Patrick O'Donovan (Limerick, Fine Gael)
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Question 55: To ask the Minister for Finance if he will examine the situation that life assurance companies are increasing the level of premiums payable by policy holders while also reducing the value of the policy and the amount due to be paid out to the beneficiary of the policy; if companies are entitled to do this without the expressed consent of the policy holder; and if he will make a statement on the matter. [22856/11]

Michael Noonan (Limerick City, Fine Gael)
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Consumer issues relating to insurance matters are covered by the Central Bank's Consumer Protection Code. The Central Bank has informed me that there are life assurance products for which the benefits and premiums can vary over the life of the product. These are called 'Unit Linked Whole of Life Policies'. Each life protection policy is intended to pay out a sum of money to the beneficiary in the event of death of the insured person. Premiums are not guaranteed to remain constant throughout the life cover protection period. Premiums that are paid are used to purchase units in a unit-linked fund, which in turn pays for the life cover protection.

The performance of the fund is linked to fluctuations in the stock markets and, therefore, if the fund increases, the value of units held by the consumer increases. Conversely, if the fund underperforms, then the consumer's share of units in the fund decreases. As the consumer gets older the cost of the life cover protection will become more expensive and therefore more units will have to be used if the same level of life cover is to be maintained. To avoid the possibility of policy funds not having sufficient value to pay for the life cover, life companies are supposed to carry out periodic reviews of a policyholder's fund to ensure that sufficient units are maintained in the fund to pay for continued life cover protection. This is governed by the terms of the policy rather than by any statutory obligation. Generally, a periodic review will take place 10 years after the policy's inception and usually at intervals of 5 year thereafter.

At the periodic reviews, life companies usually offer the policyholder a choice of:

paying a greater premium in order to maintain the same level of life cover, or

reducing the life cover protection in order to maintain the static level of premium.

The Central Bank expects that entities, regulated by it, ensure that the key issues, specific to 'Unit Linked Whole of Life Policies' such as the periodic review feature and the non-guaranteed nature of the premiums are highlighted by their sales staff at the point of sale.