Address by Mr. Frank Fahey T.D., Minister for Labour Affairs at the Annual General Meeting of the Professional Insurance Brokers Association

Mr. Chairman, thank you for your kind words of introduction. It is indeed a great pleasure for me to be here this afternoon at PIBA's Annual General Meeting. As a Galwayman, I have to say that you certainly picked a lovely venue.

The regulation of the whole financial services area, both domestically and throughout the rest of the European Union, is undergoing a sea-change at present. One of the areas particularly affected by the new and emerging regimes, and certainly the area of greatest interest to most of you gathered here today, is in regard to insurance broking.

As you will know, the Insurance Act 2000 abolished the previous practice of self-regulation and transferred responsibility for the regulation of insurance brokers to the Central Bank. Under new legislation which passed into law only last week, these powers now lie with the Irish Financial Services Regulatory Authority - or IFSRA.

I am aware that PIBA has expressed serious concerns, to Ministers, members of the Oireachtas, the media etc., about the new regulatory arrangements, for instance, about what it sees as the restriction on the freedom to contact potential new clients, but particularly about the perceived lack of a level playing field for all participants in this sector.

The establishment of the new regulatory authority will, I believe, result in equivalent codes of conduct being applied regardless of who provides the service. I understand that IFSRA is examining its Codes of Conduct for all sectors, with a view to striking the right balance not only between all market operators, but especially with the interests of consumers in mind. The Minister for Finance, who has Ministerial responsibility for this area, supports this approach.

In particular regard to insurance broking, many of you will be aware that a new EU Directive on insurance mediation has recently come into force and will have to be transposed at national level by January 2005. The provisions of this Directive are a reasonably close match to those existing in current Irish legislation, especially with regard to professional requirements and information to be supplied to clients.

The Department of Finance is responsible for the transposition of the EU provisions into Irish law and to that end they expect to begin the consultation process in the coming months. Of course, PIBA will be one of the key players this process and the Department is looking forward to constructive discussions on the relevant issues.

The net result of all this will be that the provision of insurance intermediary services throughout the European Union will be subject to equivalent regulatory regimes. Furthermore, brokers will be allowed to avail of the European passport, whereby they can freely offer their services throughout the rest of the EU.

One of the results of this freedom to provide services, should be that consumers should reap the benefits from increased competition. It has been widely publicised that this is an area in which the Government has taken a particular interest and a number of steps have been taken in an effort to reduce insurance premium costs. To that end, the Tánaiste and Minister for Enterprise, Trade and Employment, chairs a Ministerial Committee which oversees the implementation of a high-level initiative called the Insurance Reform Programme. This programme aims to bring about a reduction of insurance costs by way of:

• Improving the functioning of the insurance market,
• Decreasing the cost of delivery of compensation,
• Investigating the competitiveness of the market.

The Programme contains three key elements:

• Implementing the Motor Insurance Advisory Board Action Plan
• Establishing the Personal Injuries Assessment Board
• Competitiveness study of the insurance Sector, by the Competition Authority

The implementation of the first key element, the MIAB Action Plan is a far-reaching task, involving as it does 67 recommendations. Some of these recommendations have already been implemented, with substantial progress on many of the others. Some of the more notable changes have been

• the introduction of the penalty point system for speeding, with a view to extending the scheme further
• requirement for sworn affidavits
• loss of compensation for fraudulent claims
• requirement for insurers to issue early renewal notices
• the Law Society has made changes to its rules regarding advertising by solicitors

and so on.

The establishment of the Personal Injuries Assessment Board will bring about reductions in the costs of delivering compensation. Legislation is expected to be enacted by the end of this year, enabling the PIAB to formally commence operations from the first of January next.

The Competition Authority study on the insurance sector aims to identify any anti-competitive practices in the non-life insurance market in Ireland, with a view to producing a report in early 2004.

Initial indications are that the reform programme is having the desired effect.

So, while the insurance sector has already undergone radical changes recently, further changes are not too far down the line.

To conclude, I would again like to thank PIBA for the kind invitation to attend here today.

ENDS/LA 37