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Seanad Éireann debate -
Wednesday, 15 Jun 2022

Vol. 286 No. 3

Insurance (Miscellaneous Provisions) Bill 2022: Second Stage

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

I welcome the Minister of State. The floor is his.

I welcome the opportunity to address the Seanad on the Insurance (Miscellaneous Provisions) Bill 2022, which was published on 1 April and which passed all Stages in the Dáil on 1 June. There were no amendments to the legislation as it passed through the Dáil. People were generally happy with it. I want to put that on record at this point.

As Senators will be keenly aware, the availability of affordable insurance is vital to underpin a healthy and vibrant economy. This is why the Government has continued to prioritise insurance reform, which is identified in the programme for Government. We are delivering on this commitment through the action plan for insurance reform, which is a cross-departmental initiative that seeks to tackle key insurance issues head-on. The issues range from award levels and the cost of claims to competition and fraud.

The Bill before the House speaks to a number of insurance-related issues that have arisen since the action plan was published in December 2020. In doing so, it represents another important step on the journey towards greater transparency and openness in our insurance market and complements the significant volume of work already achieved under the action plan. The Bill addresses four main issues, namely, the matter of insurers deducting State supports from claim settlements, the Central Bank's new price walking ban, technical amendments to the Consumer Insurance Contracts Act 2019 and changes to the scope of the insurance temporary run-off regime set up to ensure the orderly withdrawal of certain insurers from the Irish market following the UK's departure from the EU. Ultimately, these pro-consumer measures are about increasing transparency, clarity and legal certainty in the insurance market.

I will give a short overview of the Bill's main provisions. First, the Bill amends the Central Bank (National Claims Information Database) Act 2018 to enable the Central Bank to collect information regarding deductions by insurers from claim settlements that relate to State supports.

Building on the well-established success of the national claims information database, NCID, this enhancement aims to increase transparency around such practices, and to generate evidence for future policymakers. In doing so, it will help apply important lessons learnt from the Covid-19 pandemic.

Second, the Bill requires the Central Bank to submit a report to the Minister for Finance setting out the steps it has taken to address the practice of "price walking", and its views on whether further action is required. Following a review and public consultation, the Central Bank has published new regulations to ban price walking in the motor and home insurance markets, which will be the first of its kind in the EU, from 1 July this year. As Senators may be aware, price walking can result in consumers who stay with the same insurer for many years being subject to a loyalty penalty. By requiring a report on the price-walking ban, the Bill will help reinforce the work of the regulator to end the loyalty penalty, and ensure timely oversight of this important new consumer protection measure.

I use the phrase "loyalty penalty" as shorthand to cover the practice that in many insurance companies the more loyal one is to a particular insurance company on the motor insurance side or the home insurance side, one is charged extra the longer one stays. One would have thought one would get a loyalty bonus but, in fact, the insurance companies in many cases have been penalising people for staying with the same company and not seeking to renegotiate their premiums on a regular basis.

Third, the Bill makes technical amendments to the Consumer Insurance Contracts Act 2019 to address technical and legal issues that arose following the initial enactment of this legislation. The Bill also inserts a new provision into the Act to require the disclosure of information by insurers in relation to deductions from amounts paid in claim settlements. In line with the enhancements we are making to the NCID, this is a further measure to ensure maximum transparency around such practices, and will mean that consumers benefit from full and complete information about any deductions from their claim settlements.

Finally, the Bill provides for technical amendments to the European Union (Insurance and Reinsurance) Regulations 2015, which underpin the temporary run-off regime, TRR, for UK and Gibraltar-based insurers as a result of Brexit. These changes will guarantee service continuity, and thus protection, for Irish policyholders by ensuring that certain firms which provide reinsurance, and firms in liquidation, can use the temporary run-off regime to run-off their existing Irish insurance contracts. By that, I mean they might be no longer writing here but a claim could arise and it might be quite a period of time before it comes to be settled and that is why we have this run-off regime to cover those issues.

The Bill passed smoothly through the Dáil, where I feel it got a broadly positive response. Accordingly, I hope that consideration by this House can be similarly constructive. I believe that the delivery of this Bill is timely in light of the clear desire for insurance reform, not least here in the Oireachtas, where we have had many important debates on this issue in recent times. From my regular engagements as Minister of State, I can see that the desire and willingness for tangible change exists among all stakeholders, from consumer groups to industry bodies. I believe that we now have to pull together and build on this momentum to deliver real, meaningful reform that will last, and lead to an improved insurance environment not just for our benefit, but for the benefit of generations to come.

This means completing remaining actions, such as reforming the duty of care, and enacting the Competition (Amendment) Bill 2022, which is currently making its way through this House. Delivering these outstanding initiatives remains the top priority of the Cabinet sub-committee on insurance reform, which is driving this reform agenda. However, it also involves all stakeholders playing their part to uphold and fully implement the many important reforms already delivered, notably the personal injuries guidelines, which have the potential to significantly alter the insurance environment.

Of course, the guidelines are only one of several key reforms that have been delivered in the first 18 months of the action plan. In that time, we have seen motor insurance prices continue to fall to the point where the latest CSO data for May shows a reduction of just over 40% from peak prices in mid-2016. It is my hope that with full buy-in from all interested parties, and the completion of some final outstanding measures, the action plan will lead to further declines in motor insurance, as well as increased availability and affordability of liability insurance. These reforms, including the measures contained in this Bill, should contribute to building a more open, sustainable and competitive insurance environment, one which works for both policyholders and insurers.

I stress the competitive environment aspect of it. We are a small country of 5 million people and we do not have as many insurance companies operating here as one would have in a country with 50 million, 60 million or 70 million people. It is important that, through our work at Government level, we do all we can to encourage existing companies that are in the Irish insurance market to spread their wings into areas that they are not currently covering and also to attract new businesses to write insurance in this area as well. In that regard, we are working closely with IDA Ireland to encourage new businesses to come to Ireland that are not currently based here.

I thank Senators for their attention today. I emphasise the importance of progressing this Bill promptly, in the interest of consumer protection. In order to guarantee timely insight into the effectiveness of the price-walking ban, it is vital that the Bill can be enacted in line with the implementation of this ban on 1 July. I also believe that prompt enactment of the changes to the temporary run-off regime is imperative in order to protect policyholders from any disruption in the servicing of their contracts. I look forward to hearing Senators' constructive views on this legislation, and listening to the debate in the Upper House here today. I commend the Bill to the House.

I welcome the Minister of State to the House. He is becoming a regular visitor. I believe he will be back again next week.

This is another piece of the insurance reform jigsaw that is being put in place. It is good to see that there have been no amendments and that the Dáil has more or less recognised it for what it is doing and has accepted that. However, we still have a long way to go within the insurance sector to make additional reforms to get it to where we realistically need to get it.

Any of us who have worked in business or who run a business always reward our loyal customers but the insurance industry behaves in the opposite manner. The more loyal one is, the more penalised one gets for being a loyal customer. In relation to one aspect of this, the price walking, which is probably a new terminology, it is good to see that this is included in the Bill and the Central Bank will have a role as soon as this is enacted to try to address this.

There is a generation of people out there who are not used to shopping around, who are not used to going on the Internet to secure a better offer or who are not used to picking up the phone and spending 15 or 20 minutes trying to get a better price. They were reared with being loyal to a brand that they trusted but that trust is no longer coming from the insurance side. It might be coming from the customers' side but it is not coming from the insurance side. I welcome that piece within this legislation and I look forward to seeing how it works over a period of 18 months.

The second bit is in relation to business interruption and the impact of Covid-19. I would know this as I have been through it. I refer to the behaviour of the insurance companies towards their customers and how they treated their customers in what were extremely difficult and challenging times for businesses. Not alone during that period when consumers thought they had cover for business interruption schemes, their insurance companies put up walls before them clearly stating that they did not have cover. It took a court decision to ensure that businesses were covered for business interruption during Covid-19. Certain sectors were covered. Some businesses were not covered. During that period, the Government stepped in to support those businesses to ensure they did not fail through very troubling times. For the court to rule that a business had business interruption cover but then for insurance companies to deduct all the State supports one had got during that period was, in one sense, disgusting in terms of how the insurance businesses operated during that time. It was either the State or the insurance cover, but not both. I paid a premium to have a business interruption policy to cover the Covid-19 pandemic and I was entitled to claim that from the insurance but, because the Government stepped in in that intervening period, the insurance company will not pay that. The people of this country are at a loss in terms of that money. The insurance company is the only company that benefits out of this process.

I am delighted to see that measure in the Bill. I accept we cannot retrospectively go back on this, but if we had known this at the start of the pandemic and the Government had been in a position to say that business A was covered and business was not covered, the supports could have been targeted at the businesses which were not covered and the Government would not have been exposed, to the benefit of the insurance companies, in terms of the companies that were covered.

The only ones losing out here are the people of this nation. I welcome the report and I know that we cannot go back on it retrospectively but it is something that was identified in the pandemic that we cannot allow to happen again. As a business owner, I am grateful to the Government for its supports during that period. Again, it goes to the behaviour of insurance companies, how they treat individual and business customers. Covid-19 exposed them for what they are. If there is any decency in these companies, they should pay the State back the money the Government paid to them. That is the least they should to do have any credibility with the public.

I thank the Minister of State for coming here today. I know his commitment and dedication to the whole issue of insurance. I agree with all that Senator Casey has said. While some people will shop around, others do not. I am chairperson of a community centre in Limerick. Our insurance went up by more than €10,000 this year. We are a not-for-profit organisation in the voluntary and community sector; any moneys that are made go back into the community centre. They are working on delivery to the community. It is a massive increase for an organisation like that. I welcome all the work the Minister of State and his officials have been involved in. We are going in the right direction. The Minister of State indicated that people are being stung for the fact that they were with the same insurance company all the time. That is not right, either. People should get credit for how long they stay loyal to a business. That happens in many organisations. It needs to be brought in to the insurance sector. The Minister of State is committed to that.

While some small businesses were covered during the Covid period, some were not. If a claim comes in against a small business now, the small business is no longer in control most of the time in respect of what happens in the courts. A settlement is made in a lot of cases. Sometimes the business owner receives a letter telling him the matter is no longer going to court as it has been settled. We need to look at the bigger picture. The Minister of State is going in the right direction. Fine Gael fully supports what he is doing and I am looking forward to working with him on delivery of this all-important legislation. It is very protective towards businesses, and businesses deserve certainty.

We had a debate here earlier on sick pay for employees, that whole assurance for employees and the employers. In this case, we need to give assurance to people in terms of insurance. People need to be able to get affordable insurance. I refer to the number of accidents that have been reported where people did not have insurance. Those things need to be looked at. We need to be able to provide insurance at a reasonable rate so that everybody will make sure to have their insurance in place. This legislation is most important for businesses and employers.

The Labour Party supports the Bill. However, when I read through the legislation I think there are more questions than answers with regard to how the Government is proposing to deal with the myriad insurance issues in the country at the moment. Sections 3, 4 and 6, which form the bulk of the Bill, are effectively about data collection. There seems to be a hope that data collection will shine a light and bring transparency into some of the insurance companies' practices. We cannot depend on hope. We have to ensure there is regulation in place.

The main impetus for the Bill was the enormous outcry that insurance companies were profiting from the State payouts to firms by deducting the benefit that a company got in the ensuing insurance settlement. At the time last year, we heard very strong commitments from Government that it would act. Really what we are seeing in the legislation today is data collection as opposed to any outright action.

What is most galling for me is that the Government could have acted. I listened to Senator Casey who spoke really passionately about how insurance companies have acted and should act now in terms of paying back the benefit they have accrued from withholding the State benefit. Those same insurers in personal injury cases have to pay the State benefit back to the State. That is already in legislation. The Government knew about this in 2020 but decided not to put in place any conditionality or protection of the State's interest when it was setting up these State benefits to companies. It could have acted as it has already in respect of personal injury, yet it cast a blind eye. It was to be expected that insurance companies would have acted like this and deducted the State payout to the businesses when making insurance settlements.

Section 6 is the response to the appalling price walking and customer loyalty practices. It is usually the less savvy and less able customers who are less equipped to switch around and they are being penalised for their loyalty. The changes on 1 July are welcome but we really have to hear from the Minister today that he is going to monitor and act quickly if we do not see change in respect of premiums for those customers who do not switch. The precedent set down and what we are seeing at the moment with regard to the judicial council guidelines experience would not give us massive hope. The Minister of State cited figures in his own speech regarding where premiums have gone. We have not seen the fall in premiums that insurance companies promised when they were looking for these judicial council guidelines. I think insurance companies need to be pushed to a much greater extent by Government to make good on those commitments.

There is a massive issue with insurance coverage in this country and gaping holes in some sectors, particularly in the community sector, water sports, community arts festivals and other businesses and activities. I understand we are a small country and do not have the luxury of multiple insurance companies. As a small country, then, we have to look at how we correct the market failure. I know a number of small organisations making tiny profits, if any profit at all, that have had to shut down because they could not get a decent premium for their business. That was even looking to the UK because there was simply no insurance company here. It is one thing to say we are a small country and have to accept the insurance landscape as we have it. It is a very different thing for the Government to say it is going to do something about it. We have not heard that comprehensive response from Government but we need to hear it. The Labour Party and other parties, including Government parties I am sure, have been putting forward proposals as to how we can resolve some of those insurance gaps.

We know there are proposals with regard to local authorities, and with regard to the State putting in place its own insurance company for community events. We need to see comprehensive action from the Minister of State on this. It is not good enough to put our hands up in the air and say we are a small country and we cannot do any more.

I welcome the opportunity to speak on this Bill on behalf of my colleague Senator Gavan. The problems in the insurance industry are well known to all of us. My party and others - I am thinking particularly of my party colleague Deputy Doherty - have worked hard over the years to highlight the exceptionally high premiums and the rip-off nature of insurance in this country. His Bill from 2021 is unfortunately being blocked by the Government. We welcome that this Insurance (Miscellaneous Provisions) Bill has been brought forward, primarily to address the issues of business interruption insurance in the context of Covid-19 and dual pricing. Many businesses that were forced to close because of public health restrictions, primarily in the hospitality sector, were covered by their insurance companies, but it then transpired that insurance companies were deducting the value of State supports provided to firms during the pandemic from the value of those payouts. Given that wage subsidy schemes, tax waivers and other State supports were essentially paid for by the taxpayer, in effect taxpayers' money has subsidised the insurance industry. Insurance companies devised a system whereby they indirectly made a profit from State supports to struggling businesses. The Minister of State said that the Government would respond and that insurance companies would not be let off the hook. They did well out of the pandemic. Despite what the Minister of State claims, they have been let off the hook. The problem with the legislation before us is that all it does is require the gathering of information. There is nothing here that would prevent it from happening again. There is nothing here that would require the insurance companies to pay the State back.

Sections 3 and 4 require the Central Bank to publish as part of the national claims information database data on any deductions from insurance claim settlements by insurance companies that relate to public moneys. Section 8 amends the Consumer Insurance Contracts Act 2019, which will require insurers to notify their customers of any such deductions, but there is no indication of what will happen with that information. Sections 5 and 6, in Part 3 of the Bill, address the issue of dual pricing in the insurance industry, also known as price gouging. Again, the legislation does not do anything to end dual pricing or price walking. It just asks for a report on something that the Central Bank has introduced independent of the Government and would probably have provided its own reports on in any case. Therefore, this is a disappointing Bill in many respects. We are not opposing the provisions of the Bill. It does include several technical and necessary provisions in regard to the Consumer Insurance Contracts Act and the temporary run-off regime, but it is a disappointment that the Minister of State and the Government claim to be introducing legislation to deal with dual pricing and the behaviour of insurance companies which shamefully deducted State supports from business interruption insurance payments but have produced a Bill which does not do much to address either of those issues.

Price gouging through dual pricing will be banned by the Central Bank, independently of the Government, on 1 July. Outside of that, there are still major issues to be resolved in the insurance industry. I mentioned that the Government continues to block Deputy Doherty's Bill to deal with these challenges. It would be of more benefit to consumers if the Government got behind that Bill as it aims to push down insurance premiums for consumers across the board. That is what is really needed.

It is important to put this in the context of the broader package of reforms in the whole area of insurance over a long number of years. It is one of a number of Bills being looked at this year that will address various issues that have arisen since the action plan on insurance was published. It will result in the implementation of the proposed ban on price walking and other measures to address this practice and will enable the Central Bank to collect data on this through the national claims information database.

I commend the Minister of State and, indeed, the previous Government on their reforms on the area of insurance. When we talk about inflation and the year-on-year price increases to May across a range of sectors, we should note that there has been a 10% reduction in car insurance in the same period. This is reflective of the work of the cost of insurance group, which was established in 2016. This work has led to the implementation of legislation, such as the Judicial Council Bill to implement the recommendations of the Personal Injuries Commission regarding award levels, and to the reform of the Personal Injuries Assessment Board. The report on the cost of motor insurance was published in July 2017 and the report on the cost of employer and public liability insurance was published in 2018. The body of work that was done in the years after the establishment of the cost of insurance working group culminated in a final report in October 2020. A number of other pieces or actions have since been completed or are in process as well. A body of work has been done to try to reduce the levels of insurance payouts. That issue was to the fore a number of years ago. This legislation is another follow-on to that as part of the action plan for insurance reform. Other initiatives, including the reform of the role of the Personal Injuries Assessment Board, will be concluded through legislative proposals this year. There are also changes to the Occupiers Liability Act 1995 on waivers and notices to increase protections for consumers and businesses.

The most important message is that this important legislation is part of an array of measures that have been put in place over a long number of years to reform the insurance market, to reduce the levels of payouts and, most importantly, to reduce the levels of premiums for consumers. I commend the Minister of State and wish him well in advancing the other issues within the action plan.

I thank Senators Casey, Maria Byrne, Sherlock, Warfield and Kyne for their contributions. They are all very helpful and positive and accept the logic of the legislation.

A big element of this issue relates to the recovery of deducted State supports. It has been rightly pointed out that in the Department of Social Protection, there is a scheme called the recovery of benefits and assistance scheme. It simply means that someone who is involved in an accident and gets disability payments for a period is not paid twice when the insurance company comes to settle. For instance, if there was a settlement of €100,000 and someone had already received €20,000 in State support through disability payments during that period, the person would get €80,000 because they had already received €20,000. They would not get €100,000 from the settlement, which was the total value of the award, with an additional €20,000 on top from the State. They would receive a total settlement of €100,000 with €20,000 from the State and €80,000 from the insurance company. However, the insurance company would hand the €20,000 back to the State because it had saved that amount since it did not have to pay it out. That is the principle we want to pursue here.

This is step one. I totally agree that if legislation like this had been in place a couple of years ago prior to Covid, which no one foresaw, we would have had a means of dealing with this area. However, we did not have legislation and we did not see Covid coming. I see it as a good learning experience. We want to make sure that if anything like that happens again, we are in a position to legislate. That is why we are gathering information because it could happen across any sector. It could happen in respect of an environmental issue or any other payment scheme that arises down the road. We want to have information from the Central Bank so that we can draft good legislation on this in the future.

This matter may yet well come to light as part of the quantum hearings and in the context of ongoing litigation before the courts. The matter is still before the courts and this issue may have an impact on that. The door is not yet fully closed on that issue. I want to put that on public record. Again, one could not retrospectively introduce issues in respect of to the insurance payout on a policy that has in existence maybe a year before Covid-19 came. While I would have liked to have done so, it was not practical from a legal point of view. That is my comment on that.

I want to also talk about a fair remark that was made, namely, that this legislation does not ban price walking. It seeks to get a report after 12 months, and within six months of the first anniversary. I accept that. It is important that we take a whole-of-government approach. It is not the job of the Department of Finance to run every aspect of the insurance industry. The whole-of-government approach means that the Department brings forward legislation and deals with the policy in this area, because this is a regulated industry. However, the implementation of that policy can be through the Department of Enterprise, Trade and Employment, such as in respect of business. This is particularly the case with regard to the Personal Injuries Assessment Board, PIAB, which has a role in that area. Legislation in this regard is coming before the House. We already have legislation coming forward from the Department of Justice on the duty of care legislation. We already had the judicial guidelines, which are now working their way through the courts.

The Department of Finance did not write the judicial guidelines, the PIAB legislation or the duty of care legislation. Neither did it write the price walking ban, which was done by the Central Bank. Our job is to make sure that all of these things are happening. It is not our job to do all of those things. However, I would see it as our role within the Department of Finance to make sure that they are all happening. That is what in this legislation here today.

I know that I am out of time, but I want to acknowledge the work of Deputy Pearse Doherty in this area in the past. I have acknowledged that work in the Chamber. We are gathering information here that will be helpful to us in getting good legislation into the future, as we done in the past. That is why we have the price walking legislation. Over the past couple of years, the Central Bank collected the data and now we have good legislation in this area. I want to do the same in relation to payments by the State. Perhaps the State was too quick to pay out money to small businesses, but it was a priority to get it out quickly. I have no apologies to make. We could not hang around to check business's insurance policies to see if they had cover or not. They needed help there and then. That is one of the lessons we have learned.

I thank the Senators. I look forward to being back here last week for Committee Stage, as well as for the final stages of the legislation.

Question put and agreed to.

When is it proposed to take Committee Stage.

Committee Stage ordered for Tuesday, 21 June 2022.