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Seanad Éireann debate -
Thursday, 23 Jun 1988

Vol. 120 No. 8

Insurance Bill, 1987: Report and Final Stages.

An Leas-Chathaoirleach

Before we proceed with amendments, I would remind the House that the proposer of an amendment may close the debate on that amendment, but no other Senator may speak more than once on each amendment. I have also circulated a list showing the groupings of the various amendments. I am sure the Senators will be aware of that.

Government amendment No. 1:
In page 5, to delete lines 22 and 23, and substitute "agent or an insurance broker;".

This is a technical amendment limiting the definition of insurance intermediary to either an insurance agent or an insurance broker. The amendment is made in the interests of making clear precisely what we mean about this. Senator Robinson also suggested this on Committee Stage and I undertook to take it on board, which I am now doing.

Amendment agreed to.
Government amendment No. 2:
In page 9, line 15, to delete "subparagraph" and insert "paragraph".

This is another technical amendment made on the grounds of precision. The reference to subparagraph (a) is incorrect as (a) is, in fact, a paragraph and not a subparagraph. This was pointed out by the Cathaoirleach on Committee Stage, so we are sorting that out.

Amendment agreed to.

An Leas-Chathaoirleach

Amendments Nos. 3, 4, 5, 6, 8, 9, 10, 13, 14, 15 and 22 are related and may be discussed together.

Government amendment No. 3:
In page 11, line 8, after "business" to insert "in accordance with the procedures provided for in section 56".

During the course of the debate on Committee Stage of this Bill, I agreed at Senator Robinson's request to review the powers contained in Part II of the Bill to suspend or revoke the authorisation of an insurer or to require information of undertakings from insurers with a view to making these powers more uniform. The power to revoke or suspend an insurance company's authorisation is contained in several sections of this Part of the Bill and in section 38 in Part III which deals with revocations or suspensions after conviction of an insurer under section 36 and 37. I have decided to bring all the procedures and requirements relating to the revocation or suspension of a company's authorisation into a new section 56 of the Bill, which also combines the existing sections 56 and 57. Amendments Nos. 4 and 13, therefore, bring sections 17 (2) and 24 (1) into line with other sections of the Bill which require the furnishing of information to the Minister by a specified date. Amendment No. 8 allows insurers to appeal to the court against any ministerial direction or objection resulting from his dissatisfaction with the qualifications of directors, managers or authorised agents. This amendment brings section 20 of the Bill into line with other sections of the Bill where appeal procedures are provided for.

Amendment agreed to.
Government amendment No. 4:
In page 11, line 17, after "him", to insert ", by a specified date".
Amendment agreed to.
Government amendment No. 5:
In page 11, line 28, after "business", to insert "in accordance with the procedures provided for in section 56".
Amendment agreed to.
Government amendment No. 6:
In page 12, line 26, after "business" to insert "in accordance with the procedures provided for in section 56".
Amendment agreed to.
Government amendment No. 7:
In page 13, to delete lines 6 and 7.

An Leas-Chathaoirleach

It has been included with the other group.

Section 19 of the Bill deals with the question of prior notice and display of policy terms and premium rates. Subsection (4) subjects the requirements laid down in this section to the provision of any Council Directive. I have been advised by the parliamentary draftsman that there is no need to include this provision as all national legislation is in any event subject to Community law. I thank Senator Mary Robinson who made the point during the course of Committee Stage for her valuable contribution.

Amendment agreed to.
Government amendment No. 8:
In page 13, between lines 38 and 39, to insert the following:
"(7) An undertaking may appeal to the Court against a direction or objection of the Minister under this section. The appeal may be heard in chambers.".
Amendment agreed to.
Government amendment No. 9:
In page 14, to delete lines 8 to 11.
Amendment agreed to.
Government amendment No. 10:
In page 14, between lines 17 and 18, to insert the following:
"(5) The revocation or suspension of an authorisation under this section shall be carried out in accordance with the procedures provided for in section 56".
Amendment agreed to.

An Leas-Chathaoirleach

Amendments Nos. 11 and 12 are related and may be discussed together.

Government amendment No. 11:
In page 14, to delete lines 31 and 32.

What we are doing here in amendments Nos. 11 and 12 is inverting the order of section 22 (2) and (3) to make the sequence more logical which is a point Senator Robinson made.

Amendment agreed to.
Government amendment No. 12:
In page 14, between lines 47 and 48, to insert the following:
"(3) Reinsurance acceptances by an undertaking shall be subject to the provisions of the Insurance Acts.".
Amendment agreed to.

An Leas-Chathaoirleach

Amendment No. 13 has already been discussed with No. 3.

Government amendment No. 13:
In page 15, line 13, after "undertakings" to insert "by a specific date".
Amendment agreed to.
Government amendment No. 14:
In page 15, to delete lines 22 to 25 and substitute the following:
"(3) Where the holder of an authorisation fails to comply with subsections (1) or (2) the Minister may suspend or revoke the authorisation in any class or part of a class of business in accordance with the procedures provided for in section 56.".
Amendment agreed to.

An Leas-Chathaoirleach

Amendment No. 15 already discussed with amendment No. 3.

Government amendment No. 15:
In page 22, between lines 39 and 40, to insert the following:
"(3) The revocation or suspension of an authorisation under this section shall be subject to the procedures provided for in section 56.".
Amendment agreed to.
Government amendment No. 16:
In page 26, to delete lines 17 to 21 and substitute the following:
"(9) Any amount or percentage rate in subsections (2), (3) and (4) may be altered as the Minister may from time to time prescribe and different amounts and percentages may be prescribed for different classes of intermediary by reference to turnover or to such other matters as the Minister may consider appropriate.".

The purpose of amendment No. 16 is to make it explicitly clear that the Minister can alter requirements both as regard amounts and percentages in relation to bonds for intermediaries. The existing wording might not have allowed the percentage figure to be varied and I was concerned about that. It is important that the Minister should have full flexibility to alter bonding provisions to take account of circumstances and possible developments in the future in the light of actual experience in operating a bonding system in this area. I am anxious that the Minister would have that flexibility to amend the bonding figure.

An Leas-Chathaoirleach

Is the amendment agreed?

Could I ask one question on that? Does the Minister have the power himself without consultations with the Oireachtas to amend the bonding?

The regulations have to be laid before the Oireachtas.

Amendment agreed to.
Government amendment No. 17:
In page 26, line 24, after "force" to insert "of subsection (1)".

This amendment is required to link this definition to the coming into force of subsection (1) which will come into effect following the enactment of the Bill.

Amendment agreed to.

An Leas-Chathaoirleach

Amendments Nos. 18 and 19 are related and may be discussed together.

I move amendment No. 18:

In page 27, line 33, to delete "four" and substitute "three".

I understand the Minister stated on Committee Stage he would consider the request of my colleague, Senator Hogan, that agents would have three rather than four agencies. I think it is a very serious facet of the Insurance Bill. It has serious implications. If agents are allowed to have four agencies, both life assurance and insurance agencies, the danger is of insurance brokers who are working full time in the insurance business being inhibited to become agents rather than brokers. I think the Minister should consider very seriously giving them only three agencies rather than the four allotted. My colleague, Senator Hogan, dealt with it very well on Committee Stage. There are many insurance brokers that have been working very hard in the insurance business and have cleaned up a lot of practices that have been going on. It is essential that the brokers be given a fair chance to make an impact. I do not think that agents should be given the same type of consideration as brokers. I feel that brokers have a better role to play in the insurance business.

I would like to endorse what Senator Reynolds has said. The Minister knows very well that it was the one area of real concern in the Bill. There were others as well, but this one in particular took up quite a lot of time. The Minister did agree, as far as I can recall either on Report Stage or before it went to the Dáil, that this matter would be examined again in the light of evidence that came to him. I am sure Senator Reynolds and Senator Hogan will accept that that is the position. The view of the House in regard to this problem is that there is no point going back on the history of it and so on, but the Minister said that either on Report Stage or before it went into the Dáil it might be examined or looked at in some detail again.

I indicated in the course of Committee Stage that I was concerned to ensure that an insurance broker would be in a position to offer his clients a very wide range of choice. For this reason I decided at that time to set a floor of five agencies for a person wishing to act as an insurance broker to make sure that clients would receive the professional service they expected of and deserved from brokers. While in practice most brokers will hold more than the requisite five agencies I cannot, unfortunately, agree to a lesser number than that being enshrined in the legislation as the minimum requirement on brokers. While accepting this minimum figure of five agencies — and the figure I quoted previously supports this — the inescapable logic is that agents be allowed to hold up to four agencies. Otherwise, there is a lacuna and there would be a "no man's land" situation.

I thank Senators very much for their very helpful debate on Committee Stage of this Bill. I did, as promised, have a very close look again at it to see how I could practically meet their points of view. The more we looked at it the more we came back to the same conclusion, which was that if you accept that brokers must have at least five then anybody operating under any other hat has to start at the immediately preceding figure. One has, first of all, to decide whether one moves to the figure five for brokers. Are we prepared to say that somebody acting for less than five companies could genuinely offer a brokerage professional service? Anything less than that would have a very small share of the market. Therefore, they could not be said to be independent professionals. I say again that if we reach the five agencies then the figure four is automatic. We cannot have a gap between the five and the four; you have got to drop down one. If you say at least five for brokers, then you must set agents at four. I have not been able to find a way out of this difficulty.

I fully understand the Senators' point of view on it, but the logic of what they are saying to me is that you would have to reduce the number of companies that a broker would act for. If we were to do that, then we would be having brokers who would act for a very small percentage of the market. That would not put them in the business of being genuine brokers. Unfortunately, I have to stay with the Bill as it is at present drafted.

The Minister's explanation is reasonably satisfactory. This is a very controversial area. I would ask the Minister if there is any further development in the coming months before the Bill goes into the Dáil. Will he consider looking at any fresh evidence that might influence a change of heart in this matter?

One other question I want to ask: if we agree to brokers having five agencies, is it for legal reasons that the agents should then have four agencies? When the Minister says that the brokers have five agencies, and that we have to start immediately under for the agents to have four agencies, is that legally binding?

All I can say is that this Bill has been around for a long time. It is time to make up our minds on it now. I would ask Senators to recall that there was no cap put on the agency system until this Bill came in. There was a free-for-all. We have limited the scope of the freelance agent considerably, not, I appreciate, to the satisfaction of many Senators, but certainly as far as we practically can go at this time. I am satisfied that this is a major step forward. Regarding your final question, it will be legally binding once the Bill is adopted. It is not a legal reason. The logic of it is compelling. We say that there are brokers and agents. If everybody with five agencies upwards is a broker, and if we reduce the figure for agents, say, to two, what would a person be who has three? He would not be an agent or a broker; he would be stuck in the middle. It is just wherever you set the broker figure you simply logically have to have the next one. It is like when you set a threshold obviously the figure underneath it is the other figure.

Amendment, by leave, withdrawn.
Amendment No. 19 not moved.
Government amendment No. 20:
In page 28, to delete lines 27 to 30 and substitute the following:
"(2) An undertaking shall be responsible for any act or omission of its tied insurance agent in respect of any matter pertaining to a contract of insurance offered or issued by that undertaking, as if the tied insurance agent was an employee of that undertaking.".

This amendment places equal responsibility on an insurer in respect of his tied insurance agent as he has for his employee. Under the provision now being replaced a tied agent was deemed to be the agent of the insurer. If the agency agreement was narrowly drawn the insurers' responsibility for the actions of his tied agents could be correspondingly narrow. The equating of the responsibility of the insurer for his tied agent with that for his employee broadens the insurers' responsibility for his tied agent, and further strengthens the consumer protection element in the Bill, which is something I am particularly keen to do.

I must confess this is an amendment that I am quite happy about. As the Minister knows, I expressed great concern about the whole tied agency system. I would have further wished that there would be guarantees of training for any agent of the tied agent. As the Minister knows, what is happening is the tied agent employs, on a commission basis, individuals from particular areas where they work. They give them crash programming in the insurance industry and let them off selling life assurance to an unsuspecting public and without the knowledge and training they should have. Certainly, this may have the effect of curtailing in some way the tied insurance agent at least from the point of view that the undertaking in question would be conscious of the fact that they shall have a clear responsibility to the tied agent and whoever he employs on a commission basis. I presume that would be the logical conclusion of this amendment. If it is, it is certainly one that I agree with. The Minister and the Department have, as a result of this Bill, a greater insight into the workings of the tied insurance agent. I welcome the amendment.

Amendment agreed to.
Government amendment No. 21:
In page 29, line 9, to delete "policy" where it first occurs and substitute "proposal".

This is a technical amendment. The clear intention of the section was to encompass a "proposal" of insurance rather than a "policy" of insurance.

Amendment agreed to.
Government amendment No. 22:
In page 30, to delete lines 6 to 34 and substitute the following:
"56.—(1) Where the Minister proposes to suspend or revoke an authorisation under section 21 he shall notify the undertaking concerned in writing of such proposed suspension or revocation.
(2) A decision by the Minister to suspend or revoke an authorisation under this Act shall be notified in writing to the undertaking affected together with the reasons for the suspension or revocation of the authorisation.
(3) Where an authorisation is suspended or revoked under the provisions of this Act the Minister shall notify the suspension or revocation to the supervisory authorities of any other Member State of the European Communities in which the undertaking carries on business.
(4) Where an undertaking has its head office in another Member State the Minister shall not revoke the authorisation of the undertaking without first consulting the supervisory authority of the Member State in which the head office is situated. The Minister may, however, suspend the authorisation of the undertaking in the State before such consultation is concluded and shall in such a case notify the supervisory authority of the Member State where the head office is situated.
(5) The Minister may terminate the suspension of an authorisation at any time by notifying the undertaking that its authorisation has been restored.
(6) An undertaking may appeal to the Court against a decision of the Minister to suspend or revoke an authorisation.
(7) The whole or part of an appeal under this section may be heard in chambers.
(8) Nothing in this Act in regard to the suspension or revocation of an authorisation shall affect the validity or due continuance and fulfilment of any contract of insurance effected before the suspension or revocation of the authorisation.".
Amendment agreed to.
Government amendment No. 23:
In page 30, line 36, to delete "purpose" and substitute "purposes".

There is more than one purpose to the Insurance Acts. This is a minor amendment to bring the formulation into line with that used in other places in the Bill.

Amendment agreed to.
Bill received for final consideration.
Question proposed: "That the Bill do now pass."

I want to say a special word of thanks to the Senators who stayed here day after day and debated this Bill. I do not want to mention particular Senators but perhaps the Seanad would understand if I thank Senator Hogan and Senator Fallon for their particular interest in the Bill and their assistance with it throughout the time we spent here. It is a major piece of legislation designed to improve the insurance industry, improve the standing of the insurance broker and to give consumer protection. I thank the Senators for their passage of this Bill. I have learned considerably as it now goes to the Dáil.

I would like to put on record my appreciation and thanks to the Minister for his work with us in this legislation. It has been described as the most important insurance legislation for over 50 years. I hope that in time it will prove itself to be important for the industry and that it will be of benefit to the industry and to the consumer. It is primarily in regard to the consumer. The role of the consumer in the whole insurance industry is vital. Much of this debate deals with the protection of the consumer.

The Minister has been very fair with us. Naturally we would have liked additional amendments to be taken on board, but nonetheless he has gone a long way and we appreciate it very much. The Bill is a far better Bill now than it was on coming into the Seanad. The Senators accepted the fact that it was a Seanad Bill. They studied and researched it well. In particular, Senator Hogan was a most fair operator. He realised that it was above the political system, that it was not a political matter and was one that all of us should involve ourselves in to get the best Bill possible. I think we have got that. As I said, the question of concern was referred to by the Minister, the question of three rather than four agencies. That was, of course, one area of contention in the Bill. There were many others. The result is that we now have a better Bill. When the Bill came in first the number of agencies was unlimited. At least now it is tied to a particular figure.

The agent must also have a consumer bond and he must have his own bank account within the bank system dealing with clients' money only. We have come a long way. The same applies to the broker who now must have a minimum of four agencies, a clients' account, consumer bond and a professional indemnity bond. This is now tied into the legislation. The position of the tied agent has been tidied up better as a result of this legislation. There is the question of a greater awareness and a greater emphasis on the role of the auditor within the insurance company which was tidied up on Committee Stage with a fairly long amendment from the Minister and one which again will give further protection to the consumer.

I thank the Minister and the Senators who participated in the Bill, in particular Senator Hogan who is extremely helpful and fair at all times. The Bill is far better now than when it came into the Seanad.

I would also like to thank the Minister for all the work he put into this major Bill. On behalf of my colleague, Senator Hogan — if he was present he would be seven feet tall instead of six feet four listening to all the glowing tributes paid to him — I want to express our thanks for all the work Senator Fallen and Senator Mulroy put into the debate. This is very serious legislation and nobody has any political axe to grind. It will be very good for the insurance industry. I have no doubt that the Minister will come up against the question of the agents and brokers again in the Dáil and perhaps he will have to reconsider his thinking there. I would like to ask the Minister a final question. Is there any proposal that the legislation on building societies will come before the Houses quite shortly?

An Leas-Chathaoirleach

The last portion of the Senator's speech hardly arises on this Stage of this Bill.

I would like also to thank and congratulate the Minister for successfully guiding this Bill through the Seanad. It will be recognised on all sides as a very important step forward in protecting the position of the policyholder not only in his dealings with insurance companies but in his dealing with insurance intermediaries as well.

The main objectives of the Bill were to set out the Minister's legislative powers in relation to the supervision of insurers, to regulate the commission paid to intermediaries where the policyholders' interests so require and, finally, to introduce a form of regulation for the insurance intermediaries. The Bill will be seen as a major step forward in achieving these aims. I am very pleased to welcome the Bill.

I never realised before that it was the correct procedure at the end of a Bill to——

An Leas-Chathaoirleach

On the Fifth Stage it is appropriate to discuss the contents of the Bill.

I admit my ignorance. I want to join in congratulating the Minister on the contribution he made to the Bill. He has been very tolerant and is a great example to many other Ministers. It is a very complex and difficult Bill but, in my view and that of the Labour Party he has gone out of his way to do everything possible. Whereas some of us may have been masters of details he is now master of the Bill in general. I congratulate him on his tolerance and understanding.

Question put and agreed to.
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