Minister Treacy Publishes Insurance Bill, 1999

Mr Noel Treacy, T.D., Minister for Science, Technology and Commerce, has today (Tuesday 21st December, 1999) published the Insurance Bill, 1999.

The Insurance Bill 1999 has four main purposes. It will provide for the transfer of responsibility for the regulation of insurance intermediaries from the Department of Enterprise, Trade and Employment to the Central Bank. It will enable the Minister to make regulations to require the disclosure of important information by those selling insurance to consumers. It will improve the existing system of notification required of reinsurance undertakings and it will update the provisions of the Insurance Act of 1989 in relation to offences, penalties and the appointment of authorised officers.

The main thrust of the new legislation will be to make insurance intermediaries subject to the powers and provisions of the Investment Intermediaries Act, 1995 which is administered by the Central Bank. Minister Treacy said that there is increasing convergence between insurance and investment and that both products are often available from the same intermediary. "It is essential," the Minister said "that vendors of insurance and investment services are regulated by the same regulator if we are to avoid disparity in the regulatory system". Minister Treacy went on to say that the current system of self regulation of insurance intermediaries was no longer appropriate and that the powers available to the Central Bank under the Investment Intermediaries Act would provide for a more effective and efficient form of regulation.

Minister Treacy welcomed the powers outlined in the Bill to enable him to introduce disclosure regulations for the industry. He stated that the rationale behind these proposals was the need to rectify the failure of the insurance market to provide adequate information to the consumer in the promotion and sale of insurance products and to generate competition between suppliers.

The Minister said, "It is clear to us that adequate information is not being provided to enable consumers to make rational and considered choices in relation to the purchase of insurance products". The disclosure regulations planned by the Minister will initially be restricted to the sale of life assurance products but the Bill will enable the Minister to make similar regulations for non-life in due course. The objectives of the new disclosure regime will be to:

1. simplify the presentation of insurance products to the consumer;
2. minimise the scope for mis-selling, including "churning" of policies;
3. ensure transparency of all charges and expenses;
4. identify the principal with whom the insurance consumer is dealing;
5. provide an adequate enforcement system on a firm statutory basis.

The Bill will provide for the updating of the provisions of the Insurance Act of 1989 relating to offences, penalties and the appointment of authorised officers by the Minister. The powers included in the existing legislation have proved to be too restrictive to pursue a successful prosecution and Minister Treacy said that he is determined to rectify this position.

The provisions in the Bill covering reinsurance will strengthen the existing system through which reinsurance undertakings, whether resident or registered as non-resident in the State, would notify the Minister of their intention to carry out reinsurance business. They would enable the Minister to introduce a statutory system of authorisation of reinsurance undertakings if such a system is required in the future. The main justification of these provisions is to protect the reputation of the Irish insurance and financial services sector.

Welcoming the Government decision to publish the Bill, Minister Treacy said he believed that "the proposed legislation would help to enhance the standing of the insurance industry in the eyes of the public and to repair the reputation which had been tarnished by a small number of unscrupulous operators in recent years." He added that the legislation has no implications for the establishment of the Single Regulatory Authority for the financial services sector, a decision on which will be taken by our Government later.