The long-signalled Consumer Insurance Contracts Act 2019 was signed in to law on 26 December 2019. It is not yet in force but insurers need to prepare. It is currently anticipated that some provisions will be commenced in the early part of this year with a longer lead in for those provisions that require insurers to make systems upgrades.
The Act, which is very pro-consumer and in line with the Law Reform Commission Report on Consumer Insurance Contracts, introduces a number of significant changes to how life and non-life insurance companies will do business with Irish consumers. Consumers in this context are not just individuals, but also include clubs, charities or businesses with an annual turnover of less than €3 million. The Act will apply in relation to applicants for insurance, policyholders and claimants.
The key changes brought about by the Act are:
- Policyholder disclosure: Replacement of long-standing "utmost good faith" principle with a lesser duty to fully answer specific questions posed.
- Insurers' remedies for misrepresentation: Varying rules depending on whether misrepresentation is innocent, negligent or fraudulent.
- Dilution of "insurable interest" requirement: This has been replaced with a requirement that the consumer policyholder must have a factual expectation of economic repercussions based on the loss or preservation of the insured matter (or person).
- Right of third parties to claim: The Act introduces a new statutory entitlement for third parties to claim against insurers in certain circumstances, without first having to establish the liability of the insured party.
- More information at renewal time: Insurers must provide a schedule of information about the previous five years' premiums and claims.
- Basis of contract clauses no longer valid: Any term in an insurance policy purporting to convert a pre-contractual statement made by a consumer into a warranty, shall be invalid.
- Increased claims handling-related duties on the insurer.
- Changes to insurers' subrogation rights in certain specific circumstances.
Comment: While signalled since 2016, some of these changes will require substantial changes to insurers' application and claims processes, with likely repercussions for underwriting models and assumptions. Insurers that have not yet begun to consider and make the necessary systems and policy application and documentation changes in advance of the Act's commencement, should now do so.
For further information please contact any member of A&L Goodbody's Insurance Team.
