The Minister for State at the Department of Enterprise, Trade and Employment, Mr Treacy, has written to all of the Irish-based life assurance companies expressing concerns about "churning" within the industry.
In a letter, which was also circulated to the life assurance industry's representative body, the Irish Insurance Federation (IIF), Mr Treacy has sought clarification from each company on procedures put in place to guard against mis-selling of policies.
The Minister has asked each company to check its procedures and to advise him on how they would detect and handle instances of mis-selling.
The companies have been asked to respond individually to the Minister's letter. A spokesperson for the IIF said yesterday the various companies will outline their practices and procedures to Mr Treacy as requested.
The Minister's queries follow allegations of widescale "churning" of policies at Irish Life.
"Churning" is the term used in the assurance industry to describe incidents where policyholders are encouraged to cash in an existing policy before maturity and replace it with a new one to generate commission for the salesperson.
If this happens, policyholders lose out because they end up unnecessarily paying additional commission and set-up charges on new policies and the value of their long term investment is undermined.
Acting on foot of allegations made in Magill last month, Mr Treacy initiated an investigation into Irish Life selling practices by officials from his department.
Their inspection of files at Irish Life relate to alleged mis-selling of 644 insurance products and is continuing. The officials also have a wider brief and are assessing the effectiveness of current procedures adopted by Irish Life to guard against "churning".
Meanwhile Irish Life is itself reexamining an earlier review into the sale of the 644 policies and has agreed to adhere to compensatory measures on foot of the discovery of any wrongdoing.
The outcome of these inquiries is not expected for another couple of weeks. Magill has alleged that Irish Life management was aware of and took part in mis-selling practices which cost its customers money. The company has vehemently denied this. Irish Life has stated it has fired 21 people from its staff for gross misconduct. It is fully co-operating with the Ministerial investigation and has made files available to his officials, a spokesman said.
The main issue for Irish Life is the extent to which the company had procedures in place to guard against the practice and whether it had acted to put a stop to it whenever it was uncovered.
The Consumers Association of Ireland has urged policyholders who have been victims of "churning" to contact its Dublin office. It is seeking to compile this information and forward it to the various authorities, including the Director of Public Prosecutions.
