Vol. 510 No. 2
10 Mr. R. Bruton asked the Tánaiste and Minister for Enterprise, Trade and Employment the position on the introduction of new disclosure regulations for the insurance industry which were to be introduced from September 1999; and if she will make a statement on the matter. [21867/99]
49 Mr. Rabbitte asked the Tánaiste and Minister for Enterprise, Trade and Employment the reason she sanctioned the lifting of the cap on commission which insurance companies can pay brokers, particularly in the absence of regulations requiring the disclosure of commission levels; the reason for the long delay in introducing regulations regarding disclosure of commission levels; when these regulations will be made; and if she will make a statement on the matter. [21981/99]
78 Mrs. Owen asked the Tánaiste and Minister for Enterprise, Trade and Employment the position on the introduction of new disclosure regulations for the insurance industry which were to be introduced from September 1999; and if she will make a statement on the matter. [22043/99]
I propose to take Questions Nos. 10, 49 and 78 together.
It is vitally important to establish a sound legal base for the proposed insurance disclosure regulations. The original intention was to make the regulations under the Sale of Goods and Supply of Services Act, 1980. Legal advice suggested that a comprehensive disclosure regime, as proposed by us, could be vulnerable to constitutional challenge if introduced under the 1980 Act. I was, therefore, obliged to have recourse to enabling provisions in the Insurance Bill, 1999, setting out the principles and policies upon which the disclosure regulations would be based.
Regulations to introduce greater transparency in the sale of insurance products will be introduced by me as soon as practicable following enactment of the Insurance Bill, 1999, which is due to be published shortly. The Bill contains, inter alia, enabling measures which will allow me to introduce policyholder information requirements at point of sale and on an ongoing basis, in respect of both life and non-life insurance. There are three elements to our proposals: the incorporation of existing policyholder information requirements into primary legislation in respect of life assurance policies and proposals, for legal clarity; the provision of additional policyholder information requirements, including disclosure of commission payments, over and above the minimum EU requirements for life assurance and the provision of additional policyholder information requirements, over and above the minimum EU requirements for non-life insurance.
Draft regulations to give effect to life insurance disclosure are at an advanced stage of drafting within the Department and have been widely disseminated for comment by interested parties. The precise format cannot be finalised until enactment of the Insurance Bill. Framework proposals in pursuance of greater transparency in non-life insurance, based on the enabling provisions of the Bill, are being prepared by the Department. We will engage in the same extensive and comprehensive consultation process shortly with interested organisations in that regard.
One of my priorities for the insurance industry market is the development of a competitive and consumer-friendly environment. The maintenance of anti-competitive measures is anathema to progress in the creation of real market conditions.
My recent decision to remove section 37 controls on insurance commission levels must be viewed in that context. Essentially, such controls have long outlived their usefulness or effectiveness as a cost control measure. There are indications that non-established insurance companies viewed statutory control on certain insurance commissions as a barrier to trade in this State. Furthermore, the European Union Commission has also been critically examining member states' local "general good" rules, with a view to weeding out anti-competitive practices or trade barriers. I was also heavily influenced by the decision of the Competition Authority in 1997 to declare as anti-competitive the insurance industry's maximum commissions agreement on life assurance commissions and the decision by the then Minister with responsibility for commerce, science and technology, subsequently, not to introduce section 37 controls on life assurance commission payments.
Insurance commissions in non-life insurance are no longer a significant cost factor in motor insurance and the Department, through the Motor Insurance Advisory Board and the Special Working Group on Personal Injuries, is seeking to address the major cost factors, including the high frequency and cost of claims.
Will the Minister clarify his opinion as regards direct insurers selling insurance directly, brokers and the difficulty which has surfaced recently that charges are being applied initially? I welcome the transparency. I also refer to the opinion that charges should be levied over a certain period. There is a problem as regards brokers and banks selling insurance in that they can incur costs elsewhere in the policy while giving the impression of cheaper costs. That is unfair.
As far as I, the Tánaiste and the Department are concerned, we want to ensure a level playing field in the insurance industry. No matter who is selling insurance policies and investment products, they will have to disclose the exact deductions in respect of commission, bonuses and so on. I am not sure I accept the sincerity of a demand that these commissions should be paid over a certain period because the incentive in the insurance market has been front-loading commissions to sell policies and payment immediately to the person who sells that product as soon as the payment takes place. That is the system which has been in place so I do not see how we can agree to a change in that to allow for disclosure. As far as I am concerned, disclosure is just that, and once payment is to be made, those buying the product should know exactly for what they are paying, what they are getting and what the person or organisation selling it is deducting.
Nobody will ever accuse the Minister's Department of lacking in consultation. There is more consultation over there than one would—
Did the Deputy not find that in his day?
I did.
Is consultation not a wonderful thing?
When did this legal advice come to light that the disclosure regime, as proposed, would not proceed or would be open to constitutional challenge? From whom was it received? If it is true that is constitutionally infirm, why did the Minister proceed with removing the cap which is on commission at the moment? Why not proceed contemporaneously to deal with the cap and the question of proper disclosure of commission?
They are separate matters as far as I am concerned. The removing of the cap is a totally different issue in that the situation from the point of view of the Competition Authority and the EU Commission and our experience was that it was anti-competitive and was not in the interests of the consumer. The legal advice on the disclosure of commission became available to us earlier this year from the Attorney General and, based on that, we proceeded to ensure this was included in the Insurance Bill which will be published shortly. Based on the advice available and the experience and information available to us, we have taken two decisions which, in the long-term and, indeed, in the short-term, as soon as we enact the law, will be in the interests of the consumer.
