On this section, I should like to have your ruling, Sir, on a matter of procedure. The section reads: "The scheduled agreement is hereby confirmed." If you pass this section, does that mean that we are precluded from discussing the scheduled agreement?
Insurance (Amendment) Bill, 1938—Committee.
Sections 1 and 2 ordered to stand part of the Bill.
Question proposed: "That Section 3 stand part of the Bill."
If this section is passed, it cannot be amended.
In passing this section, we are also passing the Scheduled Agreement?
Yes, that seems to be the position. It may, however, be more convenient for the House to have the discussion on the Scheduled Agreement than on this section. You can discuss it now, or on the Scheduled Agreement.
Mr. Hayes
Would it not be much simpler to allow Senators who desire to raise points on the Scheduled Agreement to raise them now in the usual way before we pass the section? All we can do apparently is to ask for information.
The fact of passing the Second Reading meant, in my opinion, passing the Schedule. I understood that we could not interfere with the Schedule, and by passing the Second Reading of the Bill, we also passed the Schedule.
That is too simple.
I understood that if we altered the Schedule, it involved the destruction of the whole Bill. The passing of the Second Reading meant the passing of the Schedule.
If the Seanad were not satisfied with the Bill after discussion, it could, in theory, defeat it even on the Fifth Stage.
All we can do is to ask for information on certain points that may not be clear and we should have some opportunity of finding out what a particular provision means. I, personally, have only one matter to raise.
It is all a question of which is the most convenient time to raise the points Senators wish to have elucidated. Senator Keane may proceed now if he wishes to make any statement.
Is it on the Schedule, I am to raise the points?
That appears to be the feeling of the House.
The question I want to ask the Minister really arises on Section 1, sub-section (3), paragraph (c) of the Schedule under which the terminating company will have power to promote a permanent company. I should like the Minister to explain why that roundabout procedure is adopted, why the permanent company should not come into being first and the terminating company be a subsidiary of that company, or why some arrangement could not be made whereby the existing contracts that are now to be handled by the terminating company, could not be segregated in the books of the permanent company? I know it is a question that is somewhat technical. I have read this Bill through to the best of my ability but it is very complicated and I find it very hard to understand the procedure laid down.
Of course many different schemes of amalgamation could have been devised. I have no doubt that those responsible for this agreement, during the course of the negotiations which led to it, considered many different schemes and the scheme which appealed most to them was the one that appears here. On consideration, it appears to be a simple straightforward scheme having regard to the many difficult problems with which those who negotiated the scheme had to contend. Four companies are being amalgamated. All their assets and liabilities are being transferred to a company which is being established for that purpose—a company established for the purpose of taking over these assets and liabilities. The amalgamated companies then go out of existence, except in so far as they remain in existence as holding companies in this Insurance Amalgamated Company, Limited. That Insurance Amalgamated Company, Limited, will have to deal first of all with policies issued by the amalgamated companies, policies which were issued at different times, subject to different conditions and on no uniform basis. They decided that the best way to deal with these policies, that is policies which are being transferred by the amalgamated companies, was to transfer the function to a terminating company and to form a new permanent company to deal with new business, operating the existing business on the basis of a closed fund. The new company will be able to issue uniform policies. It will be able to standardise the method of working. It will not be faced with the difficulty of having the efficiency of its operations marred by the various sets of policies issued by the companies taking part in the amalgamation, whereas the terminating company will be able to operate the closed fund without difficulty, using as its agents for that purpose the officers and the staffs of the permanent company. In due course, the company that will be operating the closed fund, that is the Insurance Amalgamation Company, will cease to exist. Its business will be finished. It will have worked off its liabilities or arranged for the transfer of these liabilities upon some basis to the permanent company, and will then be liquidated. At that stage, there will be only one company, the permanent company, which will have carried on none of the problems of the past and will have conducted its own business from the start on what we hope will be a new and better system which will prove more beneficial to those engaged in industrial assurance business.
I think there are advantages in having this arrangement of two companies, and I think that of the various methods of amalgamation which could have been adopted this has most to recommend it. I am recommending it to the Seanad, as I recommended it to the Dáil, on the ground that it was agreed by the companies. The prospect of getting an agreed scheme of amalgamation appeared at one time very difficult, but we have got an agreed scheme, and in so far as that scheme is open to no objection in principle that I can see, the best course for us to take is to accept it and to use it as a basis on which to build up future industrial assurance organisation here.
The Minister has enlightened me up to a point, but only up to a point. I rather gather that the Minister left it to these participating companies to formulate a scheme and during the formulation of that scheme stood aside and, finally, when an agreed scheme was presented, he consented to sponsor it. I rather feel that the Government had a responsibility from the very commencement of the formulation of the scheme in view of the very substantial obligations which the Government are undertaking in connection with the whole transaction. I do not want to get into a Second Reading debate, but what I do not see is the necessity for two separate boards of directors. Apparently there is going to be a board of directors to handle this terminating business, this closed fund, which will be getting less and less and, finally, will disappear altogether. At the same time, there is going to be another board of directors to handle the permanent company's business which will have to deal with all new business, and, no doubt, it will be very substantial. I cannot see the necessity for the two boards in that the business of the terminating company is only a segregation of business and practically only a book keeping matter. I know that this is agreed and I do not except that the House will upset it, but the House is at least entitled to full information on these points which, to me, are certainly obscure.
I should not like to give the Senator the impression that the history of these negotiations was precisely as he says—that the Government stood aside and waited until an amalgamation scheme was presented to it. In theory, that is what happened. Four companies came together; they agreed on a scheme which they presented to me, and I approved of it eventually. In practice, before they started negotiating, I informed them of the nature of the scheme that I would approve, the principles to which that scheme would have to conform and, in fact presented the parties concerned with a rough draft of the type of scheme I desired to have presented to me, with an intimation that a scheme which was not in general conformity with that draft would not be approved, so that it would be incorrect to say that the Government stood aside. Quite the contrary is the case, because the Government intervened right at the beginning and pushed through an amalgamation along these lines.
The Senator does not quite see the reason for two companies. We are proposing to put a large amount of State money into a fund designed to be the security of the policy-holders of the existing company. We are not in any sense guaranteeing the solvency of the permanent company, nor do we intend to subsidise it in any way. We want to ensure that none of the money which the State is providing is going to be devoted to the business of the new company. On the contrary, that money is being put up to make good a deficiency in the funds of the amalagamating companies and will be security for the policy-holders of these amalgamating companies. It is, therefore, I think, clear that there should be a separate fund. That is one reason, but there are other reasons. We hope that the new company will be able to operate its business on such a basis that the payment of bonuses to policy-holders will be a practicable step for it to take. Clearly, whatever profits are realised by that new company, and can be devoted to that purpose, should be retained for the benefit of the policy-holders of that company. We are, I think, doing enough for the policy-holders of the amalgamating companies in guaranteeing the solvency of the insurance funds behind their policies, and there are other reasons more directly related to administration which make it desirable that the two funds should be operated separately.
The one I have referred to is important, namely, that the policies of the amalgamating companies which the terminating company will take over have been issued on no uniform basis. There will be no common set of conditions applying to them and it would complicate the business of the new company to a considerable extent if they had also to be directly responsible for these older policies. The establishment of two companies does not, in fact, mean any substantial increase in the overhead costs of the whole scheme. While it is true that there will be two boards, the staffs, generally speaking, will be the same in both cases. In fact, the staff of the terminating company will be small indeed, in so far as the service of these policies will be dealt with on an agency basis by the permanent company, and there will be a certain amount of duplication in the personnel of the two boards. It is intended that some of the directors of the terminating company will also be members of the board of the permanent company. The managing director will be the same in each case, so that whatever additional expense may be involved in having an organisation of two companies, it will not be very great, and certainly will not be sufficient to offset the very substantial gains which result from this method of organisation.
This discussion is somewhat academic, but I hope the Minister will give an assurance that he will not in any sense duplicate these directors, because you reach a position, if you do duplicate them, in which some directors will be left with absolutely nothing to do. In the course of time the closed fund will get smaller and smaller, and eventually you will be paying directors for doing nothing. No doubt, directors are sometimes paid for doing nothing, but I do not think it is a principle to which the Government should, directly or indirectly, be a party.
I should not like to suggest that the directors of the terminating company will have nothing to do. They will have a very heavy responsibility to carry. They will have the investment and the safeguarding of the investment of a very large amount of money. While it is true that, in the course of time, the liabilities of the company will gradually disappear, it is not intended that the company will continue until the last claim on the last policy has been discharged. It could do that, but it is intended that, at some stage, as soon as it is practicable to do so, an arrangement will be made between the two companies for the transfer to the permanent company of the outstanding liabilities of the terminating company, and, when that takes place, the terminating company will be liquidated.
I did not intend to intervene in this debate until I found that I could not put in amendments. The Minister has said that the directors of the terminating company will have a very grave responsibility. If that is so, I should like to ask the Minister what were the considerations which induced him to select the persons whose names have been given in the Press as the directors of the new company? I find that one of the directors is a motor man. He may be a very good motor man, but I have grave doubt about his being a good insurance man. Another of the new directors is the manager of a milling concern. He may know how many loaves can be got out of a 10-stone bag of flour, but when it comes to insurance it may be quite another matter. Another director, who is a very estimable gentleman, and for whom I have a very high regard, is considerably over 60 years of age, and while a member of the board can be over 60 years of age, no agent over that age is to be employed. I have yet to find out what that gentleman knows about winding up an insurance company. Another gentleman is a stockbroker, and my small experience of stockbrokers has not been very satisfactory. I should like the Minister to tell us what induced him to make those selections. One would expect the Minister to select men who knew something about the business, or some men who knew something about it. I find also that the managing director is to be managing director of the terminating company and of the new company, and that we have had to go to the other side to get a man for this position. If my information is correct, we have got a pensioned servant from a company on the other side for the job. If we are going to start an Irish company, although I have nothing to say about this gentleman, I say that we should have got an Irish national. I should like the Minister to inform us as to the considerations which induced him to make these selections, and why, when appointing a managing director, an Irish national was not secured.
With regard to compensation for staffs, there is mention on page 32, sub-paragraph (b) (i) as to the amount of compensation to be given to persons who have what are known as book interests. There is a provision here which I should like to have explained. The scheme is that compensation will be payable on one of two bases. The first is that if you belong to a company which has, in fact, purchased books, you will get compensation based on the price paid by the company for the books. If, on the other hand, the company has not purchased books, the amount shall be fixed on a fair and reasonable basis, and having regard to the average value obtained for a book interest in such company during the 12 months ending 31st December, 1937. I am not an expert in the matter, but it has been represented to me that where a company purchased book interests it always did so at very low prices, and that, therefore, those persons holding a book interest, who will be compensated under this part of the scheme and who hold an interest in a company which made such purchases will get a very low amount indeed, while other people will get what one might call a fair market value. A book interest, as I understand it, is a saleable asset to which a person up to the present had the same right as I have to a house, or as any man has to any other asset of his. If, in fact, there are two different bases and one much less advantageous to the agents concerned, it is a matter worthy of explanation.
Paragraph 2, at the top of page 33, contains a provision which I do not understand. It seems to me to be capable of two meanings. It says that these persons "shall be entitled... to demand employment with the permanent company" and that "the amount of the salary to be paid to each such person shall be fixed with reference to the amount of the capital payment." Does that mean a bigger capital payment and a bigger salary, or a bigger capital payment and a lower salary? I am not quite clear about it, and would be glad if the Minister would enlighten us.
On the point raised by Senator Kelly it is not an easy matter to discuss the claims of individuals for appointment to a particular post of responsibility. I should say at the start that the persons whose names have been published as having been invited to act on the board of the terminating company will not constitute the whole of the board of that company. Only certain persons were asked so that a beginning could be made, and possibly those persons will be added to before the company really begins to operate. In making a selection of persons for membership of that board, regard was given to the work which that company will primarily have to do. It will not be directly concerned with the day to day administration of insurance business at all. The main function of the board of that company will be to safeguard its funds: to see that these funds are so employed as to ensure that there will be no wastage of the assets of the company—on the contrary, in the expectation that there may be an appreciation of them. I think that the persons we have chosen are fully competent. They are probably as competent as any persons available in the country to do that work.
Reference has frequently been made to the selection of the first managing director of this company of a person who is not of Irish nationality. I think if Senators and others will pause and think for a moment they will conclude that that had almost necessarily to be the case. We have in this country five companies carrying on industrial insurance business, four of which are participating in this amalgamating scheme. Clearly the selection as managing director of a person directly associated with one of the amalgamating companies might give rise to considerable difficulty when one has regard to the problem that there will be of amalgamating the staffs and of ensuring fair treatment between staffs, particularly in the case of a company which is going to carry for a long period of time a considerable surplus staff. I have no desire to disparage the ability of many of those associated with the amalgamating companies. Some of the officers of these companies would, I am quite sure, be quite fitted to act as managing director of this company. I do not say that we could have got the services of those that we would have chosen ourselves, because not all the executive officers of the amalgamating companies will be transferred. I do not think we would have been justified in selecting as managing director some of those who have been offering their services.
I feel certain that we have chosen an individual whose competence and knowledge of the insurance business are beyond question, one detached from whatever rivalry may exist between the amalgamating offices, one who will establish the amalgamation scheme on a fair basis and carry out more easily the general design of the Government behind the amalgamation scheme, which is to change entirely the conduct of industrial insurance business here—to put it on a basis which, we trust, will be fairer to the general public and better from the point of view of the country as a whole. I have no apology whatever to make for having chosen for that post a person of other than Irish nationality. I think that if we were under an obligation to ensure that the person whom we appointed was the most competent of all those available, having regard to the circumstances which I have described, we had necessarily to look outside the ranks of the employees of the amalgamating companies for such person.
Senator Hayes raised a question of considerable intricacy. I do not know that I will be able to give him a very lucid explanation of that part of the scheduled agreement. I have not heretofore received any representations to the effect that the provision for the compensation of persons holding a book interest, as set out in the agreement, are unreasonable. I do not know that the question of book interest is of very great importance. All that I know is that the price which will be paid will be reasonable, and I think that the provisions in the agreement are sufficient to ensure that the intentions of the agreement in that regard will be given effect to.
The reference which the Senator made to the paragraph at the top of page 33 relates to a particular provision of the agreement which is perhaps more difficult to put in non-technical language. Perhaps it would be better to defend that section of the agreement by a mere advertence to the fact that the scheme, as a whole, was approved by those who had a very direct interest in ensuring that no part of the scheme would be unfair to the interests concerned. It is true that the peculiar nature of the terms of the employment of some of the staffs of the amalgamating companies created a difficulty in laying down a clear line of policy for dealing with them. Generally speaking, I told the companies, when we were engaged in these negotiations, that the undertaking which I had given in the Dáil when the 1936 Act was being considered there, must be given effect to in the agreement: that is to say, that the agreement must provide adequately for the maintenance in employment in insurance of all persons who were dependent for their livelihood upon their existing employment in the insurance business. In giving effect to any general principle of that kind, some rough and ready method of calculation must, of course, be adopted. The method that was adopted is embodied in the agreement. It seeks to cover the various types of employment, and is designed to ensure that those persons who could be properly described as being dependent for their livelihood on their employment in the insurance business, and who had been looking forward to making employment in the insurance business their career, will be continued in that employment in the future on terms not less favourable than those which they now enjoy. All the various provisions of this section of the agreement are designed to ensure the application of that principle to the various types of employment concerned.
Representations have been made to me that there are two types of compensation to people with book interests: that where the company has bought a book interest the price will be low, and that otherwise the price will be a fair price. This is a matter on which I am not myself an expert. The Minister's explanation of the paragraph at the top of page 33 was, if I may say so, delightful. He did not make it clear to me.
Question put and agreed to.
Section 4 agreed to.
SECTION 5.
Question proposed: "That Section 5 stand part of the Bill."
There is just a point that I wish to raise on the section. It seems to me that if the sole object of this measure was to safeguard the policy-holders in these four participating companies—I know the Minister will say that it was the primary object—it would have been better for the Government to have guaranteed any deficiencies that might arise. In that case the assets would have been taken over and the fund would continue to work. That, it seems to me, would have been much better than locking up a sum stated to be in the region of £500,000. That money will have to be borrowed at a time when borrowing is none too easy and invested in the shares of this terminating company. I would like to know whether that £500,000 is going to be invested solely in the terminating company. I agree that question does not arise on this section. I would like to know if the Minister, or his advisers, considered this point that I have raised, because it seems to me that it would have been much more straightforward and, I suggest, more economical to have guaranteed the policies of the four participating companies rather than do what is set out here.
I do not know if the Senator is suggesting that we might have guaranteed the policies of the amalgamating companies or guaranteed the solvency of the amalgamating companies. In other words, is he suggesting that we could have secured the position of the policy-holders without an amalgamation scheme at all, or is his idea that, having effected the amalgamation scheme, we might have nevertheless secured the policy-holders of the amalgamating companies by a simple guarantee given to the terminating company? We could have done it that way but we considered that the giving of a guarantee by the State would involve the State directly in the administration of the company. The State would have to see that all reasonable precautions were taken to ensure that the guarantee would not have to be met. We preferred to see the company operating on a freer basis such as this scheme contemplates. There was, of course, also the consideration that it was desired to secure for the State some share in the equity of the company in proportion to its contribution to its establishment. That involved clearly that there would have to be some accurate assessment as to the value of the Government's guarantee.
The system devised here is fairly simple. By reference to it the Senator will, perhaps, see what I mean. In the scheme provided for in the agreement, the four amalgamating companies transfer to this company their assets and liabilities. By reference to the form set out in the agreement, the value of what they transfer is determined, and they get against that the value of shares in this company. In addition, the State puts in cash and for that cash gets shares. It is a simple matter to determine the number of shares which the State should get under that arrangement. To determine the number of shares which it should get in return for a guarantee would be a much more difficult matter. These shares are of a rather peculiar character. Their actual value will have no relation to their face value. The face value has, in fact, been fixed at 2/- each, but the State is getting only one 2/- share for each £1 it contributes and the amalgamating companies are only getting a 2/- share for each pound of value, if I may use that term, that they put into the company. These shares will, we expect, appreciate in value very considerably and will eventually be worth considerably more than their face value, possibly worth more even than the £1 upon which the number is calculated at present.
We could undoubtedly have operated some kind of amalgamation on the basis of a Government guarantee, but I think it is a better system to have this company dealing with its policy-holders on the basis set out here. It is desirable that there should be, in the case of industrial assurance, a fund in existence which is the property of the policy-holders—their security that they will be paid when they make claims on their policies. Each company doing industrial assurance should have that fund. The fact that the sum total of the life funds of the amalgamating companies is insufficient to cover their liabilities is due to the fact that a portion of the money that should have gone to the policy-holders' fund had gone in expenses of administration, or in bad investments or some other way. We felt that the best way to deal with those deficiencies to make them good in cash.
It is not practical to say that the money will be locked up, because the money held by the terminating company must be invested. It is from that income that the company will meet its outgoings and I do not think that constitutes a problem because if these deficiencies had not arisen, if there had been no wastage of assets in the case of some of these amalgamated companies, then the same amount of money would be there now, not in one fund but in four funds and would be invested by each of the amalgamated companies. Again, I have to say that it is only through that that this amalgamation scheme could have been devised. I do not know that I am making myself very clear as I do not profess to have technical knowledge on this matter, but having regard to the considerations which appear to me to have weight, I felt it desirable to approve this scheme. The State, against that cash subscribed, is going to get an asset of real value, an asset which may prove to be worth considerably more than the actual amount of cash that is being put up now.
I do not want to embarrass the Minister because this is a very technical matter, and I know that the Minister will understand that no one has a greater admiration for the way he has handled it than I have. I would like to ask, however, if a valuation has been made of what the deficiency will be in the four amalgamating companies or how has the £500,000 been arrived at? One word more, while I am on my feet. The Minister said that it would not be right, or probably proper, to take a managing director from any one of the four amalgamating companies but, might I point out that the man who has been appointed comes from another company that is likely to come in? I will let it pass at that, but I would like to ask if the £500,000 is the whole State liability in connection with the four amalgamating companies and, if so, how is it arrived at?
It is only an estimate of what the deficiency will prove to be. No one can say yet what the actual deficiencies will be, first, because the actual transfer date has not been fixed and secondly, because the valuation has not been concluded. The transfer date cannot be fixed until this Bill is passed by the Oireachtas.
Might I just point out that before we go any further, we would like to see what the deficits of these companies are. I claim to know a little bit about insurance and I do not want the Minister to have to come to the Dáil some time hence for another £250,000. Let us know exactly what the amount will be now. We should have those four societies valued at once because that £500,000 might easily become £750,000 or £1,000,000 later on.
I think that if the Senator will look into it for a moment he will see that no one can say exactly what the deficiency will be or what it is now. The figure we have determined is the figure estimated for the date on which the actual transfer of business will take place. That will not take place until the scheme is passed by the Dáil and the most we can give is an estimate. That estimate is about £500,000, representing what the deficiency will be.
On the second matter, it is quite true that we hope that the Prudential, the Refuge, the Pearl and other British insurance companies will eventually participate in this amalgamation and to that extent there is some point in his argument. When I referred to the difficulty of taking as the first managing director somebody directly associated with one of the amalgamating companies, I was thinking more of the difficulty there will be of adjusting differences between staffs, and I felt that difficulty would be enhanced if the managing director was directly concerned with staff matters here, that is, dealing with one section of the staffs amalgamated. There are other considerations. I do not want to say that that is the sole consideration. There was also his very high standing in the industrial assurance business, his reputation therein, and his approved competence and the fact that he had considerable experience——
As an actuary only.
The Minister is in possession.
—— and that he had experience of a method of administering business which is different from the method adopted here.
As the Minister has referred personally to the individual, I wish to say that I entirely agree with what he has stated in that respect. I am not an insurance expert by any means, but I know something about the gentleman, and I do not think the Minister could have got a better person. It is a highly technical subject. Senator Kelly raised the question of the qualifications of directors versus managing directors. Of course, they are quite different. Gentlemen who occupy positions as directors are, very often, not experts, and very often would only be interfering with the expert. The managing director must have technical qualifications. If I may say so, Sir, I do not think that these qualifications were available in the country. It would be absurd to say a retired civil servant had them.
The Minister said that, and it was clearly provided that the policy of the Government was to get full control, or a large measure of control, over industrial assurance, but I was not a bit convinced by the objections to guarantees on the grounds that they would have involved the Government in direct management or control of the administration. Why, every day the Government issues guarantees to concerns over which they have had no control whatever, Trade Loan guaran tees. There is an inquiry made in the first instance, of course, but there is no interference afterwards with the management of the concern. Until default is made on the guarantee, the Government can do, and actually do nothing. I do not feel that the difference is convincing, but I would like to raise this point.
Deficiencies are to be guaranteed— the Minister or the Government is to be responsible. How will that operate in practice? In the course of time, the finances of the terminating company may be very considerably better, and although there are deficiencies now in prospect, a position may be reached some time in the future where bonuses will be payable. When that position has been reached, it will be reached partly by management, but largely by the finance, assistance and participation of the Government. Should not the Government have the first say on that bonus or on that surplus? I do not think it is fair for the Government to be put into a position in which, if the finances improve, they get only the interest on their investment, while the surplus goes to the benefit of policy-holders who, if the Government had not come to their rescue, would probably be subject to default.
I do not say that the board would necessarily follow that policy. I am inclined to agree with the Senator that policy-holders of the amalgamating companies whose policies are being transferred should not bank unduly upon the expectation of getting bonus payments. When I referred here to the possibility of the payment of bonuses I was thinking of the policies of the permanent company, but what will eventually happen, we expect, is that this terminating company will be left only with assets, that, in due course its liabilities will disappear, for one reason or another, and it will be left only with assets, which will then be distributed to the owners of the equity of the company when the company has been liquidated. The Government will, at that stage, get its due proportion of the assets. If, in the meantime, the Government disposes of its shares—the Minister is entitled to do that although I think it would be bad policy to do so—then the amount the Government will get for the shares will be determined by the position of the company, the extent to which it has made progress towards that position when it will have assets only without liabilities, or when the shares will be worth more than their nominal value or more than what was paid. The extent to which profits paid by the company will be available for policy-holders will be a matter for the board, but I think it will be some considerable time before that question will arise in that acute form.
I have no doubt that the Minister and his advisers have looked into that matter, but under insurance law at present, shareholders are only entitled to a certain proportion of the surplus profits and the balance in excess of that proportion has to go to the policy-holders. No doubt all that has been gone into. I am satisfied that the Minister agrees that it would not be equitable for the residue of the policy-holders to share largely in any surplus that may exist when the fund is approaching the winding-up stage.
Section 5, put and agreed to.
SECTION 6.
(2) The following provisions shall apply and have effect in respect of all shares of the terminating company which are for the time being standing in the name of the Minister for Finance, that is to say:—
(a) it shall be lawful for the Minister for Finance to do all or any of the following things in respect of A shares of the terminating company which are for the time being standing in his name, that is to say:—
(i) to hold all or any of such shares for so long as he shall think fit,
I move amendment No. 1:—
In sub-section (2) (a) (i) to delete lines 44 and 45 and insert in lieu thereof the following words:—
"until the final allocation of shares as between the Minister and the participating companies shall have been determined as provided by Section 22 of the Scheduled Agreement, and thereafter for so long as he shall think fit unless within a period of 12 months from the date of such final allocation it is shown to the satisfaction of the Minister for Industry and Commerce that such shares can be disposed of on terms which will recoup the Central Fund for the advances made to the terminating company in which event it shall be the duty of the Minister to so dispose of his holding."
This amendment is designed to ensure that when the new amalgamation has been set upon its feet, the Government will be prepared to divest itself of its financial responsibility and leave the development of the undertaking to private enterprise, provided that Irish capital is then available to the extent necessary. The Bill provides for the investment, to an unspecified extent, of State funds and, because the amount required is an unknown quantity, it is obviously impossible, at the moment, to determine whether the capital necessary would or would not be made available by private investors.
An entirely new position will arise when the actuarial position of the participating companies has been ascertained and the liability to be undertaken by the Minister for Finance has been ascertained. The project will, then, have reached the stage when it can be examined as a business proposition.
The amendment provides for the termination of State ownership and control only if the Minister for Industry and Commerce is satisfied that the shares held by the Government can be disposed of on terms which would recoup the Exchequer, and it will be observed that the wording limits the time during which this change from State ownership may be effected. There can, therefore, be no question of private investors hanging back to assure themselves of the ultimate financial success of the new undertaking, as the disposal of the shares envisaged in this amendment could only take place while the amalgamation is still in its very early stages.
My reasons for moving this amendment having been put forward in the course of the debate on the Second Reading of the Bill, I do not propose to delay the House by restating the argument. It is true that, in the past, there were many serious abuses associated with industrial life assurance—many of them due to a defective agency system—but the provisions of the Insurance Act, 1936, preclude a recurrence of such abuses in this country and, even before the enactment of similar legislation in Great Britain, reputable insurance companies had taken effective steps to eradicate the evil. Private enterprise has had its failures in every branch of commerce and, although the business of insurance has had its quota of casualties, there is no branch of economic activity which can lay claim to a more creditable record of beneficial service to the community.
I can see no adequate reason why insurance or any section of insurance should come under permanent State control—as distinct from State supervision—and it must be remembered that not one, but two branches of insurance—ordinary life assurance as well as industrial life assurance—will be transacted by the new company. In other countries where Governments have tried the experiment they have learned their lesson in due time at the expense of the taxpayer, and, all too frequently, at the expense of the policy-holder as well.
Insurance is a business where same competition is necessary to provide an adequate service to the public and to maintain the flow of new business essential to successful underwriting. If the permanent Company achieves a virtual monopoly it will lack the incentive which would ensure the facilities which the public should have. On the other hand, if other insurance companies continue to operate, the new undertaking should be as unfettered as possible in order to work successfully on competitive commercial lines.
If we were to ask the man in the street his outstanding impression of industrial life assurance he would probably point to the number of cases which are contested in the courts. This factor exists in spite of the fact that insurance companies do not like contesting these cases and, as a general rule, do so only when no alternative is open to them and when equitable settlements cannot otherwise be secured. Can anyone imagine that a State-controlled institution would be able to deal with such cases except on a basis of strict adherence to rules which would preclude the flexibility possible in a commercial undertaking? It seems inevitable that a State-controlled company would find itself contesting many more cases than are brought before the courts under present conditions.
There is one national company with which I am personally associated, which furnishes an example of what can best be done by a Government in this matter of insurance. In 1926, the Oireachtas passed legislation to enable local authorities to establish a company for the transaction of their insurances. If I may say so, that company is an example of successful administration by insurance experts. I have had the honour of piloting it from its small beginnings to its present assured position, and I am convinced that the Oireachtas was right in allowing the company to develop along its own lines under competitive conditions.
Finally, I would stress the importance of the point that a Government-controlled company must for all time confine its operations to native territory. Life assurance could be developed so as to become an important invisible export, for the premiums paid to a life company remain in its custody for long periods, and there are not the same "in-and-out" payments which are a feature of fire, workmen's compensation, and the various branches of accident insurance. A commercially-controlled national life assurance company could, in course of time, spread its ramifications to almost every part of the world with an Irish population, for our exiles would gladly insure with a sound company operating from the homeland, and, with their assistance, the new enterprise could not fail to become an important factor in our national economy.
No one appreciates more than I do the anxiety of the Minister to put the business of industrial life assurance on a sound basis, and it is because I feel that the real help which the Government is offering in the proposals contained in the Bill can be supplemented and intensified, that I commend this amendment to the House. If the investing public are not prepared to take up the shares, the amendment will have no effect on the fortunes of the permanent company. On the other hand, if the necessary capital is forthcoming, the amendment will ensure that the State will be relieved of the obligation to run an insurance business for all time, contrary to all the lessons which may be learned, and all the experience which may be gained from those countries which have been least successful in the development of the business. I have pleasure in commending the amendment to the House, and I hope that it will meet with the favourable consideration of the Minister.
As amendment No. 2 is consequential on amendment No. 1, we shall take the two together.
I am afraid I must express my complete opposition to the amendment proposed by Senator Brennan. As I see it, the main object of the Bill is to relieve private enterprise from the awkward situation in which it found itself when its chestnuts had somehow got into the fire. To a certain extent, it is a case of the State acting as a cat's paw to recover the chestnuts from the fire, and the suggestion contained in the amendment is that the State, having acted in that kindly capacity, should in due course make a present of these chestnuts to private enterprise. I think the State, if it retrieves the chestnuts, should keep them. I think that the situation contemplated by the mover of the amendment, in his advocacy of the virtues of private enterprise, requires some further elucidation.
The situation which existed before the amalgamation was that we had a number of private insurance companies competing with one another and with English insurance companies for a certain amount of insurance business. That was private enterprise, if you like, and it certainly was not, in any sense, monopoly. But, when this legislation has been completely carried out, and when, as we hope, the amalgamated company has acquired the interest of competing British insurance companies in Eire, the situation will then be that there will be a single monopolistic insurance company doing all the industrial assurance in Eire; and I think a very desirable situation, so long as the State maintains a rigid control over the proceedings of that one monopolistic company. But, if the State relaxes its control, as the amendment contemplates, you then have a situation in which you have a monopoly company owned by so-called private enterprise, but actually, a monopoly, with all the economic power of a monopoly to exploit a monopoly position, and to make the public, either as policy-holders or otherwise, pay more for the service of insurance than that service is worth, the balance representing a form of transfer of income without service; in other words, exploitation of the policy-holders by the fortunate owners of this monopoly position.
I maintain that, if we must have monopoly, the State should have absolute control of that monopoly and should do any taxing of the individual that is to be done; and that any form of monopoly which involves, as a monopoly must, a certain power of taxation which is not under the control of the State is thoroughly objectionable. We have enough public taxation already, but at all events, we get public services in return for public taxation. But those who are the victims of monopoly taxation get nothing in return for that monopoly exploitation. I want to avoid a situation coming into existence in which a monopolistic insurance company will be able to exploit the public.
As I read the Bill, I do not understand that the purpose of the Bill is to bring all industrial insurance into the monopoly, but that industrial insurance can proceed independently of this Bill if people are so minded to do so. I also do not see how this amendment is going to effect the objects of the mover. If I am right, it only refers to the "A" shares; it only gives power to public investors if they so desire, to acquire "A" shares. But as I read the Bill and the schedule combined, it is the "B" shares that have the voting control, and if public investors wish to have control, they will have to acquire the "B" shares.
Arising out of that, would the Minister tell the House what is the distribution between "A" and "B" shares. The participating company, in return for assets transferred, I understand, get "B" shares at their nominal value. I may be wrong in that, but the Minister can correct me. Then a certain number—I do not know how many—of these "A" shares are allotted to the Minister for Finance. Over and above that the Minister for Industry and Commerce gets the "B" shares. I presume he gets the quantity of "B" shares stated in the scheduled agreement.
May I point out to Senator Sir John Keane that, as far as I can find out, the division refers only to the terminating or temporary company, and there is in fact no such division of the share capital in the permanent company.
Surely the amendment is to Section 6 of the Bill and this refers only to the shares of the terminating company. The first line says: "Every share of the terminating company..." There is no question that the section refers to the shares of the permanent company.
The point is that eventually the shareholders of the permanent company will be comprised of the shareholders of the terminating or temporary company; so that whoever holds the majority of the shares of the terminating company must of necessity have control of the permanent company.
Perhaps the Minister would say why he should hold the shares in this company through a nominee instead of openly holding them himself?
I think that that is not unusual. The Minister may find it more convenient to hold these shares through an officer in this Department or some other nominee than to hold them himself. The main question that arises is whether the Minister, either directly or through his nominee, should hold these shares at all. Senator Johnston has dealt to a considerable extent with the arguments put forward by Senator Brennan in moving his amendment. I was also struck by the fact that Senator Brennan's speech in support of his amendment did not appear to relate to the amendment at all. He was, in fact, arguing in favour of the retention of a reasonable amount of competition in industrial assurance business while the sole purpose of the amendment is to ensure that the Minister for Finance shall sell to members of the public the shares of this company which he may obtain. This company, whether it occupies a monopolistic position or not, will not have its position altered by reason of the sale of the shares to members of the public and what I take to be the main idea of Senator Brennan—to secure a reasonable amount of competition—would not be effected by the change.
Senator Keane asked if the purpose of the Bill was to create a monopoly. The answer must be "no." The purpose of the Bill is to give statutory effect to the scheduled agreement. That is an agreement for amalgamation between four companies now carrying on industrial assurance business here. There is, then, the further purpose of facilitating and making legal subsequent agreements between the new amalgamated company and any other company that may wish at a later stage to come within the amalgamation scheme. There is no legal enactment of any kind designed to compel the establishment of a monopoly in industrial assurance or to prohibit companies now doing industrial assurance business from carrying on that business. There are, of course, restrictions on the formation of new companies. In fact, one Irish insurance company has not, as yet, agreed to take part in this amalgamation, and the inclusion within the amalgamation of any of the English companies which have been mentioned would be as a result of agreement on their part. There is no power in this Bill or in any Act to require them to do that. If they do that they will do it as a result of agreement reached through negotiation. Personally, I favour monopoly in this type of business. I think that whatever disadvantages may arise through the absence of competition are of no consequence compared with the advantages which result from monopoly in this particular type of business. I do not say that monopoly in other forms of insurance business or in any other business is necessarily good, but in this particular type of business experience has shown that abuses of a very grave kind follow from excessive competition or, indeed, from any competition. The only real argument against the existence of a monopoly of industrial assurance is the danger that the monopolistic concern will not have the same inducements to go out and get new business which companies in competition have and that people who would benefit by insurance will not have the advantages of insurance brought to their notice or will not have the pressure put upon them which is now exercised in order to get them to take out insurance policies. I think that that is merely a matter of management, and that with good management, the same volume of industrial assurance business can be done here as was done in the past, or even a larger volume. The fact that business will be done on a much better basis from the point of view of the assured, that the terms which will be offered will be better and that abuses, known by the public to be associated with industrial assurance, will be eliminated, will help to extend, rather than diminish, the volume of business done.
My answer to Senator Brennan's amendment, apart from the speech he made in support of the amendment, is that the Bill gives the Minister for Finance power to sell these shares if he thinks it is good policy to do so. The amendment seeks to compel him to sell these shares under certain circumstances. While, in my opinion, it would be undesirable for the Minister for Finance to dispose of these shares in any set of circumstances that can now be foreseen, and while I think it would be very bad national policy for him to dispose of the ownership of the B shares at all, I think we should not compel him to take one course or the other. He must exercise his discretion in the matter. The Minister for Finance in any Government will be only too anxious to secure repayment to the Exchequer of the amount of the State contribution and, if the circumstances the Senator visualises arose and it became possible for the Minister to dispose of his A shares for the amount of the State contribution to the funds of the terminating company, the Minister for Finance would be strongly tempted to do so. If that circumstances did arise, I should use my in fluence to discourage him from such a sale because, unless it was clearly in the public interest that the Minister should dispose of his interest in these shares, I think he should not do so.
Different considerations attach to the A and the B shares and the Senator's second amendment relates to the B shares. It would be bad from every point of view for the Minister to dispose of his holding of B shares in any circumstances that we see at the moment or in any circumstances that we think might arise during the lifetime of the terminating company. If the Bill were to be amended to permit of the Minister for Finance disposing of his ownership of the B shares, we should put in a large number of conditions limiting his power of disposal. We should ensure that the Dáil and Seanad should be consulted as to whom he might dispose of these shares. A number of other conditions of that kind would also be desirable. As the Bill stands, the Minister for Finance is not entitled to dispose of his B shares at all, and I prefer to see it that way. When the Bill becomes an Act, it can always be amended by a subsequent Act, but that subsequent Act will have to be fully considered and passed by both Houses of the Oireachtas. If the circumstances at any time made it good policy, I am sure the Government of the day would come with such a Bill to the Oireachtas, but I do not think that the Minister should be given power to dispose of his B shares without consulting the Oireachtas, having regard to the whole history of insurance here, and to the circumstances which made necessary this scheme for amalgamation and the provision of a substantial amount of money by the State to make good the deficiencies in existing life assurance funds.
Senator Keane asked some question about the shares. I am not quite clear as to the point on which he required information. The nominal capital of the terminating company will be £200,010. That would be divided into 200,000 A shares of 2/- and 100 B shares. When I say shares of 2/- each, I ask Deputies to forget that figure, because we must put some value on these shares under the law, and that value does as well as any other. We have deliberately put a low value on the shares for the purpose of ensuring that the good-will item which must appear on the other side of the balance sheet will not be unduly large, and can be easily disposed of in the course of time out of the profits earned by the company. These shares are merely tokens by which the equity of the company will be distributed amongst the various interests concerned. The bulk of them will go, presumably, to the participating companies. To the extent that they become entitled under the provisions of the agreement, they will get these shares. The Minister for Finance will then get his shares to the extent that he has supplied cash. In addition, he will get 5 per cent. or 100,000, whichever is the lesser, without any cash consideration at all, in return for his having financed this undertaking and acted as promoter of the company. Furthermore, he will get all the B shares, and these B shares will carry the sole voting rights and give him complete control over the company. It is not possible to say the extent to which the shares will be held by any one of the participating companies. That cannot be determined until the assets and liabilities of these companies are ascertained, and the formula prescribed in the agreement prescribed in each case. On the basis of that formula, the shares will be distributed to these companies, and the balance will go to the Minister for Finance.
Why is it necessary to have two separate Ministers acting in respect of these shares? Why should the "A" shares be held by the Minister for Finance, and the "B" shares by the Minister for Industry and Commerce?
The Minister for Finance holds the "B" shares also.
I take it that this terminating company will pay stamp duty?
They are exempted from stamp duty.
On what grounds are they exempted? Is it because the Government are participating?
Because the Government are participating.
It seems to be a rather dangerous precedent and rather unfair to commercial promotions generally that because the Government are participating no stamp duty should be payable. I do not know how that will react on the formation of the permanent company. The money for that company will come largely from existing prosperous insurance companies. If they are also, indirectly through this measure, to be exempt from stamp duty, I think the Minister for Finance is doing himself a very bad turn. I do not think it is a thing that should be done without the full knowledge of the Legislature.
With regard to the second amendment, where is the necessity in the event of the Minister for Finance deciding to sell the "A" shares—and only in that event—of limiting his right to sell? The Minister seems to envisage a sort of situation where the Minister for Finance might get somebody to offer to but all the "A" shares.
We are not prohibiting the Minister for Finance from selling the "A" shares.
I know that. You are not prohibiting him from selling the "A" shares, but in fact, you are leaving a provision in the Bill which will tie his hands considerably if ever he attempts to sell these shares. According to the second amendment which I have proposed, he would be obliged to hold the "B" shares so long only as he holds the "A" shares. He has already power to sell the "A" shares, but if the second amendment which I have proposed were adopted you would give the Minister much more freedom with regard to the disposal of these shares.
We are giving the Minister for Finance power to dispose of the "A" shares, if he thinks fit. The Senator proposes to insert a condition in the Bill that the Minister must sell them under certain circumstances. I do not think we should do that. We are prohibiting him from selling the "B" shares under any circumstances and he cannot sell these "B" shares without promoting fresh legislation. I think that there should be no disposal of the "B" shares without all the circumstances being made known to the Oireachtas and without the necessary legislation being passed by the Oireachtas. If we were to insert now a section, which would in certain circumstances give a discretion to the Minister to sell these shares, we would have to limit that discretion by imposing certain conditions on the sale. I can see a situation arising in which members of the Dáil or Seanad would object to selling these shares to non-nationals or to some external company. That is one obvious limitation which should be imposed upon the Minister if we were to give him this discretion. I do not think we should give him that discretion. If at any time he should consider it desirable to sell these shares and hand over control to some external interest I think it should be necessary for him to promote a Bill and to get prior approval before he does it.
Is the Senator insisting on his amendments?
In view of what the Minister has said, I shall withdraw the first amendment. With regard to the second amendment, I am really giving the Minister for Finance a wider discretion than it is proposed to give him under the Bill. I should like to have the second amendment put to the House.
Amendment No. 1, by leave, withdrawn.
Amendment No. 2 put and declared defeated.
Section 6 ordered to stand part of the Bill.
Question proposed: "That Section 7 stand part of the Bill."
I should like to ask if there is a legal definition of the terms "life assurance business" and "industrial assurance business".
Yes. They are separate forms of insurance business under the existing law. A separate fund must be kept and separate authority obtained by a company to carry on each form of business.
Is there some specific distinction between what is stated in the Bill as "life assurance business" and "industrial assurance business"?
The two forms of business are defined under the 1936 Act.
Could the Minister give us any indication of the volume of life assurance business as against the volume of industrial assurance busi-business?
The bulk of the business is industrial assurance business.
I hope the Minister will excuse me if some of the points which I raise in connection with this section have been settled already. I was making inquiries in the House to-day before the Seanad met, but I did not have an opportunity of satisfying myself that the information which I got was correct. My interest in this Bill is entirely on behalf of the policy-holders. First of all, I made inquiries as to the procedure to be adopted in formulating amendments on the Committee Stage and the Report Stage. I must confess my ignorance of the routine to be followed in submitting amendments. I would, first of all, ask the Minister to guarantee that all policies taken over by the terminating company shall be accepted as correct. In line 25 the statement occurs "every right and every liability of such participating company". Such right and such liability will, I assume, be taken over by the terminating company. My experience is that some insurance companies sometimes refuse to pay an insured person when his policy matures or to pay the dependents or relatives of an insured person when he dies. I was informed that that matter is covered in the 1936 Act, at least in so far as policies of six months' duration or longer were concerned. The suggestion which I had hoped to put forward in an amendment was to the effect that all policies of three years' standing should be accepted as correct by the terminating company. I have been informed that that matter has been dealt with in the 1936 Act and, if so, it might be irrelevant to raise it now.
The other point I wished to raise had reference to the question of bonuses on policies which are taken over by the terminating company. It is unquestionable, I think, that many people took out life policies for patriotic reasons with these companies that are now entering into this agreement. They were approached many years ago, as far back as 1919 and 1920, to support Irish industries and to join Irish companies. They took out policies with the object of supporting these Irish industries. I am not conversant with what bonuses have been allocated by these various companies since, but I believe these bonuses are negligible. They must be, even in the case of endowment policies. If they had been giving bonuses, I do not suppose that this enactment would now be necessary. I claim that these people who have paid premiums for so many years should have a primary claim on any benefits or any profits that may accrue from this amalgamation system. So much for the question of bonuses.
To lend force to my argument, I may say that in the case of policies taken out many years ago, there were legal inaccuracies or legal commitments that the policy-holder could not understand at the time. I believe that when these policies were taken out there was no definite or proper check on age limits, for instance. Again, I believe that has been covered in the previous Act, but I should like the Minister to enlighten me fully on the matter. There were other points, legal points in these policies, of which the holder was entirely unaware. I might just mention the fact that, to my amazement, quite recently I got a demand for £5 from a company which is in liquidation. That demand was by reason of the fact that I held a policy, the premium on which was something like 6/- or 7/- in the company. All my insurance is laid with Irish companies, but in this case I did not insure directly with the company. The insurance was effected through the agency of a company with which I was insured. I give that information to the House as proof of the fact that in these policies of some years' standing there may be some commitment under which the terminating company can claim the right to say to the policy-holder: "We will not pay you because such-and-such a thing is inaccurate." Or, again, you may have the legal representative of deceased persons being told: "Well, this policy is inaccurate and the amount cannot be paid." I just wish to raise these points to demonstrate the fact that there may be inaccuracies in these policies which may be used afterwards to the detriment of policy-holders. I have given an instance in which I myself was concerned to show that that can happen. I certainly did not know that I was a member of that company by the fact that I was insured through the agency of another company or that I was under an obligation to pay £5 by the fact of having taken out a 6/- or 7/- policy with the company. My only point in referring to these matters is to ensure that policy-holders will be safeguarded to the fullest extent. I accept the assurance that the Government has introduced this Bill in the interests of policy-holders. I should like the Minister to assure me that the points I have raised are completely covered, or that if they are not, they will be.
I feel that if the demands of the last Senator were granted in their entirely a very dangerous precedent might arise. We are all liable to undertake obligations of which we are not fully aware, but we have to stand up to them all the same, and if certain policy-holders undertake legal obligations of which they were not aware, surely they should be liable the same as anybody else. To put it another way, why should the State come to the relief of a special section of debtors in the community? There may be specific cases where the State might come to their assistance, such as lapsed policies or injustices of that kind, but if I understood Senator O'Donovan correctly his argument would cover a policy-holder against a wrong statement in a proposal form which, as everybody knows, is part of the contract. If a person proposing insurance gives a wrong date or age it is tantamount almost to a criminal offence, and I do not think the State should come in any way to such a person's assistance. It would create a most embarassing situation, and I hope the Government will safeguard themselves to the extent to which they indemnify policy-holders against their legal obligations.
It is not the policy-holder who is in any way the debtor, but the insurance company. So far as inaccuracies in a life policy which is in existence for a number of years are concerned, the only question can be one of age, and the liability of the State in taking over such a policy would, I maintain, be negligible. I know perfectly well that birth certificates were not sought when policies were taken out at that time, and it would be very hard on the individual concerned or his dependents after his death if the insurance company could say: "You said you were 25 or 40 when, in reality, you were 30 or 50," and so invalidate the policy. When a company has accepted premiums over a number of years that would be a hardship, even if the holder had made an inaccurate statement. I do not think it is even correct to speak of the policy-holder making an inaccurate statement, because in many cases the agent was so keen on getting business that he accepted the age without confirmation, so that the policy-holder is not the prime offender in respect of the statement of a wrong age. Cases have been heard by the courts in which relatives of deceased policy-holders found difficulty in getting money accruing from the maturing of a policy. This entire discussion is irrelevant if all this has been covered by the 1936 Act, but I ask the Minister to assure me that that is so. If it is my point is met.
If that is the case under the 1936 Act I think there should be an amendment in this Bill, or in some other Bill, to put it right, because it means that the State is going to accept responsibility for a wrong statement with regard to age. A person who said he was 25 when he was 40 paid a much smaller annual premium, and if the State is going to make up that deficiency I think it would be outrageous. I have no other word for it, and I could not support such a proposal.
What I suggested was a difference of a few years. Confirmation of age in many of these cases was not sought by the company. They are not quite as anxious about accuracy in the country as the Senator or I might be, but when a birth certificate was not demanded and when a person has been paying premiums for so long, the State should not victimise either that individual, or his dependents, when the policy has matured.
Might I suggest that we hear what the Minister says because if the position is as stated by the Senator, it is a most alarming state of affairs.
All this seems to be a very faint echo of the discussions we had in 1936. We passed an Act in that year which was designed to lay down the condition under which industrial assurance should be carried on in future. We dealt with all these things as they applied to the future. Clearly, we could not go back and validate invalid policies in the past, or invalidate what were legal policies. We did set out to deal with the future and we said that, in future, all industrial assurance policies must be issued subject to the terms we passed then. We dealt with this question of age then, but we could not go back, as Senator O'Donovan would like us to do, and deal with all the existing policies on the assumption that they had been issued on conditions such as those contained in the 1936 Act, when everybody knew that they had not. In the future, on the question of age, for example, the age of insured persons will be deemed to be agreed. It will be deemed to be the age stated in the proposal. The insurance company can question the accuracy of the insured person's statement of age when he is applying for the policy, or within a limited period thereafter; but once the policy is issued with the age stated in it, the age cannot be questioned at the time the claim arises. It can be questioned now and that is one of the abuses which the 1936 Act was designed to deal with, because even though it was not an uncommon practice for persons to attempt frauds on companies by mis-stating their ages, neither was it altogether an uncommon practice for agents to induce persons to mis-state their age with a view to giving grounds for contesting the claim when a claim did eventuate. That was dealt with so far as this country is concerned in 1936, and in Great Britain, earlier.
So far as the 1936 Act is concerned, it will apply in the future. That particular section has not yet been brought into operation, but it will be when this new company comes into being. The provisions of that Act in relation to all those matters will apply to the policies of the new company. So far, however, as the policies now being taken over from the amalgamating companies are concerned, these policies, in so far as they are legal policies, will be met in full. In so far as they are illegal, and could be illegal on many other grounds than mis-statement of the age of the insured person, they could not be accepted. I do not think I can say more to the Senator than that the policies will be taken over and the obligations of the new company will be as stated in the policy, or in the law under which these policies were issued. The extent to which the law may have been defective when these policies were issued cannot be remedied now. It can only be remedied in respect of the future, and that has been done in the 1936 Act; but so far as any of the policies transferred prove on examination to be invalid, then invalid they must be.
Then, my information is absolutely incorrect. I still maintain that there is a point for the Minister to consider. If a policy is accepted by one of these participating companies, the only question that can arise in regard to it is a question of age. The question of disease can scarcely arise. It might arise in respect of an industrial policy, but in life policies, I think the main factor is the question of age.
There is also the question of insurable interest, which is the principal one.
I do not follow what the Minister means by insurable interest. I should like to be educated on that point.
You must have a certain relationship to another person before you can take out a policy on his life. Otherwise, you would be putting a premium on violent deaths.
I am referring to an individual who takes out a policy on his own life. Take the case of a man who, 20 years ago, took out a policy on his life. The agent, being what I might term aggressive in trying to secure a client, says to him: "We are an Irish company just starting and we want as many people as we can." I distinctly remember canvassing of that kind and the cases have been heard in the courts since. I should not like to see the terminating company proceeding afterwards to invalidate such a policy which has been in existence since 1918, 1919 and 1920, because of a year, or even two years' inaccuracy. I maintain that farmers, who at that time took out policies, when asked their age, did not say that they were such and such an age on such and such a day of such a year. They gave their age roughly, and it was so accepted by the company. I maintain that those policies should be taken over as correct, or investigated when being taken over, and, if necessary, corrected, so that a position would not arise when, after paying hundreds of pounds to an insurance company, the policy-holder or his next of kin would be told that the policy was invalid and nothing was payable. I think the section requires looking into to see that a satisfactory settlement would be made under the scheme.
I think the Senator is in error when he says that such a policy-holder would get nothing. He would get what he was entitled to. If a person takes out a policy, and if 2d. a week brought him £10, he would get £7 if that was what he was entitled to in relation to his correct age. That is the proper legal position. The Senator says that the farmer does not know his age, but I can say that he always knew it on the right side, so far as insurance is concerned. He also says that insurance agents induced people to state their ages as being lower than they were. That may have been done so far as the Irish societies, when they came into operation, were concerned. It was done, and done with a view to getting insurance from other societies. I do not blame them, but the respectable insurance agents and the profession as a whole would do nothing of the kind. The man who goes into insurance business and desires to make his living at it, wants a clean business, and he can only do a clean business by getting people to insure at their correct ages, so that when death takes place the claim will be met. That is the best advertisement an insurance office can have.
So far as the 1936 Act is concerned, the Senator said that it made all insurance legal. That is not so. It only makes the question of age right. There can be 101 other things wrong with a policy, such as want of outside relationship, or even disease. A man might insure himself, or a friend, who, at the time, was suffering from a severe disease, and that would invalidate the policy, but the 1936 Act does clear the matter of age up, and I think the Senator need have no misgivings on the point. I think the 1936 Act has done a lot to clean up the business generally, and the Minister is entitled to every-body's gratitude for having put things right. We were not, however, the land of saints and scholars here, so far as insurance is concerned, that we thought we were.
The very fact that all the Irish insurance companies are in such a deplorable condition to-day is due to the fact that they have given better value than they should have for what they received. I believe that this amalgamation scheme will put matters right. I would like to warn the Minister that in this he is travelling on a road that has many pitfalls. He will need to be careful because the road of insurance is a thorny and a difficult one. I hope that his advisers will put him on the right road, and that the new company will do business according to business principles, and only give value for money. The companies which are amalgamating under this scheme had, unfortunately, many men on their salary staff who probably did not give value for money. Unfortunately, they could not do otherwise than they did, and they are not to be blamed. As one who has been engaged in the insurance business all his life, and has made some success of it, I hope that the new company will do well. I am confident that, if properly managed, it should do well.
Question put and agreed to.
SECTION 8.
Question proposed: "That Section 8 stand part of the Bill."
On the section, I should like to know whether the terminating company is to be exempt from the payment of stamp duty. I take it that the transfers and assets of the four participating companies to the terminating company will be free from stamp duty, or that if any stamp duty is paid it will be refunded. I cannot see whether the company itself is free from the payment of stamp duty.
I will look into the matter and let the Senator know.
Question put and agreed to.
Sections 9, 10 and 11 agreed to.
Question proposed: "That Section 12 stand part of the Bill."
On the section, can the Minister give us any information as to the form of the balance sheet— of the profit and loss account—that the terminating company will publish. The Italian companies have a standard form. Will it be on those lines?
Under the 1936 Act we have power to prescribe the returns that must be made by all insurance companies. That will apply to this company as it does to a privately owned company.
Question put and agreed to.
Section 13 agreed to.
SECTION 14.
Question proposed: "That Section 14 stand part of the Bill."
On this section, I desire to take this opportunity of getting my mind clarified as to the relation between the terminating company and the permanent company. The terminating company has power, I understand, to promote a permanent company. That is clear as far as it goes. Can the Minister give any indication as to what form that promotion will take? He has mentioned that a certain number of existing companies will come in. They will bring in certain assets and will get certain shares. That is clear. It is straightforward practice. If the terminating company promotes a permanent company, what will it bring in? It cannot bring in the terminating company's assets, because they are all earmarked for the benefit of the policy holders of the terminating company. Later on, when the terminating company is wound up, I suppose then those assets will be available for the permanent company, but until that situation arises, what will be the extent of the participation of the terminating company in the proposed permanent company
I think the Senator misunderstands the position somewhat. The four companies that are parties to this agreement will be amalgamated in what we are calling the terminating company. Any other company that comes into the amalgamation will come into the terminating company and not the permanent company. They are amalgamated in this Industrial Insurance Amalgamation, Limited. It is that company—the terminating company—which promotes the permanent company. It is the terminating company which will own all the shares of the permanent company. There will be no other person with a share in the equity of the permanent company except the terminating company until, of course, the terminating company is liquidated and its assets, including the shares in the permanent company, are distributed amongst its shareholders. The Senator will appreciate the position if he realises that all the companies which come into the amalgamation come into the terminating company. The terminating company will be the sole owner of the shares of the permanent company. None of the companies participating in the amalgamation will have anything to do with the permanent company. Their assets and liabilities will be transferred to the terminating company.
With regard to the assets brought in by new companies— I think the Prudential and the Refuge were mentioned—these assets will not be available for the policies taken over from all the participating companies?
They will be available. Apart from the four companies which have made the agreement, no other company will come into the amalgamation—will come into the terminating company—unless it transfers assets equivalent to its liabilities. On the basis of valuation set out in the agreement, it will have to transfer assets fully equivalent to the liabilities that it is transferring. These assets will take the form of funds and of cash paid into the coffers of the terminating company. The four companies that have signed the agreement will, so far as they can, transfer assets equivalent to their liabilities, and to the extent that they are unable to do so the deficiency will be made good from the State contribution.
I confess I do not understand. It is very complicated. I understood that all the shares of the terminating company were to be taken up either by the participating companies or by the Minister for Finance. Now we are told that certain other companies may come in. What shares will they get?
They will get an equivalent issue of "A" shares in the company. Of course, the controlling shares—the "B" shares—will all be held by the Minister for Finance alone. They will not be influenced by any change of that kind at all. The only shares that will be issued against the transfers that we have been speaking of will be "A" shares.
Will it be necessary to increase the capital of the "A" shares if those other companies come in?
Possibly.
Will another Act have to be passed to enable that to be done?
I do not think so.
And will they be exempt from stamp duty, too?
I am not quite clear about that question of stamp duty, but, as I have already indicated, I will let the Senator know what the position is.
We will have another opportunity of dealing with this on the Report Stage, and in the meantime of trying to digest the information which the Minister has given us.
Question put and agreed to.
Remaining sections, schedule and title agreed to.
Report Stage ordered for Wednesday, 7th December.