Irish Life has become the first major financial institution to call for independent statutory regulation of the industry, admitting that the public had lost faith in the current system of self-regulation. Any future independent authority should be charged with regulating the entire financial services industry, rather than being limited to banks or building societies, the life assurance company said.

The firm's chief executive, Mr David Went, yesterday told an Oireachtas joint committee that trust between customers and financial institutions was of absolute importance. Customers had to believe they were being dealt with in a fair and impartial manner, and that their interests were being safeguarded, he said.

"The current system of self-regulation, where the industry plays a very large role in policing its own behaviour, can no longer be said to be sufficient to encourage consumers to have faith in the industry," Mr Went told the committee.

The statement by Mr Went, the head of the Republic's fifth-largest public company and the former chief executive of Ulster Bank, is likely to cause surprise within the industry.

In around a fortnight's time, the Tanaiste Ms Harney and the Minister for Finance Mr McCreevy will bring a memorandum before the cabinet outlining a proposal to establish such a regulator.

Mr Went appeared before the Oireachtas Joint Committee on Enterprise and Small Business primarily to answer questions about alleged misselling of Irish Life insurance policies.

He and Irish Life's chief operating officer, Mr Denis Casey, stressed yesterday that the company had never condoned "churning" of policies - unnecessarily selling customers new policies to replace old ones - and had introduced a series of measures to prevent the practice.

They also said that churning benefited the sales agent by increasing commission volumes, and harmed both the company and the customer.

Mr Went said that of the 805 cases of suspected churning investigated by the company, about 100 were initially identified where customers could have been mis-sold policies "based on calculations done with the full benefit of hindsight". However, individual scrutiny of these cases has so far revealed just 27 instances where the company felt obliged to compensate customers.

Mr Casey explained that often when customers changed policies, they were seeking to access a different range of benefits. Sometimes a couple might have gone through a separation and a joint life policy needed to be split, he said. A company source said last night Irish Life had paid out some £33,000 in compensation for the 27 cases to date and expected to have to recompense around 10 further customers.

Mr Went questioned the original anonymous affidavit which appeared in Magill magazine last June and provoked the committee to question the company. If it was to be believed, the salesperson who had written it would be "a fraudster and a crook", he added.

Mr Went said that, under European Economic and Monetary Union, Irish financial institutions would be prevented from achieving their full potential if they could not restore full consumer confidence in their business.

"Whether the current self-regulatory system is judged to be effective in practice or not, it is our view that it is unsustainable, because the consumers of this country do not believe it to be effective," Mr Went said. "In essence, the perception of the consumer is the reality of the industry."