Dáil Éireann Debate, Tuesday - 13 November 2018
185. Deputy Richard Boyd Barrett asked the Minister for Finance if there is a cap on the percentage an insurance company is entitled to increase a life insurance premium by in order to maintain cover; and if he will make a statement on the matter. [47016/18]
View answerAt the outset, it is important to note that as Minister for Finance, I am responsible for the development of the legal framework governing financial regulation. Neither I nor the Central Bank of Ireland can interfere in the provision or pricing of insurance products, as these matters are of a commercial nature, and are determined by insurance companies based on an assessment of the risks they are willing to accept. This position is reinforced by the EU framework for insurance which expressly prohibits Member States from adopting rules which require insurance companies to obtain prior approval of the pricing or terms and conditions of insurance products.
In a general sense, it is my understanding that insurers use a combination of rating factors in making their individual decisions on whether to offer life insurance cover and what terms to apply. These factors can include age, health, family medical history, occupation and lifestyle. In addition, these may be determined or linked to the length of time with which such a policy may last. Furthermore, my understanding is that insurers do not all use the same combination of rating factors, and as a result prices and availability of cover varies across the market, and that they will price in accordance with their own past claims experience.
Based on the assumption that the Deputy is referring to whole-of-life insurance policies, I have been advised that in the early years the payments for such products are higher than the cost of the policy holder’s chosen benefits with the extra money paid going into a plan fund. However, protection benefits become more expensive as policy holders get older with the result that payments into the plan begin to equal the cost of the chosen benefits. In the later years of reviewable protection plans, the cost of the benefits increases significantly, and in order to keep the level of benefits at the current level of payments, the difference is made up from the plan fund.
In order to see if the consumer’s regular payment plus any fund that has been built up is enough to cover their chosen benefits for their reviewable protection plan, an insurance company carries out regular reviews of these plans. During such a review the insurance company may find that the consumer’s current level of payments is enough to maintain the level of cover that the consumer wants. However, the insurance company may also find that the current level of payments is not enough to maintain the level of cover desired by the consumer, thus explaining why a number of people are finding that their premiums are increasing.
In conclusion, while I have sympathy for the concerns that have been expressed, it is important to note that I am unable to direct insurance companies as to the pricing level or terms or conditions that they should apply, including on the imposition of caps for increases in order to maintain cover under life insurance policies.
