Government Approval for an Insurance (Miscellaneous Provisions) Bill

PUBLISHED: 3rd November 2021

The Government has approved the drafting of the Insurance (Miscellaneous Provision) Bill. 

Its purpose is to deal with issues relating to insurance that have arisen since the Action Plan for Insurance Reform was published in December 2020.

The Government has stated that it is committed to reform and transparency in the insurance sector and this Bill will further those objectives.

The Department of Finance has published a General Scheme of the Bill, which is like a draft or preliminary version of the forthcoming Bill.

Insurers should be aware of key changes being introduced by the Bill. 

1. The Central Bank of Ireland (CBI) may collect data from insurers on State supports or public money deductions that they have made from settlement amounts or amounts paid in respect of insurance claims.
2. The CBI will submit a report to the Minister for Finance setting out what measures it may take to regulate the practice of price walking.
3. The CBI will be able to enforce the obligations contained in the specified sections of the Consumer Insurance Contracts Act 2019 (2019 Act) against insurers as “regulated financial service providers” using its statutory powers.
4. A consumer or an insurer will be required to disclose to the other party information that would either support or prejudice the validity of the consumer’s claim.  The scope of disclosure requirements will be clarified to safeguard legal professional privilege.
5. Insurers will be required to notify a claimant of any deductions made to a final claim settlement amount (excluding such amounts that may be recovered by the State through the Recovery of Benefits and Assistance Scheme), the reasons for the deduction including naming any State support relevant to such deductions, and the final amount to be deducted from the settlement.
6. Where a policy of insurance is held in the name of more than one consumer, and the insured property is damaged by the criminal or intentional act of one of those co-insured consumers, the fraud perpetrated by one co-insured will not exclude a claim made by an innocent co-insured.
7. UK and Gibraltar insurers operating under the Temporary Run-off Regime (TPR) will continue as intended and those firms will also be able to carry out third-party reinsurance activity in Ireland.

A more detailed review of the Bill is provided below.

Enhanced data collection by the National Claims Information Database to allow it to collect data on the deduction of public moneys and State supports from compensation payments

The Bill will amend the Central Bank (National Claims Information Database) Act 2018 (2018 Act) to enable the CBI to collect data in relation to insurers deducting the value of State supports funded by public moneys from insurance settlement amounts or the amounts paid in respect of insurance claims. 

This amendment is made in response to the practice that developed during the COVID-19 pandemic whereby insurers would deduct COVID-19 related State supports from final business interruption insurance claim settlements – a deduction most insurers were contractually entitled to make.

The CBI may collect the data through insurers’ regular annual returns as part of their reporting requirements under the 2018 Act.  Policymakers may then use the data as evidence to decide whether further action needs to be taken in this area.

The CBI will be required to submit a report to the Minister for Finance setting out the steps it has taken, if any, to regulate the practice of price walking and other related issues

The Bill will require the CBI to prepare a report for the Minister for Finance on the measures it has taken (if any) to regulate the practice of “price walking” and to comment on whether further legislative or regulation is required.  Price walking is a form of differential pricing whereby an insurer charges a customer a higher premium on their second or subsequent renewal than it would charge a year-one renewal customer with similar risk and cost of service. 

This report is intended to complement the CBI’s Final Report on its Differential Pricing Review published in July 2021, and its current consultation on its proposals to address price walking in the insurance sector. 

The CBI’s proposals to address price walking include:

1. A ban on the practice of price walking for personal home and motor insurance policyholders.
2. A requirement for insurers to review their pricing policies annually.
3. A requirement for automatic renewals of all personal non-life insurance contracts. 

Insurers operating in the personal home and motor insurance areas should expect these measures to come into effect on 1 July 2022.

Changes to address legal queries that have arisen in relation to the Consumer Insurance Contracts Act 2019 Act and to enhance transparency around deductions of State supports from claims settlements.

An amendment to the Central Bank Act 1942 (1942 Act) will designate the 2019 Act as a “designated enactment” under the 1942 Act.  That will enable the CBI to enforce the obligations contained in the specified sections of the 2019 Act against insurers as “regulated financial service providers” using its statutory powers.

A new Section 16A of the 2019 Act will replace Section 16(10) of the 2019 Act, which had the unintended consequence of encroaching too far on legal professional privilege.  Section 16A will require a consumer or an insurer to disclose to the other party information that would either support or prejudice the validity of the consumer’s claim.

Further, where that information is contained in a report prepared by a third-party expert for the purposes of pending or contemplated litigation (excluding any reports prepared by lawyers containing legal advice), the consumer or insurer should disclose that report to the other party within 60 days of receiving it.

A new Section 16B of the 2019 Act will require insurers to notify a claimant of:

1. any deductions made to a final claim settlement amount (excluding such amounts that may be recovered by the State through the Recovery of Benefits and Assistance Scheme);
2. the reasons for the deduction including naming any State support relevant to such deductions; and
3. the final amount to be deducted from the settlement.

The requirements of this new section will mean that insurers are fully transparent with consumer regarding deductions that are made in relation to a settlement of a claim, in particular any State supports that the consumer may have received.  The section is a response to insurers that deducted or sought to deduct the value of COVID-19 State supports, such as the COVID-19 Restrictions Support Scheme and wage subsidy schemes from business interruption insurance claims settlements during the COVID-19 pandemic.

This new transparency requirement imposed on insurers will apply in respect of individual consumers and small businesses in relation to non-life insurance contracts. Insurers may need to adapt their internal systems to provide the above information.

The Bill will also replace Section 18(4)(a) of the 2019 Act with new language to ensure that where a policy of insurance is held in the name of more than one consumer, and the insured property is damaged by the criminal or intentional act of one of those co-insured consumers, the fraud perpetrated by one co-insured will not exclude a claim made by an innocent
co-insured.

Changes to the European Union (Insurance and Reinsurance) Regulations 2015 (2015 Regulations) will allow UK and Gibraltar insurers under the Temporary Run-off Regime (TPR) to continue as intended and will also allow those firms to carry out third-party reinsurance activity in Ireland

The Bill will amend and insert new provisions into the 2015 Regulations.  The purpose of those changes is to allow for UK and Gibraltar insurers under the TPR to continue as intended and ensure that consumers in Ireland are protected, including in cases of liquidation of a TPR firm.  The changes would also allow UK and Gibraltar firms to carry out third-party reinsurance activity in Ireland for the purposes of the TPR.

Prepare

Insurers should review the implications for their businesses of the forthcoming Bill and assess whether their internal policies, procedures and systems need to be adjusted to comply with the new legislation.

If you require any assistance or have any questions related to any of the points discussed above, please get in touch with your usual contact at LK Shields Solicitors LLP.