Vol. 504 No. 5
24 Mr. Perry asked the Tánaiste and Minister for Enterprise, Trade and Employment if she will provide an update on the forthcoming disclosures within the insurance industry with particular reference to insurance and pension products; and if she will make a statement on the matter. [12414/99]
The draft life assurance disclosure regulations are currently undergoing legal drafting in the parliamentary draftsman's office. They will be based on a specific enabling provision in the Insurance Bill, 1999, which is due to be published later this year.
The essential rationale behind the proposals is to rectify the failure within the market as a whole to provide adequate information to the consumer in the marketing and selling of life assurance products and, as a by-product, to generate more competition among suppliers of insurance.
The up to date situation with regard to the disclosure regulations remains fundamentally unchanged from my comprehensive responses to parliamentary questions on this matter on 9 March 1999 and 21 April 1999.
The prime objectives in the formulation of the disclosure regime will be to simplify the presentation of such products to the consumer; minimise the scope for mis-selling, including the churning of policies; ensure transparency of all charges and expenses; identify the principal with whom the insurance consumer is dealing and provide adequate redress through a firm statutory basis.
Information shall be provided in respect of the terms and conditions of the proposed insurance policy, including benefits and options, cooling off provisions, purpose and intention of policy, type of policy, the costs of the policy and the means and duration of payment of premia, and the consequences of early surrender of the policy.
As part of this overall comprehensive disclosure package I will be introducing, for the first time, mandatory disclosure of insurance intermediary remuneration and salesperson's remuneration, as a separate item of disclosure. The thrust of the draft regulations is to ensure, as far as is practicable, a level playing field in disclosure as between the different distribution channels, irrespective of whether institutional or individual.
The achievement of equivalent disclosure across all suppliers is an extremely difficult concept. Nevertheless, the draft regulations provide that in determining illustrations of prospective benefits, all expenses and costs, charges and intermediary and sales remuneration, the insurer, through the appointed actuary, shall take all reasonable steps to ensure that the illustrations are not misleading and are presented in a fair and clear manner.
All the interested representative bodies and parties have been furnished with the draft actuarial guidance notes which will accompany the final regulations and have been given the opportunity to make submissions on their content. The Society of Actuaries in consultation with our Department are considering all observations received and we will take them into account before enacting the regulations, particularly in so far as maintaining the principle of equivalence, which we strongly support.
That is a fair old turnabout.
Will the Minister of State please explain why large companies dealing with a company with more than three staff, particularly in the area of life assurance, personal health assurance and group pension schemes, are omitted from the proposed new disclosure regulations? This is giving an unfair advantage to the larger market players while small brokers are being asked to declare commission on small individual schemes. It is unfair that banks can hike charges considerably in their own internal house advertising while small brokers must fully disclose all other charges on a company dealing. It is unfair to small businesses whose brokers must disclose all charges, while banks are omitted once they exceed a staff of three to ten. That is what is being proposed.
No.
Will the Minister of State clarify that point?
Let the record show that the Minister is shaking his head.
Absolutely. I want to make the situation quite clear. I am a bit confused as to where some Members of the House stand on this matter. We are either pro-disclosure and pro-consumer or we are not. Our job is to represent the citizens of this country in this House.
There should be full disclosure for everybody.
This is a priority question and there is a time limit on it. May we hear the Minister of State's reply, please?
The situation is very clear.
Can the Minister of State contradict my point?
Everybody will have to disclose, whether it is an individual selling policies as a field officer—
And all banks, as well?
—a broker, an intermediary or an institution, they will have the same disclosure to the consumer. The Deputy should have listened to the words I used. The same information will have to be disclosed, including the cost of the product and how much is being paid for selling that product.
Overheads?
Absolutely everything. The whole operation will have to be disclosed.
Is the Minister of State going to attack solicitors and accountants as well?
Please allow the Minister of State to reply.
So the cut off of three staff does not apply to brokers? If a broker sells a policy, regardless of whether it is taking on a company with three personnel, is it on equal terms with banks and larger companies? Is the playing field level for everybody? Will there be full disclosure for brokers and banks?
Deputy Perry is becoming confused with this figure of three. An insurance agent can be an agent for a company selling the company's policies. An intermediary must have a minimum of three staff, or five agencies, to go into that category. Other institutions are selling their own policies across the board. It does not matter whether one is representing a company, an agent for a company or part of a brokerage, one will have the same level of disclosure on an equivalent basis. That is what we are proposing. We have worked assiduously to ensure this matter will be resolved and that there will be absolute transparency. We are confident we will get it right in the Insurance Bill, 1999.
Why is there no provision to allocate or pay a broker's commission over the life of the products to which it applies? The Minister of State should examine that area.
The Deputy may or may not know that in most cases when insurance policies are sold, the commission, at the rate of about 90 per cent, is charged in the first year and transferred to the person who sells it. Surely the consumer is entitled to know that. Surely consumers are entitled to know that if, for any particular reason, they cannot afford to continue to pay for that policy – due to a bereavement, an accident or other unexpected difficulties – and have to cash in the policy, it is worthless for perhaps one, two or three years. It is important that that information be made available to consumers.
Yes, but all the commission is gone in year one.
Up to 90 per cent of the commission is paid in year one. I want to ensure that the consumer is treated fairly and that those who are employed to sell these products, or who employ people to sell such products, are treated fairly and equitably. There should be no discrimination whether it is a big banking institution, a small brokerage or an individual. At the end of the day the consumer will be protected. Within that environment we want equality for all so the economy can continue to grow.
