Gerald Nash (Louth, Labour) | Oireachtas source

I welcome the opportunity to speak on the Bill. The Labour Party will not oppose the legislation. The Minister of State will know that is not the same as supporting the legislation. The legislation should not make any extensive claims as to how effective it will be in making the playing pitch of insurance fairer for consumers. There is a degree of tokenism in the legislation. Of course, the bulk of the insurance reforms that are about to be introduced come from the Central Bank, not necessarily the Minister of State or the Department of Finance, yet it would be churlish of me not to recognise that the Government has the Action Plan for Insurance Reform in place. The jury is very much out on the effectiveness of the measures that the Government has announced and that are central to that initiative. We know that reform of the insurance sector has been snail-paced at best. Over the course of the past few years, insurance companies have continued to raise their premiums year after year and the Government has, frankly, stood idly by and failed to protect customers, businesses and community services in the way it ought to have done.

A prime example of this is the so-called loyalty penalty, or differential pricing. In fairness, I pay tribute to the work undertaken by Deputy Doherty over the past few years in drawing attention to this set of circumstances and the imposition, to put it diplomatically, it has involved for customers and consumers across the country. Efforts are under way to address that in the context of the Central Bank reforms that will be instituted from 1 July, but it has taken nearly three years for the Central Bank and, to a lesser extent, the Government to take action finally on price discrimination across the consumer insurance market.

That is what this is. It is clear price discrimination. Of course, we know that the situation relating to the loyalty penalty involves a practice whereby suppliers charge higher prices to existing customers who they believe are unlikely to switch to another provider in order to get a better deal. In practice, it means that after years of staying with the same insurer, one customer’s policy might be 30% more expensive than that of a new customer, even if the risk profile is exactly the same. Repeated work by the Central Bank of Ireland has identified that as an issue. It is important that that is on the public record. Credit is due to the Central Bank for undertaking those important exercises.

The so-called loyalty penalty does not impact everyone equally. It particularly effects those who are disadvantaged and older customers who may not have the time, the resources or the knowledge to navigate complex financial products. I am thinking of elderly parents or elderly grandparents, who may be in their mid-70s, 80s, or even 90s. They may live at home alone. They may not have the Internet, or they may not be all that comfortable using the Internet. Yet, the system expects them to fend for themselves and to go into battle against what I describe as “rogue” insurance companies to scour the net and shop around for the best deal available. Not only are these non-switchers - or what used to be termed loyal customers, which should be the term applied to them - being ripped off, but to add insult to injury, they are also indirectly subsidising lower premiums for those regular switchers who are often more financially savvy, who are capable themselves and are better equipped to begin with to get a better deal given the skills and experience that they might have. This whole issue of price walking and the loyalty penalty is a scam, plain and simple. That is what it is. The Central Bank reforms, which are due to come into effect in July, will help. There is no doubt about that. This legislation complements those reforms, but it should not make excessive claims about what this legislation might achieve in itself. There is no doubt that more transparency is required. The Central Bank reforms, and indeed this legislation, will assist in that regard, especially around the issue of consumer consent for renewals and so on. That is an important issue that will be addressed and that ought to be addressed.

The practice of loyalty penalties is not confined to the insurance sector. It is a practice that is common across the economy. The Government’s failure to regulate adequately cartel-like behaviour extends beyond the insurance sector, which is the sector that is at issue here. The loyalty penalty is somewhat endemic in this country. It is a practice that is common across economic sectors. For example, existing customers of gas and electricity suppliers are also charged higher rates than new customers, who often get offered special deals to switch. With prices soaring, every customer should be obliged to be switched to the best available price. Ofgem, the regulator from the UK, has already moved existing customers to the best tariffs available. Their rules require suppliers to provide payment plans on emergency credit for prepaid metres. Similar measures ought to be considered here. Yet there has been no move, from what I can establish, from the regulator or the Government to do this. Particularly in the context of the ever-rising cost of living, this should be an area that is properly examined by the Government and by the relevant regulator. They can also take some guidance from my party, the Labour Party. We published legislation last year. We introduced last year the Consumer Protection (Loyalty Penalty and Customer Complaints) Bill, which would ensure, if passed, that utility companies must offer all their customers the best possible rate and not to restrict lower rates to new customers only. It would also significantly strengthen existing consumer protection legislation. As we know, too many citizens have been at the sharp end of shoddy customer service in insurance, energy and utilities. We recall here many debates and references for example to the behaviour of Eir over the last few years.

This kind of behaviour also extends to the banking sector, as the Minister of State will know. With the rushed exit of Ulster Bank and KBC potentially putting over 100,000 account holders under pressure to switch, this is going to become a bigger issue over the next period of time. Put simply, the system will not cope with the number of closures at one time. Yet again, the cost here will be borne by ordinary people, due to the failure of regulators to regulate appropriately and to take the companies that they ought to regulate into hand in a proper fashion. There is a common pattern here, which is a hands-off approach of it will be alright on the night and waiting until the 11th hour until acting in the interests of consumers. I am mentioning this issue in relation to utility companies and other service providers because there is a pattern right across the economy. This question of a loyalty penalty does not only apply to the insurance sector, but it applies to others as well. It is important to point that out. There is deficiency here in how we regulate.

I want to return to the general point of reform in the insurance sector. A narrative, as the Minister of State will know only too well, was long sown by the insurance sector that the so called compo-culture was to blame for sky-high premiums. Undoubtedly, sky-high pay-outs were part of the problem that needed to be tackled. Excessive high payments were extremely damaging to businesses, to their prospects and to jobs. Yet, this was not the full story. It was far from it. The Central Bank’s successive reports on the experience of Covid-19 proved how premiums still rose even as claims declined. We were promised that the introduction of judicial guidelines for personal injury awards last year would put a stop to runaway premiums. Yet, a recent survey from the Alliance for Insurance Reform showed that premiums for liability insurance for businesses, sport organisations and charities have increased by 16% in that period.

The foot dragging with regard to passing on premium reductions and rebates is simply unacceptable but, given the track record in this country, should we be surprised? We all know that excessive rewards were a problem. There is no doubt about that. There is no getting away from that, but they certainly were not the kind of problems that were presented to us by various insurance sector interests. The scale of the problem was simply not that significant. We know that now from our experience and from research by many organisations, which is important to note.

Nearly two thirds of organisations also had additional accesses or exclusions imposed on their policies since 2019. That is just not good enough. It is deeply unfair. The insurance sector should have no more excuses. It should have no one else to blame. It has to be held to account. We all know, and Deputy Conway-Walsh referenced this, of experiences in our constituencies and across the country of local businesses and community services folding as a result of their inability to get insured. We know the challenges that we have experienced over the last couple of years in the context of Brexit where often specialist insurance providers are not any longer available to insure certain types of activity. That is something we need to be mindful and conscious of. That is having a particular impact on the tourism and leisure sector in my experience. I have dealt with in many cases in my constituency where companies of this nature have only been able at last minute to access reasonable insurance cover to allow them to continue with their businesses. Therefore, competition and access to products is a big challenge undoubtedly.

It is clear that we have a fundamental market failure in that regard in the insurance sector. That is acting as a block and it is holding back Irish society. When there is that kind of market failure, it is imperative that the State steps in, as in housing and healthcare, to ensure that good local businesses, community services and jobs in the real economy across the country can be maintained. For instance, in recent years, my party has proposed the introduction of what we describe as innovative pooled insurance schemes, which are the norm in other EU countries. They would allow community services, such as community-run childcare centres, sports clubs and others to group together under one policy to secure significantly cheaper premiums. We have also called, for example, on local authorities and education and training boards, ETBs, to use their mutual ownership and collective ownership of the Irish Public Bodies Insurance to extend cover to community events and festivals in certain circumstances. That would be necessary if we are to help our vibrant arts and entertainment sector to bounce back after their desperate experience of Covid-19. They do require our support.

We need some more lateral and innovative thinking about how we address some of these societal problems in a progressive way and how the State responds to those problems because the reality is that the market is simply not going to do it. It is not profitable enough and they would argue that it is too risky so the State has a function here or an entity like Irish Public Bodies, IPB, Insurance could step in.

We could also put an immediate levy on the profits of insurance companies that have not played ball in the context of regulation and Government policy. We could ring-fence this revenue to give customers a long overdue break on their premiums. It is high time that we had much more progressive thinking on how we do insurance in this country. There is certainly merit in many of the propositions contained in the 66-point action plan that was published by the Government but it is fair to say that the jury is out. There is little confidence, frankly, in the regulator and in the Government that they will take the insurance industry in hand and make sure it works in the interests of consumers. We know from the loyalty penalty and the dual-pricing scandal that there is no confidence whatsoever in the insurance industry. It is concerned with and motivated by one thing alone and that is profit.

While the Labour Party will not oppose this Bill, we believe much more reform is needed in the coming years. We are happy to work with the Minister of State on progressive reforms he might want to introduce in the best interests of society, the economy and jobs and enterprises across this country. We have proposed some ready-made solutions that I suggest the Minister of State takes another look at. He really needs to fast-track and expedite many of the reforms that have been long fingered and that, according to his action plan, have been identified for actioning next year or the year after. This is an urgent matter. This Bill overpromises in many ways or, at least in the way it is presented, seeks to make excessive claims in terms of its effectiveness and what it aims to do. The reality is that the bulk of the reforms that are about to be introduced that are consumer focused are coming from the Central Bank and not from the Government. We are constantly told, of course, that the Central Bank is the independent regulator and that it makes its own decisions independently of the Government and that is the case. The Central Bank reforms are welcome but the Government needs to do much more in relation to reform of the insurance sector more generally.

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