Dáil debates

Wednesday, 13 November 2019

Consumer Insurance Contracts Bill 2017: Report and Final Stages

 

2:40 pm

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 1:

In page 5, between lines 21 and 22, to insert the following: “ “continuing restrictive condition” means any condition, however expressed, that purports to require a consumer to do, or not to do, a particular act or to act, or requires him or her to act, or not to act, in a particular manner (and any condition the effect of which is that a given set of circumstances is required to exist or to be maintained or not to exist shall be taken as falling within this definition);”.

Amendment agreed to.

Photo of Pat GallagherPat Gallagher (Donegal, Fianna Fail)
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Amendments Nos. 2 and 3 are related and may be discussed together.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 2:



In page 6, to delete lines 38 and 39 and substitute the following:

47 No. ___ of 2019 Consumer Insurance

Contracts Act 2019
Sections 10, 11, 12,

12, 13 and 15
”.
”.
These amendments relate to section 3, amendment of Schedule to the Central Bank Act 1942. Amendment No. 2 is a technical amendment which aims to update section 3 so that it references the correct section numbers of the Bill that the Central Bank will have a role in supervising. The asterisk next to "12" on the amendment paper refers to the section being proposed for insertion by Deputy Pearse Doherty later on Report Stage.

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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I welcome these amendments which bring clarity to the fact that the Central Bank Act 1942 will be amended as a result of my amendment No. 12, which will place a requirement on companies to provide details of premiums charged on all non-life insurance policies for the previous three years and in respect of claims that have been paid out.

Amendment agreed to.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 3:

In page 6, after line 40, to insert the following: “(2) With respect to the amendment effected to the Central Bank Act 1942 by subsection (1), and that amendment only and so as not to affect the operation of the general law specified in subsection (3), where a reference occurs in any section of this Act, specified in that amendment, to “insurer”, that reference shall be construed, where an insurance intermediary is acting on behalf of an insurer, as including a reference to the insurance intermediary.

(3) The general law referred to in subsection (2) is the general law, as it applies to this Act, whereby an act or omission done or made by an agent, such as an insurance intermediary, on behalf of an insurer is regarded as an act or omission done or made by the insurer.”.

Amendment agreed to.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 4:

In page 7, line 19, after “sum” to insert “of compensation”.

Amendment agreed to.

2:50 pm

Photo of Pat GallagherPat Gallagher (Donegal, Fianna Fail)
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Amendments Nos. 5 and 6 are related and may be discussed together.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 5:

In page 7, lines 23 to 25, to delete all words from and including "(1) The" in line 23 down to and including line 25.

I propose an amendment to section 5 regarding regulation-making powers. Section 5(1) provides that the Minister for Finance may make regulations to give full effect to the Act. However, this provision serves little practical purpose because the Bill does not set out any principles and policies to provide the basis for the making of regulations. Such criteria are an essential legal prerequisite for making of secondary legislation as, first, they provide direction as well as limits as to what a Minister can do and, second, the provisions of the Bill are self-contained and do not appear to require or permit further elaboration in secondary legislation in order to have full effect. Furthermore, the policy intent behind this proposal as set out by the LRC to determine formalities in a consumer insurance contract such as prescribed notices, notifications and forms would be better achieved through existing Central Bank powers. For example, the Central Bank has powers under section 48(2)(f) of the Central Bank Enforcement Act 2013 to make provisions specifying the information to be given to customers by regulating financial service providers. I, therefore, propose to delete section 5(1) through amendment No. 5.

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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I welcome the fact that section 5(2) will remain in amended form, which allows for the Central Bank to issue regulations. It has that power under the Central Bank Enforcement Act 2013 and this brings clarity on any potential issue that could develop that it also has these powers in this Act.

Amendment agreed to.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 6:

In page 7, lines 26 and 27, to delete "or any other requirements related to, a consumer insurance contract as set out in this Act" and substitute "a contract of insurance or any other requirements related to such a contract contained in this Act".

Amendment agreed to.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 7:

In page 7, line 29, to delete "whether made under statutory authority or otherwise" and substitute "made under any enactment or instrument under an enactment".

Amendment agreed to.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 8:

In page 7, line 31, after "Services" to insert "and Pensions".

Amendment agreed to.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 9:

In page 8, line 14, to delete "from" and substitute "to".

Amendment agreed to.

Photo of Pat GallagherPat Gallagher (Donegal, Fianna Fail)
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Amendments Nos. 10 and 11 are related and will be discussed together.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 10:

In page 10, lines 27 to 36, to delete all words from and including "(1) Subject" in line 27 down to and including line 36 and substitute the following: "(1) Subject to subsection (3), in a case in which the consumer’s entitlement to cancel a contract of insurance is not governed by the European Union (Insurance and Reinsurance) Regulations 2015 (S.I. No. 485 of 2015) or the European Communities (Distance Marketing of Consumer Financial Services) Regulations 2004 (S.I. No. 853 of 2004), a consumer may cancel a contract of insurance, by giving notice in writing of cancellation to the insurer, within 14 working days after the date when the consumer is informed that the contract has been concluded.

(2) The giving of notice of cancellation by a person shall have the effect of releasing the person from any further obligation arising from the contract.

(3) The right to cancel a contract of insurance under subsection (1)does not apply where the duration of the contract is less than one month.".

It is important to be aware that the bulk of insurance policies are covered by cancellation or cooling-off periods. For instance, all life policies are covered by the solvency II regulations and distance marketing regulations while cross-border non-life policies are also covered by the distance marketing regulations. The original proposal, therefore, from the LRC covering all life and non-life policies is not required and would be in conflict with aspects of the above maximum harmonisation regulations. Consequently, it was proposed to confine section 11(1) to face to face non-life contracts of insurance, that is, those areas that currently have no cooling-off period option. This approach avoids legislative duplication and more important prevents any conflict with EU law.

Section 11(2) sets out various scenarios where the right to cancel a contract does not apply. My officials have engaged with the Central Bank on this provision and I have been advised that in respect of subsection (b), when a contract is renewed on the same terms and conditions, it is a new contract and, therefore, a cooling-off period is also necessary in this case. Otherwise we weaken the rights of policyholders. With regard to subsection (c), the bank has advised that this provision is not aligned with existing EU law and its inclusion is likely to create more uncertainty than anything else as, for instance, preliminary insurance is not relevant in an Irish context.

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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I agree with this amendment. It pares it back to just allow for the areas that are not covered by insurance contracts but are covered by the directives that have been transposed, and to deal with the face to face non-life insurance contracts. This brings clarity and I support the amendment.

Amendment agreed to.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 11:

In page 10, line 37, to delete "avoids" and substitute "cancels".

Amendment agreed to.

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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I move amendment No. 12:

In page 10, after line 39, to insert the following: "Renewal of contract of insurance

12. (1) In the case of a contract of non-life insurance, the insurer, when issuing a renewal notice to a consumer, shall provide the consumer with a schedule outlining the following:
(a) any premiums paid by the consumer to the insurer in the preceding three years, and

(b) a list of any claims that have been paid by the insurer to the consumer in the preceding three years.
(2) Where there has been any mid-term adjustment made to the policy in any of the previous three years, the information to be provided for the purposes of subsection (1) (a)shall be met by:
(a) the provision of an annualised premium figure for the relevant year(s) excluding fees or charges applied as a result of that adjustment, and

(b) a statement indicating that the annualised premium figure shown may not reflect the actual premium paid in the relevant year(s).
(3) The Minister shall by order appoint a day for the commencement of this provision.".

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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This is an important amendment. Some of the amendments we have dealt with had substance and others were technical or textual changes. This is one of the amendments of substance and there will be several others from the Minister of State and Deputy Michael McGrath later. This will require the insurer to notify a consumer in his or her schedule of any previous premiums paid by the consumer to the insurer in the preceding three years and the list of any claims that have been paid by the insurer to the consumer in the preceding three years. It also sets out what would happen in respect of a consumer only having cover for a portion of that period where an annualised premium figure would be provided. Regulations were introduced earlier this month that only cover motor insurance. This would apply to public liability as well. It also goes further than the regulations that are in place because it provides not only for last year's figures but also over a three-year period. The Alliance for Insurance Reform has strongly argued for this. In my discussions with the Minister of State and on Committee Stage we addressed a five-year timeframe. We have been able to settle at this point on three years and I encourage the Minister of State to provide for the earliest possible commencement date for this. Does he have a view on that?

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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I support the amendment. We need to move to a point where there is much more transparency in the insurance industry. Consumers should be given much more information. It has taken almost three years of a programme of reforms to get to a point where, since 1 November, in the case of motor insurance, the renewal documentation now shows how much the person paid last year. I welcome the setting out the premium paid over the previous three years and, critically, the details of claims paid by the insurer over that period. For too long the process of claims being paid out by insurance companies has been cloaked in secrecy and policyholders have at times been the last to be told what has been done in respect of claims made against their policies. If we have a more open system, it will lead to better outcomes for all concerned.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I thank Deputy Doherty for this amendment and his constructive engagement with officials on its drafting. The Department has consulted the Central Bank, which has expressed reservations about the amendment, including the fact that it was likely to lead to additional costs for insurers and is complex insofar as it will apply to many different classes of insurance. The industry has also expressed its concerns about this provision. I do not agree with the Central Bank or the insurance companies.

To be very frank, when I first came into this office I thought the easiest thing to do for motor insurance was to put last year's premium a couple of lines above it and I met nothing but resistance every step of the way and there was no flexibility on that. We are passing legislation here that obliges three years' information on the premium and the awards to be given and I am very supportive of this amendment.

The Government understands the background to this proposal and is broadly supportive of this provision. We have to give time to the insurance companies to introduce systems to enable them to provide this information as this is not something that can be done overnight. Whether they are willing or unwilling is a moot point. The legislation will be passed and I hope that all Deputies will accept that I will move this along as quickly as I can.

Amendment agreed to.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 13:

In page 11, line 35, to delete "20 days" and substitute "20 working days".

Amendment agreed to.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 14:

In page 11, line 39, to delete "the post-contractual stage of a consumer contract" and substitute "all stages subsequent to the entering into of the contract".

Amendment agreed to.

3:00 pm

Photo of Pat GallagherPat Gallagher (Donegal, Fianna Fail)
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Amendments Nos. 15 and 16 are related and will be discussed together.

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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I move amendment No. 15:

In page 14, line 19, to delete “less than €20,000” and substitute “less than €40,000”.

These amendments relate to section 16, which deals limitations on deferring payment of claim until completion of works, etc., in the case of property contracts. In essence, it relates to amounts being retained by insurance companies pending the completion of works and the furnishing of relevant documentation, invoices and so forth.

According to the research I have done, my understanding is that this practice of retaining payments in the case of household insurance property damage claims has only arisen in the past ten years. It grew out of commercial insurance policies initially where the amount retained was regarded as the difference between the reinstatement value and the indemnity value, namely, the value at which the property had been insured. In many cases, the amounts retained ended up being a saving for insurance companies because individuals sometimes found they might not be in a position to furnish documentation to the satisfaction of the companies.

This relates to cases where there is a claim settlement amount. The amount that has to be paid in total is agreed following a process. The insurance company appoints a loss adjuster. The policyholder may well have his or her own loss adjuster. That is good practice, particularly for significant claims. There is then engagement between the insurance company and the policyholder, with the amount agreed. By further restricting the amount that can be retained by the insurance company, it will not be out of pocket because the liability is agreed.

The thresholds are set in the Bill as 5% of the claim settlement amount in a case in which the amount is less than €20,000 and 10% in a case in which it is €20,000 or more. Raising that figure to €40,000 is reasonable and is appropriate under the circumstances.

It is a pro-consumer amendment, and I make no apologies for it. We are coming at this from the perspective that the claim amount is agreed. The insurance company has signed off on the amount that must be paid. This is more about timing. I have seen individual cases where excuses were used and the full amount was not paid out. In some cases, it was never paid out. That is not good enough.

I hope the Minister of State and Deputy Pearse Doherty will see fit to support this amendment.

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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I welcome the amendment. This issue was brought forward by the Minister of State on Committee Stage. The thresholds for the claim settlement amount are being increased to €40,000. In some cases, it will result in a large amount of retention, depending on the value of it. However, this is an appropriate move and I welcome the amendment.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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This issue came to the fore when the Department conducted an investigation into storm damage claims. On too many occasions, insurance companies did not pay out all the agreed amounts. That is not acceptable. I welcome increasing the thresholds from €20,000 to €40,000 and I can accept the amendment.

The claims from Storm Emma and Storm Ophelia were analysed. Brokers stated that, on some occasions, up to 25% of the claims presented did not have not the full amount paid and that the retention amounts were never drawn down. That is not acceptable. If there is evidence of this continuing, I will not be slow in adjusting the thresholds again.

Amendment agreed to.

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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I move amendment No. 16:

In page 14, line 21, to delete “€20,000 or more” and substitute “€40,000 or more”.

Amendment agreed to.

Photo of Pat GallagherPat Gallagher (Donegal, Fianna Fail)
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Amendments Nos. 17 to 19, inclusive, are related and will be discussed together.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 17:

In page 15, line 28, to delete “consumer”.

Section 18 sets out to remove the potential of abuse by insurers of the use of warranties in insurance contracts. In the past, a breach of warranty allowed insurers to avoid liability, no matter how minor the breach or even where it was not material to the insured risk. The best example is if there is a requirement for a burglar alarm on a property but it does not have one. If the house goes on fire, in those circumstances the insurance company has the opportunity of avoiding liability because there was a breach of the actual circumstances.

Legal counsel has reviewed the section and concluded its provisions appear to cover in broad terms what they are intended to achieve. Legal counsel, however, recommended that "continuing restrictive condition" should be defined. An amendment to section 1 included such a definition on this basis.

Legal counsel also recommended the section be strengthened. It observes section 18(4) provides that an insurer’s liability is suspended when there is a breach of a continuing restrictive condition, and that if the breach is remedied before the time the event occurs, an insurer’s liability should not be suspended. However, section 18(4) makes no reference to the fact that an insurer’s liability should not be suspended when the breach that has occurred is unrelated to the event or risk for which a claim is being made.

Amendment No. 20 is a technical change to facilitate amendment No. 21. Amendment No. 21 is designed to make it clear that if there is a breach in a continuing restrictive condition, an insurer’s liability should only be suspended when the breach is associated with the loss occurred. For example, an insurer should not refuse to pay out in the event of a house burning down, if the house alarm was not applied, as the house alarm is not connected to the fire which occurred.

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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Are we dealing with amendments Nos. 17 to 21, inclusive?

Photo of Pat GallagherPat Gallagher (Donegal, Fianna Fail)
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No. We are dealing with amendments Nos. 17 to 19, inclusive.

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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The Minister of State referred to amendments Nos. 20 and 21. I might respond to them all.

Amendments Nos. 17 to 19, inclusive, are drafting amendments. I have no issue with them. They involve changes to terms such as "consumer" and substituting "an insurance contract" with "contract of insurance".

Section 18 is important as it deals with warranties. These are the obligations by which a consumer must abide. We accepted earlier amendments on the definition of "continuing restrictive conditions". These warranties can result in an entire claim being voided. The Minister of State gave a good example from the LRC report. An insurance policy may require a policyholder to have a burglar alarm in his or her home. The example is if the house burns down, be it due to lightning or an electrical fault, and the assessor notes there was no burglar alarm or it was a class C alarm as opposed to a class B alarm. While it had nothing to do with the fire, the insurance company would be within its rights legally, but not morally, not to pay out on any of the claim. The family then has lost all its possessions, even if it paid insurance for a long time.

Section 18 makes it clear that such circumstances will not be permitted in the future. It states that, where there is a breach of warranty, that it is only for that period and that section of the loss that will be suspended.

I do not have an issue with amendment No. 20 but I am not sure if it is required because section 18(5)(b) states any breach "shall only suspend the liability of the insurer in respect of that particular type of loss, or loss at a particular time or loss in a particular location". In the case of a burglar alarm, if it is not operational and the house is insured for theft, it could be argued that it was not covered against theft, but if lightening strikes the house and it is burned down the insurance company cannot get out of paying the liability. This section is really important. As I said, I have no issue with the amendments. They tighten up and clarify the legislation. It is important on the legal advice that is available to the Minister that there is clarity because we do not want insurance companies to be able to wriggle out of their obligations to pay a claim as a result of an action that is negligible or has no impact in regard to the damage caused to the property.

3:10 pm

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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Am I correct that we are speaking to all of the remaining amendments?

Photo of Pat GallagherPat Gallagher (Donegal, Fianna Fail)
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Strictly speaking, we are dealing with amendments Nos. 17 to 19, inclusive.

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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Yes, but the Minister of State has already read into the record his note on the remainder of the amendments. On amendment No. 21, the key point is that the breach has to be relevant and, in effect, the suspension of the liability should not be allowed unless it is relevant and unless, as provided for in the Bill, the risk of a loss has occurred. If the breach has not increased the risk of a loss occurring then it would not be sufficient grounds for the suspension of the liability on the part of the insurer. In other words, a technical breach that is not directly relevant in practical terms and did not increase the risk of a loss event occurring is not sufficient grounds for a suspension of the liability of the insurance company. This is a sensible change and I support that amendment.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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On amendment No 20, legal counsel were clear that it was required.

Photo of James LawlessJames Lawless (Kildare North, Fianna Fail)
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I support these amendments. I also support the Bill. I welcome the rebalancing from the insurer to the consumer, which is line with consumer law as it has evolved in the last couple of decades. The privity of contract provisions are welcomed also as they bring us into line with the UK jurisdiction in terms of some recent developments there. The disclosure requirements in terms of what is known as the small print or, legally, Uberrima fides, under which the consumer is obliged to disclose all information, can now not be used to trip up or arrest and block legitimate claims. The balance in this regard is now tipped via this Bill in favour of the consumer. I welcome that and I commend the Bill.

Photo of Brian StanleyBrian Stanley (Laois, Sinn Fein)
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I support amendment No. 22. This is an important Bill. I commend Deputy Pearse Doherty on bringing it forward. As we know, insurance costs are a huge problem across this State for businesses, householders and motorists. They have been the cause of many businesses closing. Many of the provisions of this Bill will provide some level of comfort and security to people who need insurance cover to transact their business and to travel to and from work. There have been situations where insurance companies have used opt-out clauses to wriggle out of paying justifiable claims to customers. This Bill attempts to close off those loopholes.

While there is further work to be done on the insurance industry, I look forward to the enactment of this Bill. People are being fleeced by insurance companies. Sinn Féin has proposed that the Government levies imposed on insurance premia over recent years be removed. We need to start lifting the burden on ordinary families, workers and small businesses that have been caught with huge premiums over the years.

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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I did not intend to speak again but as I reflected on section 18, I realised that as we are on Report and Final Stages of the Bill this may be the last opportunity I will get to comment on it. The amendment to section 18 brings further legal clarity to the Bill. Section 18 sets out clearly the intention in regard to a loss. The example used was that of a house burning down, in respect of which, because it had no burglar alarm, the claim was nullified. Section 18(4)(b) provides that "if the breach has been remedied by the time the loss has occurred" - in other words, the burglar alarm was broken but repaired before the theft occurred - "the insurer shall (in the absence of any other defence of the claim) be obliged to pay any claim made under the contract of insurance". It is hard to understand why we would have to legislate in this day and age for this type of situation. The example we have used is a contract in respect of which there was a warranty in place and an obligation on a consumer to, among other things, install a burglar alarm to protect him or her from theft; the burglar alarm was non-operational for a week or two following which it was repaired and the house was broken into and a claim was made in respect of damage to property. It is important to reflect that the reason this exists in Irish law at this point in time is because our insurance contracts legislation dates back to the 1600s. The laws that exists today in regard to the warranty and the breach of same and how it can nullify an entire insurance contract and a valid claim dates back to a court case that was adjudicated under British law in the 1600s, which involved the insurance of cargo as it travelled the high seas. This case is from where much of the insurance activity originated. The warranty in this case was that when the ship left port it had to have 50 crew on board. The ship left the port with fewer than 50 crew on board but it stopped in a near neighbouring port where it picked up additional crew, which meant the ship had in excess of 50 crew when it left for the high seas. The ship ran into trouble, the cargo was destroyed and lives were lost and the company was able to refuse to cover the liability because even though there were more than 50 crew on board, at a point in time the warranty had been breached, even though that had taken place well before then. This was happening in the 1600s. Unfortunately in 2019, insurance companies are still doing this and so we are using this Bill to modernise the law.

Amendment agreed to.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 18:

18. In page 15, line 34, to delete "an insurance contract" and substitute "contract of insurance".

Amendment agreed to.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 19:

19. In page 15, line 35, to delete "insurance".

Amendment agreed to.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 20:

20. In page 15, line 37, after "is" to insert ", subject to subsection (5),".

Amendment agreed to.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 21:

21. In page 15, between lines 40 and 41, to insert the following:

"(5) Subsection (4)does not suspend the liability of the insurer if the fact that the breach referred to in that subsection has occurred has not increased, in the circumstances concerned, the risk of a loss that has occurred (being a loss for which liability on the part of the insurer is claimed by the consumer).".

Amendment agreed to.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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I move amendment No. 22:

22. In page 16, to delete lines 13 to 40, and in page 17, to delete lines 1 to 12 and substitute the following: "19. In addition to applying to a "consumer" as defined in those Regulations, the European Communities (Unfair Terms in Consumer Contracts) Regulations 1995 (S.I. No. 27 of 1995) shall apply to a consumer within the meaning of this Act.".

Amendment agreed to.

Bill, as amended, received for final consideration.

Question proposed: "That the Bill do now pass."

Photo of Willie PenroseWillie Penrose (Longford-Westmeath, Labour)
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As somebody who has dealt with contracts in a litigation environment, I should comment on this Bill. The Bill is based on a 2004 Law Reform Commission report. Many of the proposed reforms are non-controversial and they are very welcome.

I compliment Deputy Pearse Doherty on bringing it forward. It rebalances the contract of insurance away from the insurance companies that are in the dominant position. To restrict their wriggle room is extremely important. While it is an excellent Bill, section 7 is a worry. I say this genuinely. It abolishes the concept of insurable interest. It means that in future, a claim by a consumer under an otherwise valid insurance contract cannot be rejected by the insurance company simply because the consumer did not have an insurable interest in the subject matter of the contract. Insurable interest may well be a difficult concept to pin down, but I think we all know it when we see it. It is the term used to describe the policyholder's connection with the subject matter. For example, I can insure my own house against fire because, if my house goes on fire, I will suffer loss. However, if I insure Deputy Michael McGrath's house against fire, I am either just placing a bet or I am preparing for arson. I have no insurable interest in his house and so, if I insure it, the policy is void under the law as it now stands. There are admittedly difficult cases at the margins and the rules about insurable interest may well, as the Law Reform Commission argued, have developed in a way that is confusing and sometimes illogical. However, there is a principle at stake here. The concern of the courts has been that insurance contracts can involve a high degree of moral hazard and should never resemble gambling or wagering. The Law Reform Commission considered but rejected the option of reforming the law on insurable interest. Instead it recommended what is here in section 7, namely, its abolition.

I have to raise two issues, otherwise I will be asking myself in 12 months' time why I did not. They deserve serious consideration. One is the general policy question arising from the connections, and differences, between insurance and gambling. The second relates to a specific rule that prohibits parents from insuring the lives of their underage children for an amount that bears no relation to any expenses they may incur. On the first issue, a wager and an insurance policy are clearly similar in that there is a sum paid to another party, with the possibility of a much larger payback depending on a future event that may or may not occur. The difference, however, is that with a wager placing the bet creates the risk, while an insurance policyholder is being protected against a risk to an interest which he already possesses, independently of the contract. In other words, whether or not one has an insurable interest is at the core of the distinction between a wager and a bet. The Law Reform Commission disagreed but it was not definitive on this point. The commission instead argued that while the approach of the common law and earlier legislation reflected the prevailing attitude in the 18th century that such activities were a significant social evil, in this State in the 21st century, gambling is now seen as an economic activity to be regulated in much the same way as other comparable activities such as financial services, including insurance. The commission argued that the Gaming and Lotteries Act 1956 is thus now regarded as an unsuitable legislative framework. It pointed to the fact that in 2013 the Government had published the general scheme of a gambling control Bill, to provide a system of regulation that aimed to "achieve an appropriate balance between, on the one hand, encouraging commercial gambling (including casinos and online gambling) and, on the other, protecting vulnerable consumer gamblers". It said that the 2013 scheme proposed that gambling contracts would be in future legally enforceable, replacing the long-standing ban on enforceability of wagers. The commission concluded that:

Gambling is now recognised as a legitimate activity with significant economic benefits which can be dealt with through statutory regulation. These matters are seen as consumer protection matters rather than moral hazard issues and attest to the fact that any insurable interest requirement, as a legislative proxy for counteracting socially undesirable contracts of speculation, has no part to play in modern Irish law.

Although making gambling contracts legally enforceable was indeed provided for in the 2013 scheme, it is important to highlight that this proposal has not yet emerged in Bill form, let alone become law. There is a Gaming and Lotteries (Amendment) Bill 2019 currently in its final Stages, but that Bill does not make any amendment in this area of law. There is a cart and a horse here. In other words, a vital development that the Law Reform Commission presumed would be in place before its own report was acted on - as Deputy Pearse Doherty has done through the present Bill - has not in fact occurred. Nor do I believe, incidentally, that there is any reason to presume this or any future Oireachtas will in fact legislate to make gambling contracts enforceable or legislate with a view to encouraging commercial gambling which includes casinos and online gambling. I do not believe it will ever happen. It is too soon to say the Oireachtas agrees with the commission that the 18th century views on gambling as a significant social evil are outdated and that gambling should be instead viewed as a legitimate economic activity with significant benefits.

We are amending insurance law by removing the requirement for an insurable interest in an insurance policy. However, we will have retained the rule, in section 36 of the 1956 Act, that says that gambling contracts are still legally unenforceable. What will be the law? Does either the sponsor of the Bill, Deputy Pearse Doherty, or the Minister have a view as to the legal effect of enacting this Bill while section 36 of the Gaming and Lotteries Act remains in force? The Law Reform Commission did not have a view on this, because it presumed that section 36 would have been repealed by the time their proposals came to be considered. Even though the requirement for insurable interest is removed from insurance law, is there not a risk that an insurance policy taken out on a subject matter in which the policyholder has no insurable interest will continue to be considered a wager under the Gaming and Lotteries Act? We pass law reform measures to clarify the law. Passing this measure, in these circumstances, just makes the law more obscure.

With the latitude of the Leas-Cheann Comhairle and the House, the second point relates specifically to children. The Life Insurance (Ireland) Act 1866 introduced the rule that life insurance cannot be taken out where the policyholder has no interest in the life of the person insured. The law recognises that an individual has an interest in insuring his or her own life, the life of a spouse and, in some cases, the life of an employee. The law has never recognised that parents have an insurable interest in the lives of their underage children. This is not just down to a purely economic argument that the death of a child is not measured in terms of financial loss. It is based on the reality that children are vulnerable and, if they are more valuable dead than alive, then they are vulnerable to being killed if there are insurance proceeds to be claimed from policies on their lives. The law has prohibited not just life insurance but also payments from benevolent societies, trade unions and so on, to parents on the death of minor children, except to cover reasonable funeral outlay and expenses. This Bill proposes to disapply the Life Insurance (Ireland) Act 1866. It seems there will be no longer any requirement for the policyholder to have an insurable interest in the life of the person whose life is insured. In other words, there will be no requirement that the policyholder would suffer any financial loss as a result of that death. We must remember that life insurance policies are not an indemnity under which one claims compensation limited to the actual financial loss suffered. Instead, life insurance policies are entered into for lump sums. It seems there will be now no limit to the amount for which one could insure the life of a dependent minor child. What is more, as I read it under this Bill, I still could not profit by insuring another person's house against fire, because the indemnity rule would still limit me to a claim for the economic loss I suffered on its destruction. However, life insurance is not governed by the indemnity rule. Even though I as a perfect stranger could not insure another person's house, I could insure another person's child. Why is that a good thing? Most parents would be appalled at the notion that we are changing the law here to allow strangers to speculate on the lives of children. Any parent who discovered such a policy would, I think, notify the Garda. They would regard it either as a most distasteful bet or as a threat. Why should we change the law so that, as a result of transactions entered into by parents or by strangers, a child who is a financial burden when alive becomes a financial asset when dead? Usually, we change the law on foot of popular demands for change. Who has called for this change? What interest group is behind it? What need does it meet? It seems to me to be a step that is worrying. The scrutiny report on this Bill stated, "In respect of life assurance, if someone is prompted to murder to recover a life assurance policy, they are unlikely to be deterred by "insurable interest"." That is quite clearly missing the point, with respect. The point is that no one can be prompted to murder to recover a life insurance policy if such a policy is not permitted in the first place.

I ask the Minister of State to consider those points. It is an excellent Bill but I am genuinely worried about section 7. It may have consequences which are definitely not anticipated or intended by Deputy Pearse Doherty or by the Minister of State. Perhaps it might be worthwhile to run it through the Office of the Attorney General to see what he thinks, particularly in the context of a measure that the Law Reform Commission anticipated would have been implemented prior to the passage of this Bill, which would have dealt with this anomaly. I say this in a constructive way and congratulate the Deputy on the Bill progressing at the speed it has.

3:20 pm

Photo of Pat GallagherPat Gallagher (Donegal, Fianna Fail)
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Before the Minister of State comes in, I do know that Deputy Penrose had hoped to request the recommittal of section 7.

Photo of Willie PenroseWillie Penrose (Longford-Westmeath, Labour)
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Yes. I apologise, I was late.

Photo of Pat GallagherPat Gallagher (Donegal, Fianna Fail)
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I think we were running early as well. That has to be done at the commencement of Report Stage. The Deputy has had his opportunity and perhaps the Members may take it on board in the other House.

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael)
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In response, certainly we will look at it. We have legal advice on this from the Office of the Attorney General. They are quite satisfied with what we have in respect of section 7, that there must be an economic interest. Section 7(2) states:

Where the consumer is required, because the contract of insurance is also a contract of indemnity, to have an interest in the subject-matter of the contract, the interest required shall not extend beyond a factual expectation either of an economic benefit from the preservation of the subject matter, or of an economic loss on its destruction, damage or loss that would arise in the ordinary course of events.

We are satisfied that the section is covered. That said, I will bow to the Deputy's legal knowledge and ask that the matter is run through in conversation again.

I thank Deputy Pearse Doherty. This Bill took longer than anticipated to complete, but we have good legislation. I have been fair to both Houses and all Members on the issue of insurance. We are going through a difficult period in the insurance sector in Ireland and I could not have got this legislation through without the co-operation I have received. We have the Insurance (Amendment) Act 2018, the Central Bank (National Claims Information Database) Act 2018, the Judicial Council Act 2019, had changes to sections 8 and 14 of the Civil Liability and Courts Act 2004 and a change to Central Bank rules and regulations within the last month. We now have this Bill and there is more work to be done.

We will continue to improve the insurance sector on every occasion we have an opportunity to do so. There were parliamentary questions to the Minister for Finance earlier today. We expect to move towards the establishment of the personal injuries committee shortly. Responsibility will then move from this House for the guidelines. I am clear that they will be lower cost, lower impact guidelines. Two thirds of all personal injury claims in Ireland are for sums less than €26,000 and they are the claims that are doing damage. There are too many occasions on which people present innocuous claims and seek large amounts of money in damages. That era has to end. I know that I have the full support of every Member of this House, as well as of the other Chamber, in trying to bring it to an end. One of the reasons I am doing this is for people who have been impacted on by injury, damage and loss. I refer to having a properly structured insurance sector in this jurisdiction in order that they will receive fair and adequate compensation. I am not referring to people with a bruise or a scratch or who have suffered a little knock.

3:30 pm

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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I thank all of the Deputies for the contributions made on the Report and Final Stages of the Bill. In taking on board the comments made by Deputy Penrose, there are provisions regarding indemnity which deal with all non-life insurance policies. They fall into the indemnity insurance category, where there has to be an economic interest in the contract. While a person might not have an insurance interest, he or she must have an economic interest in a case. There is that protection in reference to some of what was suggested by Deputy Penrose. Further scrutiny will probably be required, although this issue did not arise at any stage of the pre-legislative scrutiny process and has not been raised prior to today. An amendment on an earlier Stage would have allowed us to tease it out further.

I welcome the support of the Deputies present and their respective parties for the legislation. It is important legislation which deals with issues such as an insurable interest. It will ensure, for example, that the interpretation of a contract of insurance will be to the benefit of the consumer in a case where there is confusion. It will also ensure issues such as the warranties we discussed will not provide a way for insurance companies to wriggle out of paying legitimate claims. The Bill will also ensure the consumer will no longer have to volunteer information and try to second-guess what the industry is looking for. The Bill places the requirement on the industry to ask the questions and an obligation on the consumer to answer them honestly. In cases where there are minor discrepancies the Bill will ensure claims cannot be completely invalidated. One such case involved damage to a property which had four bedrooms. In the insurance contract the property was described as having three bedrooms. As a result of providing what could have been perceived up to now as fraudulent information, the insurance company did not pay. That was completely unjustified and immoral, but the Bill will resolve such issues. It also deals with issues such as renewal notification in seeking quotations. This will help people to shop around and look for better value. It also deals with a crucial issue for sectors such as the soft play sector which are finding it difficult to obtain insurance cover. We saw where they were able to come together. It took a lot of work for them to try to find out what claims and premiums were being paid. Under this legislation, all of the different organisations will be able to pick up last year's renewal notification and see what premiums were paid in the last three years and what the quotes were.

I again thank Deputies for contributing to the debate, both today and on previous occasions. I also thank the Minister of State, Deputy D'Arcy, for his engagement on the Bill. He has mentioned that it is a long time since the Bill commenced its journey. It is and it would be remiss of me not to point out that it was one of the pieces of legislation that were being held up by the lack of a money message. However, where there is a will, there is a way and where we can come together and pass legislation, it will be to the benefit of consumers. During his time as Minister of State, Deputy D'Arcy has been nothing but helpful in dealing with this legislation, as have his officials. They engaged with me several times and my staff. I mention Pól McIlvenny and Declan O'Farrell who have been instrumental in making sure the legislation will be passed. I also thank Peter Boland from the Alliance for Insurance Reform who is keeping us on our toes in dealing with this issue, rightly so.

The legislation was originally authored by the Law Reform Commission, but it has changed since as we, the Minister of State and Deputy Michael McGrath made some amendments. It is all for the better for them. I commend the work done by the Law Reform Commission and during its early engagement with my office. I thank everybody who has been involved so far. I am glad that this is my second item of legislation to be passed in this House and I hope into law. Both Bills are aimed at protecting consumers. This legislation, in particular, is very important. It will protect and enhance the ability of consumers to obtain better value in seeking insurance contracts.

Question put and agreed to.