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Dáil Éireann díospóireacht -
Thursday, 2 Jul 1998

Vol. 493 No. 5

Written Answers. - Insurance Broking.

Phil Hogan

Ceist:

83 Mr. Hogan asked the Tánaiste and Minister for Enterprise, Trade and Employment the details of a ministerial decision made in 1989 in relation to the Commission of Insurance Brokers; the date on which that decision was made; the reason the decision was necessary; the estimated savings to insurance companies on an annual basis arising from this decision; and if she will make a statement on the matter. [16664/98]

In 1985, the then Minister for Industry and Commerce indicated to the Irish insurance industry that, in the absence of a voluntary cost reduction programme, including a reduction in commission rates, legislation would be introduced to reduce these rates. In response, the industry took steps to reduce administration costs and also concluded the non-life Commissions Agreement binding insurers to reduce and standardise insurance commission rates. Despite these initiatives, in 1987 the Government, under the Programme for National Recovery, introduced a package of measures to improve the insurance cost environment. As a result of pressure from the EU Commission, in response to complaints from the Irish insurance broker representative bodies, that the non-life Commissions Agreement was in breach of Article 85 of the Treaty, the Irish Insurance Federation discontinued the agreement.

The Insurance Act, 1989, contained in Part III provisions on the payment of commissions by insurers. Section 37 gave the Minister power to require reduction in commissions. The policy stance when implementing the section 37 provision was to ensure that the ceilings on commission rates for certain categories of insurances, which had been established by the non-life Commissions Agreement, should be maintained. Following surveys undertaken by the Department, it appeared that certain insurers had offered commission rates above the norm and such commissions were, therefore, considered to be excessive under the terms of the section 37 provision. As a result, in 1989 the then Minister issued notices to these companies requiring them to pay no more in commissions, than the amount set out in the notices, for the classes of insurance specified. In accordance with section 37 of the Insurance Act, 1989, the contents of these notices were copied to all other non-life insurers operating in the market and they are similarly bound by their contents.

Data regarding the estimated annual savings to insurance companies since 1989 is not available. It is considered, however, that the guidelines as set out in the section 37 notices have acted as an effective mechanism to prevent upward pressure on commission rates and consequent savings on insurance premiums in the classes of non-life insurance concerned.

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