With less than four months to the end of the year, the Minister of State for Science, Technology and Commerce, Mr Noel Treacy, who has responsibility for the insurance industry, is running out of time if he is to make good his pledge to bring in full and transparent disclosure regulations for the sale of life assurance products.
He reiterated his plan last May at an annual Insurance Industry Federation meeting where the companies themselves said that they were "looking forward to a new era of clarity and transparency when the pre-contractual disclosure of information regulations are introduced". But a spokesman for the Minister said this week there was still "no definite date set" for the Ministerial Order.
This issue has been with at least two administrations for at least three years and has still not been adopted - as promised - as a Ministerial Order to the Sale of Goods and Supply of Services Act. This week, the Consumers' Association of Ireland wrote to the Competition Authority asking that it investigate whether the Irish Insurance Federation is in contravention of the Competition Act because of what it claims are continuing efforts on the part of the IIF, in particular, via its powerful Life Management Committee, to lobby the Department "to prevent the pro-active disclosure of commission".
"It is our view that if commission is disclosed, the cash costs taken by the companies from life policies must also be disclosed which would allow consumers to make a real comparison of value between companies," said a CAI spokesman.
"When the Competition Authority ruled against the IIF Remuneration Agreement [which set the maximum levels of commission] they said that it `engendered a culture of consensus decision-making'. Basically, the Competition Authority said that the life assurance companies could not work in concert to set commission payments, that this was anti-competitive. We believe any lobbying by the IIF against the full disclosure of commission is also violating the same Competition Act that virtually closed down the IIF's Remuneration Committee for working in concert. We are calling on the Competition Authority to investigate whether this is happening and to rule on any findings."
The chief executive of the Irish Insurance Federation, Mr Mike Kemp angrily denied that the IIF has lobbied to keep disclosure of commission or other charges out of customer information at point of sale. "We have been saying that the most important information is the total charge that is to be taken from premium contributions. We don't think that commission on its own adds very much to the customer's knowledge, but we are happy enough if it is included. We also genuinely do want this ministerial order to be introduced."
Mr Kemp added that one of the "minor issues" that still needs to be finalised by the Department is whether the same sort of information being discussed for disclosure for individual contracts should apply to group pension schemes.
It isn't just disclosure of commissions and other costs that is supposed to be introduced by the end of this year. The insurance industry said last May that it was "close to finalising an industry model fact find that will ensure that companies gather, during the sale process, adequate information to ensure they supply the customer with a policy specifically tailored to his or her needs". Except for the disclosure of costs and commissions, at least half a dozen IIF members (including the bank assurers, AIB and Bank of Ireland, Irish Life and Equitable Life) have already introduced extensive fact finds, some of which are virtual replicas of the comprehensive models required by the highly regulated British insurance industry. This begs the question why four months later, this standard fact find has still not yet been introduced.
Finally, it was announced at the May meeting that "considerable progress has been made in discussions with Government departments and with the Central Bank about the creation of an investor-compensation scheme which, it is hoped, will be introduced before the end of 1998".
The CAI, which was invited to make a contribution to those discussions, says that it is a year since the draft documents were first presented and that it has not seen any updated version. The compensation scheme is being introduced as a requirement of a European directive on consumer protection. Self-regulation of the life assurance industry, through compliance with the Insurance Act and its own codes of conduct and practice, has been something the Irish Insurance Federation companies and its intermediaries - life and pension brokers - have been keen to defend. Over the years, as examples of poor value and misselling emerged or as EU directives were adopted, they would make some minor adjustments and claim that the system continued to serve the Irish customer far better than the "quagmire of costly regulation" (as one insurance chief described it to Family Money) ever did in Britain. (Despite this, no IIF company has ever been sanctioned by the Department for breaching the Act or codes.)
This is why the IIF's recent admission in its August newsletter that "the proposal of the Oireachtas Joint Committee on Finance and Public Service for the establishment of a central regulatory authority for the Financial Services sector deserves careful consideration" is such an interesting one. The IIF notes that "the gradual blurring of traditional boundaries . . . has resulted in a marketplace where the customer now has a bewildering array of product providers from which to choose. It is no coincidence that one of the proposals contained in the recent Pensions Board report Securing Retirement Income was for a portable pension product that would be available not only from life assurance companies and banks but also from post offices and even supermarkets and other retailers".
It is no secret within the life industry that most of the existing companies are deeply concerned that low cost distributors, like An Post, supermarkets and credit unions, would be able to sell highly lucrative pension plans. Family Money has been told by industry sources that "the last thing the IIF wants is to lose control of the distribution of life and pension products to the likes of Dunnes Stores or Superquinn". The same industry sources believe that the IIF's late conversion to the idea of a centralised regulator is its way of positioning itself and safeguarding its interests with any new regulatory body.
