Thursday, 20 September 2018
Central Bank (National Claims Information Database) Bill 2018: Second Stage
I move: "That the Bill be now read a Second Time."
I welcome the opportunity to address Dáil Éireann today on the Central Bank (National Claims Information Database) Bill 2018, which was published on Tuesday, 10 July 2018.
This Bill seeks to provide the legislative basis for the Central Bank of Ireland to establish and maintain the national claims information database which was recommended by the cost of insurance working group in January 2017. Its essential purpose is to improve data availability in the motor insurance area.
One of the key themes which emerged from the discussions of the working group was that an improvement in transparency, through the additional collection and publication of data, was essential. This was something which the joint Oireachtas committee also called for in its report on the rising cost of motor insurance. The working group found there are a number of factors that influence the cost of insurance premiums, and it is not always clear what is the main factor at a particular point and time. Therefore, in order for policymakers to have a better understanding of the causes of any future peaks and troughs in pricing, it is essential to have reliable and regular information on the key factors causing such volatility, in particular, some insight into the different component costs of providing insurance. The availability of this type of information should provide both policymakers and insurers with a better understanding of what triggers market distortions, thus enabling them to respond more appropriately. Examples of the areas that the database will cast greater light upon include legal costs and settlement channels.
Therefore, because of this need for greater transparency, the concept of a national claims information database, to be established and maintained by the Central Bank of Ireland, was put forward and a subgroup of the cost of insurance working group was charged with driving its development. That subgroup, chaired by officials from the Department of Finance, included representatives from the Central Bank, the State Claims Agency, the Personal Injuries Assessment Board, the Central Statistics Office and the Society of Actuaries of Ireland. The subgroup worked from the objectives set out in the working group's report to identify relevant data that could be defined in a consistent manner and to devise a practical method for the collection of those data.
Earlier in the summer this work culminated in the publication of the Bill before the House today. In parallel, work has been undertaken by the Central Bank in close co-operation with the data subgroup on the finalisation, subject to the passage of this legislation, of a specification document which sets out the specific data that will be required from insurers for the purpose of the database. The progression of the specification in parallel with the drafting of the Bill was seen as necessary to ensure that the database can be operational as quickly as possible following enactment. It also provided a means of signalling to industry certain system changes it may need to undertake to be ready for engagement with the database.
I might add by way of further context that as a short-term measure prior to the establishment of the national claims information database, on foot of another recommendation of the working group and based on data collected from insurers on a voluntary basis, my Department has also been publishing key information metrics in regard to motor insurance. These metrics included certain ultimate claims costs which had never been collected on an industry-wide basis prior to this. The logistics of the process in terms of collection, verification and definitional alignment among companies has reinforced the importance of establishing the national claims information database on a statutory footing.
I now propose to give an overview of the operation of the Bill and each of its 14 sections. The first three sections set out a number of definitions to clearly outline the scope of the database in terms of the types of claims in respect of which information can be collected.
Section 4 is a standard interpretation section and defines a range of relevant expressions. Importantly, it sets out the different settlement channels through which a claim may be finalised. For instance, a claim may be resolved directly with an insurer, through the PIAB or by a court decision. As aggregate industry data are not currently available, for example, on direct settlements, this breakdown was identified as important to allow policymakers to see trends or distinctions in the costs related to these channels and to enable them to develop more targeted response measures where necessary.
Section 5 is a standard section to allow for the expenses associated with the administration of the Bill to be met from the moneys supplied by the Oireachtas. While it is intended in the first instance that the database will focus on the motor insurance sector, it was clear from our consultations that many saw a case to extend the scope of the database in the future to encompass other lines of non-life insurance, such as employer liability insurance and public liability insurance. Section 6 allows for this extension of the scope to other classes of non-life insurance in the future on foot of an assessment by the Central Bank of the appropriateness of such extension after consultation with the Minister for Finance.
Section 7 allows the Central Bank to make regulations setting out the exact terms on which a claim is considered to be within the State. The need for this definition is because the scope of the Bill focuses on claims relating to risks in the State only.
Section 8 confers the Central Bank with the function of establishing and administering the database. Subsection (2) of section 8 requires the Central Bank to collect and analyse data from insurance undertakings on the income and costs associated with carrying on the relevant class of insurance. The Central Bank is then required to publish information about those data at least annually. Subsection (4) elaborates on the specific information which can be collected by the Central Bank in execution of this function. For example, information can be collected on different types of income, exposure, business expenses, the number and nature of claims and the costs and provisions associated with those claims, as well as the amounts paid in respect of claims resolved in different settlement channels and the costs associated with those claims. There is also scope to collect details relating to large claims in particular.
Subsections (6) to (9) of section 8 deal with the reporting of information that is collected from insurance undertakings. In particular, subsection (7) sets out the purposes which the reports should try to meet. These include the following: increasing the level of information around the relationship between the cost of providing insurance and the cost of a premium for the consumer; identifying current and emerging trends within the sector; identifying the factors that cause price movements in the relevant line of insurance; presenting a statistical analysis of income and expenditure associated with providing the relevant type of insurance; and presenting a statistical analysis of information relating to claims and of each particular settlement channel used in respect of such claims.
Section 9 makes it a prescribed contravention under the Central Bank Act 1942 for someone to fail to comply with the requirements in the aforementioned section 8 and section 12, which relates to the sharing of data and to which I will turn shortly. Section 10 provides the Central Bank with the authority to require, by written notice, the provision of information specified in the notice. This is to be achieved by an amendment of section 22 of the Central Bank (Supervision and Enforcement) Act 2013, which contains much of the Central Bank's information gathering powers.
Section 11 sets out the funding regime for the establishment and administration of the database. The working group recognised there would be resourcing implications to be addressed as part of the implementation of the database, including an arrangement for financing that ensures the Central Bank is fully reimbursed for the performance of this additional function. One of the reasons for this is to ensure that the financing of the project does not run contrary to the prohibitions on monetary financing set down by the European Central Bank statutes. As such, the Central Bank is provided in section 11(2) with the capacity to levy insurance undertakings for the execution of its functions under section 8, such as the establishment and administration of the database and the publication of reports.
Section 11(3) provides a funding backstop where, notwithstanding the levies being in place, there is insufficient money to meet its costs or where the bank apprehends that it will not be able to meet its costs from the levies raised. Where this is the case, the bank may write to the Minister for Finance to request funding from the Central Fund. The Minister, under section 11(4), has the authority to attach such terms to the payment of moneys as he may determine after consulting the Central Bank. In particular, these terms may relate to repayment and interest.
Under section 12(1) the Central Bank may provide data which it collects under section 8 to any person on request. Subsections (2) and (3) of section 12 then set down conditions where data cannot be shared. Subsection (2) prohibits the sharing of data where a person or insurer is identifiable from the data.
Section 12(3) prohibits the sharing of data where the Central Bank considers that there are exceptional circumstances, including where the provision of the data would be seriously prejudicial to the legitimate interests of consumers or of any company or other undertaking or where the data are unlikely to be of value as they are not complete or sufficiently verified. Section 12(4) allows the Central Bank to attach conditions to its provision of data. Sections 13 and 14, the final two sections of the Bill, are standard provisions which allow for the making of regulations under the Bill and the commencement of the Bill in whole or in part at such time or times as are deemed appropriate by the Minister for Finance.
As those following the progress on the Bill to date may be aware, the Minister for Finance forwarded the heads of the Bill to the Chairman of the joint committee in January to request a determination on whether pre-legislative scrutiny was appropriate in this case. The Minister was advised on 7 February that pre-legislative scrutiny would not be undertaken. As Minister of State with responsibility for insurance matters, I welcome this and also the assurance of the committee at that time that it would engage fully with the Department in the context of the legislative process.
Deputies will be aware that to implement a number of the recommendations made by the cost of insurance working group, there is a requirement to amend existing legislation. Specifically, I refer to recommendations 6 and 14 of the working group's report on the cost of employer and public liability insurance which were addressed to my colleague, the Minister for Justice and Equality, Deputy Flanagan. Recommendation 6 seeks to amend section 8 of the Civil Liability and Courts Act 2004 to ensure that defendants are notified of a claim lodged against them at an earlier date than currently required. Recommendation 14 seeks to amend section 14 of the same Act to allow a court to draw inferences from non-compliance with the requirement to lodge the verifying affidavit within 21 days after the lodgement of the service of the pleading concerned. These are key recommendations and it is important that are implemented as soon as possible. Consequently, I am discussing this matter with the Minister for Justice and Equality to seek his agreement to request the Government to approve the introduction of a small package of amendments to sections 8 and 14 of the Civil Liability and Courts Act 2004 on Committee Stage of this Bill. Subject to these discussions and any subsequent Government approval, the inclusion and subsequent adoption of these amendments through this legislation would allow for a significant reform of the insurance sector. I will keep Members of the House informed of any developments.
I reiterate the importance of the swift passage of the Bill to ensure that the national claims information database is established and the Central Bank of Ireland can begin collecting and analysing the data necessary to increase transparency in the insurance sector as soon as possible. Doing so will add to the various measures that this Government has been putting in place to address the concerns regarding the cost of insurance. I thank Oireachtas Members for their co-operation, in particular the members of the Committee on Finance, Public Expenditure and Reform, and Taoiseach who facilitated the Insurance (Amendment) Act prior to the summer recess. The Bill is important in the context of grappling with the cost of insurance which is doing far too much damage to people and businesses nationally. I hope we can move the legislation through both Houses as quickly as possible. Pre-legislative scrutiny is not required and we are expecting an imminent response from the European Central Bank on the Central Bank of Ireland's role in this context. This legislation will be a very important weapon in our armoury as we seek to bring down the cost of insurance premiums, not only for motor insurance but also employer's liability and public liability insurance.