Unclaimed Life Assurance Policies Bill 2002: Committee Stage.
We will now deal with the Unclaimed Life Assurance Policies Bill 2002. I welcome the Minister for Finance, Deputy McCreevy, and his officials to the meeting. I suggest we remain in session today until Committee Stage of the Bill has been concluded. Is that agreed? Agreed.
A sheet outlining the grouping of amendments for discussion purposes has been circulated to members. Is that schedule agreed? Agreed.
Deputy Burton has sent her apologies. She will not be here this afternoon and has nominated Deputy Richard Bruton to move amendments on her behalf.
Section 1 agreed to.
SECTION 2.
Amendments Nos. 1, 3 and 4 are consequential on amendment No. 2 and all will be discussed together.
I move amendment No. 1:
In page 5, to delete lines 30 to 34, and in page 6, to delete lines 1 to 3, and substitute the following:
" 'approved policy' means-
(a) a policy approved by the Revenue Commissioners-
(i) for the purpose of receiving payments from retirement benefit schemes approved under Chapter 1 of Part 30 of the Taxes Consolidation Act, 1997,
or
(ii) under section 784 or 785(1)(a) of Part 30 of the Taxes Consolidation Act, 1997,
or
(b) a Personal Retirement Savings Account established with an insurance undertaking;”.
Could the Minister briefly outline the intention of his amendment?
Approved policies are specifically referred to in the Bill for the purposes of acknowledging the nature of such a product in that it can have a range of dates on which it matures and of allowing for that range of dates in setting the specified term under section 2(3) at which such a policy would come within the ambit of this legislation.
These policies are regarded as personal pensions rather than life assurance policies. The current draft of paragraph (b) of the definition of an approved policy provides that life assurance policies approved by the Revenue Commissioners under section 785(1) of the 1997 Act fall within the ambit of the dormant scheme. However, section 785(1)(b) provides for policies, the sole benefit under which is the provision of a lump sum on the death of the individual or where he or she attains the age of 70 years. Such policies will be captured under section 6 without reference to them being approved policies and, as such, we do not need to refer to them in paragraph (b), which gives the definition of approved policies. We only need to refer to policies approved under section 785(1)(a). The reason for doing so being for the purposes of setting the specified time after which such products become unclaimed. The proposed amendment also results in PRSAs now being specifically provided for as being approved policies by inserting the new paragraph (b).
From the example quoted by the Minister where someone sets up a scheme which will mature on his death and is therefore available primarily to the beneficiaries of his will, the Minister is, as I understand it, including such policies as potentially dormant accounts. This would seem to indicate that where a person dies intestate and does not bequeath the benefits of such policies in a will to a beneficiary they could become the property of the State. Given the provisions of the Bill whereby notification is sent to the policyholder, who in this case will be deceased, does the Minister feel adequate protection is being given to the potential beneficiaries from intestate holders of these accounts to recover the money due?
Let us take some examples of where this may occur. If these accounts are not claimed they will be taken up by the dormant accounts fund. If, ten years from now, a person comes along and says he has just become aware of a policy held by his grandfather who died intestate and if that assertion were proved correct he would then notify the life insurance company of the situation. The person in question, the grandson, would have to go through all the procedures of intestacy before the life insurance company could pay out on the policy. He would have to engage a solicitor and work out the details of the claim and, unless the policy was a large one, it might not be worthwhile following it up. The rules of intestacy are quite complicated. That is the only circumstance in which I could envisage that happening.
It seems that people who die are a soft target. The Minister is, effectively, seeking out people who have a lump sum maturing on their death as being potential victims of this acquisition or exploitation by the State. Given that category of person, which we can well anticipate now, issues surrounding the identification of the next of kin will arise.
Let us look at it another way. Let us suppose that at the time of that person's death, the grandson knew about the life insurance policy which was worth €100,000 and that the life insurance company was not aware the man had died. The grandson could write to the insurance company informing it of his grandfather's death and claim the money. He would then have to look at ways of getting the money.
At the moment, the only beneficiary of that policy is the life assurance company which has taken premiums from the individual concerned every month or, perhaps, every year for, say, 25 years and has accumulated a great deal of money which is not claimed by anyone. That money will lie in the company's reserves. This Bill will ensure that if such moneys are not claimed within a specified time, they will be swept up in to the dormant accounts fund.
A guarantee is built into the Bill whereby if a person turns up at any time in the future, ten, 50 or 100 years, they will be able to retrieve that money from the institution which will, in turn, claim the money from the dormant accounts fund. It is easier to understand this in regard to banks.
I know the banks have, in the past month, put enormous effort into contacting those on their lists because moneys must be sent over by 31 March. Even rural branches are actively seeking owners of accounts so as to rule out difficulties in the future regarding their ownership. While it appeared there was €400 million in bank accounts which we thought were dormant, at least 150 have been reactivated in the past nine months. I am sure many more will be reactivated before 31 March.
I accept that introducing the life assurance area is much more complicated. I do not see many people reactivating intestacy cases because the expense may be greater than the benefits. If they do, however, the same situation as prevails in the banks will apply - the money will be available to those who should have benefited in the first instance.
Given that this category of people may be deceased, the onus should be greater in legislation to require the assurance company to do more than simply write to the policyholder whom they know is deceased. We should specify, in later sections, an onus to pursue next of kin.
I know where the Deputy is going with this but I do not think it would be right to place an enormous burden on the life assurance company to contact all the people who could possibly benefit from a relation's will. This is a difficult area. I accept that the company should make the best effort possible in this regard. I am sure the assurance company would rather pay out to a beneficiary than pay the money to the dormant accounts fund. While banks think in that way, it is somewhat different with assurance companies because the money is being paid out either way. The money remains in the banks' reserves whereas in the case of the assurance company, it goes to the beneficiaries of the estate or to the State. While I know what the Deputy is trying to do, I do not think I can go much further and place a burden such as this on assurance companies.
Over 500,000 policyholders will be notified of this by way of advertisement placed in the newspapers.
Will there be over 500,000 potential claims?
No, we omitted life assurance companies from the Dormant Accounts Act because it is a matter which requires a great deal of expertise. It was far more complicated than we thought originally.
Does the Minister have an estimate of the potential claims?
We do not have a strong estimate. It could be small or large. We had a better idea in relation to bank accounts because the bankers' association had compiled information about dormant accounts going back over ten, 15, 20, 25 or 30 years whereas policyholders do not have such information.
Is there any merit in having the particular companies advertise the list of names which they will send to the Minister? Such information could, perhaps, be published in IrisOifigiúil from which many provincial newspapers tend to take tax settlements. There would also be free advertising from the Minister’s point of view. It would generate a lot of interest in rural communities to see certain names which might——
There is a later amendment from Deputy Bruton regarding the provision of a database. Unfortunately, I will not be able to accept it at this time because it raises the question of privacy, unless perhaps we can find some way around it. One does not want to see the names of persons listed in newspapers as missing when they might be alive and turn up. Their families might not want it to be known that they had such a policy. Issues of privacy relate to circumstances such as these. Advertisements have been placed in newspapers to alert people to the fact that life insurance companies are doing this and to get them to look up the details of people they can think of who might have unclaimed life assurance policies. The same applies to the banks.
My amendment is deliberately designed to be a two stage process where there would be no lists on general display. It provides for a person who has a prima facie belief that there may be an entitlement to present his or her birth certificate and evidence of identity to a central database which would not have access to the funds or details of the accounts, it would simply have the names and dates of birth of potential holders of unclaimed policies. Initially the individual would go to the central database where he or she would be told whether there was an account in his or her name corresponding to the date of birth. If there was, arrangements would be made for the financial institution to make contact with him or her but they would get no information directly.
I spoke to the Data Protection Commissioner to see whether such an amendment would be robust. While he did not give me a categorical statement, he said he thought there was potential to stay within the data protection legislation within that sort of process. The Minister should not rule it out without first taking a hard look at whether the data protection legislation can be complied with because the commissioner did lead me to believe that it could be dealt with. Effectively, we would be providing a benefit in not allowing people a prurient interest in seeing lists.
Amendment agreed to.
I move amendment No. 2:
In page 6, subsection (1), between lines 43 and 44, to insert the following:
" 'Personal Retirement Savings Account' has the same meaning as in Chapter 2A (inserted by the Pensions (Amendment) Act, 2002) of Part 30 of the Taxes Consolidation Act, 1997;".
This amendment relates to PRSAs. It was always intended that the PRSAs sold by insurers, though not yet on the market, would come within the ambit of this legislation. We had thought this advice referred to such products being approved under Chapter 2A of Part 30 of the Taxes (Consolidation) Act 1997 as currently provided for in the Bill. However, we were subsequently advised by the Revenue Commissioners and the Department of Social and Family Affairs that this was not the case because PRSAs were not policies per se and therefore could not be approved under Chapter 2A of Part 30 of the 1997 Act. The proposed amendment is required to rectify the inaccuracy in the drafting. As such, it will provide that PRSAs are deemed to be approved policies for the sake of this legislation such that they will fall within its ambit and have a specified term as provided for in section 2(3) of the Bill.
Amendment agreed to.
I move amendment No. 3:
In page 6, subsection (1), to delete lines 44 and 45, and substitute the following:
" 'policy' means——
(a) a policy of life assurance in respect of which the contract may or may not be evidenced by a policy document, or
(b) a Personal Retirement Savings Account established with an insurance undertaking;”.
Amendment agreed to.
I move amendment No. 4:
In page 7, subsection (1), line 14, after "otherwise" to insert the following:
"or
(f) a contributor (within the meaning of Chapter 2A (inserted by the Pensions (Amendment) Act, 2002) of Part 30 of the Taxes Consolidation Act, 1997) in respect of a Personal Retirement Savings Account established with an insurance undertaking,”.
Amendment agreed to.
I move amendment No. 5:
In page 8, subsection (4)(d)(ii), line 21, to delete “Fund” and substitute “Agency”.
The definition of relevant date refers to the date that the insurance undertaking must refer to in calculating the amount of interest to be paid on a cash for value policy. The proposed amendment rectifies a drafting error in this definition. Paragraph (ii) of the definition of relevant date refers to the date a notice of reclaim was given to the fund. This should be the date a note was given to the agency.
Amendment agreed to.
I move amendment No. 6:
In page 8, subsection (5)(b), lines 27 and 28, to delete “subsection or paragraph is to the subsection or paragraph” and substitute “subsection, paragraph or subparagraph is to the subsection, paragraph or subparagraph”.
The proposed amendment is to rectify a drafting error. It is to ensure any references throughout the Bill to subparagraphs are correctly interpreted as being references to the subparagraphs of the paragraphs in that section.
Amendment agreed to.
Question proposed: "That section 2, as amended, stand part of the Bill."
Section 2 defines the correspondent's address as the holder's last known address for correspondence according to the records of the insurance company. Should we not indicate that if the holder has other policies with a new address the company should ensure any new address available to it within its own offices should be used? Presumably someone could take out a policy and move on. Because he or she has a new policy, the company should know the new address.
I am advised that under the Data Protection Act it must keep an up-to-date record of addresses as best it can.
Therefore, if a person has a new policy at a new address the company will have to update the address.
Question put and agreed to.
Sections 3 to 5, inclusive, agreed to.
SECTION 6.
Amendments Nos. 7 and 8 are related and will be discussed together.
I move amendment No. 7:
In page 10, subsection (2)(a)(ii), line 18, to delete “made” and substitute “were to make”.
The proposed amendments are to rectify drafting errors and a way of ensuring grammatical accuracy. They change the term "made a claim" in each instance to "were to make a claim". I am such a genius on grammatical accuracy that I am sure it was done especially for me.
Amendment agreed to.
I move amendment No. 8:
In page 10, subsection (2)(b)(ii), line 34, to delete “made” and substitute “were to make”.
Amendment agreed to.
I move amendment No. 9:
In page 11, subsection (3), between lines 7 and 8, to insert the following:
"(d) an endowment policy.”.
This amendment involves schemes where an exemption is being provided for from the operation of this Bill. I suggest that endowment policies should be exempted because there is a corresponding liability they are designed to meet. While it may remain dormant for the specified period, it is clearly linked to repayments. Should they be exempt from the provisions of this Bill?
We are dealing only with unclaimed policies which have achieved a net cash-in value which should have been claimed by the policyholder. There is no advantage to the policyholder in leaving such policies unclaimed with the life insurance company. They would be as well off to take the money and invest it themselves. This is of particular significance in regard to endowment policies that have reached the end of their term. As the committee will note from section 2 of the Bill, it is only this net encashment value of any unclaimed policy which is due to transfer to the dormant accounts fund. Endowment policies, by their nature, are term instruments. As such, the only types of endowment policy that will fall within the ambit of the dormant accounts scheme are ones that have come to the end of their term where an amount is available to be claimed by the policyholder but has not been claimed for at least five years.
If the Deputy or the committee is concerned that transferring the net encashment value of an endowment policy would, for instance, jeopardise the policyholder's mortgage, they should rest assured that this is not possible under the terms of the legislation. It is only where such a policy no longer actually assures the policyholder's life but provides the contractual basis for a claim of a lump sum that the dormant scheme comes into play. Even where the net encashment value has been transferred to the dormant fund there is still the statutorily guaranteed right to reclaim the moneys with any interest they have accrued. For these reasons I do not accept the Deputy's proposal for an amendment in this regard.
I accept the Minister's explanation.
Amendment, by leave, withdrawn.
Section 6, as amended, agreed to.
SECTION 7.
I move amendment No. 10:
In page 11, subsection (3)(d), line 38, after "policies" to insert "provided the regulation does not adversely affect the interest of the policy holder".
It is proposed that the Minister may make regulations to reduce the administrative and financial burden of maintaining unclaimed policies. Clearly we have an interest that this does not become extremely burdensome for insurance companies but equally we do not want to see the insurance companies cutting corners for administrative or financial ease that in some way jeopardises the interests of the policy holder who may turn up in subsequent years. In making such regulations the Minister should be conscious of the interests of the policy holders. I therefore propose that they should be explicitly provided for in this Bill so that the Minister will take due account of that when variations are being drawn up.
Section 7(3) of the Bill sets out the purposes for which the Minister for Community, Rural and Gaeltacht Affairs may make regulations in relation to the various matters set out in section 7, such as the form of the notice of procedure to customers or the information to be stored on an institution's register of unclaimed policies. The normal scheme is a new initiative which has not been implemented elsewhere in the EU so we have not been able to build on the experience of our European colleagues in this matter. Therefore the reason for section 7, generally, is to ensure that once the scheme is operational, both the public and the institutions get used to it and in particular when the backlog of long unclaimed policies have been cleared, adjustments can be made in the interests of all concerned, the policy holder and the insurance undertaking. For instance, once the scheme is operational it may come to light that more details should be kept on the register of unclaimed policies in order to assist all parties in the making and processing of a claim. The section closely mirrors what has already been enacted in the Dormant Accounts Act. Section 7(3)(a) and (c) specifically provide that the Minister may make regulations for the purposes of consumer protection and to facilitate policy holders who are attempting to identify moneys to which they may be entitled. For that reason it should be clear that the ethos of the provisions is primarily to assist the policy holder rather than the insurance undertakings. Therefore, as the section is designed mainly to protect the policy holder, I do not think we need the provision proposed by the Deputy.
Section 7(3) provides for consumer protection and the proper and orderly regulation of the financial service industry. I do not honestly think that the Deputy's amendment is necessary. We will gain experience when this legislation is up and running and after the initial backlog is met. The purpose of this Bill is to assist policy holders and reconnect them or the beneficiaries with their policies.
I cannot envisage the Minister for Finance or the Minister for Community, Rural and Gaeltacht Affairs bringing in a regulation that would penalise a policy holder. I do not think it is necessary and section 7(3)(a) and (c) would not allow me to do that.
I realise there are not many Ministers for Finance who would be so in cahoots with life assurance companies that they might conspire to do down policy holders but we should make it clear to anyone who is drafting regulations under this Bill that where changes are being made to relieve the financial or administrative burden on the life insurance company, immediately the red light should flash and the question should be asked whether this will have adverse effects on others. I know the Minister will say that consumer protection is listed as something that should be considered but I prefer that, while talking about reducing administrative burdens, it should be provided that they do not adversely affect the interests of the other side of the exchange, so to speak.
I would like the Minister to accept the amendment. I take his point that in 99 cases out of 100, it will not be necessary but a lot of legislation is to protect the one case in 100 where it might have been an advantage.
I understand the Deputy's sentiments but I do not think it is necessary. It is adequately covered here.
Is the amendment being pressed?
Yes. I propose that the amendment be made.
Amendment put and declared lost.
Section 7 agreed to.
SECTION 8.
I move amendment No. 11:
In page 12, subsection (1), lines 3 to 5, to delete all words from and including ", except" in line 3 down to and including "policy," in line 5.
Under this section the insurance company is required to give notice to policy holders that they are in danger of losing their policy. The section provides that they will have to give written notice except where a policy holder has previously been given notice under this section in respect of an unclaimed policy. I do not believe that if a policy holder has been given notice in respect of a policy and did nothing about it he or she should not receive notice in respect of other policies that he or she may also hold with that same institution. For every policy that is being transferred to the dormant account there should be a separate notice given to the policy holder. This is out of the same stable as the last amendment and proposes changes for the convenience of the life assurance company which are not in the interest of the policy holder.
Section 12 provides that certain policy holders will be personally notified once in the year that their policies are deemed unclaimed, that the moneys claimed are due to transfer to the dormant fund and of the steps that can be taken to reactivate the policies. It should not be forgotten that before and possibly since these policies became inactive, the insurance undertakings attempted to make contact with the policy holders to no avail. Although the Bill only requires a single notification, it is in the industry's interest to pull out all the stops to contact these policy holders, given that they will lose the underlying funds if no contact is made and still have to administer the policy. The Bill does not prevent an undertaking from making further attempts to contact policy holders whose moneys have been transferred. To compel the insurance undertakings to go beyond what is reasonable in this regard will inherently involve extra costs to the insurance industry which will inevitably be passed on to the customer. Royal Liver alone estimates an increase in costs of over 500% if attempts must be made to contact all policy holders.
Section 9 of the Bill provides that the public notification regarding the scheme will take place every year so we can take it that the public will have sufficient notice of what might be happening to its money. I do not consider that the full burden of keeping track of life policies should lie with an insurance undertaking. It is for the individual to take the responsibility for his or her own financial matters. This legislation and the Dormant Accounts Act is intended to assist individuals in this regard, not remove all responsibility from them. In any case, the policy holder will not lose out if his or her money is transferred to the fund as the right to reclaim is statutorily guaranteed.
In addition, a number of statutory and contractual arrangements already exist which oblige the insurance undertakings to keep regular contact with their customers. These include the Life Assurance Provision of Information Regulations, 2001. During the term of the policy, the undertaking must inform the policy holder of, for example, any changes in the policy conditions. Under the Insurance Act, 2000, for all policies other than industrial branch policies issued after February 2001, which have acquired a surrender value, the insurance undertaking must provide the policy holder with an annual written statement in relation to the policy. Under the terms of the 2000 Act, the policy holder must complete a declaration form to the effect that he or she has been given this information. The Insurance Act 1936, states that when insurance undertakings merge, existing policy holders must be informed of the details of the merger.
As some policies require index-linked contributions, undertakings must notify policy holders annually of what the contributions will be. As matters stand, I am very pleased to report that, since the dormant accounts scheme came on line last March, less than 12 months ago, its success in reuniting people with their money has been significant. This is evidenced by the number and value of the reactivations that have taken place since last March, as shown by figures my Department has received from industry representatives. In total, as I indicated earlier, approximately €400 million lay dormant in March of last year in financial institutions. By the end of last December, approximately €150 million of that had been reactivated. On that basis, the scheme has been a resounding success, meeting its primary goal to reunite people with their money. This has been done via the notification procedures under the 2001 Act, which are identical in nature to what is now proposed in this Bill. For that reason, I do not propose to accept the Deputy's amendment.
My heart bleeds for the Royal Liver, or whatever institution is complaining about a 500% increase in costs. The reality is that institutions had the use of those moneys in unclaimed accounts without payment of interest and without value to the holders for many years. Insurance companies have had a significant benefit in this regard and the Minister is rightly saying that if there is to be a benefit, let it be for the State rather than the insurance companies.
I understand that the Royal Liver is one of the last mutual insurance undertakings remaining in the UK. Any increased costs it may incur will eventually be charged to policy holders, as there will be less profits to redistribute. Accordingly, it might not be the best example to take.
Perhaps that is why Royal Liver was asked to raise the issue. In that regard, I suggest that the information provided by Royal Liver be made available to this committee. I would like to see on what basis the 500% is calculated and what benefit the company has enjoyed. In my view, the Minister's response made my case more strongly than I could have done. The Minister is already obliging insurance companies to make contact annually with people with far more trivial information than I am asking, namely, that the institution should make contact if it is proposing to transfer that money in its entirety to a dormant accounts fund. It is reasonable to ask companies to make contact individually in respect of each policy which they propose to transfer. A number of years could elapse between the transfer of one policy and another. That is not asking too much from companies which will have enjoyed the benefit of unclaimed policies for many years.
The Minister said earlier that no Minister for Finance would ever be swayed against the interests of policy holders by complaints from life assurance companies with regard to their costs. In this instance, the Minister is citing such a complaint by a life assurance company as a basis for short-changing policy holders by lack of notification of, perhaps, far more valuable unclaimed policies in future, relative to those originally notified.
In the dormant accounts legislation in relation to banking and financial institutions and in this Bill, I am not demanding too much of institutions. There is an enormous amount of work involved in getting this system off the ground initially. It will become easier in subsequent years, once the backlog has been dealt with. There are limits to what we can legitimately expect. I have to take account of legal advice in relation to banking and life assurance institutions as to how far one can go in this regard. One has to have the co-operation of those institutions for this scheme to work, particularly in the case of the banks. What I have put forward in the Bill is a reasonable and balanced approach, not imposing an unduly heavy burden on any of the institutions while, at the same time, making sure the system works. If we went too far, the institutions might take the position that the State should take direct responsibility for doing the work. The institutions are in a better position to do this work and we are relying on their co-operation. The provision in the Bill is reasonable to all concerned.
I believe the amendment should be made.
Amendment put and declared lost.
I move amendment No. 12:
In page 12, subsection (1)(c), line 14, after “holder” to insert “on or”.
The proposed amendment is to rectify a drafting error and to ensure that policy holders will have until 31 March each year, following receipt of notification, to reactivate their policies. Without the amendment, it might be taken that policy holders must contact the insurance company before 31 March, whereas it is intended that notice to the company on 31 March suffices to prevent the policy from being treated as unclaimed.
Amendment agreed to.
Section 8, as amended, agreed to.
SECTION 9.
Amendment No. 13 is consequential on No. 19. Amendment No. 14 is an alternative to No. 13. and Nos. 13, 14 and 19 may be discussed together, by agreement.
I move amendment No. 13:
In page 12, subsection (1), lines 33 to 35, to delete paragraph (a).
In moving this amendment, which is in the name of Deputy Burton, I wish to address my amendment No. 14 which states:
In page 12, subsection (1)(a), line 34, to delete “€500” and substitute “€250”.
This relates to the thresholds which should be applied. In this Bill, the Minister has set a threshold considerably higher than that in the Dormant Accounts Act which, if I recall correctly, was €100. The figure proposed in this Bill is €500. Deputy Burton's amendment proposes the removal of the entire subsection so that every policy would have to be notified to the policy holder if it was proposed to be deemed unclaimed. My proposal is that the threshold should be lowered. I would like to hear the Minister's reasons for choosing a substantially higher threshold in this case. In amendment No. 19, Deputy Burton proposes to delete the Minister's power to amend the relevant amount by order. Having already set the higher figure of €500 in this Bill, the Minister also seeks the power to raise that figure, by order, to perhaps a much higher level in response to pressure from insurance companies in relation to their administrative burden. The basic issue relates to where the line should be drawn as between the burden being imposed on insurance companies which have the use of the relevant moneys, free of charge, for a considerable period and the interests of the policy holders whose money may be transferred to the State.
Section 9 sets out the criteria and mechanism for the annual public notice to be made by insurance undertakings in respect of unclaimed policies. Specifically, it provides that where the value of a policy is below €500, that policy holder will not receive personal notification in relation to the policy. Deputy Burton has requested the removal of this provision with the effect that all policy holders, other than those whose policies are of the non-correspondence type or whose money has already been transferred to the dormant accounts fund, would receive personal notification regarding their policies. This is not a viable proposal for a number of reasons. First, insurance undertakings tend to hold a large number of very low value life policies. It would place an undue and substantial burden on the undertakings to have to personally write to the holders of policies valued at, for example, €5. In any case, the undertakings are perfectly entitled to charge for doing so, with a resulting negative impact on an already low value policy.
Second, particularly in the case of the old industrial branch policies, there are often very few contact details available. Those policies were sold from door to door by representatives who knew their customers personally and, therefore, did not see the need to record accurate contact details as to addresses of their customers. In those circumstances, if I were to accept the Deputy's proposal, it would be impossible for the insurance undertakings to comply with the law. Third, the proposal would put the insurance sector at a serious disadvantage relative to the banking sector which, under the Dormant Accounts Act, is not obliged to make personal contact with holders of low value accounts. Credit institutions placed their first public notice last October to great effect given the number of subsequent reactivations on dormant accounts. For these reasons, I do not consider we should accept this proposal.
Under this legislation, insurance undertakings will be required to personally notify holders of unclaimed policies valued at €500 or more. The undertakings will also be obliged to bring the scheme to the attention of the public by way of annual notices in two or more national daily newspapers and notices in each public branch of the undertaking. The first of these notices is due to be placed in March. In general, an unclaimed life assurance policy would have a higher value than a dormant bank account. Therefore, to avoid placing an undue and substantial additional administrative burden on insurance undertakings, it is not proposed that they personally notify holders of very low value policies. This would seem to be more of an issue for the insurance undertakings than it is for credit institutions and I considered that the threshold of €500 was more appropriate to them. Therefore, I have proposed leaving the threshold for personal notification at €500.
Deputy Richard Bruton has pointed out that there is a section in the Bill that gives the Minister power to change the regulations in this regard. That exactly mirrors the provision in the Dormant Accounts Act regarding the banking institutions and I eventually came down to a figure as low as €100 with regard to that. The intention of allowing the Minister power to do that is to give him or her the opportunity in years to come to reduce that amount. It must be remembered that the major initial work in this regard on both the Dormant Accounts Act and this Bill is being done now. After this, only a yearly tranche will be done. Unless someone has an extraordinarily large quantity of dormant bank accounts, most of the money will come in the first year, as the accounts go back years. An account that is 14 years dormant is not considered dormant in this legislation, but it would be so considered in the following year. These powers are being transferred to the Minister for Community, Rural and Gaeltacht Affairs. The intention is that after a couple of years the Minister might consider lowering the threshold from €100 to perhaps €20 as there would be less work to be done then.
However, a sum of €500 would be a reasonable amount for an insurance policy. Deputy Bruton considers the amount should be €250 but I consider that €500 for an insurance policy is quite a low figure. This section gives the Minister the power to make further regulations in years to come. That can be considered and the figure could be lowered at that stage. A sum of €500 is a reasonable figure for an insurance undertaking and I consider that €100 was appropriate for a bank. It is a matter of judgment, not an exact science.
I realise that, but I want to know if the Minister has seen evidence submitted by the insurance companies, which have no doubt been lobbying him. What do they estimate the cost of the obligations under section 8 would be in respect of a policy? Once they have identified the account that is to be deemed unclaimed, they ought to have the name and address of that account. They ought to be able to send a letter, bringing their costs to perhaps 50 cent. Why should we run from an obligation of 50 cent per policy and decide to set a threshold as high as €500? That is the nub of the matter. What burden do we think we are imposing on these insurance companies?
I will give the Deputy some figures on this and I am sure I will be able to get other figures for him. Royal Liver has approximately 250,000 basic policy details of old policies that do not have address details on them. It would not be in a position to find these people if it wished. Having a limit of €500 allows the company to correspond to all relevant policy holders on the basis that no policies held within the paper registers exceed this limit. All policies that exceed €500 are held on a computer file with address details. Royal Liver believes the costs of dealing with dormant accounts will increase by 500% if the limit is lowered. It would have to deal with close to 6,000 customers instead of 1,000. In both the Dormant Accounts Act and this Bill, there is a section which allows the Minister to reduce the limits and there is a provision in the Dormant Accounts Act to reduce the period of time also.
A period of 15 years was struck for bank accounts, which was seen as taking a middle course. In other European countries it takes up to 30 years before accounts become dormant. I decided on 15 years but there is a section in the Bill which allows the Minister to reduce the number of years and the financial amount. If a Minister feels in years to come that the bulk of the money has been dealt with, it may be decided to reduce the number of years or the amount, or both. However, to get this up and running, my approach is a reasonable balance between demands on the insurance undertakings, the costs involved and the benefit that will accrue to the dormant accounts fund. I accept that the difference between my figure of €500 and the Deputy's figure of €250 is a matter of judgment.
I agree with the number——
Deputy Burton would have set no figure and, at this stage, that would be too onerous. Perhaps in ten years' time——
We should set this threshold according to some objective assessment of what the extra cost imposed on the insurance company by having a lower threshold would be as it would clearly be of some benefit to the policy holder. If the companies do not have the addresses of policy holders, they cannot write to them. If they have the addresses, it will cost the companies just 50 cent to process and send a letter. The Minister is saying that he acted on the basis of proportionality in going for a figure of €500 but he is only saving the insurance company a trivial amount by not lowering the figure.
I want this to work and the best way to do that is to start off with a reasonable figure. After a number of years, if the initial work is done the figure can be changed. The insurance companies will have an enormous amount of work to do to comply with this Bill, as do the banks, and they are doing it. Insurance companies will have a much more difficult task than banks because the banks have records and branches all over the country, and detailed accounts. The annual accounts of a bank inherently imply that all the accounts are detailed.
However, the effort is in finding these policies, not in sending a letter in the post to the people who own them. I admit the companies have a lot of work to do but the effort is in identifying the policies and their value and assembling a register of the policies. When that work is done, putting a stamp on a letter is not the main effort.
I want this legislation to work and to have the money in the dormant accounts fund in 2004.
The Minister has to convince this committee that he is acting reasonably.
That is why the section is there to allow the Minister to change the regulations in the future probably with a view to reducing the years and the value of the policy.
By that stage, this money will be in the dormant accounts fund.
No, the companies will not have written out to these policy holders so those policies will still be lying there. With regard to the banks, a dormant account of less than €100 is not being considered at this time.
Is it not being taken over?
It is being taken over but the people are not being notified.
That is my objection. They are not being notified for the sake of 50 cent and the sending of a letter despite the records being there. The account will be transferred but the Minister is telling the companies not to send that letter.
I understand that insurance companies intend to computerise their records of smaller accounts, which is a massive undertaking. Insurance companies have hundreds of thousands of small accounts. I am not particularly amazed by this, as my mother took out policies with a company - I will not name it - that called door to door. The company asked me for a few pence until well into my married life.
The Minister is missing the point I am making. The insurance companies will have to do the work he has mentioned in any event, but he is imposing a burden on them that may cost millions of euro. The Minister has said that he will save them the 50 cent it may cost to notify policy holders, but they will still have to dredge through their files. The consequence of this saving is that policy holders will not be notified and I am concerned by that. It is obvious that they cannot be notified if their addresses are not on file.
We could argue about this all day.
Amendment, by leave, withdrawn.
I move amendment No. 14:
In page 12, subsection (1)(a), line 34, to delete “€500” and substitute “€250”.
Amendment put and declared lost.
I move amendment No. 15:
In page 12, subsection (1)(c), line 41, to delete “fails” and substitute “has been unable”.
This amendment appears to be necessary to tighten up the drafting of the Bill.
Section 9(1)(c) provides that if an insurance undertaking has taken all reasonable steps to notify the policy holder of an unclaimed policy but has failed to do so, it need not notify him or her. This amendment proposes that the undertaking need not contact such a policy holder if it has tried and “been unable”, rather than failed, to do so. This section was drafted to provide a defence for undertakings in circumstances where they had taken all reasonable steps. The Office of the Attorney General advised that the onus of proof would be greater if the requirement came into force in the event of the undertaking being unable to make contact, rather than in the event of it having failed to do so.
The use of the phrase "has been unable" would imply a lack of ability to make contact which either would not be the case or would be indefensible. The use of the term "to fail" to make contact implies that all that could reasonably have been done was done and that no fault lies with the undertaking. A provision to the effect that the undertaking has taken reasonable steps but has been unable to make contact infers that the undertaking should have been given more time, that the reasonable steps were inadequate, and this would leave us with a conflict in the Bill. I do not intend, therefore, to accept this amendment.
Amendment, by leave, withdrawn.
I move amendment No. 16:
In page 13, subsection (2)(a), line 2, to delete “17 January” and substitute “21 March”.
The proposed amendment is required as a result of the delay in the enactment of this Bill. The current text of the Bill intends that insurance undertakings would be required ordinarily to publish their first public notice in respect of unclaimed policies on 17 January 2003. It is obviously no longer reasonable to expect the undertakings to comply with such a date as today is 22 January. It is proposed that the date of the first public notice should be Friday, 21 March 2003. This will give undertakings time, subsequent to the enactment of this legislation, to prepare such notice. As a notice has been published in Iris Oifigiúil, which is published on Fridays, a Friday was chosen as the date of public notice.
Amendment agreed to.
I move amendment No. 17:
In page 13, subsection (3)(b), line 10, after “policies” to insert “and the number of such policies”.
This amendment relates to insurance companies that propose handing over unclaimed policies to those with whom contact has not been made or with whom they have not been obliged to make contact. The notice informing people that the handover is to take place, as set out in the Bill as it stands, will simply state that the undertaking holds such policies, but my amendment suggests that it should also set out the number of such policies. Such a provision would be in the interests of the public and freedom of information, as it would make clear the extent to which policies have been unclaimed and it would alert people to the possibility that they may own an unclaimed policy.
Section 9 sets out the obligations of insurance undertakings in relation to the annual public notice they must place in national newspapers. Section 9(3), in particular, sets out the details of the information that must be contained in a notice. The most basic of these requirements is that undertakings will have to indicate that they have unclaimed policies on their books.
Deputy Bruton's amendment proposes that undertakings will have to state in their public notices the number of unclaimed policies that are held. Such a provision would not be viable for a number of reasons. This Bill has just come to the House for enactment and the first such notice is due in March. If we assume that the enactment process is concluded speedily, undertakings will still not be given enough time to identify the number of unclaimed policies that are on their books.
Experience gained from the application of the scheme relating to credit institutions indicates that identification of all unclaimed policies in any given year is a large task. The process is likely to be more onerous for insurance undertakings than for banks and building societies, given the disparate nature of life insurance policies and the fact that two different terms - five or 15 years - of dormancy apply. It is likely that the process of identification will continue after the date of public notification. Public notice will have to be given at the start of October of policies identified as unclaimed by the end of September.
It is likely that public notification will be carried out on behalf of many insurance companies by a representative organisation such as the Irish Insurance Federation, as allowed under section 9(1). If all undertakings do not make a timely return of their figures to the IIF in such circumstances, the resulting figure in the public notice will not only be misleading but will cause the IIF to be in breach of its obligations under the Act. If the notice is published on behalf of various undertakings, the resultant all-encompassing figure will be of little informative value to the public. I do not propose to accept the Deputy's amendment for those reasons. I do not see the value of the public knowing that a given company holds 123,648 unclaimed policies.
I see the value of making such information available to the public. It will alert people to the fact that the scale of this phenomenon is significant and it will inspire them to examine whether they are potential beneficiaries. The Minister should not forget that when the notice is published, the insurance undertakings will already have written to the policy holders who have not claimed their policies. They will know most of their names and addresses, although they might not have bothered writing to those whose unclaimed policies are worth less than €500.
They will not have done so at that stage.
They will. They are obliged to publish a notice if an unclaimed policy is held at the insurance company and they have failed to make contact with the policy holder.
They will start the work of contacting them after the notice has been published. They will have to spend the next year doing the work before they will be in a position to collect the money, as was the case with the banks.
Section 9 provides that insurance companies are obliged to place the notices about which we have been talking after they have taken all reasonable steps, in accordance with section 8, to notify policy holders about unclaimed policies and have failed to do so. The obligation to place a notice applies only after the undertakings have conducted the search. The names and addresses can be ascertained from the register of policy holders at that stage and there is no question that these details will not be known. One may say that the information should not be made known, but I do not see why it should be a secret.
I do not see any benefit in making it known that there are 73,648 unclaimed policies.
That would be a significant amount.
When all the work has been done and the money enters the fund at the end of the year, it will be possible to say that a certain company's unclaimed policies were worth a certain amount.
The work will have been done earlier, as the notice will be published only when a thorough search has been conducted and unclaimed policies have been found. The public will be notified of their final chance to claim their moneys through a public notice before the funds are signed off. If the numbers are known at that stage, why will they not be made known to the public?
The banks will not know at that stage. The banks will not know when the notice was placed in the newspaper. They will not know how many non-activated policies they have. They will be aware that some exist but they will not know how many. They have given us a different figure today than what they gave us six months ago because a number of the accounts have been reactivated.
Things change once the accounts are claimed. If a notice advertising the existence of 73,000 accounts is placed in a newspaper and that notice alerts 50,000 people to claim them we are left with only 23,000 accounts. That would not be misleading advertising, it would be an accurate picture of what they had at the time they placed the advertisement. I do not wish to make a meal of this but I do not accept the arguments being offered by the assurance companies that this is burdensome. They are aware of the number of policies they have.
Amendment, by leave, withdrawn.
Amendments Nos. 18, 21, 22 and 23 form a composite proposal and amendments Nos. 31 and 32 form a related composite proposal. All the amendments will be taken together by agreement.
I move amendment No. 18:
In page 13, subsection (3), between lines 24 and 25, to insert the following:
"(f) that-
(i) a Central Database of the name and date of birth of unclaimed policies is jointly operated by the NTMA and institutions covered by this Act so that a member of the public can check the possibility that they are the holder of an unclaimed policy or have an entitlement to its proceeds, by furnishing photographic evidence of identity and the Birth Certificate of the possible policy holder, and
(ii) the operator of the Central Database, on receipt of this evidence, will arrange for any institution holding an unclaimed policy in that name to make contact with persons in respect of whom there is prima facie evidence that they are entitled to the proceeds of an unclaimed policy, in order to establish if he or she is entitled to any monies;”.
This amendment is one which I would like to be made. As things stand, when people move house and the bank or insurance company is not aware of the new address, they often write to the old one and receive no reply. Following that they place an advertisement in the newspaper stating they have unclaimed policies. People are not sure what to do in that situation.
I am suggesting that we establish a central database to which insurance companies would provide the name of the policyholder and his or her date of birth. If a person provides the relevant information and proves that he or she is a specific person, the central database would then check the unclaimed accounts in that regard and arrange for the company in question to contact him or her regarding the policy. The reason it is a two stage process is to cover data protection. The central database would have only a fairly minimal list of information such as names, dates of birth etc. A person would not be able to scan this information. One would have to present one's date of birth and evidence of who he or she is and would then be told whether or not a policy existed. Even if the answer was "yes", the person would not obtain access to the policy but would be contacted by the relevant insurance company or bank seeking that he or she furnish them with information regarding the claim.
The ordinary member of the public will not gain access to this information. One of the advantages of this process is that it would provide a central place where people can go and check, quickly and cheaply, if they are one of the claimants of the 100,000 policies or accounts. This would be of enormous benefit to the public. The Minister says the primary aim of this legislation is to assist members of the public in obtaining money which is rightfully theirs. The cost of such a database would be borne jointly by the companies and the NTMA. This, in my view, fills the gap which remains in the Minister's original proposal. The scale of this is due to people having changed addresses and forgetting what company they had accounts or policies with. This is a relatively cheap, uncomplicated, user-friendly proposal which would facilitate the public. I signalled on Second Stage my intention to table an amendment in this regard. I hope the Minister's officials have had time to study this proposal and that they will give, if not today, on Report Stage, an indication of support to this process.
We considered this possibility when drafting the Dormant Accounts Act as a very useful tool in assisting the owners of lost or forgotten assets. However, for various reasons, primary among them being privacy rights, we did not proceed with the matter. In particular, the Deputy should note that it was not considered that the NTMA would have a role in this matter given that it will be given no personal details about the owners of the money transferred to the fund.
A number of concerns apply regarding privacy considerations. First, there is the companies and credit institutions' confidentiality to their customers. Legal text on the subject states: "The duty by institutions to maintain a secrecy is a legal one arising out of contract not merely a moral one." Although we can all accept that in the interests of unclaimed assets many of the owners, who died or have forgotten about their accounts or policies, or their heirs might be glad to come across information about them. We cannot take it for granted that that will always be the case. In particular, some accounts and policies have been specifically designated non-correspondent by their owners.
Second, section 2 of the Data Protection Act 1988 specifically provides that personal data held by a data controller, in this case the credit institutions and insurance companies, shall be kept only for one or more specified and lawful purposes and shall not be used or disclosed in any manner incompatible with that purpose and the data controller shall take appropriate security measures against unauthorised access to the data. The 1988 legislation was clearly enacted to protect the privacy of persons whose details are being held by a third party. To provide such details on a generally accessible database would clearly flout the 1988 Act as when those details were given to the institutions it was not intended by the consumer that they would be made generally available.
Third, there is a constitutionally guaranteed right to privacy. It should also be noted that even if we could get around the legal impediments, the industry feels that to establish such a database would be a very expensive undertaking, developing software, getting the returns from the various institutions and keeping the information up to date. The increased cost would inevitably be passed on to the clients. Although there may be many queries in year one of operation there are unlikely to be very many in subsequent years.
There are also difficulties with inadequate records relating to the old industrial branch policies. In many cases, there is no data given for the policy and in some cases not even a name is available. Therefore, the cost of establishing and maintaining such a database may well be unwarranted.
I wish to direct the committee's attention to section 12 of the Bill which provides that each undertaking as with credit institutions must establish a register of unclaimed policies. This register will contain as much detail as is available about the policy holder or account holder as the case may be. The main purpose for establishing such a register is to assist customers seeking information about dormant assets. The committee will note that provision is made in section 15(5)(b) for anyone who can prove they may be entitled to the proceeds of an unclaimed policy to inspect the undertakings register.
In practice, as it currently stands, anyone who suspects they may be entitled to make a claim with some insurance company can contact the Irish Insurance Federation and ask that organisation to pursue the matter based on whatever evidence is available. This goes a long way towards what Deputy Bruton is trying to achieve. Nevertheless, as I consider the establishment of a database as something worth striving for, I have asked my officials to keep the matter under consideration. It is their view that circumventing the current legal impediments would be of great benefit to the public at large. However, this can only be achieved with the agreement and assistance of the industry and this will require further consultation as well as further legal analysis. While I cannot accept the Deputy's proposal now, I will keep it under review.
I take issue with some of the Minister's arguments. Regarding the legal obligation to protect the secrecy of contracts, in cases such as these we could, if necessary, provide some indemnification. Where an account has been unclaimed and the State steps in and effectively expropriates it and extinguishes the relationship of obligation between the client and the principal, surely it would be possible to devise a formula by which the actions of the State would not constitute a breach of contract. If there is a breach of contract, it is in the transferring of money entrusted to the financial institutions to the State. By introducing this legislation, we are effectively allowing these institutions to breach the contract they have made with the account holder or policyholder. The Minister's argument regarding breach of contract is, therefore, a red herring.
The data controller may keep information for one purpose only. This amendment would not change this position as the database would be maintained for the purpose of recording the policy holder or account holder's contributions to insurance policies. The amendment does not, therefore, create a new purpose. As the data source is being used to allow people who will be separated from their policy to trace their policy, no new purpose arises and no breach of the data obligations would occur.
The Minister argues that it was never intended that the information would be made generally available. This is not the intention of the amendment. As the database would not be open to consultation, no list of names, addresses, bank accounts, sums or similar information would be open to inspection. Again, the Minister is incorrect in his interpretation of the amendment.
He also argues that it is very expensive to keep the register up to date. One of the obligations the Bill imposes on the insurance companies and banks is that they keep their registers up to date. The amendment would simply require the extraction of a small element of the information on the register in order to make it available at a central point. Given that the Bill already imposes on the institutions an obligation to keep their registers up to date, the Minister's argument does not hold water.
The Minister stated that some policies do not bear a name. We all know one cannot get breeches off a highlander. If an account does not have a name, the institution will not have a data source and will not be in a position to list it. Again, therefore, the Minister's argument does not stand up.
The only positive element in his reply was his commitment to keep an open mind on the matter. This is a small crumb in the midst of so many "Yes, Minister" type arguments against the proposal, none of which hold up to scrutiny. Let us strike through everything with a red pencil and concentrate on the last paragraph of the amendment to ascertain how we can apply it. It is possible. The Minister appears to suggest that one could approach the Irish Insurance Federation, which would adopt a course of action which would be in breach of contract, data protection and privacy as well as being both expensive and impossible to do. I do not accept his case.
I do not dispute that there is merit in the suggestion. There was such merit in it that we considered this possibility while drafting the Dormant Accounts Act. However, the Deputy should note that under this legislation the State does not receive the details of either the dormant accounts in the credit institutions and banks or the details of the life policies. All the National Treasury Management Agency will receive on behalf of the State is the money. The details of the person's bank account or life policy will be retained by the relevant institution and we will not be allowed to so do.
I do not propose to change that.
I am aware of that. I merely make the point that while we will receive the money, we will not receive information on the individual account holders or policyholders in the credit institutions. If the matter was to be considered further, in light of all the privacy issues that have been raised, it would also be considered by the Department of Justice, Equality and Law Reform. While this would be the appropriate legislation for such a provision, many issues remain to be teased out. Although I am not sure the constitutional problem can be overcome, there may other ways to get around some of the difficulties. We have been scrupulous in the Dormant Accounts Act and in this Bill in ensuring we do not breach the confidential relationship between the customer and the undertaking. Regarding the Irish Insurance Federation, as I understand it, the policy holder allows the transfer to occur in concert with the insurance company.
It is defined as property in the Constitution. We are clearly introducing a provision to breach the right to property by removing it and placing it in another location that is not the place where the individual made the contract.
I and Deputy Jim O'Keeffe were interested in dormant accounts long before I was appointed Minister for Finance and the previous Minister for Finance considered the issue long before the Committee of Public Accounts was established. There is a minefield of legislation related to this area which we gently walked around and over in order to introduce the Dormant Accounts Act and the current Bill. The Deputy would be amazed at the strict interpretation which could be given as to whom a bank account belongs. There are many interesting legal issues involved.
At the time, I am sure the former Minister for Finance gave the current Minister many grounds for not pursuing the proposals he made on dormant accounts.
When I asked questions on the matter, the previous Minister sought information and was told it would be impossible to pursue dormant accounts. We decided to ignore this advice and proceeded to legislate in this area. However, we also took a great deal of legal advice from all the experts in various Departments. Although much of this was correct, we got around it. The Act is now in place and the banks and credit institutions are co-operating with it, but the area remains a minefield.
The Minister has offered to examine the matter further. I suspect from his comments that he does not intend to lose much sleep over it between now and Report Stage. Equally, I am aware that we will never again have another opportunity to provide for this proposal in legislation.
I do not agree with the Deputy's use of the word "never". However, while the proposal is a good idea, giving effect to it would be very difficult.
The difficulty is we will not deal with the legislation again and the horse will have bolted. It has already nearly bolted with regard to the Dormant Accounts Act, which is the reason I have proposed to amend Schedule 2 to allow us to do this with the banks. It is a very worthwhile proposal and while I will agree to withdraw it, I intend to resubmit it on Report Stage in the hope the Minister will have some good news for us.
Amendment, by leave, withdrawn.
Section 7 agreed to.
Amendment No. 19 not moved.
Section 8 agreed to.
SECTION 9.
Question proposed: "That section 9 stand part of the Bill."
In respect of the provision in section 9(7) to amend the amount specified by order of the Minister, the money in question will be with the National Treasury Management Agency at that stage. Will the bank or insurance company be then obliged to write to the policy holder or account holder whose money has been transferred to the National Management Treasury Agency informing him or her that the Minister has dropped the specified value of the policy from €500 to, for example, €250?
What will happen when the Minster drops the threshold?
Any new accounts will be taken up.
In other words, all the owners of the accounts already transferred to the National Treasury Management Agency will not be informed, even though the threshold has been dropped. People who hold accounts at present will be informed by letter, but if an account became dormant three or five years ago it is just too bad. We accept that it is their money and will be held for them by the NTMA. Should we not be ensuring that——
I will reconsider the matter.
Question put and agreed to.
SECTION 10.
I move amendment No. 20:
In page 14, subsection (6)(a), line 42, after “section” to insert “or amounts claimed by the Minister where the Minister is of opinion that the undertaking’s estimate under subsection (2) is inadequate”.
Section 10 currently provides that where the net encashment value of a policy cannot be accurately determined by an insurance undertaking, an estimate of its value will be determined and that amount transferred to the dormant accounts fund. This section was drafted to take account of the situation vis-à-vis the old industrial branch policies where often, due to inadequate details, it is only possible to establish what is owned on presentation by the policy holder of the policy document.
The section closely reflects the provision in the Dormant Accounts Act for petty balances. The amendment proposes that my colleague, the Minister for Community, Rural and Gaeltacht Affairs, be given authority to claim further amounts in respect of these policies from the undertakings, where the Minister is of the opinion that an undertaking has underestimated what it should have transferred to the fund.
I do not accept the Deputy's amendment for a number of reasons. First, during discussions with the insurance industry when drafting the Bill it became clear that it would be impossible to accurately determine how much is owned under these policies. Therefore, I do not think the Minister would be able to carry out any more accurate assessment of the amount owned. Second, effectively, most of the undertakings tend to establish an industrial branch fund into which they transfer an amount they estimate to be their liabilities in respect of these policies. The undertakings have indicated that they intend transferring most of the proceeds of these accounts to the dormant accounts fund. The amount to be transferred will be based on the calculation carried out by the undertaking's actuary, as most of the records relating to such policies are non-computerised. As these IB funds generally hold moneys from a large number of low value policies, it is preferable, from a cost-effective administrative point of view, that the undertakings, rather than the NTMA, deal with any reclaims on that money. We expect the dormant accounts fund will take most of the moneys from these IB funds, which would render the amendment unnecessary and, most probably, unworkable.
Amendment, by leave, withdrawn.
Question proposed: "That section 10 stand part of the Bill."
This section deals with the transfer of moneys to the dormant accounts fund. It is an offence under the Bill to fail to make a proper return. While I am not an advocate on behalf of the insurance industry, it is important that the area of liabilities or obligations, such as insurance costs, be catered for.
Is the Deputy referring to cases where there is an assignment of the policy by the policyholder against a loan? In such a case, the assignee - namely a bank, building society or individual - would have to be informed before the money could be transferred anywhere.
If there was a further responsibility on the part of a policy holder in regard to insurance then that obligation would also have to be met. If the Minister decides, in accordance with the Act, that a full disclosure has not been made then the question of an offence arises. Is there provision for these obligations to be met?
I cannot think of where this might occur.
It could occur on an assignment.
If an insurance company came across such a policy it would have to contact the policy holder and if there was an assignee he, she or it would also have to be contacted. I do not see it as being a difficulty and cannot see how it would arise.
The net encashment value is the amount payable under the policy to the policy holder if the policy holder was to make a claim for same on the day it transferred. In calculating this amount the insurance undertaking will have regard to any contingency or risk cover insured under the policy - that is, the undertaking will have verified for itself that the contingency has not occurred. This will clearly vary the amount due under the policy. The net encashment value also includes any non-contractual interests, which the undertaking would normally pay out on the policy. I do not think that will be relevant. I believe the Deputy's point has been covered.
I think it has been covered in what the Minister said.
I am sure they would have to go to the trouble of making sure everything was covered before anything was done with it. They can hold back money if they so wish.
That is the point I am making. It is an offence to hold back money under this section of the legislation. In some circumstances money has to be held back for certain purposes.
Question put and agreed to.
SECTION 11.
Question proposed: "That section 11 stand part of the Bill."
Essentially we are saying that if a company is in examinership its obligation to transfer money to dormant accounts will not apply during the period of examinership. What is the reason for that? Are these unclaimed accounts potential resources for the examiner or the administrator that may be applied to other purposes associated with the examinership?
Subsection (3) refers to what is meant by the term "relevant date". What is the purpose of that definition? Perhaps I missed something, but I do not see the need to refer to relevant dates.
It affects the circumstances under which an insurance undertaking is to stop transferring moneys into the dormant accounts fund. For example, where an undertaking is in liquidation, in receivership or has had its licence revoked, suspended or withdrawn by the regulatory authority or ceases to trade, no further moneys can be transferred from the undertaking to the fund, until and unless, the undertaking begins trading again. It is to be expected that if any of the above scenarios occur the insurance undertaking is in some form of financial or legal difficulty. In these circumstances it is also to be expected that an undertaking's customers are at that stage likely to come forward to make claims on their policies in order to retrieve what they can in case the undertaking gets into further difficulties. If we were to continue allowing the undertaking to transfer moneys to the fund it could be expected that the NTMA would have to deal with a larger than usual volume of reclaims from the fund. This section was drafted to avoid that possibility.
I never thought of that reason. To what does the "relevant date" refer?
It states in subsection (3) what the term "relevant date" means. It is after those things happen that subsection (3) comes into play.
The intention is that as soon as we become aware there is a problem we distance ourselves from it.
I thought that was a definition. I was looking for the line in the Bill which refers to this relevant date coming into operation. I did not find it elsewhere in the section and that is what confused me, but it must be there somewhere.
Section 11(1) begins with the phrase: "After the relevant date."
Question put and agreed to.
SECTION 12.
I move amendment No. 21:
In page 16, subsection (2), between lines 23 and 24, to insert the following:
"(b) the Birth Certificate of the policy holder, if ascertainable, shall be established, recording the name and date of birth;”.
I will withdraw this amendment in the fond hope that the Minister will be coming back with a similar one.
Amendment, by leave, withdrawn.
Amendments Nos. 22 and 23 not moved.
Question proposed: "That section 12 stand part of the Bill."
The Minister in his defence, or at least his Department's defence, against my proposal regarding the central register suggested that people could go to the insurance company and inspect the register. However, under subsection (5), they cannot do so.
They have to produce some sort of evidence that they may have a claim.
That is fair and reasonable.
That was why I advocated a two-stage process. At one stage, I thought the Minister said in his defence that if people went to the IIF, it could do the inspection.
I understand that the IIF does that kind of work now.
The register is not open to public inspection so that cannot be.
The IIF does not inspect but it contacts the relevant insurance company. If one thinks that one's relation may have had a policy some years ago and has died, one can contact the IIF and it will contact the relevant insurance company for one.
If one knows the company.
It can contact a number of companies for one.
Question put and agreed to.
Sections 13 and 14 agreed to.
SECTION 15.
Amendment No. 24 has been ruled out of order because it involves a potential charge on the Revenue.
Amendment No. 24 not moved.
I move amendment No. 25:
In page 18, subsection (3)(a), line 22, after “undertaking” to insert “in accord with regulations set by the Minister”.
Section 15(3)(a) allows the insurance company to impose charges or deductions. I am proposing in my amendment that the company should only be allowed to impose charges or deductions, “in accord with regulations set by the Minister”. We should not give an open-ended right to insurance companies to decide the deductions or charges to be made without having them vetted as being appropriate by the Minister.
Section 15(3)(a) of the Bill provides that the moneys to be paid to a valid claimant are to be net of any charges or deductions that “may be made by the insurance undertaking”, in other words charges that comply with normal and legal practice of insurance undertakings in these circumstances. As such, these charges and deductions take account of taxes and administrative charges to which the undertakings are legally entitled or obliged to recoup from the proceeds of a policy that has been encashed.
It would be inappropriate for my colleague, the Minister for Community, Rural and Gaeltacht Affairs, to make regulations in relation to such taxes or administrative charges in that they relate either to revenue matters or the contractual relationship between an insurance undertaking and its client. In any case, the basis for these charges is the policy contract. I have long held that the dormant policy scheme should interfere as little as possible with the rights of customers, and it is to this that both relevant pieces of legislation must try to adhere. For these reasons I do not propose to accept the Deputy's amendment. The charges that can be made would be specified in the original policy contract.
Why does the Bill not state that the charges or deductions may be made "in accord with the policy contract"?
Section 15(3)(a) refers to charges or deductions that “may” be made. It is a matter of having legal authority.
Does "may" mean that the companies can only deduct in cases for which they have legal authority?
I did not know that. One learns something new every day. "May" is a powerful little word.
Amendment, by leave, withdrawn.
Question proposed: "That section 15 stand part of the Bill."
While my amendment may have been ruled out of order, the principle is still of interest. Under section 15(2), the agency is obliged to repay the value of the policy that was handed over to it. In the Dormant Accounts Act we made provision that when the agency is paying back money, it must also pay the interest that accrued in the period while it held the account. An unacceptable practice has developed in which the insurance companies that hold these unclaimed policies just hold the net encashment value. When a customer comes to claim a policy the company does not pay back any interest. It seems that the Minister will transfer that malpractice over to the NTMA when it comes into possession of the money.
This relates to the issue concerning the Ombudsman and Revenue Commissioners, where widows were given their money but not their interest. They did not get the current value of the money they lost. This Bill will lead to a similar problem; the Minister will be hoovering up different policies and holding them, and if somebody claims one of them he or she will not get the interest, but will just get the principal sum. This does not seem fair. I acknowledge that the Minister is applying rules that the insurance companies are already applying themselves. No doubt that is where the idea came from. It was not the Minister's own concept.
The reason the Deputy's amendment was ruled out of order is that it is drafted in too wide a fashion and imposes a charge on the people of the State. When a claim is validated, interest will be paid up to that date.
Where is that? The obligation is——
In section 2 of the Bill.
Is it in the definitions?
Yes. Section 2(4)(a) states:
For the purposes of this Act, the net encashment value of an unclaimed policy is the total of the amount payable ". . ." and any interest applied by the insurance undertaking, on the relevant date, to the moneys payable under the policy, in accordance with the usual practice of the undertaking concerned.
Section 2(4)(d) states:
In this subsection "relevant date" means-
(i) in the case of the transfer of moneys to the Fund under section 10, the date of transfer, and
(ii) in the case of a claim under an unclaimed policy under section 15, the date of the notice given to the Fund under subsection (1)(b) of that section.
It includes all interest.
My understanding is that it is not the practice to add on interest if the policy is unclaimed.
It would have to be in the terms of the contract. We will pay it on the same basis as in the insurance contract.
It is an unfair basis. The Minister could take a €1,000 policy and hold it in the NTMA for five years, but people would then turn up and get only €1,000.
I presume it will be paid to just causes.
Where someone discovers it was unclaimed——
I am not going to step in on the State's behalf and add something to the insurance policy that was not in it originally. If that was the position in the original policy I will step into the shoes of the original contractor. If the terms of the policy state that no further interest is added and if it is unclaimed and has lain there for 20 years, I am not going to step in and do something on behalf of the Exchequer. I think that is asking too much.
The Minister has had the benefit——
When policies are not claimed the policy will go the State and then be given to just societal causes. I am not escheating the money for selfish reasons; it will be used for the general good.
Everything the Exchequer gets is used for the general good. In the case of the Revenue Commissioners, the Ombudsman made the ruling that the value of what was taken from people should be restored to them. I know this is a different instance. For example, if the Exchequer gets €1,000 and has use of it for ten years and then someone claims it, the interest applied might bring it to €1,500 but the Exchequer will only pay out €1,000 because the insurance company wrote the policy that way.
The Irish Insurance Federation has advised that all companies pay interest on their policies when it says so in the contract. If the company will pay interest, we will too.
We understand they do. Section 2(4)(a)(ii) reads: “Any interest applied by the insurance undertaking, on the relevant date, to the moneys payable under the policy, in accordance with the usual practice of the undertaking concerned.”
That is what worries me. I am not arguing that the usual practice is an exception.
We are told that they do, and if they do, we will too.
Maybe the Minister will return to this on Report Stage to clarify any grey areas.
Question put and agreed to.
SECTION 16.
Amendment No. 27 is cognate on amendment No. 26. These amendments can be discussed together by agreement.
I move amendment No. 26:
In page 19, subsection (2)(b)(i), line 5, to delete “liquidator” and substitute “regulatory authority”.
The proposed amendments rectify a drafting error. This section is intended to provide for measures to be put in place to ensure that the thing be wound up after the transfer of moneys from unclaimed policies to dormant accounts only. That is proposed and the undertakings register of an unclaimed policy should be given to the regulatory authority by a liquidator. As the undertaking no longer exists, and, therefore, as no further policies issued by that undertaking can be deemed unclaimed, the only role of the regulatory authority will be processing claims for repayment for the dormant fund and updating the register in accordance with any claims it has made in the dormant fund.
Subsection 2(b)(i) provides that when the regulatory authority has made a claim from the dormant fund, it is then to register details of how much was paid by the NTMA to the regulatory authority and how much was paid by the regulatory authority to the claimant following deductions for tax, etc. However, as currently drafted, subsections 2(b)(i) and 2(b)(ii) indicate the claim for repayment from the fund in these circumstances will be made by the liquidator who will then pay the money to the claimant. This was a drafting error.
Amendment agreed to.
I move amendment No. 27:
In page 19, subsection (2)(b)(i), line 6, to delete “liquidator” and substitute “regulatory authority”.
Amendment agreed to.
Section 16, as amended, agreed to.
SECTION 17.
Question proposed: "That section 17 stand part of the Bill."
Why would the auditor not carry out the certifying? Each insurance company is to give a certificate of compliance to the regulatory authority. Is this not something that the auditor could do as standard practice rather than having a duly authorised officer?
It would be impossible for the auditor to go through all these insurance policies.
The duly authorised officer is not going to do it either. I presume there will only be a certification of their good practice.
In most companies the annual certificate will have to be signed by an authorised officer of the board of the company and the regulatory authority will decide the level that person is going to be. I think this would be normal.
Who are the duly authorised officers?
Its new function as to who will be the authorised officer for the purposes of the Dormant Accounts Act will have to be established in these undertakings. The banking institutions must have these people.
Is this something the State is asking them to do?
No, the State is imposing an obligation.
It seems to be the sort of thing an auditor would do in the same way as he certifies other practices.
With all that is happening not many will be left taking on the responsibility of auditors. One would want to be brave to take on that function nowadays.
The Minister had better hang on to his seat.
I would not look forward to going back to do this.
Question put and agreed to.
Sections 18 to 20, inclusive, agreed to.
SECTION 21.
Amendment No. 29 is related toNo. 28. These amendments can be discussed together.
I move amendment No. 28:
In page 23, subsection (4), lines 31 and 32, to delete all words from and including "If," in line 31, down to and including "are" in line 32 and substitute "If, after informing the supervisory authority concerned under subsection (3), any measures taken by the supervisory authority against the insurance undertaking concerned are".
The proposed amendment seeks to clarify the procedures that take place should it arise that a foreign insurance undertaking does not comply with a request from an inspector regarding his or her function under this legislation. If the inspector's request regarding scrutiny of the insurance undertaking's documents is refused, the inspector will inform the regulatory authority of this and the regulatory authority may write to the undertaking requiring it to comply. If the insurance undertaking refuses to comply with the regulatory authority's direction, the authority will inform its home supervisory authority which will then take whatever action it considers necessary. If the regulatory authority does not consider the supervisory authority's measures to be adequate, it may inform the supervisory authority of this and apply to the High Court for a suitable order.
The proposed amendment is essentially grammatical in nature in that it reiterates that if the supervisory authority's measures are not adequate in the opinion of the regulatory authority the regulatory authority may apply to the High Court for a suitable order.
Amendment agreed to.
I move amendment No. 29:
In page 23, subsection (4), line 35, after "authority" to insert "of its intention".
The proposed amendment clarifies that the regulatory authority will inform the supervisory authority of its intention to apply to the High Court for a suitable order in relation to the insurance undertaking's non-compliance.
Amendment agreed to.
Section 21, as amended, agreed to.
Sections 22 and 23 agreed to.
SECTION 24.
I move amendment No. 30:
In page 24, subsection (2), line 46, after "privilege" to insert "or would otherwise be privileged against disclosure in legal proceedings".
Section 24 provides that undertakings will be indemnified for the information disclosed to inspectors if it is made in good faith. This section is included so that confidential information about policyholders can be given to inspectors where it is needed to check the valid and efficient operation of that undertaking under the dormant scheme. Subsection (2) provides that an undertaking can refuse to disclose any document containing information that is based on professional legal privilege. This is a standard provision and, as such, there are many statutory precedents for this type of clause, for example, section 68 of the Stock Exchanges Act 1995.
To attempt to provide for privilege beyond solicitor or barrister advice is only ever done on foot of statutes for a specific reason. For example, the Freedom of Information Act 1997 grants privilege to certain officials in relation to their functions under the Act. Such individuals cannot, as a result of the provisions of the 1997 Act, be compelled to produce documents which are the private papers of representatives of the European Parliament. Privilege is also given to witnesses appearing before the House in relation to documents they are compelled to produce to a committee. What Deputy Burton suggests has no precedent in statute and, having checked with the Attorney General, it would be unacceptable from a legal point of view. For that reason, I do not propose to accept the amendment.
Amendment, by leave, withdrawn.
Section 24 agreed to.
Sections 25 to 27, inclusive, agreed to.
Schedule 1 agreed to.
SCHEDULE 2.
Amendment Nos. 31 and 32 not moved.
Amendment No. 34 is an alternate to amendment No. 33, so they can be discussed together by agreement. Is that agreed? Agreed.
I move amendment No. 33:
In page 28, to delete lines 15 to 24 and substitute the following:
" '41.-(1) (a) The moneys in the investment and disbursements account shall be applied by the Agency, on the direction of the Board, for the purposes of programmes or projects, designed to assist the personal, educational and social development of persons who are economically, educationally or socially disadvantaged or persons with a disability (within the meaning of the Equal Status Act 2000) and, in particular, programmes or projects, designed to assist primary school students with learning difficulties.
(b) The Minister, in consultation with the Board, may, from time to time, specific programmes referred to in paragraph (a) having regard to the plan prepared under section 42.
(2) Whenever a programme is specified under subsection (1)(b), the Board shall publish notice of the specification in Iris Oifigiúil.’.
42.-(1) As soon as practicable after its establishment, the Board shall prepare a plan for the disbursement of moneys from the investment and disbursements account and the plan shall include-
(a) the objectives of the Board in making disbursements under this Part and its strategy for achieving those objectives, and
(b) the priorities of the Board in respect of particular programmes or projects referred to in section 41(1)(a).
(2) In preparing the plan the Board shall comply with any directions issued by the Minister, from time to time, including directions relating to the objectives referred to in subsection (1)(a).
(3) The plan prepared in accordance with this section shall be submitted to the Minister for approval as soon as practicable after it is prepared.
(4) The plan is deemed to be adopted when it is approved in writing by the Minister.
(5) The Minister may amend a plan submitted for approval under this section and the Board shall comply with the plan as so amended.
(6) The Board shall review, and if necessary, update the plan not later than 3 years after its establishment and at least once in every 3 years thereafter and subsections (1) to (5) apply to a plan reviewed and updated under this subsection.'.".
I propose to introduce a verbal amendment to amendment No. 33 to give effect to Deputy Bruton's proposal. As such, I propose the following amendment to amendment No. 33:
In page 28, line 22 to delete after "2000" the words "and, in particular, programmes or projects that are designed to assist primary school students with learning difficulties".
The advice of the committee was to carry out this procedure. I am accepting Deputy Bruton's amendment, but I had to go through this procedure to do so.
It is a verbal amendment to the Minister's own amendment.
The reason I tabled the amendment is that this is a mainline statutory responsibility of Government.
I have the details. That was the case put by a colleague of the Deputy's, the late Deputy Jim Mitchell, and others from Fine Gael in respect of the original Bill. They put forward that amendment and I accepted it.
I could give the Deputy the draft——
The reason I tabled the amendment is because the notion that——
I argued that at the time, Deputy.
Is that so? Great minds think alike. What did they argue?
I can give the Deputy the transcripts. On 26 June 2001, Deputy Jim Mitchell moved amendment No. 52 to add the words "with special priority to be given to primary school pupils with learning difficulties so as to ensure, to the maximum extent possible, that the number of children leaving primary school with literacy or numeracy levels below standard for their age is brought down to the irreducible minimum". He went on to say that the area was crying out for attention. I can supply the Deputy with a copy of the transcript if he wishes.
The area is crying out for attention. In my view it is a constitutional obligation on the State and we should not be making such an obligation conditional on how much money may be generated by these funds. This is one of the few areas of public spending on which there is a constitutional obligation to honour.
I said I would bring forward an appropriate amendment on Report Stage once we had completed that debate and I did so.
I know. I would be sorry to dismantle something that the late Deputy Mitchell put in place, but I am an advocate on this matter, having produced reports on learning difficulties and literacy, and I believe the State has a massive obligation in this area. I would not like to develop a situation that this sort of provision became dependent on the occasional availability of funds of this nature. That is my concern. I should consider for Report Stage whether I continue to concur with the Minister. I do not know who to consult at this stage. It would be a pity to remove a monument to the late Deputy Mitchell.
Amendment to amendment No. 33 agreed to.
Amendment No. 33, as amended, agreed to.
Amendment No. 34 not moved.
Schedule 2, as amended, agreed to.
Title agreed to.
