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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"—
(a) He is a member of a body of Insurance Brokers...
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.
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