Dáil debates
Wednesday, 13 November 2019
Saincheisteanna Tráthúla - Topical Issue Debate
Life Insurance Policies
2:30 pm
Pat Deering (Carlow-Kilkenny, Fine Gael)
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I thank the office of the Ceann Comhairle for selecting this important issue. I compliment the Minister of State, Deputy D'Arcy, on his work on the insurance sector. I raise an issue of which he is aware as I have previously brought his attention to it, namely, unfairness in the insurance sector. The issue needs to be highlighted at the highest level.
I refer to a married couple, George and Mary, who are aged 90 and 86 years, respectively, and effectively being penalised for living too long. That is a damning indictment of the aspect of the insurance industry I wish to highlight. In 1984 they took out a whole-of-life insurance policy to provide for their funeral expenses and so on. In 1984 Mary was paying £50.79 for life cover to a value of £25,394. In 1989 George took out a policy at a cost £50.15, with a sum of £12,697 to be paid at the end of his life. The couple were planning for the future by putting in place a fund for their final days. They were doing the right thing which they were being encouraged to do. However, they have been crucified for doing so. Mary has paid £34,000 and George, £48,000. Mary is now paying €242.98 for cover to a value of €34,890, while George is paying €311 for cover to a value of €29,622. Each year they are given the option to increase their monthly payments or reduce the level of cover. If they decide to stop paying their premiums, they will lose every penny they have paid during the years. They have paid a significant amount of money in the past 35-odd years to provide more than adequate cover in their final days, including to meet funeral expenses and so on. They are being penalised for living too long.
This is an example of the price gouging seen in all segments of the insurance sector in recent years which extends to the public liability insurance issues, whereby companies have gone out of business because they were unable to afford to pay their insurance premiums. Under the whole-of-life policy system, those who are encouraged to do the right thing well in advance of their later years are being penalised for living too long. I ask the Minister of State to begin an investigation and give this issue the attention it urgently requires.
Michael D'Arcy (Wexford, Fine Gael)
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Last year the Department of Finance insurance policy team sought information from the Central Bank on the nature and workings of this type of insurance product. The Central Bank has advised that whole-of-life insurance policies are designed to provide consumers with life cover for their whole life. As long as the policyholder makes regular payments and the payments are sufficient to maintain the chosen benefits, under this type of policy a lump sum will be paid on the death of the policyholder.
Regular payments under the plan cover the cost of providing the chosen benefits. In the early years payments are higher than the cost of the policyholder's benefits, with the extra money paid going into the plan fund. However, protection benefits become more expensive as policyholders get older, with the result that payments into the plan begin to equal the cost of the chosen benefits. In the latter years of reviewable protection plans the cost of the benefits increases significantly. In order to keep the level of benefits at the current level of payments, the difference is made up from the plan fund.
In order to determine whether the consumer's regular payment, plus any fund which has been built up, is enough to cover the chosen benefits for the reviewable protection plan, the insurance company carries out regular reviews of plans. They may be completed every five, six, ten or 12 years, depending on the product involved.
During such a review, the insurance company may find that the consumer's current level of payments is enough to maintain the level of cover which the consumer wants. However, the insurance company may also find that the current level of payments is not enough to maintain the level of cover desired. I understand it is generally following these reviews that some people, particularly those who are more elderly, may find that their level of payments is being increased. This invariably places some of these individuals under increased financial pressure.
I encourage people who are dissatisfied with the outcome to go to the Financial Services and Pensions Ombudsman. The Financial Services and Pensions Ombudsman Act 2017 was amended to provide for changes to the six-year rule for long-term financial products, which are products with a term of five years and one month or more. A six-year limit normally applies in all cases. This means the ombudsman will not investigate a case arising from events that happened over six years ago.
However, for long-term products, a person may now make a complaint to the ombudsman within any of these following limits: six years from the date of the conduct concerned; three years from the date at which the person becomes aware or ought reasonably to become aware of the conduct; where it appears to the ombudsman that there are reasonable grounds for a longer period that would be just and equitable in the circumstances. The time limit can be extended.
I know of these cases. There are too many of them. In my view there was a mis-selling of a product to people especially when they get older and when the review kicks in. On too many occasions I have seen these presented to me and in effect if the person continues paying it means that it would be so expensive the insurance company will take all of the product from the person in the next five-year period rather than pass on anything if somebody passes away which is the term of the actual product that the company sold. This is a very live issue about mis-selling of products and it should go to the Financial Services Ombudsman and Pensions Ombudsman.
2:40 pm
Pat Deering (Carlow-Kilkenny, Fine Gael)
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The Minister of State's last few sentences sum up the point I was trying to make. I may not have made it forcefully enough in the first place. There is inherent unfairness in what we are discussing. This couple have obviously worked hard all their lives. They are now aged 90 and 86 and at the end of their lives. They were planning for those end-of-life expenses. Most people approaching that stage of life like to have a certainty for themselves. They do not want to have to leave bills for those coming after them. They were planning for that and doing what they were told to do. Now, as the Minister of State accepts, they are being unfairly treated by an insurance company.
This is not an isolated incident. Many people in similar situations are being crucified as a result of living too long. They have paid in an enormous amount of money already - more than the cover they required 35 years ago. Now because they want to pay the same amount of money, they are being crucified for doing so. Going to the Financial Services and Pensions Ombudsman may be an option for them, but at this stage is it fair to ask a couple aged 90 and 86 to pursue this case through that process? There must be a fairer and more equitable way of doing so. At this stage in their lives, they want a bit of comfort and not to have to go through a process of hassle and hardship dealing with these people who effectively do not want to deal with them.
I thank the Minister of State for coming to the House to discuss the matter and accepting that there is an issue here. Is there a deficit in legislation that could be addressed to deal with this matter in future? In addition to this present issue, there are people who are younger than this couple and who may have to endure the same difficulty in coming years. That should be looked at from a legislative point of view.
Michael D'Arcy (Wexford, Fine Gael)
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If that elderly couple had set aside that amount of money in a deposit account, they would have been far better off. Unfortunately, on some occasions the product was the wrong type of product and it was mis-sold to people who believed that they or their heirs would at some point be able to have the benefit of the product in question. There is a solution which lies with insurance company treating elderly couples in a fair and equitable way. This is not something that pleases me much. I am the Minister of State with responsibility for insurance. I have no powers to instruct insurance companies as to what to do. I do not believe, because the product was sold and the contract was signed many years ago, there is anything we can do from a legislative point of view. However, that does not mean that the insurance company is not dealing with an elderly couple in a very immoral way.
Pat Gallagher (Donegal, Fianna Fail)
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Deputy Brassil wishes to give an explanation.
John Brassil (Kerry, Fianna Fail)
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There was a misunderstanding. I had submitted a Topical Issue today relating to FEMPI cuts affecting pharmacists and it was accepted. Unfortunately, no Minister from the Department was available to take the matter. I got a phone call from the Minister's office about an hour ago asking me to defer the issue and I agreed to do so on the basis, first, that no further action would be taken until the matter got resolved and, second, that I could raise it again next week. That was agreed with the Ceann Comhairle's office. Unfortunately, that message did not get to the Leas-Cheann Comhairle's office. It is not that I am not looking to take the issue on; I most certainly am. In co-operation with the Minister it will be heard next week.
Pat Gallagher (Donegal, Fianna Fail)
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I thank the Deputy for that explanation.