Seanad Éireann díospóireacht -
Wednesday, 8 Mar 1989

Vol. 122 No. 5

Insurance Bill, 1987 [ Seanad Bill Amended by Dáil ]: Report and Final Stages.

An Cathaoirleach

This is a Seanad Bill which has been amended by the Dáil. In accordance with Standing Order 82 it is deemed to have passed its First, Second and Third Stages in the Seanad and is placed on the Order Paper for Report Stage. On the Question that the Bill be received for final consideration, the Minister may explain the purpose of the amendments made by the Dáil and this is looked upon as the report of the Dáil amendments to the Seanad. The only matter, therefore, that may be discussed is the amendments made by the Dáil.

For the convenience of Senators I have arranged for the printing and circulation of those amendments to them.

Question proposed: "That the Bill be received for final consideration."

An Cathaoirleach

Before I call on the Minister, I would like to make Members aware that they may only speak once and that we are taking all the amendments together.

Minister of State at the Department of Industry and Commerce (Mr. S. Brennan)

Of the 23 amendments before the House today, seven are purely technical and do not require that I make individual reference to them. These are amendments Nos. 3, 5, 8, 16, 19, 21 and 22. The following is the situation with the balance of the amendments.

Amendment No. 1 is simply a definition which is included for the purposes of clarity. Amendment No. 2 increases the level of fine under the Bill for conviction on indictment to a sum of £10,000 from the original figure of £5,000. This was suggested to me by Deputy John Bruton on Committee Stage in the Dáil and I accepted it. Amendment No. 4 was proposed at Dáil Committee Stage by Deputy Mervyn Taylor and I accepted that as a possible improvement and a means of serving documents on an individual under section 4. Amendment No. 6 consolidates the fees reference in section 7 and section 59 can, accordingly, be dropped. Section 12 (f) also has a reference to fees removed from it under amendment No. 7. The deletion under amendment No. 9 is to allow the Minister to fully monitor policy conditions and premium rates in the marketplace. Words which are superfluous to section 20 are deleted and we do that through amendment No. 10.

The former section 27 is being replaced by a completely new section. Under the Insurance (Amendment) Act, 1978, as amended by the Insurance (Amendment) Act, 1981, licensed banks are permitted in the course of their banking business to enter into or accept a bond or contract of suretyship or guarantee in specific instances. Under section 27 of the Insurance Bill, 1987 it is proposed to extend the same powers to the Industrial Credit Corporation and to Fóir Teoranta.

In their recent submissions to the Fifth Joint Committee on the Secondary Legislation of the European Communities and to the Department, the banks maintained that, first, the 1978 Act gave very limited freedom to banks in the area of suretyship necessitating the setting up of complicated and expensive mechanisms to accommodate routine bank transactions. Banks must continually refer to the 1978 Act to make sure they are not breaking the law in issuing guarantees. They specifically instance cases of import duty liabilities to the Revenue Commissioners and bonds for tour operators and travel agents which are statutory rather than contractual obligations, the legality of which is in doubt under the existing legislation. Secondly, the 1978 Act allowed banks to give guarantees for payment of moneys where the payment of money is a contractual obligation of the customer of the bank and not where the customer's obligation is a statutory one.

The Oireachtas Joint Committee recommended that amending legislation be introduced and the new section is intended, therefore, to substitute for the former section 27. Subsection (1) of the new section removes the restrictions on licensed banks under sections 2 (1) (a) (2) of the 1978 Insurance (Amendment) Act, as amended, and extends to the Industrial Credit Corporation and Fóir Teoranta the same powers as banks in the bond guarantee suretyship area. I have decided to leave the reference to Fóir Teoranta despite recent announcements by the Government; I made that decision purely for technical reasons and for tidying-up purposes. Senators may have thought that was out of place there but for technical reasons it is not.

Both ICC and Fóir Teoranta have represented that this extension is necessary to remove impediments to their ability to provide loans or banking services to clients through their not being able to give or accept guarantees in respect of loans and related financial services. Subsection (1) also extends to ICC and Fóir Teoranta powers to obtain and accept guarantees from foreign institutions to cover loans made by the ICC or by Fóir Teoranta. Subsection (2) defines certain terms used in subsection (1).

Amendments Nos. 12 and 13, both of which relate to section 31, can be taken together. Section 31 deals with the Insurance Compensation Fund. It proposes certain restrictions on who may benefit from the fund. The amendments proposed, which replace the existing sections 31 (2) and 31 (4) of the Bill, are of a technical nature only and do not change the original intention behind the section which, just to remind Senators, was to restrict claimants to 65 per cent or £650,000, whichever is the lower of the sum due under a particular claim. Legal advice received by my Department stated that a number of different interpretations were possible from the original text. Accordingly, the text has now been tightened up to avoid possible misinterpretation.

An amendment to (1D) of section 31 (2) ensures that an individual will be compensated even if he is liable to a corporate or unincorporated body. A new subsection (1E) requires that any amount paid out of the fund shall be passed on by the liquidator to the person to whom it is due. The new section 31 (4) (b) is designed to ensure that where the Insurance Compensation Fund is used to compensate a claimant, that claimant cannot receive more than 65 per cent or £650,000, whichever is the lower, of the sum due to him unless the fund receives from the assets of the insolvent insurer the amount which it, that is the fund, paid to the claimant. As previously stated, this was the original intention behind this section but as a result of legal advice it has been decided to make our intention more explicit. In any event, the likelihood of the liquidator of an insolvent insurance company being in a position to pay out more than 65 per cent of the sums due to a claimant is highly unlikely.

Amendment No. 14 is of a technical nature and follows from the amendment to section 31 (4) (b) above. The purpose of this amendment to section 32 is to ensure that the priority given to policyholders in so far as the technical reserves of the insurer are concerned does not override the priority given to the Insurance Compensation Fund in section 31 (4) (b). The substituted section 33 under amendment No. 15 is not different in substance from the previous draft of the section. The amendments involved are purely technical in nature and stem from legal advice received by my Department.

Section 36 is provided for by way of amendment No. 17. This new section provides that where the High Court sanctions the amalgmation of two or more insurance companies or the transfer of insurance business from one company to another, the court shall provide for the effective transfer of the property and the liabilities involved. I take the view that the sanction of the High Court of the amalgamation or transfer of insurance business has always had the effect of transferring all the assets and liabilities, including liability to policyholders of the transferer company to the transferee company. While the most recent case law supports this view, it has come to my attention that the earlier case law is inconsistent and might give rise to doubt in the matter. This, in turn, could raise doubts as to whether we have fully implemented the relevant EC directives which require member states to provide that a scheme of transfer once approved by the competent national authority shall affect directly the policyholders concerned. This section is intended to put the matter beyond doubt by providing that where the court has sanctioned a transfer or amalgamation it shall, by order, transfer the relevant property and liabilities and that any such order shall be effective in making such transfers.

During Committee Stage of the Bill in the Dáil, Deputy John Bruton put down an amendment to subsection (1) to insert the words: "having had regard to all the liabilities of the companies". This arose out of concern on the Deputy's part that the court, in deciding whether to sanction an amalgamation or a transfer of business, should take into account the liabilities of the companies involved. While I took the view that the section as drafted was sufficient as the court would naturally have regard to the liability of the companies involved, I did agree to accept the Deputy's amendment to make it explicit that account should be taken of the company's liabilities. The section also provides that details of the agreement and the court order be provided to the Minister.

Under amendment No. 18 the Minister is empowered to require, by regulation, that insurance agents as well as insurance brokers have professional indemnity insurance. This amendment was tabled in the Dáil by Deputy John Bruton and I accepted it. Amendment No. 20 brings new section 51 into being. The purpose and intent of this section is clear. Subsection (1) (a) and (b) prescribe the circumstances in which the intermediaries, be they brokers or agents, may accept money from a client in respect of insurance. First, an intermediary may only accept money from a client in respect of a proposal for insurance if it is accompanied by the completed proposal or the proposal has already been accepted by the insurance company. Secondly, an intermediary may only accept money from a client in respect of a renewal of a policy if such renewal has been invited by the insurance company. These are important requirements because their effect will be to oblige intermediaries to have an identifiable insurance company in mind in respect of proposals and renewals before accepting money from clients.

Subsection (2) gives the Minister power to expand on the requirements set out in subsection (1) to meet any new contingencies. Subsection (3) requires intermediaries to issue receipts in a specified form to their clients when they accept from them money in respect of proposals or in respect of renewals. The receipts will establish a clear link between the client, the intermediary and the insurance company involved. It is important that we establish that link clearly.

Subsection (4) is an important provision in that it will highlight to the client that the completion of a proposal accompanied by a sum of money does not, of itself, mean that he or she is on cover. In most cases, insurance companies will not have delegated authority to an intermediary to bind them in contracts of insurance and it is important for the consumer to know this. Usually it is the insurance company who examines the proposal and assesses the risk before deciding to go on cover and actually issue a policy.

Subsection (5) exempts intermediaries with binding authority from insurance companies from the receipting requirements. The policy document itself, of course, would constitute a receipt. Subsection (6) gives the Minister power to alter or add to the information to be provided in the actual receipt. Subsection (7) merely states that a receipt is a receipt unless proved otherwise and would, for example, put the onus on intermediaries, etc. to prove that a receipt was bogus. While the requirements of this section are new to this Bill they should already be common practice among reliable intermediaries.

The final amendment involves the inclusion of a new section at section 61. It was introduced by me on Report Stage in the Dáil as a more workable alternative to an amendment which had been tabled by Deputy Mervyn Taylor in relation to insurance contracts. This will enable the Minister, having consulted with representatives of the insurance industry and consumers, to make codes of conduct in relation to the disclosure and warranty aspects of insurance contracts.

I commend all these amendments to the Seanad today.

Mr. Hogan

I am glad we have reached a stage today where the Insurance Bill will eventually be passed by the Houses of the Oireachtas. It got a fair airing not only in this House but in the other House and that is indicated by the number of amendments made in both Houses.

The Minister dealt with an amendment extending professional indemnity cover to include agents in addition to insurance brokers. I would like the Minster to clarify how he intends implementing and enforcing that measure. There are many agents who, perhaps historically, have developed relationships with particular insurance companies and, therefore, are deemed to be agents. Many agents may not consider it worthwhile continuing on the small business they are at present operating for a particular insurance company in view of the cost of professional indemnity. It would not be financially attractive for them to continue transacting business for one particular company. Is this being introduced in an effort to get rid of agents and force the status of insurance broker on intermediaries, rather than letting them continue as agents, complying with the regulations, indicating on their letter headings the insurance companies with whom they transact business, the consumer bonding and professional indemnity cover they have and the appropriate office where they transact business with the consumer? The difficulty I have with that change in the legislation is how it will be enforced.

I understand that various opinions were given about the number of agencies a person is required to have to come under the definition of "agent" or "broker". The Minister is aware of the long discussion we had here in relation to that matter. I am sorry the Minister has not seen fit to alter the definition of "broker" from that of four agencies to three as indicated in an amendment in the other House. It would have meant some improvement in the appalling situation that can now arise with the enactment of this legislation. Many brokers will now reduce the number of agencies they have in order to avoid the various requirements they must comply with which would be a financial burden to them if they come under the definition of "broker".

They will be treated under the definition of "agent" in the legislation. Under the definition of "agent" an intermediary will not need consumer bonding and will not need to indicate clearly the number of companies he or she has in order to give a fair spread of market opportunity to the consumer to get the lowest possible premium. Perhaps the inclusion of professional indemnity will assist in getting rid of a lot of the agencies. The Minister seems to be indicating that is the road he is taking.

There will be a responsibility on brokers' organisations and on brokers themselves to draw up a code of practice by which an intermediary may operate. I regret that the legislation does not have more teeth and enforcement procedures to deal with the misbehaviour of intermediaries who traverse the countryside. They have no training, no standards of insurance practice or bona fide qualifications to indicate they know anything about what they are selling. This is very serious because in the event of a claim under life cover or in the event of maturity of a policy there may be a huge sum of money involved which might be earmarked for a particular purpose in a household.

There are cowboys in the insurance industry who have no knowledge whatever of the industry but are employed or subcontracted by various insurance brokers to flog policies to unsuspecting consumers who take them at face value. I would much prefer to see the voluntary commitment that was given by the life offices in relation to the cooling-off period enshrined in the legislation. Consumers would then have an opportunity to pull out of the contract they entered into with the life office. There was an opportunity under the regulations to give teeth to the code of conduct that would rigorously enforce the type of standards we expect brokers and intermediaries to operate which would have eliminated the great concern at the moment about the manner in which policies are sold. In reading the debates in the other House, I regret the Department seem to have little knowledge as to how consumer bonding will be enforced particularly in relation to some intermediaries. A long debate took place on that in the other House. I would like the Minister to indicate to us how consumer bonding, particularly in relation to brokers, will be implemented and what means will be used to achieve it.

The Minister is extending the application of the Bill to the Industrial Credit Corporation and to Fóir Teoranta. The major problem we can see arising in the future in relation to insurance is the apparent ease with which banks and building societies can become involved in the insurance business. There will be a plethora of life companies after 1992 which could absorb many of the existing Irish life offices if they are not competitive or if they have not got their act together. We could have a lot of banks and other financial institutions other than life offices involved in the insurance business. I would like to know what regulations the Minister will introduce to ensure that managers and staff of financial institutions do not play a role in the sale of life assurance policies to subsidiary companies of financial institutions.

Since this legislation went through the Seanad I have no doubt that the Minister got an enormous number of complaints about the practice that is growing up particularly with the Lifetime operation which was brought to his attention in this House. At that time the Minister gave the impression we did not know what we were talking about in relation to this appalling activity that was taking place. Inducements were given to staff of financial institutions to sell policies for a particular life assurance company. As a result of the level of complaints the Department received in the past six months, I hope the Minister is prepared to take on board suggestions that were made to him in this House, even though they may have been made by people who had perhaps an interest in relation to the matter. There is a lot of talk about that at present.

The Minister is well aware of my interest in this industry as an intermediary. That has been declared on more than one occasion but I am always anxious to see that there is fair play to everybody in the industry. The alarming growth in 1988 in the business of a particular insurance company that is linked to a bank should have alerted the Minister to the fact that either there was something wrong in relation to the other life companies or else there was some malpractice in the life time operation, as was indicated to him in this House earlier. The Bill fails to address that problem. I hope that the Central Bank Bill which is at present going through the Dáil and will come before this House will include amendments which will ensure that customers' accounts are used solely for banking purposes and not as a source of information for the sale of life assurance policies.

We must state quite categorically the extent of life assurance activities, what limits we will put on them and what scope we will give to financial institutions and life offices involved in the writing of business. It could get out of control if we allow the present development to continue. I would like to hear what controls the Minister intends putting on it. The consumer may not be treated in the best possible way if we allow that to continue without regulation.

The Minister on many occasions indicated that the main purpose of this legislation, together with other legislation in the justice area, was to bring down the cost of insurance. The regulation of intermediaries is another part of it. What we are doing in the Insurance Bill is to regulate intermediaries. The whole package of measures of which the Minister has often spoken is to reduce the cost of insurance to the general public. However, there has been very little evidence that reductions, if there are any reductions, are being passed on to the consumer. I do not see how you can reconcile the Voluntary Health Insurance Board bringing in, as part of their recovery plan, a regulation to cease payment for victims of motor accidents——

An Cathaoirleach

I have allowed the Senator quite a bit of latitude. Strictly speaking, the Senator is making a Second Stage speech. I would prefer if he would remain with the amendments made in the Dáil to the Seanad legislation.

Mr. Hogan

I was speaking on section 27, amendment No. 11 and I was distracted.

An Cathaoirleach

That is a good Kilkenny excuse. Will the Senator deal with the amendments, please?

Mr. Hogan

I do not see any evidence of benefits being passed on to the consumers as a result of what is proposed. Developments such as those in the VHI will not reduce motor premiums but will provide a greater possibility for motor insurance companies to load policyholders in order to compensate for the risk they will have to carry.

I would like if the Minister would indicate what efforts his Department will be making in order to ensure that life offices, particularly the wholly owned Irish ones, will be able to face the stiff competition we will encounter after 1992. There is a great challenge to insurance companies in that regard. The consumer is waiting anxiously for foreign companies to come into this country because they feel they will get a better deal. I always wonder why Ireland, a small country in the context of many European insurance companies, is treated separately and as one region, and that UK companies are not prepared to treat the British Isles as one unit for the purpose of motor insurance. They treat Ireland on its own and, as a result, load policyholders and consumers to the hilt rather than spreading the risk over a wider territory. Has the Minister entered into any discussions with the life assurance and general insurance industry in order to ascertain if they can widen their scope and thereby further reduce the premium to policyholders? Perhaps there are regulations preventing him from doing that.

I commend the Bill to this House. I am very pleased it has come to the stage where we can regulate insurance intermediaries. I had hoped it would go further in relation to the areas I have mentioned, namely, consumer protection and particularly the role of financial institutions getting into the life assurance business. I hope the Minister will have the necessary controls and protections under the regulations to ensure that there is fair play given to all aspects of the insurance industry.

Mr. Fallon

I would like to say how pleased I am that we are finally in the home strait, as it were, with regard to the Insurance Bill. The Bill was introduced in the Seanad and with the number of amendments both here and in the Dáil it has become a much better Bill as a result of the discussion in both Houses. The Minister can take a lot of credit for his active response to most of the amendments. He played a major role in bringing about what we have with us today — a far better Bill than we had at the beginning.

Like the previous speaker, I cannot say that everything in the Bill suits me. I have always declared a particular interest in the Bill but, at the same time, I accept the Minister has a responsibility to see that the best Bill is produced for the consumer and to ensure fair play for the various intermediaries of the insurance business. It is a great and a very honourable business and one which has been with us for hundreds of years. Insurance has played a major role in the development of the economy. This Bill is regarded as being the most important insurance Bill for 50 years and on leaving this House today it will be a much better Bill than when it was introduced.

There are a number of points I would like to touch on and perhaps the Minister will reply to them. Section 36 is important and will have considerable implications in the future. I am not sure if the Minister has any particular company or take-over in mind but within the industry the bush telegraph is a mighty indicator of events and there are very strong rumours and there have been for the last year or so of take-overs within the industry. Perhaps the Minister would make some comment on that. If he has any inside information he may not wish to tell us but we would like to know about it.

I would like further clarification on section 44. It is provided that an agent may have four agencies, four life and four non-life and that he must have a consumer bond. Under section 45 the Minister may, by regulation, provide that a person cannot act as or hold himself to be an insurance broker or an insurance agent unless he has taken out a policy of professional indemnity insurance in a specified form. It is saying that an agent and a broker must have the professional indemnity policy and I would like clarification of that. An agent with four life and four non-life agencies had just a consumer bond and the other extras such as special clients' accounts which are small in comparison to this regulation. It is now being provided that with four life and four non-life agencies he must also have a professional indemnity bond. One could argue that there is no difference at all between the broker and the agent. This point is worthy of clarification. The key word in this is that the Minister "may". I would like further clarification as to what he has in mind with regard to that word.

Section 51 is a new section the Minister has inserted. I am not in any way against the idea of a person receiving a receipt for money paid to an insurance broker or agent. This may involve further administrative implications for an agent or broker. In the case of a person taking out a composite insurance — for example, he may want his car or tractor insured and fire and public liability and employers liability, all of which involve separate policies — it is to be assumed that one receipt would be sufficient in that case or is there to be a separate receipt for each of the policies and each of the payments made for each policy? Perhaps the Minister would clarify that point?

I understand that section 60 is taken for an amendment which was recommended in the Dáil by Deputy Mervyn Taylor. Again, I do not disagree with this. It is no harm to reflect on this because a feature of insurance over the years has been the moral and physical aspects. The physical aspect for example, in the case of a house would be whether it is roofed with mineral felt or is of standard construction and so on. On determining that point certain rates can be applied and one can be assured of getting value in terms of premiums. However, in regard to the moral aspect, if the applicant is telling lies, is deliberately misrepresenting a situation, then no premium would be sufficient for the risk. There has always been within the insurance industry the concept of innocent misrepresentation, of genuine omission. That has always been part and parcel of insurance, of dealing with claims. While this is reinforcing the uberrima fides principle, generally speaking insurance companies would ignore an innocent misrepresentation and pay a claim that should be paid as a result of a policy in force.

Senator Hogan referred to competition in the changing world of the financial and insurance services. I would have to agree with him. Certain banks and life insurance companies are very strong sellers of their products at the moment. I do not know the regulations under which the people operating the Lifetime scheme receive their licence from the Department of Industry and Commerce. The staff of the Bank of Ireland are thinking more of the Lifetime scheme than they are of the business of the Bank of Ireland. They have regular conferences. I am told there are little presents for them if they produce so many policies and so on. Was that ever anticipated? It could be argued it is unfair competition. Building Societies are also as active in that respect. The whole financial services industry is changing. I make the point about the Lifetime scheme because I happen to have some experience of it. I know of a person who approached his bank to take out money to put into an Irish Life bond. He was brought into a room and was advised on what to do. There is that pressure and I do not think it is fair. I make that point in support of what Senator Hogan has said.

The Bill is almost completed and I think the industry will welcome it. I would like to know from the Minister when it will come into force, what period of time the agent will have to decide if he should become a broker or if he is a broker what is the situation should he decide to go back to being an agent. He would require a period of some time, perhaps a year or two on whatever is decided. I do not think it should be to long because we have been waiting for the Bill for a long time and it should be enacted as soon as possible.

One amendment which the Minister brought in in the Seanad, which I welcome very strongly, was that dealing with the role of the auditor of the company. Where the auditor has the slightest suspicion there is something wrong he should advise his department and if he fails to do so there are various penalties provided. That should be organised and put into place immediately. I am sure there are other aspects of the Bill which should be brought into force quite quickly also. Perhaps when the Minister is replying he will comment on both aspects and indicate whether the Bill will be held over for two years or partially held over for two years.

In general, I welcome the Bill. We had much discussion on it. I repeat what I said earlier. We have a much better Bill now. That is the function of both Houses of the Oireachtas — to examine, analyse and improve legislation. We have done so in regard to the Insurance Bill with the help of the Minister, Deputy Brennan, who has been very supportive at all times and has accepted many of the amendments. We thank him.

Mrs. Robinson

I agree with the comments made by Senators Hogan and Fallon that this is a very important and significant Insurance Bill and that it has been improved by a number of amendments in this House and also in the other House, which we are now considering. However, I remain deeply disappointed that the Bill is not a genuine consolidation measure consolidating the important insurance provisions. This is particularly regrettable because the Bill has taken a long time to go through both Houses.

The Minister will recall it was introduced into the Seanad in October 1987 — it has been almost 18 months going through both Houses. However, it is a weighty and important Bill and I do not think it has been an undue time for serious consideration of it. Unfortunately it is not a Bill which consolidates the insurance provisions in an Act of the Oireachtas in primary legislation because, as the Minister is aware, it refers to and is to be read not only with the earlier insurance Acts commencing with the 1909 Act but also with the statutory instruments, with the Irish ministerial regulations made under the European Communities Act, 1972 and these are principally the non-life insurance regulations of 1976 and the life assurance regulations of 1984.

Those two statutory instruments contain enormously important regulatory provisions in this area. The interpretation section in section 2 is an interpretation largely by reference to those statutory instruments. Many of the terms like "insurer" or "non-life insurance" or indeed the amendment introduced today of "solvency certificate" means what they mean in the statutory instruments. I think it is not a good way of legislating. It is not desirable that we would interpret Acts of the Oireachtas by reference to earlier statutory instruments. It is extremely important when a measure has been implemented by statutory instrument which is authorised by the European Communities Act but it is not a desirable way of introducing major changes into our own legislative code. It is something that can be done in the short term but a significant area like insurance should be incorporated into primary legislation when there is an Act. There are lots of examples of that where something was implemented by statutory instrument and then the Oireachtas brought in an Act subsequently and the Act incorporated the statutory instrument. The statutory instrument was repealed because it was replaced by the primary legislation. It is extremely important that this be done in an area like insurance.

I raised this in my Second Stage speech on the Bill but at that stage I hoped that the opportunity might be taken for incorporation of the 1976 and 1984 statutory instruments into the Bill itself. I raise it now because it is clear that we are going to have further amendments in the insurance area in the context of the internal market. I would urge the Minister that it is important that we have consolidation into an Act of the Oireachtas to be read together with this Bill so that it is regulated by primary legislation. On the amendments themselves a number of points have already been made on the detail of them. I would like to refer to two new sections which are introduced by way of amendments made in the other House.

The first relates to the powers of the court under the proposed new section 36 with respect to amalgamation or transfer of insurance business. The Minister has clarified the purpose of that, to ensure that the liabilities are transferred and that the persons are fully protected by the assumption of liabilities by the new company to which the business has been transferred. I would like the Minister to give an assurance that the protection of employees would also be fully incorporated on such a transfer under the power of the court. I am thinking in particular of the transfer of undertakings directive and the statutory instrument — I think it is 306 of 1980 — on the acquired rights of employees in the event of a transfer, that he is satisfied that where the court does sanction a transfer here that that statutory instrument would apply and that the employees concerned would have the full protection of the statutory instrument.

The other section I want to refer to — a new section introduced by way of amendment in the Dáil — is the new section 60 on codes of conduct, on duty of disclosure and warranty. That appears to be section 61 of the Bill as passed by the Dáil but that is only a minor matter and will be corrected. Like Senators Fallon and Hogan, I consider this to be a useful power for the Minister but I do not see where there is any sanction or where there is any enforcement of it. The Minister could clarify that point. If, for example, he does consider that he should prescribe codes of conduct, what happens if companies do not abide by them? As far as I can see, there are no sanctions at all for non-compliance with the code of conduct and therefore it would be important to ensure that this section is fully integrated with the powers of the Minister. The Minister has explained that it was a Report Stage amendment in the other House and that this is a Government amendment on the proposal put forward by Deputy Mervyn Taylor. It is important that we ensure it is effective if the power is exercised by the Minister. I would welcome the clarification of that.

Otherwise, like other Senators, I welcome the fact that the Bill is now reaching a final stage and I join with Senator Fallon in asking when precisely the various stages or sections of the Bill, when it is passed, are to be brought into operation. The Minister has a fairly normal power now to bring in different sections at different stages or different times. Normally, Ministers are clear on what the likely timescale would be for bringing sections into operation and I would welcome if he would inform the House of that.

Minister of State at the Department of Industry and Commerce (Mr. S. Brennan)

I will start by sincerely thanking not only those Senators who took part in today's Report Stage debate but also thank the Seanad for its consideration of this Bill throughout all its Stages. We have taken on board many of the proposals and suggestions which have been made by the Seanad and this Bill reflects a lot of thinking of individual Senators. That can be seen in the legislation itself.

Senator Hogan raised a number of points with me. First of all, the point about sections 44 and 45. This is the position where the Minister would be enabled to make it a requirement that agents would have to have professional indemnity. That was an amendment I accepted from Deputy John Bruton in the Dáil. I made it clear I was doing that in a spirit of co-operation but that the formal intention was not to apply that professional indemnity clause to agents for reasons which were explained at length in the House. Deputy Bruton convinced me it was no harm to have an enabling power there in any case in the event that a Government, or a particular Minister, would change their mind at some future time and I put it there on that basis.

It is intended to use it in the area of brokers; it is not intended to use it in the area of agents. The reasons I need not go into any great length but basically they were because we were quite satisfied that the companies would be made to stand behind the agents, as it were, and that this clear link was being established between agents and the companies. Acts of error or omission and so on were all being made the responsibility of the individual company where an agent acted so we were quite satisfied that that professional indemnity was not required in those cases. The key phrase there is "the Minister may" and I have made it clear, and I am glad of the opportunity to do it again in this House, that it is not my intention to activate that part of the Bill. It is our intention to activate it in regard to brokers.

Deputy Hogan expressed some disappointment about the number of agencies being permitted to agents but we have had all this debated in this House and in the other House and in the Dáil we had a formal vote on that situation. So, it is well and truly settled. I wanted to say this to the Seanad and in fairness to Senator Hogan and Senator Fallon and others who raised this with me, we gave it quite an amount of thought, we looked at it from every possible angle, we made every effort to go along with the views of the Senators on it. I was unable to do so in the end for very practical reasons and very strong, indeed legal advice as to what would become of people if I allowed a gap or a lacuna to open up and I accepted that advice in the end. It may not be perfect but it is certainly a step in the right direction. I appreciate that some Senators are disappointed about that and I know they would have preferred had I further restricted the agents but I think it is unnecessary to do that and that this gives everybody a fair crack of the whip.

On the codes of conduct — Senator Hogan referred to that — I introduced an amendment. It was originally an idea and a proposal from Deputy Mervyn Taylor; it was a good thought of his and one I was happy to accept. We will be laying down codes of conduct for insurance companies to tackle a number of areas but particularly one key area which was highlighted by Deputy Taylor, namely, where some item on a form would be warranted as being correct but it might be a very minor item and because it was a very minor item the whole policy could fall, a claim could be turned down. It was a particular legal case which he referred to which I do not want to go into in any detail. He referred to a particular legal case where a claim was challenged on the basis that a person warranted that all the facts were correct and it turned out that there was some minor item like, for example, overlooking a previous small claim or something like that and that made the whole thing fall. We wanted to be sure that did not grow up as a device in the insurance industry to have individual companies get out of commitments which they had entered into. I propose in the code of conduct to ensure that we deal with that kind of issue. Senator Hogan also talked to me about life after 1992 in the industry.

Mr. B. Ryan

Is there life after 1992?

Mr. S. Brennan

This is the question I ask myself every morning. The Senator knows we are doing a number of things. First, there are still a number of directives coming from Brussels which will radically affect the life business in particular. The idea is that eventually the whole life business will be operating on a freedom of services basis which, in effect, means that somebody without an establishment here can dip in here and take business out of the country. It works the other way also, of course. That is what that means and that is coming. I have asked the industry to prepare for it and I am working with the industry to prepare for it. On the non-life side we are preparing them for competition by getting insurance costs down and the Senator knows our programme in that regard and the fact that insurance costs are now falling on the general side.

The Senator asked me about Lifetime assurance. This is a particular company. The Senator mentioned the name so I suppose we are as well to face it. My Department have had talks with the Lifetime company and have reiterated to them our wish that their banking parent and the Lifetime assurance act at arms length and I have asked and received very strong assurances from the company that this, in fact, will be the case. The Central Bank, I understand, are looking at a number of guidelines to be introduced to give effect to underpin my request in this area. I know that both the Bank of Ireland and the Lifetime company are very well aware of my strong desire to ensure that arms' length arrangements are not only there but are seen to be there, and are seen to be there by the industry. That is the direction we have taken on that at this stage.

Senator Fallon asked me about section 36, as to whether we had any particular company in mind. There are two answers to that. It will not go astray in having it here in the event of any particular company having this particular problem. That is as much as I can say to the Senator about that at this stage.

On sections 44 and 45, there was a similar query from Senator Hogan on the question of agents and I have dealt with that.

On section 51, the question of receipts, the Senator asked me about that. The position there is that one receipt will suffice. The idea is to make sure that any money is actually receipted, any policy is receipted. I think one could take a pragmatic interpretation of that. I am glad the Senator also welcomed the code of conduct and I want to refer to that in a moment, when dealing with Senator Robinson's point.

Senator Fallon also raised the question of Lifetime assurance. I have dealt with that matter in my comments in reply to Senator Hogan. I will continue to insist on that arm's length arrangement and will continue to monitor it.

In regard to the time span, the period of time we have allowed in the Bill for this to come into effect is two years. That is section 49, subsection (3). That does not apply to the rest of the Bill. There is a two year period from the date the Bill comes into effect for that situation to be actually effected: in other words, for agents to get four and the broker to get five upwards. The rest comes in immediately, unless there are particular orders.

Senator Robinson expressed disappointment about consolidation. I am disappointed about that also but I had to make a balanced judgment. This Bill has been lying around for nine years and I took a decision that it was not going to lie around any longer and we were going to try to get it passed. Even so, it took us 18 months to get it passed. I shudder to think what age I might be if I decided to consolidate this Bill: I would not bet on a political career of that length. I thought it was better to get this Bill through now rather than attempt a major consolidation, which it would certainly be. We would not be looking at this Bill for many more years had I attempted to consolidate it. That is the practical answer to that. It would be nice to do it but it is just not practically possible given the time scale. That does not mean that we have given up the idea. There is a lot of new EC legislation coming at us in the insurance area and I will try to work towards a day when we can do some consolidation work on it.

The Senator asked me about section 36, the protection of employees in the event of a court sanctioning transfers. This is not one that we can address under insurance legislation. Other legislation exists for this purpose which is administered by the Department of Labour. However, in the context of a court's overall consideration on a transfer of business situation, I am satisfied that the court would have regard to the repercussions of the transfer on the employment situation. There is something else in the Bill which would meet the Senator's concern, but that would look after it.

Senator Robinson asked about the code of conduct and about enforcement. She is quite right, but the enforcement procedure we would use, once we get the code of conduct put in place, would come under section 3 of the Bill which, in effect, would become an order. We would introduce the code of conduct by order under the Bill and orders under the Bill are enforceable and those who do not carry out the orders under the Bill are guilty of an offence. That would handle that particular situation.

I would like to thank Senators for their support on this Bill. I know that, like all legislation, it does not give everybody all of what they want. But let me say this: the Bill has been nine years coming and today it passes all Stages in this House. It is timely because it prepares the industry for 1992 in large measure. It brings in new powers to supervise the industry which are essential if we are going to meet the challenges of 1992. It does not finally solve but it sets up a division between brokers and agents which I hope the market will build on over the years. What I want to do here is to build up a very professional body of independent insurance brokers who are clearly seen by the public as such and to have other people in the industry more attached to companies because they are agents and to be seen to be so attached. We get that kind of transparency. The person who deals with an intermediary knows the difference between a broker and an agent and knows that, on the one hand, they are dealing with independent persons and, on the other hand that they are dealing with those who are closer to companies. It is up to the market itself as the years go by to build on that division which I have now put down and I trust the market will do that in the years ahead.

On top of all that it is a piece of legislation which protects the consumer, particularly through the bonding arrangement. If somebody hands over funds to an intermediary we put in a bonding arrangement similar to what travel agents have to do to protect funds. With the new supervision clauses preparing the industry for 1992, the clear division between brokers and agents and the consumer protection, I am satisfied that between all of us we have done a good day's work in putting this legislation together and I thank Seanad Éireann for their support on it.

Question put and agreed to.

Question: "That the Bill do now pass" put and agreed to.