Mary Harney (Dublin Mid West, Progressive Democrats)

I agree with Senator Twomey about the scale of the reserve required. However, it is not a matter for me as this is the requirement of the Financial Regulator, which is independent. The regulator in Ireland takes a much more conservative view compared with other countries. In Britain I believe it is of the order of 25%. In fact when VIVAS Health was incorporated in Northern Ireland and Britain, as with BUPA, that was the type of scale it had to meet, namely, a reserve of around 25%. However we do not have political control and it is appropriate that these matters should be dealt with by an independent regulatory authority.

In carrying out its duties in this regard, the Financial Services Regulatory Authority is independent of ministerial direction. It broadly comes under the auspices of the Minister for Finance and his Department. When it comes to its operational issues, it is independent in how it carries out its functions. Its establishment has led to greater protection and control for consumers generally.

The issue of a European-wide level of reserve will be the subject of an upcoming directive but this will not come into effect for a considerable period of time. In the meantime, we must meet the requirements of the Regulator. Although the Central Bank comes under the ambit of the European Central Bank as far as prudential matters are concerned, the Financial Regulator is free to set the reserve requirement it feels is necessary to regulate companies in an Irish market context. The Barrington group made recommendations on this, on which I have previously commented but ultimately, it is up to the regulator to make a determination on these issues.

It is a fact that the price setting is carried between the VHI and hospitals. The sheer size of the VHI and the clout it has by virtue of its size and scale are factors. I met a consultant recently who told me that he had recently begun to deal for the first time with claims from other insurers. Until recently, he had only dealt with one insurer, which demonstrates the scale and size of the VHI and the fact that perhaps the younger members of other companies are not yet interfacing at hospital level.

On the other hand, the sheer size of the VHI has been advantageous in dealing with consultants and hospitals. Basically, the VHI carries out what are broadly called deals, as all insurance companies do. If somebody in a hospital does a deal for a particular procedure and pays for four days in hospital, the hospital will gain if it can get him or her out in two days and lose if it keeps him or her in for eight days. There are swings and roundabouts in all of this.

In the context of talking with the HIA around consumer-related issues, I am a fan of informing patients. Many insurers will now telephone patients as a matter of routine. I understand that BUPA on average used to contact about 10% of patients about matters like their experiences, the procedures they had and the length of time they spent in hospital. Companies do this all the time in order to verify the claims that have been made. A higher number of patients will probably be contacted in the future.

The Barrington group made recommendations about informing patients and having clear notices at the bottom of renewal notices. I will require all insurers to tell people that there will be no penalty if they switch. Last weekend, I met a fairly well-informed person who did not know that if they switched from the VHI to another company they would not have to spend six months without cover. I frequently meet people who do not know this. We must give subscribers much more information in an understandable form. In fairness, the HIA has advertised this widely but we need something akin to what happened in respect of motor insurance renewals. When people suddenly receive information and renewal notices, it is very powerful in effecting change.

We have been having discussions with some insurers because we want insurers to insure health as opposed to sickness. To be fair to VIVAS, it is introducing a considerable amount of what I would call wider cover in its policies to encourage people to engage in preventative measures around their health and to take more responsibility for it. I would like to see health insurance here going in that direction because it is important from a number of perspectives, including that of chronic illness. Financial incentives by way of insurance premiums can be enormously powerful in affecting behaviour.