Wednesday, 12 February 2003
Unclaimed Life Assurance Policies Bill 2002: Second Stage.
I am pleased to have the opportunity to address the House regarding the Unclaimed Life Assurance Policies Bill 2002. I trust that the House will agree that its enactment will result in a significant step forward in the strive for consumer protection, as well as building on the laudable scheme for disbursement of moneys to worthwhile projects established under the Dormant Accounts Act 2001.
The House will no doubt recall the considerable publicity that surrounded the introduction of the dormant accounts scheme last year. I am also sure that it is aware that interest in the matter is not new. The issue of dormant assets has long been of great interest to the public, both Houses of the Oireachtas and the media – primarily in the potential there could be for the State to put the funds to good use. Failure on the part of the financial institutions to trace the owners of these moneys has long been a matter of public conjecture and concern.
With the Dormant Accounts Act, the Minister for Finance and the Government established the basic framework for addressing these concerns. The Act deals with dormant assets held by banks, building societies and An Post. Its success in meeting its primary goal, reuniting people with long lost or forgotten assets, has been significant, with almost half the moneys which lay dormant last March having been reclaimed in less than 12 months. It is not often that legislation emanating from the Department of Finance results in such an obvious windfall to members of the public. The successful achievement of this objective of the scheme is commendable.
This Bill shadows the Dormant Accounts Act in providing that life companies must take all reasonable steps to identify and contact the owners of unclaimed life policies. It is open to question what is reasonable in this regard but we can rest assured it is in the interests of insurance undertakings to pull out all the stops to reach their customers in circumstances where they will lose the underlying funds, yet still have to administer the policies if they fail to trace the owners. Therefore, the Bill is essentially a consumer protection measure, designed to protect property rights of individuals.
The legislation must also deal with the situation where the owners of funds cannot be traced or these owners do not come forward to claim their moneys. In these circumstances, the insurance undertakings will be required to transfer the net encashment value of the policies, as defined in the Bill, to the dormant accounts fund due to be established in the coming weeks by the NTMA. I stress the point that no individual will lose his or her right of access to those funds. The rightful owner, including the policyholder or, for example, his or her heirs, will have a guaranteed right to reclaim the funds at any time. The Bill provides that the amount repaid will be exactly what the policyholder is entitled to claim under the terms of the policy.
It must be expected, nevertheless, that some policyholders, for whatever reason, will never come forward to claim the moneys due. For example, the policyholder may have died without informing his or her heirs of the existence of the policy. The person may have emigrated and discontinued correspondence with the life company or decided that the amount due under the policy was not worth pursuing. Therefore, the Dormant Accounts Act introduced a scheme for disbursement, for charitable purposes or purposes of societal and community benefit, of funds not likely to be reclaimed. Moneys transferred to the fund under this new Bill will be subject to the same disbursements scheme. However, this is still on the basis that sufficient funds will be held back to meet any potential claims from owners.
There are many types of life assurance policy on the market as products are often tailor-made to suit an individual's needs. This has a significant bearing on two important aspects of the Bill: the amount that an insurance undertaking will be required to transfer to the dormant accounts fund in respect of an unclaimed policy and the criteria for "dormancy".
There are a number of issues to consider in relation to what is owed to an individual under any particular life assurance policy. Unlike a bank account, the money is not there "up front", in a way that the customer and the insurance undertaking know exactly what is owed on any given day. First, the majority of policies provide risk cover as well as having an investment element designed to secure a lump sum for the policyholder at some future date. In practice, the weighting of these two elements varies widely, depending on the needs of the policyholder and, therefore, the type of policy in question. Second, the investment element may be underpinned by a company's asset managed funds, as in the case of unit linked policies. If it is a with profits type policy, it will have other conditions attaching to it. Third, a life assurance policy is a contract that sets out the conditions under which a claim can be made and by whom – it may be when the policy has matured or, for example, by a beneficiary on the death of the policyholder. The amount to be paid out by an insurance undertaking is affected by all three factors.
Given the complexities of the issues surrounding the measurement of the encashment value of a life policy, it has been impossible for the Department of Finance to build up an estimate of the amount of dormant funds held by life companies. Nevertheless, it is believed to be significant but this is not the reason for moving forward with the legislation. Of primary importance is the need to make people aware these policies exist and remain unclaimed. This will be done via personal notifications to policyholders and also by way of public notices to be placed annually in national daily newspapers and prominently displayed in the public offices of the companies concerned. This year alone, four separate notices will be placed in the newspapers in relation to the dormant accounts scheme.
As regards the amount to be transferred from any given policy, insurance undertakings will calculate the net encashment value on the date of transfer to the fund. This will be calculated net of any insurance considerations in order that the fund will only receive the assets representative of the investment portion of the unclaimed policy. The amount required to provide insurance will remain the responsibility of the life company.
In relation to the relevant period of "dormancy", the Minister has taken account of the disparate nature of life policies and provided that this will depend on whether we are dealing with a specified term or non-specified term policy. For specified term policies, dormancy will occur where there has been no customer initiated communication with the insurance company for a period of at least five years from the later of the date the policy matured or the date the policyholder last made contact with the undertaking. For policies with no specified term, dormancy will occur where there has been no customer initiated communication with the undertaking for at least 15 years. Senators will recall that 15 years is the dormancy period applicable to banks, building societies and An Post under the Dormant Accounts Act 2001.
The scheme proposed will improve regulation in relation to unclaimed life policies and mirror and harmonise with the scheme already in place for credit institutions. It will require institutions to do their best to contact policyholders and reunite them with their moneys. It will also generate further funds for disbursement to charities and the community at large. Broadly speaking, the programmes or projects to benefit will be those designed to alleviate poverty or social deprivation or assist those who are physically or educationally disadvantaged. I am sure the House will agree this is a commendable use for the moneys which have, until now, benefited only the financial services sector.
I will now outline a few of the key principles enshrined in the Bill but, in particular, should point out that, though the Minister for Finance is bringing forward these proposals, it is the Minister for Community, Rural and Gaeltacht Affairs who will have primary ministerial responsibility for the scheme, especially the disbursement aspects. The proposed scheme will apply to all insurance undertakings in the State and all policies of life assurance taken out by Irish residents, other than policies which form part of the assets of occupational pensions schemes, group health insurance or disability benefit schemes and sponsored superannuation schemes. The application of the provisions of the Bill is set out in section6.
The fundamental basis for the scheme lies in how "dormancy" is assessed. As I indicated, under the proposed scheme a non-specified term policy will be deemed unclaimed where the insurance undertaking has received no customer initiated communication with respect to the policy for at least 15 years prior to commencement of the scheme. A specified term policy will be deemed unclaimed where the policyholder has made no contact with his or her insurance company in relation to the policy for at least five years from the later of the date the policy matured or the date the policyholder last contacted the company. These definitions, set out in section 6, will be applied uniformly by all insurance undertakings.
Insurance undertakings will be obliged to personally notify customers whose policies are valued at €500 or more that they have an unclaimed policy with that undertaking and what steps the customer must take to reactivate the policy or make a claim under it. Insurance undertakings must, for the sake of all other customers affected by the scheme, place annual notices in two or more national newspapers. These annual advertisements, the first of which is scheduled to take place in March, will generate public awareness of the scheme. The Minister for Finance believes, given the success of the same procedures under the 2001 Act, that this will encourage policyholders or their heirs or executors to make contact with the insurance companies to see whether they stand to gain under the terms of a policy held at the institution concerned. Notification procedures are provided for in sections 8 and 9.
The framework provides that the net encashment value of unclaimed life assurance policies, where the policies remain unclaimed by March each year, must be transferred by insurance undertakings to the dormant accounts fund soon to be established. The first transfers will take place by April 2004. These matters are provided for in sections 10 and 11. The National Treasury Management Agency will be required to invest these moneys prudently, based on guidelines which the Minister for Finance will help to draw up and having regard to the need to meet the costs of making repayments to valid claimants seeking a return of their moneys. The moneys in the fund will generate an investment income, some of which will be used to offset the costs of accruals payments to claimants and the rest of which will be reapplied to the fund. In that way, as set out in sections 14 to 16, policyholders are guaranteed the return of everything owed to them.
The Bill also provides that the regulatory authority – currently the Minister for Enterprise, Trade and Employment but at some point the proposed Irish Financial Services Regulatory Authority – is entitled to appoint inspectors for the purpose of ensuring compliance by undertakings with the provisions of the legislation. The inspectors will be authorised to check that an insurance undertaking has the necessary systems and procedures in place that will ensure undertakings are attempting to make contact with policyholders and that all relevant moneys are being transferred to the dormant accounts fund. Inspectors will be entitled to inspect the undertaking's records for these purposes and will have access to any relevant records held by the National Treasury Management Agency in respect of transfers to the fund. The provisions with regard to inspection are contained in sections 18 to 25, inclusive.
In summary, the Bill provides for, first, identification of the types of policies and undertakings to be covered by the scheme and those policies which will not be captured; second, the period of "dormancy" applying and, third, the obligations of insurance undertakings in relation to notification of policyholders that their policies may be deemed "unclaimed". Other key points are the procedure, including the timeframe, within which moneys which remain unclaimed are to be transferred to the dormant accounts fund.
The Bill also places an obligation on each undertaking to maintain a register of unclaimed policies which will contain the name and particulars of each policyholder whose policy has been deemed unclaimed. It will also contain details of the class of policy, the amount transferred to the dormant accounts fund and the date of transfer to that fund.
There will be an obligation on each undertaking to complete a certificate of compliance with the provisions of the legislation in order that any failure on the part of undertakings can be quickly identified. In addition, the role of the inspector, whose remit will be to check compliance with the legislation on the part of the insurance undertakings, has been detailed.
Other features of the legislation are required from an operational standpoint, such as the maintenance of confidentiality regarding ownership of the moneys in unclaimed policies and amendments to the Dormant Accounts Act 2001 to ensure the entitlement of the NTMA to manage and invest moneys realised from unclaimed life assurance policies, and to entitle the board to disburse surplus of such moneys. There are also the standard provisions for commencement, interpretation, etc., that are found in a Bill of this nature.
This Bill, which is the result of lengthy and intensive negotiations, represents a significant extension of the scheme established under the 2001 Act. The provisions of the Bill were finalised during the period when the dormant scheme began operating in the credit institutions, which provided great insight into how it might work in practice for the life assurance companies. The Minister has been reassured by the success of the scheme for dormant accounts. Its achievement to date in reuniting people with their money represents an important consumer protection measure. It is hoped that the benefit to policyholders will be as great as it has been to holders of dormant accounts. This Bill is innovative legislation which I commend to the House.
I and Fine Gael support the aims of the Bill, but there is a number of key areas where we have questions to ask. The Minister of State has referred to these aspects in his speech. One of the key issues is contacting people who hold policies. I am reminded that when I was in secondary school a salesman called to my house selling insurance to one of my parents and he almost had me, at 18 years of age, signed up to take out an insurance policy. When insurance companies and insurance brokers go to such lengths to garner customers, the Minister should ensure that they go to tremendous lengths to contact these customers before funds from these accounts end up in the dormant accounts fund.
I accept what the Minister of State has said about the Dormant Accounts Act 2001, that it has proved largely successful and has seen many customers reunited with funds which lay dormant for a long period. I am a little worried about the lengths to which the insurance industry would go to contact holders of policies. It is proposed that advertisements should be placed in two national newspapers. That is not enough, nor is it enough that the insurance companies contact policyholders by post. When canvassing one comes to houses not occupied during the day and notices the amount of post lying around. One wonders if it will be thrown into the bin.
I strongly encourage the Minister to implore the insurance industry to make contact with people who hold these policies because it is not sufficient to rely on An Post. We have learnt that An Post may not make daily deliveries of post to houses in future. By the time this Bill becomes law, perhaps there will not be any postal deliveries to households in certain rural areas. If that were the case, then an extra onus would lie on the insurance industry to make sure that they contact people who hold policies.
Another area of grave concern is the distribution of the funds which will be derived from this legislation. In the past we have seen how funds derived in similar fashion, through the national lottery or other schemes, are used as slush funds when it comes to the immediate run-up to general or local elections. It is important for the integrity of this scheme that any doubt or any possibility that the funds garnered in this way might be used for political objectives and political gain should be removed completely.
I am also interested in what the Minister of State has said about the investment of the funds. How will these funds be invested once they are garnered? In recent times we have seen the alarming decline in the national pensions reserve fund. Where investments were made in overseas stock exchanges and shares, we have seen an alarming drop in the value of the funds. We all understand and accept that the market rises and falls, but it is important that any funds raised in this way should be invested prudently for the future.
The Minister of State placed special emphasis on the appointment of inspectors who will oversee how the insurance companies enforce this new development. Is it envisaged that the Department would take on permanently people who would act in the role of inspectors or that these people would be consultants hired in at certain times during the year? It is important that safeguards are put in place to ascertain whether the insurance industry is complying with the letter of the law.
Fine Gael supports this legislation but in the key areas which I have outlined the Minister needs to ensure that safeguards are put in place for this fund into the future. Being involved in local government, we see how very cynical people are about the use of such funds. It is crucial that these funds do not develop into some sort of slush fund. If they did, it would be a sad development. The Minister of State outlined a broad spectrum of bodies and organisations which might possibly benefit from the use of the funds. I welcome the inclusion of some of these bodies, but we have seen over the years how funds such as these have been used to influence votes in certain areas during election campaigns and it would be a retrograde step if this fund were to be used in such a manner.
I support the thrust of the legislation and presume a calculation has been made of how much money and how many people are involved. While it is difficult to estimate how many will come forward to claim unclaimed life assurance policies, I presume a tentative figure has been generated. I look forward to Committee Stage when we can discuss the amendments I have tabled.
I support and welcome the Bill which is based on the good experience we have had with the dormant bank accounts legislation. That scheme has raised €400 million, a substantial sum. Obviously, it is impossible to estimate what will be raised under this legislation but presumably it will be a useful amount.
My experience of the dormant accounts legislation has been good. I had two accounts, one a personal account and the other a farm account. There were tiny amounts of money in both, around £20. Nonetheless, the bank wrote to me in regard to both and, as the Minister of State put it, I was reunited with my money. In some cases a person might have forgotten the numbers and details of the account and is not sure how to pursue the matter. In any case, the legislation had that useful impact. There is a positive consumer aspect to it.
That is even more the case potentially with insurance. Bank accounts are relatively straightforward concepts. Everybody understands what a bank account is but insurance policies are complicated and many of us do not necessarily understand their implications, intricacies and mode of operation. There is a considerable act of faith involved in an insurance policy. Therefore, legislation such as this, which encourages insurance companies to get in touch with customers, is beneficial. There is no element of confiscation in the legislation, any more than there was with the dormant bank accounts legislation. If insurance companies fail to track people down, it does not alter or diminish the rights of the people concerned should they come forward later to claim what belongs to them. There is no downside to it from the point of view of the policyholder.
I am inclined to agree with the point made by Senator Phelan. Insurance is different from banking. Perhaps a more proactive approach is needed, therefore, rather than just correspondence. Perhaps telephone calls should be encouraged as a fall-back if the correspondence fails to elicit an answer. Many find financial correspondence off-putting and even if they do not put it in the bin, they might put it aside for long periods and sometimes never actually get around to it.
I would not worry about postal deliveries only being made three times per week. That is a flyer, the type of thing in which agencies and the media sometimes engage. There is not the ghost of a possibility that anything less than postal deliveries five days a week would be either contemplated or tolerated.
Concern was expressed about slush funds. I can only go by the experience in the constituency which I contested in the last general election. There were certain announcements of sports grants and so forth but in all cases, as was probably the case in most other constituencies, the schemes that received support were of long standing which had all-party or cross-party support. People were glad to get the money. There was little controversy about slush funds in my constituency.
The dormant accounts fund disbursements will not be the responsibility of the Department of Finance. There are broad definitions in the legislation which do not provide great detail. I wish to suggest two areas where it would be socially worthwhile to provide moneys from the fund. The suggestions arise from problems brought to my attention in recent weeks. There are a limited number of medical cases involving rare conditions, the treatment of which is expensive and may have to be undertaken abroad. However, the cost is beyond the capacity of the individual and would also distort health board budgets. If somebody needs, for example, €250,000 for a certain treatment and they are one of half a dozen people in the country with the condition, it presents acute dilemmas for health boards. How does one weigh up one person's case against alternative uses under which many can be treated? There is a need for some type of fund or source of money for the small number of rare cases which require expensive treatment.
The second area is a little broader. It would be accepted by all sides of the House that while money has been spent on treatment of disability, both mental and physical, services and the resources behind them are still far from what they should be. I have personal experience in this area. I have a nephew who is severely handicapped. He is just over 18 years of age and lives in Cumbria in sheltered accommodation. Broadly speaking, services have been available for him.
I met a family last week, one of whose children is severely autistic. The father is a small businessman who managed to raise funds for treatment for a few years at a specialised facility in Boston. However, the child is now back home with weekend respite care available just once a month. The answer is more frequent respite care because these situations put enormous strain on working families and relationships within them but funding is only available for respite care once a month. Therefore, any source of funding to improve the situation would be welcome. There has been some debate about the freezing of additional amounts for disability services. Although much good work is being done in many facilities, we cannot be satisfied yet – more needs to be done. One of the uses to which this fund should be put is to try to help improve these situations.
I am concerned by how much of the national development fund is being spent on compensating landowners. This is the case more so in urban than rural areas. I was interviewed on a radio programme yesterday morning when the spokesman for CIE, Mr. Barry Kenny, admitted that over half the cost of public transport projects in Dublin was accounted for by land compensation. That is a dreadful situation. I made the point in an article at the weekend that the rights of property in the Constitution were subject to the common good. In the vast majority of cases, those who have to give up land to facilitate public transport projects would not be selling it otherwise and are not in immediate need of the money. Enormous sums are being paid out. There has not been sufficient public debate on the matter.
I would like to see a focus on this issue to have it properly debated. One of the newspapers recently reported that the metro to the airport was to cost €4 billion. I cannot stand over that figure – it may be wrong – but it is appalling that over half that sum will be spent on land compensation. There may be a case for having some form of bond scheme. Although it was not satisfactory in all respects, the old land bond system was never found unconstitutional and operated for decades. If someone's house has to be knocked down, he or she will need to buy a new one and need the cash to do so but, in most cases, the money will not be needed immediately. We also need to debate whether it should be paid, the level of payment and the criteria but perhaps the money should be in bond in order that it could be used for productive purposes, whether for infrastructural or other purposes. The issue needs to be aired because of the huge amount of money involved, much of which could be described as a windfall. The Ministers for Finance and Transport and their respective Departments should examine it closely.
I welcome the Bill as a positive measure that is part of a series of similar measures.
I welcome the Minister of State at the Department of Enterprise, Trade and Employment, Deputy Fahey. I also welcome the Bill. In my first few words in this House some ten years ago I spoke of the need for brevity. Therefore, I will attempt to set an example by not repeating the words of Senators Phelan and Mansergh in praise of the Bill.
The Government is not a disinterested party, in the sense that it is impartial, in seeking those who may have a right to dormant accounts. I am concerned that it is not enough to merely inform the public. Rather, we must go out, seek and persuade them to examine their affairs. There is a difference between looking for someone to make contact in order to make a claim by informing them and persuading them to do so. If the Government just informs, many of those who might have known will not come across the accounts and not make a claim, leaving the State with the money for good causes. We need to go out and sell this to possible claimants to make sure they are aware of the scheme and that the money may be taken from them.
I am concerned about the wording of the Bill in sections 8, 9 and 12 which makes it sound like there is no such thing as electronic communication and that we are still operating with paper communications. If the Bill was written in the 1890s, similar words would have been used to those now being used – there is no sign of modern communications. My 24 year old son does not write letters or read the newspaper, other than the sports pages, but communicates well with others through the Internet, text messages and email. In the 1600s – in the 100 or so years after Caxton had developed the printing press – when legislation was produced they insisted on everything being publicised by the town crier, ignorant of another form of communication, namely, the printed word. Sections 8, 9 and 12 use words that would have been used in the 1890s. For example, section 8 states, "each holder of the unclaimed policy shall be given written notice by the insurance undertaking concerned of the following.". This notice to policyholders seems old-fashioned.
Senator Phelan referred to a possible threat to communication but it does not matter whether there is a two, three or five day delivery service because it will not have a major effect if it is a few weeks or a few months late. We do, however, seek a way of making sure people are contacted to the best of our ability.
I am elected by the NUI. The electoral register contains the names and addresses of about 100,000 graduates, but many of those addresses were registered when the individuals concerned left university 20, 30, 40 or 50 years ago. It may be the address of the flat in Rathmines where they lived while at UCD, and they will subsequently have moved elsewhere. There is a much simpler way of contacting these people nowadays and keeping them informed – by making a register available on the Internet.
I am concerned, therefore, about the wording in those sections. Take the section dealing with publication of notice, for example. In section 9, it is pointed out, "section 8 does not apply and the insurance undertaking shall publish or cause to have published a notice in 2 or more daily newspapers circulating in the State and in Iris Oifigiúil". Those are exactly the words we would have used – not back in the 1890s perhaps because Iris Oifigiúil may not have been around then – but certainly in the 1930s, 1940s, 1950s, 1960s or 1970s, before the arrival of the Internet. The State is not a disinterested part here. In fact, it is almost open to the accusation that it is in the State's interest for people not to apply because more money will then go to the various worthy causes intended in the Bill.
Let us then consider the register of unclaimed policies. Section 12(4) provides: "The register may be kept in any form subject to its being capable of being converted into a legible form and being used to make a legible copy or reproduction of any entry in the register". That sounds like language from a previous generation. I am sure the officials who have put much very worthy work into this will say it does not exclude electronic communication, but that is not enough. It is not sufficient to not exclude electronic communication, and I want an insistence that electronic communication will take place.
Let me take the example of people who, though they have not even considered it themselves, are asked by another party whether it is possible that they have an unclaimed assurance policy. These people should be able to look up a register at home. If they are in Donegal, for example, they should be able to consult the relevant site to discover whether they have an unclaimed policy, rather than having to go through the traditional, old fashioned paper register. I may be wrong, and hopefully the Minister will point out that I am incorrect and that the legislation will insist that the register be made available on the Internet, rather than making people travel all the way from another part of Ireland to seek out the register, wherever it is, and go through it.
The two points I wish to make are, first, on the method of communication and, second, on the register itself, and making sure that it is available. One of my heroes is Tim Berner-Lee, who invented the worldwide web and decided that he did not want an income from it. He did not go out to seek an income. He has not been recognised as a hero, despite the benefits with which he has provided the world. Another young man in his early 20s, a Norwegian called Linus, invented the alternative to Bill Gates's Microsoft. Bill Gates resolved to make a load of money and became the richest man in the world, and more power to him, but Linus decided that he wanted to give his system to the world. It is almost the equivalent of William Caxton, back in the 1400s, deciding that he would patent his system and get money from everybody who ever printed anything in the future.
The reason I am going to some pains on this point is that I am an enthusiast for communication in much more efficient ways than this Bill seems to suggest. I imagine the Minister will say that the Bill does not exclude electronic communication, and it does provide that the register may be kept in any form subject to its being capable of being converted into a legible or written form. I hope the Minister will be able to show me a provision in the Bill that insists upon the register being made available by electronic means.
I have singled out this aspect because with this Bill, there is a real need to persuade the public that this money may belong to them and that they should check it before the State takes it from them. The Minister will say that the great success of the dormant account is such that it is likely to contain a far greater surplus in the future, thereby ensuring that if somebody does seek to reclaim money at a later stage, that money will still be available. I am sure that is correct, but I want to encourage people to check whether they have a claim and to make is easy for them to find that information and process their claim. I ask the Minister to respond to that point.
I join other Senators in welcoming the thrust of the Bill. It is designed to do two separate but complementary things. The first is to inform policyholders or potential claimants that they may have a life assurance policy that has not been claimed and the second is to set up a mechanism for the transfer and disbursement of funds. In terms of the latter, the balance is about right, although I do have a few comments to make about it. I am not altogether sure, however, that we have made anything remotely like sufficient provision for telling people in the first instance that there is a policy in existence under which they may be entitled to make a claim.
The comparison has been made, properly and rightly, with the 2001 Bill, but there is one significant difference. In many cases, the policyholder will be deceased, so the person entitled to claim the money is not actually the person who made the contributions to the life assurance company over the relevant period. It is also perfectly possible, therefore, that the person who is entitled to claim the money does not and never did know of the existence of the policy. They may be the nominees, the heirs or beneficiaries of the estate of the deceased person but may have no knowledge of the existence of a policy under which they might be entitled to claim money. That is a significant additional difference, which must place a greater onus on assurance companies to tell people of the existence of a policy in the first place.
As I read it, the only requirement under this Bill is for the assurance company to contact a policyholder or the heirs of a policyholder at one point only – five years after the policy matures. There is no requirement upon the assurance company to contact the policyholder at any time before the policy matures, as there should be, and there is clearly no responsibility upon the assurance company to contact the policyholders or their heirs for a full five years, or in some cases, 15 years, after the policy matures. Apart from anything else, this means that the assurance company has the benefit of that policy and the funds that accrue from it for a period of five or 15 years. It is almost certain under the terms of the policy that they would not have to pay out interest on foot of that, so they basically pocket the money and presumably hope that, in many cases, nobody turns up.
There should be a much greater onus on the assurance companies to inform policyholders at various stages during the process of what the entitlement might be. There is also, as far as I can see, no responsibility at all upon anybody, be it the NTMA or the assurance company, to tell people after the event that the money has been transferred. Once the notice has been given and the advertisements are in the newspapers, there is no specific obligation on the assurance company or the NTMA to contact potential policyholders or claimants at some stage in the future to tell them that the money is there and ready and waiting to be collected. That is also a deficiency.
Most assurance companies are cash rich and profitable, and it would not be unreasonable to require them, even before a policy matures, to contact policyholders on an annual basis to remind them what the state of play is – to remind them, at the very least, of the basic fact that there is a policy in existence.
That general principle should apply, incidentally, beyond life assurance policies. When I was looking at this Bill yesterday, I recalled that prior to my election to the Dáil in 1992, I had a pension policy with our biggest life assurance company for three or four years, which I froze. I have not heard a single word from the company since. I was well on the way to forgetting the policy until the Minister published this Bill and, in timely fashion, reminded me of it. I have not received one written communication, electronic or otherwise, from that assurance company in the past ten years. There must be an obligation on companies to communicate with policyholders on at least an annual basis. While this should apply before the policy matures, it should certainly apply when it matures and for each year of the five years before it becomes unclaimed under the terms of the Bill.
A serious case can be made to improve the way in which one can claim moneys due after they have been transferred. In so far as I can tell, there is no power in the Bill for an individual claimant, or someone who thinks he or she might have a policy, to inspect the register. It is not a question of whether the register is kept in hard copy or electronic format – one cannot check the register that includes other names. I accept a balance must be struck and that private information should not be shared with those who have no direct interest in it. Senator Quinn raised an interesting point. It is surely possible for individuals to check electronically whether they have funds held by an assurance company or which have been transferred to the NTMA.
I looked at the amendments proposed on Committee Stage in the Lower House and was struck by one proposed by Deputy Richard Bruton of Fine Gael regarding maintaining a central database. If one thinks a deceased relative may have had a life assurance policy that has matured but does not know with which company it is held, one has no alternative but to start making inquiries of individual assurance companies. There is no central database one can check. The Bill offers the opportunity to introduce a central register or database that would make it possible for individuals to contact assurance companies, or more particularly the NTMA, to establish if there was a policy under which they might be entitled to claim money. There should surely be a responsibility on the NTMA to maintain a register containing the names of policyholders whose unclaimed policies were transferred to it. There is no such facility or provision in the Bill. That is unfortunate. We should use the opportunity to introduce such a provision.
The structure for the disbursement of funds provided for in the Bill is ingenious. It is obviously an attempt to strike a balance between providing the kind of slush fund about which Senator Phelan spoke and a transparent feature. I am more than a little bewildered by what we have ended up with. The board is now required to draw up a plan that observes the general principles set out in the Bill but the Minister, in consultation with the board, still has the power to direct that a programme be funded from the moneys assembled in the fund. The description in the Bill of what the moneys can be used for is pretty broad and no doubt the plan would be, too. We need to decide whether we want a transparent policy implemented by the board or allow the Minister to decide. The latter seems to be the most sensible option but if we want the Minister to make the decision, we should remove the bureaucratic underlay set out in the Bill.
It is quite normal for the Opposition to deplore the regulations a Minister is entitled to make on foot of a Bill but these take the biscuit. Section 7 allows the Minister for Community, Rural and Gaeltacht Affairs to change any provision of the Bill he or she wants, provided he or she does so for the common good or the "orderly regulation of financial services". This is too broad a power to give to the Minister. There is little point in introducing a Bill of this kind if the Minister can change any provision in it by regulation – it should be much more restrictive. Regulations should be made by the IFSRA with the consent of the Minister for Finance.
I am puzzled as to the reason the basic power under the Bill is given to the Minister for Community, Rural and Gaeltacht Affairs. It would surely have made more sense to allow the Minister for Finance make regulations that govern an important part of the financial services industry. Admittedly, his or her consent is required under the Bill but the reason is beyond me the primary responsibility is given to the Minister whose primary interest is dispersing the funds. The balance is not quite right.
I am not sure that we have imposed the correct obligations on life assurance companies to contact policyholders. This is the principal area we should explore further. I would like to hear more about the Dormant Accounts Act 2001. To use Senator Mansergh's words, we have successfully managed to reconnect a number of dormant account holders with their money. How much money has been collected by the agency and what are the plans for dispersing it?
I welcome the Minister of State. This Bill is receiving wide acceptance as it is seen as putting money to good use that would otherwise be lying dormant. I agree that we must ensure people are informed of their accounts. How this is best done is critical. It is not sufficient to put notices in newspapers a couple of times a year. There will be a strong onus on the State to inform people that they hold unclaimed assurance policies. The Bill must deal with this more strongly and effectively.
The Minister of State has outlined that the money will be prudently invested and dispersed by the NTMA. It is important that we know how much money is involved. Based on previous experience with the NTMA, I am concerned about how effectively it will look after this money. For how long will it be invested by the NTMA before dispersal? I am concerned that moneys could lose value if they are left with the agency for an unspecified time. When I say the agency does not have a good recent record, I am cognisant of the fact that the world economy is not great and that this is affecting investments. If the money to which I refer is left with the agency it could, in time, begin to have a positive effect. It is important to know how long the Government will leave this money with the National Treasury Management Agency before disbursing it.
I suggest that the elderly should benefit from this windfall because many of them would have had investments, such as their pensions. I refer in particular to occupational pension schemes. When people retire they discover their pension is worth very little. This could be a mechanism which could assist elderly people in their later years in making their lives a little more comfortable. I welcome the Bill, although I am concerned about how the proceeds of these policies will be managed and that the best benefit will be obtained from them.
I welcome the Minister of State, Deputy Fahey. I agree with many aspects of the Bill that have been highlighted and I am delighted it has been introduced as there are many good reason for it. However, it may have been introduced too hastily. Perhaps we should have waited until details of what will happen in regard to the proceeds of the dormant bank accounts had emerged. It would be helpful to have information about the amount of money that will be collected from that procedure, the use to which the moneys collected will be put and how much it will cost to collect the proceeds of these unclaimed policies. That would be a good and necessary exercise to carry out before we deal with these policies, which are an unknown quantity. We do not know how much money the proceeds of these unclaimed policies will generate, the number of unclaimed policies, how much it will cost to collect the proceeds from them or the purpose for which those proceeds will be used. Perhaps the Minister of State should have waited until all the details in relation to dormant bank accounts were available.
A good reason outlined for the introduction of the Bill is that it may make many people aware that they or someone belonging to them may have a dormant policy. As Senator Quinn rightly pointed out, every effort should be made to ensure that people are enlightened about the proposals in regard to the fund and that every effort is made to publicly put in place procedures whereby people can easily find out whether they, or somebody belonging to them, have a policy.
Where does the buck stop in relation to the next of kin of the holder of an unclaimed policy? Is the next of kin a member of the policyholder's immediate family, a first or second cousin, a neighbour or would it suffice to have a piece of paper held by a solicitor to the effect that a policyholder intended to pass on to a neighbour the proceeds of a policy in his or her will, even though he or she had not made one? Where will the line be drawn in this regard? Wills are contested in many cases and I am sure the proceeds of these policies could also be contested.
The Bill provides that if a policyholder wishes to reclaim the proceeds of a policy, he or she can do so from the fund. How long will the proceeds of unclaimed policies be held in the fund? If all proceeds of the unclaimed policies are spent, will the taxpayer have to pick up the tab if a person claims in three or four years that his grandfather, grandmother or somebody belonging to him had a policy, the details of which he can present. Who will pay the proceeds of that policy if the money in the fund has been spent?
Like other Members, I am also concerned about how the fund will be disbursed. The majority of the holders of unclaimed policies are from various parts of the country and, as a result, the proceeds that will be transferred to the fund should be disbursed throughout the country. The proceeds of unclaimed policies should be ring-fenced for projects in areas from which the policyholders come. Projects funded should also carry the names of the policyholders to the effect that a project has been made possible as a result of the proceeds of a policy belonging to Joe or Mary Soap or a project should carry the names of a number of policyholders. The proceeds of unclaimed policies should not merely be transferred to a pool of money and then disbursed by the Government or by a Government Deputy in his or her constituency. The people who took out these policies should be acknowledged in regard to the proceeds of their policies funding for the provision of future projects.
I welcome the Bill, although I have reservations about some aspects of it. As Senator Quinn said, I hope that every effort will be made to notify policyholders and their next of kin of the details of unclaimed policies. I hope the Bill will have the effect of bringing forward many holders of these policies, who do not realise they have them, or their next of kin. The Bill will generate much publicity in relation to bringing that to light. I hope that the Minister of State will respond to my point concerning the next of kin of such policyholders.
I thank the Senators for raising a number of pertinent questions concerning the details of the Bill. I also thank them for their co-operation in facilitating the passage of the Bill through the House. I am particularly pleased that I can relay to my colleague, the Minister for Finance, the general support among Members for the Bill.
We all appreciate that life assurance is a technical subject. The Minister has attempted to produce a Bill which manages to deal with the complex issue of unclaimed life assurance policies in a relatively straightforward manner.
I listened with interest to the concerns expressed by Senators, which I will convey to the Minister. The main issue raised concerned the sending of notices to all relevant policyholders every year, regardless of the fact that their moneys would have been transferred to the dormant accounts fund. This issue was raised by Senators John Paul Phelan, Quinn and McDowell. It should not be forgotten that prior to and possibly since these policies became inactive, the life assurance companies have been trying, to no avail, to make contact with the policyholders. It is also significant that it is in the industry's interest to pull out all the stops to contact these policyholders because the companies will lose the underlying funds if no contact is made, although they will still have to administer the policies.
To compel the undertakings to go beyond what is reasonable in this regard will involve an extra cost to the industry, which inevitably will be passed on to the consumers. In trying to reach a balance, the Minister specified that notifications will take place every year so that there will be sufficient notice. This year alone there will be four newspaper advertisements to this effect. The best example of the success of this to date is the fact that the contact made to date this year has been very successful. Since the scheme came on line last March, less than 12 months ago, the number and value of reactivations have been significant. Some €400 million lay dormant at the end of last March, of which, by the end of last December, €150 million had been reclaimed. Given the difficulties prior to the introduction of the scheme, it must be accepted that it has been a considerable success. I am advised by my officials that the Department has already received a number of queries about the scheme, many of which have come through the Department's website, and this is before it has come into operation.
I accept Senator Quinn's point about notification. His example of the universities is a good one. Obviously, nothing much can be done about the fact that contact can only be made through the correspondence addresses given to the life assurance companies and that they may not have the relevant e-mail addresses. However, details of the schemes are available on the websites of all Departments.
How does that sit with the notion that it is in the companies' interests to contact policyholders? If they have the use of money for up to 15 years and they are not obliged to pay interest on it, why is it in their interests to contact policyholders before the 15 years have expired?
As policyholders are still entitled to the full benefit either way, there is no disadvantage to them and the insurance companies which must pay up in any event.
Regarding the point made by Senators John Paul Phelan and McDowell that the money in the dormant account fund could be used as a slush fund, obviously the Minister for Finance, Deputy McCreevy, has no intention of doing this. The Committee of Public Accounts recommended that the fund be used for charitable and community purposes, which is exactly what is provided for in the Bill. The involvement of the disbursements board is significant in that surplus moneys, subject to the guidelines laid down in the 2001 Act, would be disbursed by the board under the overall policy guidelines given by the Minister for Community, Rural and Gaeltacht Affairs. Obviously, no accusations can be made against the Government about slush funds.
Senator John Paul Phelan was concerned about the impact of the recent losses in the national pensions reserve fund. It is fair to say the National Treasury Management Agency has given excellent service, principally in its capacity as manager of the national debt. The Government has advanced new policy initiatives responding to the changing environment. The agency has shown its ability to build on its core experience and respond quickly to changing demands. The Minister has every confidence in its ability to manage the proceeds from dormant accounts.
The functions of the inspectors are specifically laid out in section 19. Inspections will be conducted as and when necessary, probably for two to three months from May 2004 onwards. Inspectors will have access to the institutions' registers of unclaimed policies for the purpose of carrying out their functions. Their fees will be paid from the reserve account of the dormant accounts fund.
Senator Mansergh asked that consideration be given to persons or projects catering for mental health. Section 41 in Schedule 2 reads: ".for the purposes of programmes or projects, designed to assist the personal, educational and social development of persons who are economically, educationally or socially disadvantaged or persons with a disability". This section was deliberately drafted as broadly as possible to give the board maximum flexibility in prioritising areas, including the area to which the Senator referred. It gives the scope to provide funding for any type of mental or physical health problems. Knowing the composition of the board, I have no doubt that it will give a high priority to those to whom the Senator referred, something with which I am sure we all concur.
Senators Quinn and McDowell raised the issue of a central database containing details of policyholders whose policies are unclaimed. A proposal was brought forward for such an electronic database, accessible to members of the public to the extent that they could check if there were any dormant assets in their name. That proposal has been examined and the concept holds a great deal of merit. It would come into effect where the controller of the database received reasonable evidence of a claim to the proceeds of a dormant account or unclaimed life policy. The Minister has already stated that, if such a database was properly constructed and managed, it could assist members of the public in tracing dormant moneys. He is aware that a number of commercial organisations are interested in assisting with such a database.
We should not underestimate, however, the legal complexities and obstacles to be surmounted in proceeding with this proposal. As such, it is not something that can be countenanced for the Bill because it requires detailed further analysis from both the legal and commercial viewpoints as well as the agreement and assistance of the industry. A number of issues must be considered, not least of which is the legal and constitutional right to privacy enjoyed by all and also the institutions' duty of confidentiality to their customers. The second major consideration is the commercial viability of the establishment and maintenance of such a database. However, as there is merit in the proposal, the Minister for Finance has asked his officials to examine the matter further and discuss with the industry and the Office of the Attorney General the pros and cons of such a proposal. As he sees it, the centralised large volumes of personal data would not only have to be legally permissible but also cost-effective and user-friendly to warrant pursuing the exercise. I assure Senators that this matter is still under consideration as a short-term objective.
Senator Paddy Burke referred to the definition of a policyholder, which recognises that many people – for example, the person who proposed the policy, his or her heirs or assignees – are entitled to make claims. It will depend on the circumstances obtaining at the time of the claim, that is, whether the original policyholder is still alive.
Senators Paddy Burke and Terry also mentioned the operation and management of the fund. As already stated, this will be done under the auspices of the NTMA. The money transferred to the fund will be split between two accounts – a reserve account and an investment and disbursement account. Now that we have a clearer idea of how much money will be coming into the fund and the length of time it has been dormant, the officials from the Department of Finance have already begun to discuss with the NTMA how the money is to be divided between the two accounts in consideration of the purposes these accounts are to serve. Once the officials have a feel for this, they will discuss it with officials from the Department of Community, Rural and Gaeltacht Affairs. Under the scheme, which has been running for some time, we cannot know how long the money will remain in the investment account. In any event, the board will be advised to operate very reservedly for a few years until we see how the scheme operates.
Senator Paddy Burke suggested we should wait a little longer. In this country we are plagued with waiting a little longer for so many things to happen. While I agree with the Senator in many cases, I certainly do not agree we should wait any longer in this instance. We should get on with the job because nothing but benefit will accrue from this Bill.
I thank the Minister of State for taking us through the debate and for his very comprehensive reply to the points raised.
Question put and agreed to.
Committee Stage ordered for today at 4 p.m.
Sitting suspended at 12.35 p.m. and resumed at 2p.m.