Margaret Conlon (Cavan-Monaghan, Fianna Fail)

VHI finds itself in the anomalous position of being both the market leader in the health insurance market and being an unauthorised insurer. The company's competitors consider that this position confers a competitive advantage on it. Although the present statutory arrangements also prescribe a number of significant disadvantages for VHI, the Government recognises that the derogation cannot continue. It considers that it is in the best interests of the health insurance market and VHI that the company attain authorisation as an insurer in the shortest possible timeframe and be subject to the same prudential regulation as other commercial insurers operating in the market.

The provisions of the Bill reflect the general thrust of the recent recommendations of the Health Insurance Authority, the Competition Authority and the Barrington group regarding VHI, as set out in their reports on competition in the private health insurance market. They also address matters raised by other market stakeholders, including VHI's competitors. The Bill will be good for the development of the health insurance market and, ultimately, for consumers.

The European Commission has also taken an interest in developments in the market having regard to overseeing the operation of the insurance directives, complaints made to it by other market participants and the provisions of the treaty. The Commission has emphasised the need to address the VHI's derogation as soon as is feasible. The provisions of the Bill are very much focused on providing VHI with a structure that is more appropriate to the competitive market in which it now operates and one that will oblige the board to pursue early authorisation and provide a statutory framework that will facilitate this process. The provisions of the Bill are focused on giving VHI a structure that is more appropriate to the competitive market in which it operates. The new structure will oblige the board to pursue early authorisation and provide a statutory framework to facilitate that process. Since its establishment, the primary function of the board has been to provide health insurance — that will continue to be the case.

The main purpose of the Bill is to oblige the board to achieve authorisation from the Financial Regulator as an insurer and to give it a structure that will support an application for such authorisation. This involves giving VHI the freedom to take commercial decisions about products and pricing. It will be obliged, under the parent Act and in accordance with the memorandum and articles of association of any relevant subsidiaries, to continue to provide health insurance for the population. The Bill also provides for the definition of a "health insurance contract" in respect of cash plans to be amended. If an insurance undertaking is to be authorised, the Financial Regulator will have to be satisfied that the organisation has full independence in designing its products and setting their prices. We agree that it is no longer appropriate in a competitive market for the Minister to have any involvement in such commercial decisions.

As VHI is a major provider of health care for a significant proportion of the population, we must ensure it is obliged to meet the appropriate regulatory requirements. The provisions of this legislation will have a positive effect on the management and staff of VHI, benefit VHI's consumers and facilitate the development of the health insurance market. The European Commission has been kept informed of the evolution of the Bill through its Internal Market directorate which is responsible for insurance directives. It has taken a keen interest in the development of the Irish health insurance market.

I welcome this detailed and technical Bill. VHI, which is a part of the lives of most of us, is 50 years old and has served us well. The Bill needed to be introduced to bring VHI's level of reserves in line with its competitors. VHI needs to have a certain level of reserves before it can be authorised as an insurer. Its high reserves — some €292 million — are above the minimum EU requirement. However, the company falls short — by €140 million — of the level of reserves of established insurers with premium and claim experience. It falls a long way short of what is required by the Financial Regulator.

This legislation will put in place a structure that will give VHI commercial freedom on products and pricing. I am pleased that the Bill provides that the board of VHI may raise or borrow money without any cost to the Exchequer. While there is no limit on the borrowings VHI may raise for the purpose of attaining authorisation, there is a limit on borrowings for the day-to-day running of the company or new products it may offer. Such borrowings may not exceed 10% of the previous year's charges. The board which is best placed to make decisions on products and pricing has sole responsibility for such decisions. Consumers can be assured their interests will be protected, regardless of the rate of change in the market.

VHI has provided health insurance for 50 years. It has given good and loyal service to its customers. The Government is determined that VHI should be an authorised insurer by 2008. The Bill will have a positive effect. It will allow VHI to continue to provide health insurance in Ireland, in the best interests of the health insurance market and consumers alike. I commend this legislation to the House.

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