge a claim cheque in the separate bank account. The word "moneys" is broad enough in any event to cover all eventualities in this particular respect.
Amendment agreed to.
Amendment No. 96 not moved.
Question, "That section 40 be deleted", put and agreed to.
NEW SECTION.
Government amendment No. 97:
In page 22, before section 41 to insert a new section as follows:
" .—(1) No person shall act as, or hold himself out to be an insurance agent unless—
(a) he holds an appointment in writing from each undertaking for which he is an agent.
(b) he states on his letter headings and business forms that he is an insurance agent and the name or names of every undertaking for which he is an agent, and
(c) he informs any proposer of an insurance contract that he is an insurance agent and of the name or names of the undertakings for which he is an agent.
(2) Subject to subsection (3), an insurance agent shall hold—
(a) in the case of non-life insurance, an appointment in writing from not more than four undertakings authorised under the Regulations of 1976,
(b) in the case of life insurance, an appointment in writing from not more than four undertakings authorised under the Regulations of 1984.
(3) The provisions of subsection (2) shall come into force on such date as the Minister prescribes not being less than two years after the commencement of this section.
(4) A tied insurance agent shall:
(a) state on his letter headings and business forms that he is a tied insurance agent and the name or names of every undertaking for which he is a tied insurance agent,
(b) inform any proposer of an insurance contract that he is a tied insurance agent and the name or names of every undertaking for which he is a tied insurance agent, provided always that the insurance contract in question is of a type which is subject to a tied agency agreement or arrangement entered into by the said tied insurance agent.
(5) A tied insurance agent shall not act in relation to contracts of insurance offered or issued by any other undertaking authorised under the same Regulations as the undertaking with whom the tied insurance agent has entered into a tied agency agreement or arrangement.
(6) For the purposes of this section—
‘Regulations' means the Regulations of 1976 or the Regulations of 1984, as the case may be;
‘tied insurance agent' and ‘tied insurance agreement or arrangement' have the meanings assigned to them, respectively, in section 43.".
The significant differences between section 41 of the published Bill dealing with insurance agent's qualifications and the text of the new section are, first, two years after the coming into force of the section, the maximum number of agencies which can be held by an agent will be limited to four life agencies and four non-life agencies. Tied agents will be subject to the same status disclosure rules as agents, and tied agents will be limited to one agency in the category, life or non-life insurance, in which they hold a tied agency.
I have decided to try to reflect in the Bill the public's need to be very clear about whom they are dealing with — tied agent, agent or broker — when they seek advice about insurance. There was a place in the marketing mix for individual insurance companies selling their product directly to the public, for agents who represent one or, perhaps, a small number of those companies, and for independent brokers who advise clients on a wider spectrum of products available. From initial reactions to the Bill on its introduction it is abundantly clear that the public have a need to distinguish between these different types of selling operations. The amendments, therefore, aim to highlight that distinction rather than to blur it. For instance, treating all intermediaries as if they were offering the same service — I think we have bitten that particular bullet. I would like to emphasise that it is not necessarily the purpose of the Bill to favour one or the other, but to create conditions under which members of the public will be in no doubt as to what kind of service they are getting. With this in mind the section sets a statutory ceiling on the number of agencies that an individual can hold. The ceiling, as you can see from the amendment is being set at four in each category of business, life and non-life.
I realise that this new statutory demarcation between agent and brokers may result in some rethinking by agents and brokers as to what business they want to be in. That is an important part of sorting out the business in a general sense and putting the broker bodies on to an even more professional footing than they are on at the moment.
I have undertaken — and do formally undertake — to enter into discussions with both Senators and Deputies, and to have a think about all the comments made in this debate today between now and Report Stage, and between now and the time the Bill comes to the Dáil, remembering particularly that it will probably, although I cannot pre-empt it, have to come back to the Seanad after the Dáil. The views of the Dáil at that time I would value greatly because, in fairness the Seanad has made a very good input into this Bill. Senators have been working very hard at it, which I appreciate. They have put forward very strong arguments in relation to this controversial section of the Bill. It would be no harm if we adopted it, and then went on to hear the reports and the views of Deputies on the logic which we can follow in implementing it. As of now, the only logic I have available to me is this as I have drafted it. I ask Senators for their agreement to adopt it at this stage with my commitment that some thought and work will go into it between now and Report Stage and that we will have another opportunity to discuss it in the Dáil, and to come back from the Dáil and discuss it further. With those assurances I would hope the Seanad could permit this section to go through today.
Acting Chairman
Amendments Nos. 97 and 98 are related and may be discussed together.
I will be opposing the insertion of this amendment. I see no reason why the Minister, if he is prepared to consider the various arguments we have been putting forward under amendment No. 75 and now amendment No. 97, cannot take the initiative and postpone the implementation of this amendment to Report Stage in the Seanad. We have to do a job here in the Seanad. We cannot depend on Deputies to do a job for us, as the Minister can. We have to enact the legislation as we see fit in this House. If Deputies have more wisdom in the matter and want to propose amendments or changes, we will be glad to discuss them again when they return to the Seanad.
Taking this amendment, the argument has been well put and I will not go over the same ground again. I do not agree that agents should be treated as liberally as the Minister is treating them in the Bill. He is giving them tremendous latitude to take up a significant proportion of the market without any regulation with the exception of bonding, with no recognition of the contribution which brokers have to make in terms of financial overheads, the number of agencies essential for them to survive in the business. I cannot see why we should be treating agents in the liberal way we have been doing in this Bill, in the interests of consumer choice and protection and increasing the levels of standards and expertise that are so essential in the advice that is given to the policyholder.
I do not want to go over the ground that was covered. We discussed amendment No. 75 which is the brokers definition and amendment No. 97 at length from 2 o'clock until 3.30. I am pleased that the Minister will look at it on Report Stage or, if not at Report Stage, then in the other House, and change it at that stage. He knows my views on the section dealing with the appointment of agents and the number of agencies each of them should hold, that is, four life and four non-life. I would prefer a lesser figure, but I have to acknowledge that this has come a long way from the original Bill which was unlimited in the number of agencies an agent might hold. While this Bill limits it to four, there is the extra stipulation that an agent has to have a separate client's account. There is also the bonding arrangement for him. It is an improvement. I would prefer a lowering of the fence.
I would like to move onto the other aspect of this section and make one or two observations about the tied agents. I am very strongly of the view that tied agents are cowboys. We all know what that word means. If there are cowboys in the industry, this is the area in which the cowboy can operate. What the Minister has in the present setup with tied agents, as I understand and as the industry understand, is a situation whereby a tied agent agrees to tie himself to a particular insurance company. He then can seek part-time temporary staff to go out and sell the product the company have to offer. I have made the point that the insurance industry has a very proud tradition. Many people are striving for higher values and higher principles in the industry. This is what this Bill is about. We have it from the companies and the brokers' organisation. The area of the tied agent and the people he employs, and the training of the sub-agents, could be addressed in this Bill.
I know what happens at present. I have examples of where a tied agency appoints a housewife, an Army man, anyone who will sell a life policy. They are given an agency, and told, "That is the product". There is a short crash course of maybe two hours per day for two or three days, or two hours per week for two or three weeks. They have to sell endowment assurances, single premiums and take in unit linked policies. They knock on doors at all hours of the night. They call on their relatives and they must do business with them. What happens eventually is that there is a break-off because they do not last the pace. A lot of angry people are left behind. This is the record in towns in this country. There are many solicitors' letters floating around from people who thought they were onto a good thing and found that it was not as good as they thought.
If the industry is to be serious about the tied agency, it has to examine it and the type of training given to the sub-agents of these tied agents. I consider that insurance people in this country are members of ACII and FCII and are top class insurance people. Some of them are out selling in the highways and byways. They are pitted against the individual who has a two hour crash programme. It is crazy that we are allowing this. It is known within the industry that, if a person loses his job or is made redundant, or is unfortunate in some way, you are told he has got another job and that he is selling life assurance. It is the thing to do when you lose your job. That could well be a reflection on the life assurance companies who have been far too liberal in the past in accepting the kind of people who have got agencies. If you could sell a case at all you were given an agency, or with the prospect of one or two policies you would be granted an agency. I hope this Bill will stop that.
It comes back to the tied agent. The sub-agent of the tied agent has to be closely examined. There has to be a proper training course, not like the crash course for the eight or nine people taken on. It must be more than that. I would welcome a tightening up and some input into the training of the sub-agents. If it is to continue — I hope it will not — better training facilities, longer training facilities and a greater knowledge of what the industry is about are necessary. In my opinion better and longer training facilities lead to a greater knowledge of what the industry is about and will create an interest in and love of the industry. Insurance is not about telling barefaced lies, non disclosures and all that goes with it. This is what the cowboys in the industry are doing. Tightening up would be very appropriate and I ask the Minister to investigate this and to respond positively to this matter.
I totally agree with what Senator Fallon has said about tied agents. It has been the experience of people in the industry that cowboys operating indiscriminately around the country, selling insurance without any experience or training, and with very little knowledge apart from being instructed to go and sell the product have brought the insurance industry into total disrepute. This has called into question the bona fides of most people in the insurance industry. Of all industries, the reputation of the insurance industry has been tarnished most by people who operate in this indiscriminate and inexperienced manner, selling a product whether it is good, bad or indifferent to the consumer.
By and large the public know very little about insurance. Many of the public would readily admit that they are lacking in knowledge of insurance. That is probably the reason they go more often to insurance brokers than directly to companies in order to seek independent advice on the best cover they can get at the right price. It calls into question the development of our insurance industry if we cannot tackle this cancer that is eating away at the development of the industry and the development of the insurance intermediaries.
I agree totally with Senator Fallon's suggestion about a proper training course which is essential for sub-agents. They must be able to display to the general public and consumers their qualifications from the insurance course they have undertaken. It is noticeable that in all the provincial papers, in particular, a week does not pass without various advertisements by tied agents seeking to employ people to sell their products. It has gone to such an extreme now that urgent action is needed by the Minister to ensure that the goodwill that should be part and parcel of insurance intermediaries and the insurance companies does not continue to deteriorate further and turn off the general public from service which can be so important to them. It is essential for the consumer in many cases. There is a distaste now for insurance intermediaries, developed and compounded by the cowboy tactics of some tied agents at present.
I understand the Senator's viewpoint about the cowboy element in the business. Unfortunately, you will get that in any business. This Bill goes a long way towards tying down that situation. The Bill makes the company much more responsible for the actions of their agents. Before this Bill, one perhaps had a case in law, under the insurance legislation you could not formally pin the company to the agent, and we are now doing that in this Bill. I say here today to any insurance company that they will have to look even more closely at whom they appoint as tied agents. They will then have to be sure that those tied agents conduct themselves because the companies will be held responsible under this legislation. It is a major step forward because now the companies are specifically held responsible for the performance of those tied agents. That was not the case before this legislation was introduced and, therefore, it is a big step forward and should in some ease Senators' minds about that kind of performance.
Lest there is any worry about it, I would say to the insurance companies that they should be extremely careful about the agents and the tied agents they appoint because they are responsible for them. I would be amazed if the insurance companies did not supervise more stringently the actions of their tied agents. That is my first point. I say publicly to insurance companies that they should be extremely careful in the appointment of tied agents. That is as far as any sensible person can go to ensure that those agents conduct themselves as they should. We must be very careful not to cast any doubt on genuine people. There are very good tied agents and, in fairness to them, we must acknowledge that. Again I would say to the companies: "Be careful of whom you appoint as your agents".
Section 48 of the Bill, the section dealing with codes of conduct, allows selling practices to be regulated among other things. It states:
The Minister may by order prescribe codes of conduct to be observed by insurance brokers or insurance agents in the State. Any such order may, in particular, specify the practices to be followed by brokers or agents in their dealings with their clients or the holders of authorisations or with other persons.
Together with the fact that companies now have a more clear responsibility for agents that means that whole situation should be tightened up considerably. I thank Senators for raising it with me. I know it is a genuine worry and I would say in response that these two items in the Bill will go a long way towards dealing with the situation which they want dealt with. I know the Irish Insurance Federation have moved voluntarily to improve matters in the area of selling practices with the 15 day cooling off period for consumers to cancel policies taken out by them. This is another step in that direction.
I thank Senator Fallon, in particular, for his understanding with regard to the number of agents. I formally put on the record that I fully understand what Senator Fallon has pointed out to me very forcibly, indeed, both privately and publicly today. He would prefer a lesser figure than the ones I am proposing. I wish also to thank him for accepting my assurance that I will discuss this with Senators and with Deputies and I will see where that takes us. I appreciate his understanding and acknowledge that he has very strong personal views on this matter. He has expressed these both publicly and privately and I am pleased that he is in a position to accept my assurances that I will not lose sight of his arguments as we proceed with this Bill.
I give notice to the House that I intend to move an amendment to this amendment on Report Stage if the Minister does not take into consideration the views we have expressed earlier in the debate.
Amendment agreed to.
Amendment No. 98 not moved.
Question, "That section 41 be deleted", put and agreed to.
NEW SECTION.
Government amendment No. 99:
In page 22, before section 42, to insert a new section as follows:
".—Every undertaking shall keep a register of all its appointed insurance intermediaries at its principal office in the State. The said register of appointed insurance intermediaries shall be open to public inspection at reasonable times during normal working hours.".
This amendment is necessary to take account of the fact that insurers will now be obliged to disclose all of their appointed intermediaries and not just agents. Insurance brokers hold identical agency appointments to insurance agents and it is administratively easier for companies to provide a composite listing as well as providing more information to the public.
May I inquire who will monitor the agency system that will evolve as a result of this Bill?
Each insurance undertaking will keep a register of all their appointed insurance intermediaries at their principal office in the State. The register will be open to public inspection at all reasonable times during normal working hours. The Bill actually lays that requirement on the insurance companies to keep such a public register of their appointed intermediaries.
Amendment agreed to.
Question, "That section 42 be deleted", put and agreed to.
SECTION 43.
Amendments Nos. 100 and 101 are alternatives; amendments Nos. 102 to 107, inclusive are similar, and all may be discussed together.
Government amendment No. 100:
In page 22, lines 21 to 23, to delete subsection (1), and substitute the following subsection:
"(1) An insurance agent shall be deemed to be acting as the agent of the undertaking to whom a proposal for insurance is being made when, for the purpose of the formation of the insurance contract, he completes in his own hand or helps the proposer of an insurance policy to complete a proposal for insurance. In such circumstances only, the insurer shall be responsible for any errors or omissions in the completed proposal form.".
Section 43 (1) is being amended to clarify the company's responsibility for agents helping policyholders complete proposal forms. The insurers had maintained that the existing wording was legally imprecise and cast doubt on the extent of an insurer's responsibility in this area. The intention here is to cover errors and omissions by agents in relation to the completion of proposal forms. This is achieved, I trust, under the new wording. The substitution of the word "undertaking" for the word "insurer" is to maintain consistency in the text of the section with the rest of Part IV. There is no substantive difference between "insurer" and "undertaking". This is purely in the nature of a tidying up amendment.
In regard to amendment No. 101, the amendment proposed by Senator Hogan, while I accept that the section as it stands overturns the current common law position on agents vis-á-vis clients in completing proposal forms, I do not consider it appropriate to do this in the case of brokers also. It is imperative that a broker be clearly seen to be representing his client's interests when completing proposals. Brokers offer themselves as independent advisers acting for a client. It follows therefore that they must have independent sources of protection. This is provided by professional indemnity insurance. To agree to the Senator's amendment would undermine the status of the broker as an independent professional intermediary.
In amendments Nos. 102 to 107, inclusive, the substitution of the word "undertaking" for the word "insurer" is to maintain consistency in the text of the section with the rest of Part IV. There is no difference between both phrases and it is important to tidy them up.
Amendment agreed to.
Amendment No. 101 not moved.
Government amendment No. 102:
In page 22, line 25, to delete "insurer" and substitute "undertaking".
Amendment agreed to.
Government amendment No. 103:
In page 22, line 27, to delete "insurer" and substitute "undertaking".
Amendment agreed to.
Government amendment No. 104:
In page 22, line 30, to delete "insurer" and substitute "undertaking".
Amendment agreed to.
Government amendment No. 105:
In page 22, line 31, to delete "insurer" and substitute "undertaking".
Amendment agreed to.
Government amendment No. 106:
In page 22, line 33, to delete "insurer" and substitute "undertaking".
Amendment agreed to.
Government amendment No. 107:
In page 22, line 35, to delete "insurer" in each place where it occurs and substitute "undertaking".
Amendment agreed to.
Section 43, as amended, agreed to.
SECTION 44.
Amendments Nos. 108 to 114, inclusive, are related and may be discussed together.
Government amendment No. 108:
In page 22, line 43, to delete "agent" and substitute "intermediary".
The scope of section 44 of the published Bill is being broadened to provide that where premiums are paid to insurance intermediaries, agents and brokers, in respect of a renewal of a policy or an accepted proposal, that the premium shall be treated as having been paid to the insurer except where the policyholder is notified in writing by the insurer in advance that the intermediary has no authority to collect the premium on the insurer's behalf. As I have already explained this is the effective position at present, and I am simply proposing here to give it statutory expression.
Agents only?
No. Agents and brokers. In regard to amendment No. 109 I have set out the Government amendments which I am proposing to this section. I am affectively accepting amendment No. 109 proposed by Senator Hogan by providing that where a premium is paid in respect of an accepted proposal or a renewal of a policy which has been agreed by an insurance company, whether to an agent or a broker, payment will be deemed to have been paid to the insurer. With regard to amendment No. 113, I do not think the inclusion of the proviso suggested by the Senator concerning time limits and conditions would be fair on the consumer. After all intermediaries may not have brought such conditions to the attention of the insurer or more importantly may fail themselves to pay the client's premium within such time limits and conditions specified.
The related Government amendment No. 114 exempts the insurer from liability where the insurer informs the policyholder in writing in reasonable time that an intermediary has no authority to collect premiums on their behalf. This is fair and an important protection for both the insurers and the clients. It is as far as one should go in this area. Insurers always have the option to notify a policyholder directly in the event of nonpayment of a premium, within the time limit specified, that they are no longer on cover in relation to the particular risk involved. The section does nothing to alter this state of affairs. Matters are, in my view best left as they are and for this reason I do not propose to accept amendment No. 113 as proposed by Senator Hogan.
Amendment agreed to.
Amendment No. 109 not moved.
Government amendment No. 110:
In page 22, line 44, to delete "the insurer" and substitute "an undertaking".
Amendment agreed to.
Government amendment No. 111:
In page 22, line 46, to delete "insurer" and substitute "undertaking".
Amendment agreed to.
Government amendment No. 112:
In page 22, line 46, to delete "agent" and substitute "intermediary".
Amendment agreed to.
Amendment No. 113 not moved.
Government amendment No. 114:
In page 22, after line 46 to insert a new subsection as follows
"(2) Nothing in this section shall render an undertaking liable for a premium paid to an intermediary in respect of an accepted proposal or a renewal of a policy which has been invited by the undertaking, where the undertaking has given reasonable notice in writing to the person whose policy has been accepted or whose policy is being renewed, that the said intermediary has no authority to collect such premiums on behalf of the undertaking.".
Amendment agreed to.
Section 44, as amended, agreed to.
Question "That section 45 be deleted," put and agreed to.
SECTION 46.
Amendments Nos. 115 to 118, inclusive, and No. 120 are similar and may be discussed together.
Government amendment No. 115:
In page 23, line 12, to delete "broker or insurance agent" and substitute "intermediary".
The substitution of the word "intermediary" for the words "broker or insurance agent" in the section is a technical matter and it will tidy up the situation; otherwise section 46 is self-explanatory.
Amendment agreed to.
Government amendment No. 116:
In page 23, line 14, to delete "broker or insurance agent" and substitute "intermediary".
Amendment agreed to.
Government amendment No. 117:
In page 23, line 16, to delete "broker or insurance agent" and substitute "intermediary".
Amendment agreed to.
Government amendment No. 118:
In page 23, line 17, to delete "broker or agent" and substitute "intermediary".
Amendment agreed to.
Section 46, as amended, agreed to.
SECTION 47.
Amendments Nos. 121 and 122 are alternatives and are related to No. 119 and all may be discussed together.
Government amendment No. 119:
In page 23, to delete lines 18 and 19 and substitute:
"47.—A person shall not, without the permission of the Court, act as or hold himself out to be an insurance intermediary if—".
No statute of limitations applies to the disqualification criteria in this section of the Bill as published. For example, paragraph (e) states:
he is or was a director of any company involved in insurance which has been compulsorily wound-up,.
A person could have been a director of a company five or ten years prior to winding up and have acted entirely properly and innocently but he would nevertheless be disqualified from even acting as an insurance broker or an insurance agent as the section is presently drafted. With a view to improving its overall balance, I am inserting here the proviso "without the permission of the court". The amendment qualifying this whole section gives discretion to the court to decide each individual case on its merits. This will avoid any injustice arising while at the same time preserving a general prohibition on the unworthy. The substitution of the word "intermediary" for "broker" in subsection (c) is self-explanatory. Subsection (e) is being amended so as to include not only insurance businesses wound up compulsorily by the court, but also creditors voluntarily winding-up. This is necessary because it is possible that clients could suffer losses in creditors voluntarily winding up also.
Senator Hogan has proposed amendment No. 121. I take it that the Senator's concern is that paragraph (e) involved an element of retrospection. However, this is not strictly correct. What is involved here is the application of the necessary basic standard to be met by insurance intermediaries. Furthermore, as I have already explained, Government amendment No. 119, qualifying this whole section, gives discretion to the court to decide each individual case on its merits. This will avoid any injustice arising while, at the same time, preserving a general prohibition on the unworthy and on discouraging spurious attempts to get around the restrictions on certain persons regarded as unsuitable to act in a fiduciary capacity as insurance brokers or agents. That is covered by amendments Nos. 119 to 122.
I thank the Minister for the amendments he has proposed to section 47. He has allayed my fears on retrospection that could be incurred in this Bill, whereby a nominee director who might have no involvement in the collapse of a company might be prevented in the future from establishing an insurance brokerage. I thought that was very severe and I am glad that the Minister and the Department have seen the problem that could arise and consider the amendments as appropriate. I am quite happy that what was mentioned during the course of our Second Stage contributions has been taken into account.
Amendment agreed to.
Government amendment No. 120:
In page 23, line 23, to delete "broker" and substitute "intermediary".
Amendment agreed to.
Amendment No. 121 not moved.
Government amendment No. 122:
In page 23, line 29, to delete the words "compulsorily wound up, or" and substitute the following "wound up by the Court or by means of a creditors' voluntary winding up, or"
Amendment agreed to.
Section 47, as amended, agreed to.
SECTION 48.
Government amendment No. 123:
In page 23, lines 35 and 36, to delete "the holders of authorisations" and substitute "undertakings".
The purpose of this technical amendment is to maintain consistency in the wording of this part of the Bill with that used in other parts of the Bill. There is no substantive differences between the phrase "holders of authorisations" or "undertakings" we are just tidying that up.
I am just curious to know why the code of conduct section would not be part of the Third Schedule, or is it a different procedure? Forgive my ignorance in relation to this situation, but I thought it would be more appropriate in that area. Perhaps there is merit in putting it into the Bill itself as part of the Bill. The codes of conduct are extremely important in view of the discussions we have had on another section on tied agents and indiscriminate operations around the country. If we do not establish appropriate standards and proper codes of conduct, then the entire industry will deteriorate into disrepute, which will be irrevocable. I would be interested to know the codes of conduct and the regulations the Minister has in mind.
The Minister has made the point that he is deleting "the holders of authorisations" and substituting "undertakings". It deals with the question in that the Minister may by order prescribe codes of conduct to be observed by insurance brokers and insurance agents in the State. My obvious question, which has been touched on by Senator Hogan, is whether the tied agents come into this category? Can I assume that the Minister also means that tied agents are included in this section?
I can confirm that, Senator. It will include tied agents, the code of conduct——
The tied agents are not mentioned specifically.
The phrase "insurance" or "insurance agents" would cover it. You can take it that it does include tied agents. To respond to the question, the code of conduct to be laid down by the Minister can cover brokers and agents for example, selling practices, information disclosure, cooling off periods, exercise of undue influence, handling and passing on to insurers of premiums and so on are the kind of things it can cover.
The code of conduct can also cover the giving of advice only on matters in which the person is competent, or dealing with what an introducer may do in regard to soliciting life assurance business outside the terms of the agency appointment, or attempts to influence the prospective policyholder with regard to the completion of the proposal form, and those type of areas. The code of conduct would seek to lay down codes in those areas where there is potential abuse.
I am sure that most insurance companies and those practitioners in insurance, in particular, life assurance, will welcome this. I think it is a very good move. Insurance, a financial service, is very complex and technical. It is not anything like as straightforward as it was, say, 20 years ago when you either bought a life assurance policy that was saving or whole of life. It underlines — a point that was stressed in this debate — the importance of having trained ethical people selling the range of products. I do not believe it is possible that people who have been trained for two hours each week for two weeks in life assurance or insurance as it is at present being practised are adequately trained or that it suffices to equip them to meet the needs of consumers. Perhaps there should be some centre that people could check out any proposals that are made to them by a salesman or an agent?
I am aware that in many instances consumers are sold the wrong product for their needs and that is very often governed by the fact that there is a larger commission for the agent than for something that would suit. In many instances the consumer would not be aware of the long-term implications. It is too late when the insured person is dead and the widow discovers that the policy does not suit at all. I welcome this. I think any reputable insurance company or anyone involved in insurance will welcome this and will not be afraid of it.
Amendment agreed to.
Section 48, as amended, agreed to.
NEW SECTION.
Government amendment No. 124:
In page 23, before section 49, to insert a new section as follows:
".—(1) This Part shall not apply to—
(a) contracts of reinsurance or to insurance intermediaries engaged solely in relation to the business of effecting contracts of reinsurance;
(b) travel agents and tour operators licensed under the Transport (Tour Operators and Travel Agents) Act, 1982, in so far as they are engaged in the placing of travel insurance or touring assistance contracts as part of, or in conjunction with, an overseas travel contract.
(2) In this section ‘travel agent', ‘tour operator' and ‘overseas travel contract' have the meanings assigned to them respectively under section 2 (1) of the Transport (Tour Operators and Travel Agents) Act, 1982.".
The significant difference between this new section and section 49 of the published Bill is that it exempts travel agents and tour operators from the requirements of Part IV applying to insurance agents in respect of their overseas travel insurance and touring assistance business. The reason for this is that tour operators and travel agents are already tightly controlled by the Minister for Tourism and Transport. They are also required to hold indemnity bonds which encompass such travel insurance. It is simply to avoid needless duplication in terms of administration, bonding and costs that I have exempted them from the scope of Part IV. I am satisfied that the consumers' interest will not be adversely affected.
Amendment agreed to.
Question, "That section 49 be deleted", put and agreed to.
Sections 50 and 51 agreed to.
Question, "That section 52 be deleted" put and agreed to.
NEW SECTIONS.
Amendments Nos. 125 and 126 are related and may be discussed together.
Government amendment No. 125:
In page 24, before section 53, to insert a new section as follows:
"53.—(1) The Minister may appoint such and so many of his officers as he thinks fit to be authorised officers for the purpose of the Insurance Acts.
(2) Every authorised officer shall be furnished with a warrant of his appointment as an authorised officer, and, when exercising any power conferred on an authorised officer by section 54, shall, if requested by any person affected, produce the warrant to that person.".
These sections will enable the Minister to appoint inspecting investigating officers for the purposes of the Insurance Acts. While similar powers already exist under the regulations of 1976 and 1984, they may not be ultimately exercisable in circumstances which do not fall within the scope of these regulations, for example, in relation to insurance intermediaries. The powers are enabling powers only and I do not anticipate an immediate or widespread need to use them.
Is not that going against the Minister's grain in opening up the markets and helping to create competition? Is he trying to use the big stick now so as to put the market back in order again, if it steps out of line, by seeking powers here under this legislation?
No, it is just to ensure that the provisions of the Act are carried out.
Amendment agreed to.
Government amendment No. 126:
In page 24, before section 53, to insert a new section as follows:
"54.—(1) An authorised officer may, for the purpose of obtaining any information which the Minister may require for enabling him to exercise his functions under the Insurance Acts, do any one or more of the following things—
(a) enter at all reasonable times any premises in which he has reasonable grounds for believing that there are any books, documents or records relating to the issue of any policy, bond, certificate or other instrument of insurance, or to the acceptance of any premium in respect of a policy, bond, certificate or other instrument of insurance,
(b) require any person employed in the premises to produce to him any books, documents or records which are in such person's control, possession or procurement and which such officer has reasonable grounds for believing to be records, books or documents relating to the issue of any policy, bond, certificate or other instrument, and to give him such information as he may reasonably require in regard to any entries in any such records, books or documents,
(c) inspect any book, record or other document produced in pursuance of a requirement under the Insurance Acts and, if he thinks fit, copy any entry in such record, book or document.
(2) A person who obstructs or impedes an authorised officer in the exercise of a power or does not comply with a requirement under this section shall be guilty of an offence.".
Amendment agreed to.
Section 53 agreed to.
FIRST SCHEDULE.
Government amendment 127:
In page 25, in the reference to the Insurance Act, 1936, in column (3) before "Section 103" to insert "Section 64 (2).".
At the time the 1936 Insurance Act was framed there was difficulty on the part of some individuals in obtaining birth certificates and so on as a certain public building had been destroyed by fire. I refer to the burning of the Public Records Office. It was necessary, therefore, to permit insurers to adjust the terms of an industrial branch policy within 12 months of its inception if it came to their notice that the age on which it was based was incorrect. The provision is now spent and can therefore be removed from the statute.
Amendment agreed to.
Government amendment No. 128:
In page 25, in the reference to the Insurance Act, 1936, in column (3), before "Sixth Schedule", to insert "Section 109 (3).".
Section 1(a) of the 1936 Insurance Act creates a class of continuing offence capable of being committed by an insurance company or by an officer or employee of such company. There is a danger that in imposing a continuing fine under this section a court could eventually exercise its jurisdiction. This provision is to be deleted under the Bill as published. It is now proposed to repeal section 109(3) also. The subsection provides that, if an assurance company is convicted of a continuing offence, this shall constitute a ground for the winding up of the company if the offence has continued for three months or more. As the class of continuing offence contained in subsection (1) of section 109 is being abolished, the provisions of section 109(3) will accordingly be spent and it is thus proposed to repeal section 109(3) in its entirity purely as a tidying up exercise.
I just want to agree with the Minister.
Amendment agreed to.
First Schedule, as amended, agreed to.
Second Schedule agreed to.
THIRD SCHEDULE.
Amendments Nos. 129 to 132, inclusive, are related and may be discussed together.
I move amendment No. 129:
In page 25, line 11, after "and" to insert "or".
In moving amendment No. 129 perhaps we could get clarification from the Minister in relation to the various details needed in order to provide a competent, experienced and academically qualified insurance broking organisation or profession. What does the Minister mean by being professionally competent, by having sufficient experience, and what type of academic qualifications are necessary?
I think the Minister is deleting this Schedule.
Thank you. I withdraw the amendment.
Amendment, by leave, withdrawn.
I move amendment No. 130:
In page 25, line 11, after "qualifications" to insert "Diploma holders of Chartered Insurance Institutes shall be deemed to have such qualifications".
I would like the Minister to take this amendment on board at some stage.
I think you are asking him to accept an amendment to something that he is going to delete.
Yes, in some way or other within the Bill, I am asking the Minister for a recognition of the Chartered Insurance Institute. For hundreds of years they have rightly been accepted as being the organisation dealing with the educational and other aspects of the insurance industry and this has been proved correct over the years. In my opinion, any person with a diploma of the Chartered Insurance Institute has something to be proud of. It is a qualification which has world-wide recognition and it is a recognition that is sought after very actively by personnel of insurance companies and personnel of insurance brokers' staff.
I have always felt that academic qualifications were important in the insurance industry. I have spelled that out many times on Second Stage and during this debate on Committee Stage. The academic qualifications possessed by a diploma holder of the Chartered Insurance Institute should be recognised in a Bill which we now accept to be the most important insurance Bill for over 50 years. I know that there are other areas where insurance is studied. You have the technical colleges, the RTCs and the NIHEs and institutions like that who take insurance as part of an overall course but not as a specific course in itself in the same way as the Chartered Insurance Institute do. As I said, any person with an ACII or an FCII after his name today, or a diploma holder of the Chartered Institute, is recognised generally to be an expert on insurance. For that reason I would like in this important Bill formal recognition to be granted somewhere along the line to this very important organisation.
I fully support the spirit of what Senator Fallon has said. The Chartered Insurance Institute qualifications are indeed fully recognised by insurance companies and they have the full respect of all others. There is no need in this Bill to actually put in something like that in terms of qualifications of individuals. The reality in the marketplace is that the insurance companies fully recognise and support the qualifications and that the various bodies recognised by the Minister will have to be professionally organised bodies. One would assume that they, in turn, would recognise qualifications like this. I fully support the spirit of what the Senator is saying but I do not think it is necessary to write it in because it is the situation in the marketplace. A very high degree of respect and recognition is there for the qualifications of the Chartered Insurance Institute and there is a very high degree of acceptance for their graduates. There is no evidence to the contrary and therefore it would be only stating the obvious to put it in the Bill and there is no place that it would fit neatly.
Amendment, by leave, withdrawn.
Amendments No. 131 and 132 not moved.
Question "That the Third Schedule be deleted", put and agreed to.
Title agreed to.
Bill reported with amendments.
An Leas-Chathaoirleach
Next Stage?
The Minister may be anxious to take this next week but I would prefer if we could leave Report Stage until the week after next as our spokesman, Senator Fallon, will not be available next week.
There are some Senators in this House in whose absence I would not dream of discussing insurance. Senator Fallon is one of those, so that is fine by my timetable.
Report Stage ordered for Wednesday, 22 June 1988.
An Leas-Chathaoirleach
When is it proposed to sit again?
Next Tuesday at 2.30 p.m.