Written Answers. - Insurance Industry.
Bernard J. Durkan
Ceist:
85
Mr. Durkan
asked the
Tánaiste
and Minister for Enterprise, Trade and Employment if she has satisfied herself with the degree of supervision which exists in the insurance industry; if a supervisory authority or ombudsman system independent of the industry will be provided; and if she will make a statement on the matter.
[8573/99]
Bernard J. Durkan
Ceist:
86
Mr. Durkan
asked the
Tánaiste
and Minister for Enterprise, Trade and Employment if she has satisfied herself that consumers interests are adequately safeguarded in the insurance industry with particular reference to the need to protect the interest of the consumer as a priority; and if she will make a statement on the matter.
[8575/99]
I propose taking Questions Nos. 85 and 86 together.
Authorisation and supervision of non-life and life insurance companies is carried out under the legal framework of the Insurance Acts, 1909-1990, and regulations enacted pursuant to EU directives in the insurance area. The primary function of insurance supervision is to ensure that life and non-life companies adhere to statutory solvency rules and requirements, thereby enabling those companies to meet their obligations to policyholders and claimants. These directives, Acts and regulations set out criteria by which companies are properly authorised and supervised on an ongoing basis. As stated, the financial supervision of insurance companies places a necessary emphasis on monitoring their solvency position. This system of monitoring, therefore, ensures that insurance companies remain solvent and are in a position to meet their liabilities which provides security for policyholders and claimants.
Allied to the financial supervision of insurance companies, the Insurance Division of my Depart ment encompasses a role in the development of a competitive and transparent insurance market. The main activities in pursuing this role include monitoring and responding to the changing conditions in the supply of insurance products, life and non-life, in the Irish market. The conditions include the factors affecting the cost of claims and premium charges, the information provided to the consumer as policyholder, saver and investor, changing EU requirements and the impact of insurance costs on economic activity. Finally, the role of the division is to oversee the regulation of insurance intermediaries and related matters. The division is responsible for overseeing the system of self-regulation of insurance intermediaries established by the Oireachtas through the Insurance Act, 1989.
Specifically, and in accordance with the business plan of the insurance division of my Department, for 1998-9 the following consumer oriented activities are being pursued:
1. Insurance Market Transparency
Following intensive consultations with representatives of the insurance industry, consumer interests and other relevant parties, a draft of the proposed transparency regulations on life assurance is under examination by the parliamentary draftsman. The objective is that the life assurance regulations will come into effect on 1 September 1999. The pursuance of transparency regulations in the non-life area is also being examined.
2. Investigations
In general terms, the contents of insurance policies are subject to contract law and in that regard are subject to substantive rules relating to agreements between parties as defined under both common law and statutory provisions. Non-compliance with the Insurance Acts and regulations and contravention of such legislation is an offence subject to various penalties depending on the circumstances of each case and the particular legislative provision concerned. Where the Minister becomes aware that a breach of insurance legislation may have occurred, the Minister may appoint an authorised officer or officers under section 59 of the Insurance Act, 1989, to investigate non-compliance or contravention of the Insurance Acts and regulations. Normally, a report is prepared by the authorised officer for the information of the Minister. The Minister may refer the report to the appropriate authorities.
Recently, investigations were undertaken into the alleged sale of unauthorised life assurance products by National Irish Bank Financial Services Ltd. and the allegations of churning of policyholders by Irish Life. This involved the replacement of existing life assurance policies by other policies to the disadvantage of the consumer. The report on churning was published by me in February 1999. The recommendations of the report are being actively pursued by my Department.
3. Motor Insurance Cost Reduction Programme
I re-established the Motor Insurance Advisory Board in September 1998 in order to monitor trends in the cost and availability of motor insurance, the factors which contribute to the cost including the frequency of motor insurance claims and to difference in cost between various categories of insured motorist. International comparisons with costs and key factors in other EU countries will be examined. I expect to receive an interim report from the board shortly.
4. Special Working Group on Personal Injury Compensation
The Special Working Group published its first report in 1997 regarding the establishment of a personal injuries tribunal. The group has now proceeded to Strand 2 of its remit which is to carry out a study of the personal injuries compensation systems in operation in other countries and to advise on the merits of those systems as an alternative to the present tort-based system.
5. Customer service/consumer complaints and queries
I am not legally empowered to compel authorised insurance companies to accept or reject individual insurance risks, to set premiums at particular levels or to include or exclude conditions in insurance policies, subject to the overall consumer legislative framework. Nevertheless, while the Insurance Ombudsman deals with complaints and inquiries within set terms of reference, the Insurance Division of my Department continues to provide a full time service to the general public in relation to direct complaints and inquiries and to liaise with the insurance industry and others including the Insurance Ombudsman's office, where appropriate, in this regard.
The role of the Insurance Ombudsman is essentially that of adjudicator, not regulator. The function of the Ombudsman's office is to resolve disputes between policyholders and insurance companies through mediation and, where necessary, adjudication which is binding on the insurance company involved and not the policyholder. The Ombudsman's digest of cases adjudicated and as presented in the annual report provides an important source of information to the regulatory authority. Because of the importance of this aspect, I am pursuing with the council chairman that the Insurance Ombudsman should have full autonomy in regard to the content of her annual report akin to the autonomy enjoyed by the Public Service Ombudsman in making his annual report. Consideration of the necessity for introducing statutory provisions in relation to the existing scheme or replacing it with a statutory Ombudsman scheme would obviously have to have regard to whatever proposals and recommendations emerge from the implementation group established by the Tánaiste and the Minister for Finance to advise the Government on the establishment of a single regulatory authority for the financial services sector.
The House will be aware that the Government decided in principle to establish a new Financial Services Regulatory Authority on 20 October 1998. The decision was linked to the public disquiet about financial scandals which have reduced public confidence in the financial services sector as a whole. The report of the Oireachtas Joint Committee on Finance and the Public Service called for the establishment of a single, independent regulatory authority which should be given powers in relation to all commercial, friendly and voluntary bodies, which handle funds or financial transactions on behalf of third parties or institutions in Ireland.
My Department's main priorities are that the new authority should be a stand alone entity and that it should encompass both prudential supervision, consumer protection and enforcement. Consumer confidence is an important determinant of stability in the financial services sector as evidenced by the potential of recent irregularities in banking to threaten stability by undermining customer confidence in the integrity of the banking system. At this stage, it would not be possible to give a precise date as to when the necessary legislation will be brought before the Oireachtas. However, it is my intention to have it introduced at the earliest possible date.
