Upcoming commencement of the Consumer Insurance Contracts Act 2019 in Ireland

The Consumer Insurance Contracts Act 2019 (the Act) was signed into Irish law on 26 December 2019. On 16 July 2020, in response to a parliamentary question on commencement of the Act, Minister for Finance, Paschal Donohoe TD, announced that the Act will be commenced in two stages.

Stage 1 – September 2020

The majority of the provisions of the Act will commence on 1 September 2020, including the following:

  • Section 7 - The abolition of the principle of “insurable interest” as a pre-requisite to a consumer making a valid claim.
  • Sections 11 & 13 - A cooling-off period of 14 days for consumers with no cancellation rights under Solvency II or the EC (Distance Marketing of Consumer Financial Services) Regulations 2004.
  • Section 15 - Post-contractual duties, including removing the duty to act with utmost good faith and introducing an “alteration of risk” clause.
  • Sections 16-18 - Claims-handling duties and related requirements, including handling claims promptly and fairly, paying any sums due to consumers within a reasonable time, specific limitations in relation to deferring property claims payments and proportionate remedies.
  • Section 19 - The abolition of “basis of contract” clauses, and their replacement with the concept of "suspensive conditions”.
  • Sections 21-25 - Changes to subrogation and a significant expansion of the law in relation to third party rights.

Stage 2 – September 2021

Some of the more radical and onerous provisions will not take effect until 1 September 2021. This will allow the insurance sector additional time to prepare for the changes. These provisions include:

  • Section 8 - The abolition of the longstanding principle of “duty of good faith”, and its replacement with a duty on the policyholder to answer specific questions honestly and with reasonable care.
  • Section 9 - The introduction of proportionate remedies for misrepresentation.
  • Section 12 - Enhanced rights for consumers on renewal rights, including the requirement of insurers to provide a schedule of the past five years of premiums and claims to the consumer at renewal.
  • Section 14(1)-(5) - Changes to the duties imposed on consumers and insurers on renewal.

Comment

The changes introduced by the Act over both stages will have a significant effect on Irish insurers, or indeed any insurers conducting insurance business in Ireland.

All insurers writing "consumer" business in Ireland (a term that is defined in the Act and includes business with annual turnover of less than €3 million) must review and update all proposal forms, policy wordings and related documentation, and carry out a review of the manner in which their pre and post-contractual processes operate. These exercises should be addressed by insurers promptly, given that the lobbying within the insurance industry for sufficient lead time to comply with the Act has largely fallen on deaf ears.

To assist the implementation of the Act, Section 5 of the Act grants the Central Bank of Ireland the power to issue a code of practice in relation to the form of a contract of insurance, or any other requirements related to such a contract contained in the Act. Clarification of the Central Bank's intentions in this regard is expected in the near future, in light of the Minister’s recent announcement.

For more information on the key changes introduced by the Act, please read our May 2020 briefing here.