Pearse Doherty (Donegal, Sinn Fein)
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43. To ask the Minister for Finance if his attention has been drawn to the growing number of older persons that find themselves facing a choice between huge increases in premiums or a loss of value in their life cover due to the whole-of-life policies; and if he will make a statement on the matter. [50884/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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At the outset, it is important to note that as Minister for Finance, I am responsible for the development of the legal framework governing financial regulation.  Therefore, neither I nor the Central Bank of Ireland can interfere in the provision or pricing of insurance products, as these matters are of a commercial nature, and are determined by insurance companies based on an assessment of the risks they are willing to accept.  This position is reinforced by the EU framework for insurance which expressly prohibits Member States from adopting rules which require insurance companies to obtain prior approval of the pricing or terms and conditions of insurance products. 

Consequently there is no role for my Department or the Central Bank in any post-sale reviews on whole-of-life policies.  These are an individual matter for each insurance company and may differ from policy to policy.  

In order however to provide as full a perspective on this issue, I sought the views of the Central Bank about the nature and working of this type of insurance product. It advised that they are designed to provide consumers with life cover for their whole life. As long as the policy holder makes regular payments and the payments are sufficient to maintain the chosen benefits, this type of cover will pay a lump sum on the death of the policy holder.

The regular payment into the plan covers the cost of providing the benefits chosen on the plan. In the early years the payments are higher than the cost of the policy holder’s benefits with the extra money paid going into the plan fund. However, protection benefits get more expensive as policy holders get older with the result that payments into the plan begin to equal the cost of the chosen benefits.  In the later years of reviewable protection plans, the cost of the benefits increases significantly, and in order to keep the level of benefits at the current level of payments, the difference is made up from the plan fund.

In order to see if the consumer’s regular payment plus any fund that has been built up is enough to cover their chosen benefits for their reviewable protection plan, an insurance company carries out regular reviews of these plans (the period in which these are completed can be 5 years, 6 years, 10 or 12 years depending on the product). During a review the insurance company may find that the consumer’s current level of payments is enough to maintain the level of cover that the consumer wants.  However, the insurance company may also find that the current level of payments is not enough to maintain the level of cover desired by the consumer, thus explaining why a number of people are finding that their premiums are increasing.