Written answers

Thursday, 28 April 2005

Department of Finance

Insurance Products

5:00 pm

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 122: To ask the Minister for Finance if his attention has been drawn to the fact that the commissions paid to financial institutions in respect of premia for payment protection insurance have not been revealed to borrowers, despite levels of up to 70% commission allegedly applying; and if he will report on the gaps in legislation or codes of conduct which have permitted this situation. [13829/05]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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Regulations were introduced in 2001 in respect of the disclosure, by insurers, of commissions for life insurance policies. However, similar regulations have not been introduced in respect of non-life insurance disclosure.

Under the Central Bank and Financial Services Authority of Ireland Act 2003 the regulatory and supervisory functions in relation to insurance, including the power to make regulations in relation to disclosure, were transferred to the Irish Financial Services Regulatory Authority, the financial regulator.

Since its establishment in 2003 the financial regulator has sought to promote the best interests of users of financial services. In addition to certain well publicised interventions to assist consumers, the financial regulator aims to ensure that financial service providers act in a fair and transparent way and that similar standards apply to different sectors and products. A number of the initiatives taken by the regulator have particular relevance to payment protection insurance.

On 13 January the financial regulator issued a consultation paper entitled Review of Remuneration Structures and Transparency. The closing date for the receipt of comments on that paper was 15 April 2005. The financial regulator is considering the submissions and comments received and further requirements relating to the disclosure of commissions are being considered in that context.

The financial regulator also had some concerns about how payment protection insurance, PPI, was being sold arising from consumer focused inspections and undertook a survey of sales practices, suitability assessment and claims history in 2003 and 2004. The outcome of this survey, together with any further information or clarification, will feed into the development of the financial regulator's unified consumer protection code, a draft of which is currently published for consultation.

As regards the sale of PPI, the consultation paper on the draft code proposes an extension of suitability requirements by preparing a written statement on the reasons the recommended product is considered to be in the best interest of the customer at the time it is given. Where a regulated entity offers PPI in conjunction with a loan, the initial repayment estimate of the loan advised to the customer must be exclusive of the payment protection premium. If the customer decides to avail of the payment protection insurance, the regulated entity must endeavour to get the customer to sign a separate statement confirming that he-she is aware that the insurance is optional. The payment protection proposal form must be separate to the loan application form.

The financial regulator has also produced a consumer fact sheet on payment protection insurance designed to help consumers to understand this insurance and to decide whether it is suitable for their needs. The fact sheet is available through its consumer helpline, 1890-77-77-77, on its website www.itsyourmoney.ie and from the Information Centre, 6-8 College Green, Dublin 2.

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