Seán Fleming (Laois-Offaly, Fianna Fail)
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I thank the committee for facilitating pre-legislative scrutiny of the insurance (miscellaneous provisions) Bill and for the invitation to appear before it today. My script has been provided to the committee in advance.

Insurance reform is a priority for Government. In the programme for Government there are 21 measures related to insurance reform. The Action Plan for Insurance Reform, published in December 2020, is the Government’s plan improve the insurance market and to bring down costs for consumers and business through 66 actions. I am pleased to note substantial progress has been made in implementing the reform agenda. New personal injuries guidelines have been introduced, the Government has made perjury a criminal offence, and we have created the Insurance Fraud Co-ordination Office within An Garda Síochána. In the Department of Finance, I chair an office within government tasked with encouraging greater competition in the Irish insurance market. The reforms are having a positive effect. Motor insurance premiums dropped by 8% this year so far. Early indications by the Personal Injuries Assessment Board’s data showed an average reduction of 40% in personal injury awards covered by the new injury guidelines five months after their introduction.

The Government recognises the difficulty faced by some businesses with regard to the availability and cost of insurance. This affects certain sectors of the economy, some of which are considered high-risk activities by some insurance companies. Brexit may also have exacerbated supply issues for certain sectors in the economy which were covered by specialised insurance underwriters that previously passported into Ireland from the UK. There are still important priority actions to be completed such as reform of the Personal Injuries Assessment Board, PIAB, and the duty of care legislation. As Minister of State with special responsibility for insurance, I continuing to support my colleagues on the Cabinet committee subgroup for insurance reform to get these key items over the line as soon as possible.

I would now like to provide a brief overview of the insurance (miscellaneous provisions) Bill and some important context for the main provisions set out in the general scheme, and then deal with any questions that members may have.

First and foremost, the Bill responds to an issue that came to light during the pandemic. This relates to deductions of Covid-19-related State payments within some business interruption claims. While such deductions may be lawful and in line with the principle of indemnity, Government was concerned that such behaviour could be seen as insurers in some way pocketing taxpayers' money. The Department of Finance examined this issue closely and conducted a detailed scoping exercise of how insurers more generally treat State supports. This revealed that in most other instances, this issue does not arise because measures already exist whereby State supports are either not provided if losses are already covered by insurance or are refunded to the State, such as in the case of personal injury claims within the Department of Social Protection recovery of benefits and assistance scheme, commonly known as the RBA scheme. Notwithstanding this, it is important to have much greater oversight of State supports deducted from insurance claims settlements in order to identify any instances, now or in the future, where this might become an issue, especially in the case of any new State supports. Accordingly, the Bill enables the Central Bank to collect and publish data about such deductions by insurers through the National Claims Information Database. Members will know that this database is an important tool in holding insurers to account. It can also be used to provide increased information on this issue and to enhance policymakers' understanding of this matter in order to facilitate targeted, evidence-based measures, if needed in the future.

It was also clear that the deduction of State supports from pandemic-related claims was causing confusion and uncertainty for consumers, especially small businesses. We are, therefore, seeking to close this gap in head 8 of the general scheme by requiring insurers to inform consumers if they have reduced the level of an insurance pay-out due to any State supports received by the claimant. These are appropriate and proportionate measures to deal with this issue, which will avoid unintended consequences and will not pre-empt any legal ruling on this matter which is currently before the courts.

Second, the Bill supplements the Government’s intention to tackle the loyalty penalty by examining the Central Bank’s review and taking any action deemed necessary in light of its findings. There are currently 2.2 million private motor insurance and 1.3 million home insurance policyholders in the country. The Central Bank review found those who stayed with the same insurer for nine years or more pay, on average, 14% more on private car insurance and 32% more on home insurance than the equivalent customer renewing for the first time. As the committee will be aware, the bank's report concluded that price-walking, a form of differential pricing, is causing unfair outcomes for some consumers who remain with the same insurance provider over several years. The bank has, therefore, proposed to ban this practice for personal home and motor insurance customers from mid-2022. This targeted and significant measure will eliminate the practice, but allow insurance companies to continue to offer promotions and discounts for new customers. This is a positive outcome for the consumer. As Deputies and Senators are aware, this was a commitment in the programme for Government and we have always insisted that the bank be given sufficient time to allow it to complete its work. Committee members will be aware that I have offered the bank any assistance it may need in legislating for its proposals, through this Bill. The bank has confirmed that it can introduce measures for this through its existing powers. That said, the Government is keen to ensure that any measures taken are effective and, therefore, the Bill will require the bank to report to the Minister for Finance six months after the first anniversary of its commencement about the impact of any action it takes. I will also write to the bank asking it to provide interim data on progress to the Department at the earliest date. This will allow us to identify, in a timely manner, whether more needs to be done and ensure that Government can then move swiftly so that consumers are properly protected.

Third, the Bill will resolve certain technical issues that have been identified in the Consumer Insurance Contracts Act 2019. Post-enactment, two technical drafting issues were brought to the Department's attention, which this Bill seeks to address. First, there is an amendment to clarify that legal privilege is protected in the disclosure of information requirements. Second, head 9 contains an amendment to section 18, which addresses exclusions for property damage in certain circumstances and the agreement of this amendment will allow for this final subsection of the Act to be commenced. This is the only Part not yet commenced.

Finally, the Bill will make important technical amendments to the legislation underpinning the temporary run-off regime, TRR, for UK and Gibraltar-based insurers. Members will recall that the TRR was established to enable insurers and intermediaries to continue servicing their existing contracts in the State after the UK's departure from the EU. This was an important consumer protection mechanism to ensure that Irish policyholders would continue to receive protection. The Central Bank has identified a number of technical issues regarding some firms that are seeking to run-off their existing business within this framework but, legally, are not allowed to do so because they also provide reinsurance business or are in liquidation. It has been brought to my attention that this has the potential to impact negatively their policyholders here in Ireland. I agree with the bank that these are vital amendments in order to ensure that Irish policyholders continue to have their policies fully serviced and do not suffer any unintended disruption. Part 5 of the Bill aims to address these issues so that these firms can complete their application to run-off their existing business within the TRR.

I hope that this overview of the general scheme has offered some useful context which will assist the committee. I am hopeful that the Government would be in a position to publish the Bill early in the New Year. This will, of course, depend on the work of this committee in scrutinising the Bill. Insurance reform remains a priority issue for everybody in the country. Therefore, I believe it is vital that this Bill be advanced promptly. I thank the committee for its attention. I would welcome any questions about the detail and nature of the provisions of the Bill, but I would sincerely hope the committee will conclude this pre-legislative scrutiny process today so that we can publish the legislation to help all consumers in Ireland as early as possible in the New Year.