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CHAPTER 2

THE WEAPONS OF LAW

2.6.1False Assurance ——— Irish Insurance Act 1989
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In Ireland there is no statute law, regulating ‘investment business’ as it relates to ‘insurance business’, that even remotely approaches the power of the U.K. Financial Services Act 1986 (not to mention its successor, the Financial Services and Markets Act 2000).

As already indicated in Section 2.4.4, the Regulatory Regime in Ireland was such that, up to 1st November 2001, regulation on the conduct of investment intermediaries dealing in Life Assurance investment products was wholly Self Regulation by the Insurance Industry itself. (In 2001, the provisions of the Insurance Act 2000 finally came into effect and, as a result, Life Assurance and similar type investment business came under control of the Central Bank. This will be discussed further in Section 2.6.3.)


The only statutory legislation in Ireland (prior to the provisions of the Insurance Act 2000 coming into effect) that purports to provide, and was expressly represented to clients / consumers as providing, protections for clients / consumers in matters of Life Assurance / Endowment Assurance type investments is the Irish Insurance Act 1989.


Within the definitions of the Irish Insurance Act 1989, Life Assurance investment business constitutes ‘insurance business’ and therefore comes under the ambit of the Act.

 


IMPORTANT NOTE !

(Just in case you missed it under the Section 2.6 Heading)



Be aware that Life Assurance, Pensions, and similar-type investment products, were (and still are) intrinsic to the financial services activities of most Financial Services Institutions in Ireland. Every Bank, Building Society and Credit Institution either had an incorporated Life Assurance subsidiary within its corporate structure or was affiliated to a Life Assurance Company.

There were absolute fortunes to be made by the misrepresentation (both by act and omission) of these investment products to customers / clients / consumers.

There was therefore AN ABSOLUTE IMPERATIVE that the collective self-interest of personal enrichment among those within the Financial Services Sector, particularly those in Managerial Positions, be protected above all else.

It was the singular pursuit of this IMPERATIVE, that would contort the course of Financial Services Legislation and Regulation in Ireland.

 


 


In the matter of Codes of Conduct, Section 56 of the Irish Insurance Act 1989 provides that:

The Minister may by order prescribe codes of conduct to be observed by insurance brokers or insurance agents in the State. Any such order may, in particular, specify the practices to be followed by brokers or agents in their dealings with clients or undertakings or with other persons.


Section 61 provides that:

Where the Minister considers it necessary in the public interest and following consultation with the insurance industry and consumer representatives, he may by order prescribe codes of conduct to be observed by undertakings in their dealings with proposers of policies of insurance and policyholders renewing policies of insurance in respect of duty of disclosure and warranties.


But the Act does not set out any Principles, regarding Standards and Disclosure, to be applied to such ‘codes of conduct’, as was the case with the U.K. Financial Services Act 1986.







In 1990 a Code of Conduct for Insurance Intermediaries was introduced under title of the Insurance Act 1989. This Code of Conduct was displayed in a prominent position (usually in the immediate vicinity of the customer queue line) in the customer area of every Financial Services Institution.


The Code of Conduct for Insurance Intermediaries is one page A4 size document. It (i.e. its requirements as relevant to the subject matter of this website-book) presented itself to consumers as set out below.

 

Insurance Act, 1989

CODE OF CONDUCT FOR
INSURANCE INTERMEDIARIES

Status of Intermediary
e.g. Insurance Broker, Insurance Agent,
Tied Agent etc., as the case may be.

An Insurance Intermediary shall:

1.

Act with the utmost good faith and to the highest standards of professional integrity in his dealings with clients, insurers, fellow insurance intermediaries and members of the public.

2.

Observe all statutory and other legal requirements.

3.

Ensure that the interests of the Client are paramount and in particular:

(a)

ensure that the advice given in relation to proposed contracts of insurance is appropriate to the needs and full resources of the client;

(b)

ensure that the client is given promptly information as to the suitability, scope and limitations of any insurance contract under negotiation;

(e)

ensure that any contract of insurance recommended to a client is in the best interest of the client and disclose any potential conflicts of interest to the client and the insurer;

7.

Ensure that this Code of Conduct is displayed in a prominent position in the public area of all his business premises and his status or statuses is clearly marked on the code.

Approved by the Department of Industry and Commerce


The letter of the Code of Conduct for Insurance Intermediaries prominently proclaims the following to all persons entering the place of business of the Insurance Intermediary:

(1)

The Code of Conduct carries the aegis of the Insurance Act 1989. It is therefore represented as being subordinate to this Act.

(2)

The Code of Conduct carries the imprimatur of the Department of Industry and Commerce. It is the Minister for Industry and Commerce who is empowered by the Insurance Act 1989 to prescribe Codes of Conduct to be observed by the insurance brokers and insurance agents.

Note! From 1994 the Code of Conduct carried the imprimatur of the Department of Enterprise, Trade and Employment, the governance of the Insurance Act being then transferred to that Department.

(3)

The use of the word ‘shall’, in the expression ‘An Insurance Intermediary shall:’ governing the provisions of the Code of Conduct, clearly expresses a strong assertion or command.

(4)

In Article 1, the Insurance Intermediary is required to act with the Utmost Good Faith. Clearly the Code of Conduct expressly acknowledges the reciprocation of the Common Law Uberrima Fides status of a Contract of Insurance, and, consequently, it acknowledges the Duty to Disclose incumbent upon the insurer.                              [See Section  Section 2.3.4 (c).]

(5)

In Article 2, the Code of Conduct clearly requires the Insurance Intermediary to observe all Common Law Requirements as well as those under Statute Law. This imposes a duty on the Intermediary to have knowledge of these requirements.

(6)

Article 3 (a), (b) and (e) acknowledge the fiduciary duties incumbent on an Insurance Intermediary who gives advice or makes a recommendation. The Insurance Intermediary must ensure that the interests of the Client are paramount; he must make certain that the contract being recommended is ADVANTAGEOUS to the Client.[See Section 2.3.4 (a).]

(7)

The status or statuses of the Insurance Intermediary as marked on the code, and the prominent display of the Code of Conduct in the public area of all the Intermediary’s business premises, constitute a clear endorsement of the representations contained therein.

For example (in the case of the Financial Institutions referred to in this book), the status of First National, as a tied agent of Irish Life Assurance, would have been stated as follows:

First National Building Society

Status of IntermediaryLifeTied Agent of Irish Life

Non LifeInsurance Broker





Clearly, the contents of the Code of Conduct are intended to give, and do give, considerable reassurance to the client / consumer entering into a contract with or through the Insurance Intermediary.


It must therefore come as some shock to an aggrieved customer to be informed by the Irish Insurance Federation (the Self Regulatory Body) that the Code of Conduct for Insurance Intermediaries has no legal status whatsoever under Statute; it has no status under the provisions of the Insurance Act 1989 because it has not been prescribed by an order of the Minister; it is a voluntary Code of Conduct put forward by the Irish Insurance Federation on behalf of the Insurance Industry and approved by the Minister’s Department.

As a consequence, the Code of Conduct, most particularly in the matter of disclosing any potential conflicts of interest (for example, disclosing commission that would follow from a client's choice of one product as distinct from another), was treated by those within the Financial Services Industry as if it did not exist.


Note! Of course, the Common Law fiduciary duty to disclose was treated with absolute disdain by those within the Financial Services Sector. See Section 2.3.4 (a), and note particularly in Conlon v Simms that, where a duty to disclose exists, and the failure to disclose is deliberate, the non-disclosure amounts to fraudulent misrepresentation. (See also Section 2.3.2: Fraudulent Misrepresentation, and 'Silence as Statutory Misrepresentation ?' in Section 2.3.5.)

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But the Financial Institutions / Life Assurance Companies cannot have it both ways. They have induced clients / consumers to enter into contracts with them as a result of the reassurances given. While the Insurance Industry would have the client / consumer understand otherwise, the Code of Conduct for Insurance Intermediaries, as it is represented, must therefore be seen as having considerable status in Law.



The Code of Conduct, as prominently displayed by Financial Services Institutions in the public area of their business premises, expressly states that the Code exists under the aegis of the Insurance Act 1989.

This statement
, of itself, is a false and misleading statement; it gives express assurance that the client / consumer has statutory protection with respect to the proclaimed tenets of the Code where no such protection exists.



Also, the contents of the Code of Conduct, as displayed in the public area of all his business premises, constitute representations made by each Insurance Intermediary.

These representations seriously affect the inclination of the client / consumer to enter into a contract with or through the Insurance Intermediary. If they cannot be relied upon then the consumer has been seriously misled. 


Misrepresentation
will have been perpetrated on all three counts, Fraudulent, Negligent and Statutory.


The aggrieved client / consumer will be entitled to repudiate the contract. In addition he will be entitled to claim damages for any loss suffered.


(See Section Section 2.8.1: The Right to Revoke the Contract.)




NOTE!
The Regulatory Regime in Ireland, at this time, was therefore such that the Regulatory Authority (i.e. Self Regulatory Authority) was able to, not just condone, but, itself introduce a means by which clients / consumers would be given the false impression that they had protection under Irish Statute (the Insurance Act 1989) when dealing with Financial Services Institutions. The relevant Government Department responsible for matters relating to this Statute were, it would appear, totally oblivious to what was actually going on.

 

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