Mary Harney (Dublin Mid West, Progressive Democrats)

I do not disagree with the need for competition in everything we are trying to do. We seek to foster competition from an imperfect position. This legislation will make the VHI subject to the Financial Regulator and authorised on the same basis of its competitors. Competition is at the heart of that.

Senator Fitzgerald referred to the Minister as the regulator of health insurance but the Minister will no longer be the regulator after this Bill is enacted. The VHI will be regulated by the Financial Regulator on the same basis as every other financial services company, which is desirable.

Many of the consumer issues to which the Senator referred must be appropriately addressed. It is the remit of the Competition Authority to foster competition in the market and the Financial Regulator in respect of some consumer issues mentioned.

Regarding tying health insurance and travel insurance, a new competitor in the market is offering three types of insurance — car, house and health — for the price of one. Senators may have heard the advertisements on the radio. Vivas also offers travel products. VHI's competitors have complained to the Financial Regulator regarding the link between the two types of insurance. The complaints have not been upheld. There is much merit in what the Senator suggests. Will we tie people to one product by virtue of another product? This must be addressed with consumer related measures, whether by the Financial Regulator, the HIA or a combination of both.

The purpose of giving VHI greater freedom is to allow it to operate like its competitors. Most of the issues raised by Senators Twomey and Fitzgerald relate to the size of the VHI. Its competitors have more than 600,000 customers between them, approximately 465,000 with QUINN-healthcare and 150,000 with Vivas and both are growing rapidly in respect of new entrants. I have been a member of the VHI since I entered this House 30 years ago and I never left it. Perhaps many of us are complacent but I have received a good service in so far as I have used it. Many people are like me, loyal to those who provide a good service. The only way to affect the size of VHI in the short term is for the Government to take a section of customers and hand them over to the competitors. This would engender major problems even if we felt it was desirable from the point of view of competition. We would have no way of keeping the customers with the competitor the next year. We must use all the tools at our disposal, short of the break-up of the company. It would take years to effect the break-up of the company if we decided on it and it would be chaotic. I appeared in this House during the previous Seanad at a time when risk equalisation was not paid and I heard a different story. People said I was not protecting the VHI then and in debating this legislation it is suggested I am doing too much for the VHI.

I am the first to suggest we are operating from an imperfect position. The incumbent in the market has been there for 50 years and has built credibility among customers. It will take quite some time to find a better balance. I am examining whether we can mandate the board to reduce the size of the company in the market over a number of years. That has been suggested to me by the competitors and it would be desirable that we could effect this but I do not know if it is possible in the short term. I will consider advice from advisers regarding how capital could be accumulated to provide for authorisation, in the context of regulation by the Financial Regulator. Most of the complaints made by competitors related to the derogation that VHI did not have to meet the same solvency requirements as its competitors. They felt that 2012 was too late for this to end and it will now end by the end of 2008. This will not solve all the problems and we must examine consumer protection issues in conjunction with the HIA. The Financial Regulator has built considerable consumer confidence since it was established four years ago and it will do much in this area as well.