John Minihan (Progressive Democrats)

We should read the full title of this report and acknowledge that it is a preliminary report and consultative document which is the start of period of consultation. I hope we will not be carried away by the contents of this report and the negativity in certain parts of it. Instead we should use it as a platform from which to move forward in an effort to improve the insurance industry. I am not a fan of the Competition Authority's approach as it deals only with pure economics and omits many other aspects of professional services offered by the professions it examines. I fully accept that the consumer must get value for money but that value cannot be measured only in retail terms; many other aspects of the service must be factored into the overall service. I support competition and the market economy but I am not a blind supporter of the economist's viewpoint; it is not possible to achieve a free market at any cost. There are instances when Government must intervene to protect the public interest, for example, in the provision of key social and health services. The overriding consideration must be what Government can do to improve services or ensure that quality services are available, whether directly or through the private sector on the Government's behalf.

Competition and economics are not the be all and end all of providing professional services. When is competition really competition? Do we have a situation whereby, in the name of competition, regulation can be used to boost the coffers of the one who holds the monopoly? There have been many changes in the market and the cost of insurance has become prohibitive for many consumers, be it car insurance or the examples of small industry we discussed earlier. The Government has dealt with this through the introduction of the PIAB and legal reform, etc. There have been examples of improvements on behalf of the consumer and I hope that, as a result of the Government's initiatives, there will be more. The Minister of State has highlighted some of this in his speech today.

It would be easy for me to attack brokers as soft targets but there are areas in need of change including a need for transparency, and for consumers to be fully aware of the service they receive for the broker's fee or commission. We should not be too quick to absolve the consumer of responsibility to examine the service for which he or she is paying. I have engaged and changed brokers and have been satisfied with the service I received. It is my choice to deal directly with an insurance company or to engage an agent on my behalf to negotiate the best deal for me. We often hear comments about the small print. How many consumers want to examine the small print? Some consumers out of choice hand over that responsibility to somebody on their behalf. I do not see anything wrong with that and I also feel such service should not be provided for free.

As insurance is about placing and taking risk, how can some insurance companies give various pricing structures for the same risk, for example a private car? Hibernian provides motor insurance to the market through the post office, One Direct, Hibernian Direct, Broker Line Direct, brokers and the banks. Someone giving the same details to all these outlets will get different terms from each of them. Questions must be asked in this regard. Up to 85% of those in the commercial area rely on brokers to do this work for them.

Up to three years ago many companies provided competition in the motor insurance market. However, company mergers have in effect reduced competition and reduced the number of companies we can access. It can be argued that by facilitating such mergers we reduce competition in the market. Brokers will not only seek quotations from companies in the Irish market, but will also do so outside the Irish market. Some of us have had experience of getting better insurance cover at a more reasonable cost from companies not based in Ireland.

There have been many examples of insurance companies giving quotations to clients who have in turn gone to a broker to see whether it can be reduced. The brokers have found that the quotation given by the insurance company was stacked for a variety of wrong reasons, for example by adding children to the policy. When the broker pointed this out, the insurance company reverted to the client trying to reverse its decision. This is the job of a broker. Too often we remove the responsibility from the consumer who engages the professional to ask the professional to fully explain what he or she is doing. It is far too easy for us to attack brokers.

In areas such as joinery and manufacturing the costs of public liability insurance have been huge over the years and must be reduced as too many small companies have gone out of business as a result of prohibitive costs. Insurance companies trade off risks and in doing so some of them refuse to quote to a small company. Some small companies that have been paying premiums of about €80,000 or €90,000 per year and suddenly after three or four years of not quoting they come back into the market and offer a quote at a far reduced rate. We need to understand why this is happening.

The same is true in the property market. With the increased cost of houses, those charging fees on a percentage basis such as solicitors have increased their fees dramatically. We need to consider what brokers do on behalf of their clients. The report seems to focus exclusively on commission. However, to bring balance to this debate we need to consider what a broker does. I am aware of cases where a broker not only prepares a prospectus for a client, but also outlines the different quotations and the differences in policies. This allows the client to engage the insurer he wants.

In the event of a claim, the same broker processes the claim, deals with the issues concerned, meets the solicitors and in the case of a company may deal with the builders, solicitor and insurer, and sets about negotiating the settlement figure. I am aware of a case of flood damage in which the insured had to produce accounts showing the change in trading in that period. The accountant in providing that service charged a fee of €3,500. The broker charged no fee. This service was provided as a result of initially engaging the broker to do the job required. It is not possible to look at the glass half full or half empty. We must consider this matter in its totality and some people choose to focus on only one area.

Where should we go from here? Senator Ross referred to the responsibility on the consumer to shop around. When comments were made by the Tánaiste recommending shopping around, the reaction was that the consumer should not have to shop around. There is a responsibility on individuals to shop around for the best value both in the retail area and in engaging professional services. It is a matter of personal choice. Brokers are obliged to give the best advice. This is particularly true of authorised advisers who have the ability to access all the markets. The brokers should take the opportunity to look at their own industry, to influence the changes that are coming about and to contribute to the debate about changes rather than having changes imposed upon them that may not enhance the profession overall.

Many different insurance products now exist. The implications contained in the small print must be made clear to clients. The consumer has the utmost responsibility in ensuring this. Companies must explain why it is possible to get different quotations for the same item from various different channels. Someone looking for insurance through three or four different channels will get three or four different quotations. Brokers have a responsibility to provide a professional service. They cannot work in cahoots with insurance companies as Senator Ross stated was the case, which is not a sentiment I share. While there may be isolated examples, this has not been my experience. Any such isolated examples should be exposed. It is not possible to pool a whole group of professionals into one category because of an isolated example.

Ultimately it is a matter of choice. There is no legal requirement for someone seeking insurance to go through a broker. That is a decision for the consumer. While some people may have the time and ability to read the small print, others choose to engage professionals on their behalf. The Competition Authority's report is not just about the retail side. There is a value on professional service and advice. This applies equally to the legal profession, the medical profession and insurance brokers. The consumer makes the choice to quantify and pay for that service. In coming weeks I hope the insurance industry, brokers and the Competition Authority will unite in bringing clarity to the issues highlighted by this initial consultative report.