The Gazette 1986

INCORPORATED LAW SOCIETY OF IRELAND GAZETTE Vol. No. 80 No. 8 OCTOBER 1986 Inadequate Cover?

T he recently introduced Insurance Bill is not only tardy, but in many respects, half-hearted. The Irish insurance world has suffered too many disasters in recent years to entitle it and its monitors to escape with such an inadequate measure as this. True, there are welcome provisions but the overall response to the Bill must be one of disappointment at its inadequacy. The requirements that the relevant ministers be supplied with further and better information by insurers would be even more welcome if it were certain that the information supplied would be acted on more effectively by ministers than has previously been the case. Equally, it would be an improvement if the publication of the annual Blue Book of Insurance Statistics were to be published promptly and not become, as it has been in recent years, merely a footnote to history. The sections of the Bill which are most disappointing are those dealing with Insurance Brokers and Agents. While the provision that deems a premium to have been received by an Insurer where the premium has been paid to an Agent in a case where a proposal has been invited or accepted by the Insurer is a step in the right direction, it is not at all clear why this provision should not apply to Insurance Brokers as well as to Agents. Neither is it clear why the provision that an Insurance Agent is to be deemed to be acting as an Agent of the Insurer when he helps the Proposer to complete a proposal should not equally extend to a Broker who so acts. Insurers must be made more responsible for the activities of all those whom they may equip and assist to solicit business for them. The Part of the Act dealing with commissions payable to Insurers or Brokers is apparently to be held in suspended animation in the hope that the gentlemen's agreement between Insurers in this area will continue to operate. Even if there were not doubts about how tightly the self regulation policy is being operated, it might be no bad thing to implement this part of the Act rather than have to do it retrospectively. There is, however, one major deficiency in this Part of the Act in that it does not make any attempt to limit the commis- sion payable in respect of new policies. It is notorious that in any business in which commission is payable to salesmen they will be tempted to "create" sales where the amount of their commission exceeds the first amount payable by the customer. An Insurance Broker or Agent should not be permitted to receive commission in respect of a single premium policy for a period of at least one year after the policy takes effect and in the case

of policies with annual premiums a commission payable in the first year should not exceed 50% of the amount of the first premium. The failure to introduce a proper registration system for Insurance Brokers leads to considerable weaknesses in the attempts in the Bill to control their operation. A section which starts off in bold style by saying "a person shall not act as or hold himself out to be an Insurance Broker unless"— soon weakens to "he is for the time being recognised by the Minister as having qualifications and meeting requirements equivalent to those of a member of a body so recognised by the Minister." Apart from the obvious disciplinary advantages which would flow from having a proper registration system, absence of registration is going to make life much more difficult for those who might wish to resist the spread of activities of Insurance Brokers or Agents from other E.E.C. countries. A provision that a Broker is to keep a separate bank account for all monies received by him in connection with his insurance business, which does not provide for any system of monitoring the keeping of such accounts, is worthless. A proper registration system would have made possible the appropriate monitoring of such a provision but also greatly assisted the establishment of a compensation fund backed by insurance cover for major claims such as solicitors and members of the I.A.V.I. have. The £100,000 bond provided for in the Bill could be wholly inadequate in the case of a dishonest Broker who handled the proceeds of claims for insured persons. While what is in the Bill is disappointing in itself it is even more unsatisfactory to find that no steps are being taken to follow the lead of other common law jurisdic- tions such as New Zealand and Australia that modify the increasingly unsatisfactory operation of out-dated insurance law concepts. The New Zealand Act also deals with the difficult problem of insurance cover for house and other property in the period between contract and conveyance. Over all, it is difficult to see this Bill as other than another piece of temporary tinkering, the sticking plaster solution, where a limited number of urgently needed provisions are encapsulated in a Bill while amendment of substantive law is postponed for another day, which rarely arrives. • (a) He is a member of a body of Insurance Brokers...