Consumer Insurance Contracts Act 2019: commencement of Stage 2 provisions
The Consumer Insurance Contracts Act 2019 (CICA) was signed into Irish law on 26 December 2019. The Stage 1 provisions commenced on 1 September 2020.
We have summarised below the Stage 2 provisions that come into effect on 1 September 2021 and have commented on their impact to insurers. The provisions will apply to all consumer policies incepted and renewed from that date. Most importantly, a consumer includes businesses with an annual turnover of less than €3 million.
Stage 2 – September 2021
The upcoming Stage 2 provisions include:
Section 8 - Duty of disclosure
One of the most radical changes which CICA introduces is in relation to the duty of disclosure. The longstanding ‘duty of good faith’ is replaced by a duty on the policyholder to answer specific questions posed by an insurer honestly and with reasonable care (by reference to the ‘average consumer’).
There is a duty on insurers to pose unambiguous questions in plain and intelligible language. Insurers should also avoid asking open ended questions.
Further, the policyholder will not be expected to volunteer additional information above what is asked of them.
An insurer shall be deemed to have waived any further duty of disclosure on the part of the policyholder when it fails to investigate a missing/incomplete answer, although this does not apply to answers provided fraudulently or recklessly.
Insurers will need to assess their current policy wordings carefully in light of these new duties.
Section 9 and Section 18 - Proportionate remedies for misrepresentation
CICA recognises an insurer’s right to refuse to pay a claim and avoid a contract of insurance where an answer given by a consumer involves a fraudulent misrepresentation or where the conduct of a consumer involves fraud of any kind. A fraudulent misrepresentation is a representation that the consumer knows to be false or misleading, or consciously disregards whether it is false or misleading.
Where the answer given involves a negligent misrepresentation, the remedy available to insurers shall reflect what the insurer would have done, had it been fully aware of the facts, and shall be proportionate (for example, an increased premium rather than a declinature).
Insurers cannot avoid a contract of insurance where a consumer makes an innocent misrepresentation.
In addition, where a claim contains information that is false or misleading, an insurer will be entitled to refuse to pay the claim and terminate the contract. There is no obligation to return any premiums paid.
Section 12 - Enhanced consumer rights at renewal
Insurers are required to provide a schedule of the past five years of premiums and claims to the consumer at renewal.
Insurers should be live to this when issuing policy documents to consumers.
Section 14(1)-(5) – Duties on the insured and the insurer at renewal
An insured is not under a duty to disclose or volunteer information at renewal, unless the insurer asks for further information, by way of a specific question on paper or on another durable medium, or the insurer asks the insured to update information previously provided.
Insurers must request any/all information they require at renewal, and cannot expect that this information will be volunteered by the insured.
Much like the impacts of the UK Consumer Insurance (Disclosure and Representations) Act 2012 and the Insurance Act 2015 on UK insurers conducting business, the changes introduced by CICA will have a significant effect on insurers conducting business in Ireland.
All insurers writing ‘consumer’ business in Ireland are advised to:
- Update and adapt all proposal forms (so that specific information relevant to the underwriting of the risk is sought) and procedures for telephone and online sales.
- Update policy wordings and related documentation, including insurance product information documents (IPID).
- Be live to the obligation on insurers to investigate an absent or obviously incomplete answer to a question at proposal or renewal.
- Carry out a review of the manner in which their pre and post-contractual processes operate.
- Deal with claims as promptly and fairly as possible.