Written Answers. - Life Assurance.
Pádraic McCormack
Ceist:
12
Mr. McCormack
asked the
Tánaiste and Minister for Enterprise, Trade and Employment
if her attention has been drawn to the fact that there is concern about discrimination with regard to disclosures by life brokers relative to direct assurers (details supplied) and bank assurers; if her attention has further been drawn to the fact that there is a sense that there is not a level playing pitch throughout the industry; and the new regulations, if any, made with regard to disclosures of commission.
[7628/98]
Jack Wall
Ceist:
14
Mr. Wall
asked the
Tánaiste and Minister for Enterprise, Trade and Employment
if she will introduce legislation to make insurance companies disclose commission rates on their policies to the policy holder; and if she will make a statement on the matter.
[7679/98]
Paul Connaughton
Ceist:
17
Mr. Connaughton
asked the
Tánaiste and Minister for Enterprise, Trade and Employment
if her attention has been drawn to the fact that there is concern about discrimination with regard to disclosures by life brokers relative to direct assurers (details supplied) and bank assurers; if her attention has further been drawn to the fact that there is a sense that there is not a level playing pitch throughout the industry; and the new regulations, if any, made with regard to disclosures of commission.
[7627/98]
Billy Timmins
Ceist:
54
Mr. Timmins
asked the
Tánaiste and Minister for Enterprise, Trade and Employment
if her attention has been drawn to the fact that there is concern about discrimination with regard to disclosures by life brokers relative to direct assurers (details supplied) and bank assurers; if her attention has further been drawn to the fact that there is a sense that there is not a level playing pitch throughout the industry; and the new regulations, if any, made with regard to disclosures of commission.
[7629/98]
Seán Barrett
Ceist:
55
Mr. Barrett
asked the
Tánaiste and Minister for Enterprise, Trade and Employment
if her attention has been drawn to the fact that there is concern about discrimination with regard to disclosures by life brokers relative to direct assurers (details supplied) and bank assurers; if her attention has further been drawn to the fact that there is a sense that there is not a level playing pitch throughout the industry; and the new regulations, if any, made with regard to disclosures of commission.
[7626/98]
Liz McManus
Ceist:
57
Ms McManus
asked the
Tánaiste and Minister for Enterprise, Trade and Employment
if she has concluded her discussions with representatives of the insurance industry and consumer groups on life assurance transparency regulations; if the regulations will provide for the full and clear disclosure of all commission payments; and if she will make a statement on the matter.
[7574/98]
Nora Owen
Ceist:
81
Mrs. Owen
asked the
Tánaiste and Minister for Enterprise, Trade and Employment
if her attention has been drawn to the fact that there is concern about discrimination with regard to disclosures by life brokers relative to direct assurers (details supplied) and bank assurers; if her attention has further been drawn to the fact that there is a sense that there is not a level playing pitch throughout the industry; and the new regulations, if any, made with regard to disclosures of commission.
[7699/98]
I propose to take Questions Nos. 12, 14, 17, 54, 55, 57 and 81 together.
I refer the Deputies to the comprehensive reply which I gave to the House on 18 February last, regarding the wide-ranging discussions taking place on the draft life assurance transparency regulations with insurance industry representatives, consumer interests and other relevant experts in this field. It is my intention to seek to finalise the discussions and enact the regulations as quickly as possible. I am glad to have the opportunity to restate the broad outline and prime objectives in introducing a transparency regime, governing the marketing and sale of life assurance products.
The objective in introducing life assurance transparency regulations will be to provide the consumer, as of legal right, with understandable pre-contractual and post-contractual information, on essential features and key areas, associated with the purchasing of a life assurance product.
The prime objectives in the formulation of such a regime are: an end to over-complication in the presentation of such products; the minimisation of mis-selling and confusion; adoption of realistic investment projections, where relevant; transparency on charges and expenses; a knowledge of with whom the insurance consumer is dealing; and adequate redress through a firm statutory basis.
The proposed introduction of life assurance transparency regulations is necessitated by the failure of the insurance industry to adapt and respond to the growing demand by insurance consumers for reasonable disclosure by suppliers of life assurance of the risks and benefits associated with purchasing life assurance products.
The insurance ombudsman has consistently referred to the dissatisfaction expressed by complainants over surrender values of policies and to the fact that many complaints occur because of poor communication, lack of understanding of information at the time that a policy is purchased and misunderstandings in relation to "nil-allocation" or "non-investment" in assurance and investment policies in the early years.
The insurance ombudsman also pointed out that there was an onus on prospective purchasers of life assurance policies to take care to read and understand the policy documentation themselves.
My discussions and our Department's continued interaction with relevant parties have focused on the effect which charges, including commissions and sales remuneration, can have in reducing the amount of the premium available for investment, especially in the early years and on the surrender value and maturity value of the insurance policy.
My objective is to have all charges and deductions from the premium payment disclosed at the outset in a way that will enable the policyholder to readily establish, taking all charges into account, the real return on the gross premium investment.
With regard to the efficacy of introducing separate identification of commission payments within the statement of total charges, our Department has been seeking to devise, in consultation with the insurance industry, a workable formula for calculating the equivalent of commission component sales remuneration in direct sales of life assurance products. The disclosure requirements must be framed in a way which avoids unfairly discriminating between the commission payments to independent brokers and other insurance intermediaries and the remuneration packages of direct salesforce employed by the insurers themselves, or through tied agents, such as banks and building societies. The process of devising a satisfactory formula for computing commission equivalent in direct sales is a difficult and complex undertaking. Whatever formula is devised, must be soundly based in order to provide meaningful and accurate information to the policyholder, as to how much of the total deductions from the premium in purchasing a life insurance policy, from a direct salesperson, can be directly compared to the commission charge of the policy, were it to be purchased through a broker.
The draft regulations are aimed at informing any person who proposes directly to an insurer, or indirectly through an insurance intermediary to purchase a life assurance product. It is proposed that all suppliers of life assurance must supply to the customer before he or she signs a proposal or application form information, in writing in a clear, prominent and accurate manner, as prescribed in the draft regulations. The information will include full details of the supplier of life assurance, including the legal form of the insurer's name, the regulatory authority granted to the insurer or intermediary, and details of the nature of the relationship between the insurer and the intermediary.
Information shall be provided, in respect of the terms and conditions of the proposed insurance policy including: (i) information on the benefits and options available to the proposer and the laws applicable to the contract; (ii) the circumstances under which the contract may be cancelled by either party and the arrangements for application of the cooling-off period; which will remain at 15 days as heretofore; (iii) the means of calculation and distribution of bonuses and a statement of the units to which the benefits are linked and the assets underlying unit-linked policies; (iv) the arrangements for handling disputes about the life assurance policy, including the option of recourse to the insurance ombudsman service; (v) the purpose and intention of the policy, that is whether it is a protection or savings policy, or a combination of both; (vi) the type of policy for example, regular premium savings or single premium investment, regular or single premium pension, whether critical illness cover or permanent health insurance is included and whether policies are index-linked; (vii) the long-term nature of the policy and the level of monetary commitment given in that regard; (viii) a statement outlining the cost of the insurance policy and the means and duration of payment of premiums; (ix) a prominent statement indicating whether the policy acquires a surrender or early encashment value and the consequences of cessation of payment of premiums; (x) a prominent statement indicating that early surrender of the policy, whether through non-payment of premiums or voluntarily, may result in a surrender value which is less than the aggregate of the premiums paid up to the date of surrender.
The draft regulations also provide that information shall be made available to the policyholder during the term of the insurance contract, related to any change in the name, legal form, address, branch name or address of the insurer.
Widespread support has been received from all parties concerned, including the Consumers Association of Ireland, for the provision to the policyholder of a tabular statement showing for each of the years one to five and every five years thereafter up to maturity the premium payment, the total deductions in respect of all charges and expenses, including commissions, the cumulative value of the investment at illustrative rates of return and the surrender value for early encashment. The tabular statement will be the key element of the new disclosure regime and will provide the policyholder with clear and comprehensive information at the outset and it is intended that it will be updated on an annual basis, throughout the policy term. Allied to the table will be a number of prominent health warnings, indicating essential features and some of the risks associated with the policy, notably the effects of early surrender, the illustrative nonguaranteed nature of the rates of return, premium reviews where premium is not guaranteed to provide benefits or returns illustrated, taxation arrangements, long-term nature of the policy and service fees.
It is intended to make it an offence for any supplier of insurance who knowingly or recklessly, makes a false or deceitful statement or dishonestly conceals material facts in order to induce a customer to take out a policy of insurance, or who gives a false or misleading impression as to the value of a policy of insurance in terms of its prospective investment performance and-or surrender value.
It should be stressed that the proposals as outlined not only supplement minimum life assurance policyholder disclosure requirements under EU law, but also greatly exceed them in terms of effectiveness, clarity and overall content. The regulations should also bring about a level of consistency across the insurance industry, in so far as consumer protection is concerned and indeed act as a catalyst to encourage other competing financial services providers to institute comparable transparency measures. I should stress that, in accordance with my area of responsibility, the present proposals are in respect of life insurance products only. They do not address non-insurance investment products marketed and sold by other financial services institutions. It is a matter for other financial services regulators to decide whether a need exists for greater transparency across the range of comparable investment products, including disclosure of intermediaries' remuneration.
To date, I have taken no final decision on these matters and I will only be in a position to do so when the current discussions and consultations have been concluded.
