knowledge 10 August 2020 |

Commencing the Consumer Insurance Contracts Act

Background

As set out in our previous briefing here, the Act seeks to provide increased protection to consumers entering into insurance contracts. For the purposes of the Act, the term “consumer” is defined to include not only individuals, but also unincorporated bodies, such as sole traders, partnerships and charities; and incorporated bodies with a turnover of less than €3 million (provided such businesses are not members of a group having a combined turnover greater than €3 million).

Following the passing of the Act in late 2019, the insurance industry expressed significant concerns about the early implementation of particular sections of the Act, namely:

• Section 8, which sets out the pre-contractual duties that apply to consumers and insurers, replacing the principle of utmost good faith (uberrima fides) and any other existing duty of pre-contractual disclosure applicable to a consumer; and
• Section 12, which requires an insurer to provide a schedule of the past five years of premiums and claims to the consumer at renewal.

Industry concerns also encompassed Section 9 of the Act, which stipulates the remedies for misrepresentation, and Section 14, which relates to the duties of the insurer and consumer at renewal, because of their relationship with Section 8 of the Act.

According to the insurance industry, if insurers did not have sufficient time to implement the requirements necessary to fulfil the obligations of the above mentioned sections, they could be forced to withdraw certain products from the market in order to prioritise others so as to ensure that they are fully compliant with the law.¹

Commencement

On 17 July 2020, in response to a parliamentary question, the Minister for Finance, stated that he intended to commence the Act shortly, with the bulk of the provisions coming into effect on 1 September 2020 while Sections 8, 9, 12 and 14(1) – (5) will first come into effect on 1 September 2021.

According to the Minister, the reason for the phased implementation of the Act is to provide a reasonable amount of time to insurers to put in place the necessary new systems and processes to comply with the relevant provisions and to ensure the protection of consumers’ best interest.

Comment

As is clear from the Minister’s reply on 17 July 2020, he has taken on board the insurance industry’s concerns regarding the need for sufficient time to implement Sections 8 and 12 of the Act by providing insurers with an additional 12 months to make the changes necessary to comply with these sections.

However, while insurers will welcome this additional time, they still need to ensure that they have the requisite measures in place to comply with the bulk of the Act from 1 September 2020, including requirements regarding:

• the abolition of the concept of insurable interest (Section 7);
• the provision of cooling off periods (Section 11);
• post-contractual duties of consumers and insurers, replacing the existing principle of uberrima fides (Section 15);
• the duties of consumers and insurers regarding claims handling (Section 16);
• property contracts (Section 17);
• proportionate remedies and claims handling (Section 18);
• the replacement of insurance warranties (Section 19);
• third party rights (Sections 21 - 22); and
• subrogation (Sections 23 – 25).

While we expect that most insurers are already well advanced in their preparations to comply with the sections of the Act included in the first phase, the fact that these sections will be commenced in a matter of weeks is still likely to place considerable pressures on insurers, particularly in the light of the challenges raised by the on-going pandemic.

Should you require detailed advice on compliance with the Act, or any other matter, please do not hesitate to contact any of the key contacts listed below or your usual McCann FitzGerald contact.