Ireland has a common law legal system. The law in relation to insurance contracts is primarily governed by common law principles, the origins of which can be found in case law.
Following the enactment of the Consumer Insurance Contracts Act 2019 (the “2019 Act”), the Marine Insurance Act 1906 (MIA) only applies to non-consumer contracts. There are some forms of insurance that are compulsory under statute in Ireland, for example third-party motor insurance and professional indemnity cover for certain professionals.
There is no Irish equivalent to the UK Insurance Act 2015. However, the 2019 Act, reforming the area of consumer insurance law, was signed into law in 2019 and commenced in two stages, on 1 September 2020 and 1 September 2021, following industry pressure to allow sufficient time for the insurance industry to account for the far-reaching changes imposed. Once fully commenced, the 2019 Act will replace the duty of utmost good faith and the consumer’s duty of disclosure with a duty to provide responses to questions asked by the insurer honestly and with reasonable care.
There are some restrictions on insurers’ freedom of contract, largely for the protection of consumers, as they are subject to the enactment of Irish legislation to comply with EU law. In particular, consumer protection law has undergone a number of changes as a result of the Unfair Terms in Consumer Contracts Directive 1993/13/EC and the Distance Marketing of Financial Services Directive 2002/65/EC.
When dealing with a “consumer”, the insurer must also comply with the Central Bank of Ireland (CBI) Consumer Protection Code 2012 (CPC) and the Consumer Protection Act 2007. Under the CPC, “consumer” is quite broadly defined, including individuals and small businesses with a turnover of less than EUR3 million. The same definition is applied for the purposes of the 2019 Act. Insurance contracts, and the marketing and selling of insurance products to consumers, must also be compliant with the terms of the Sale of Goods and Supply of Services Act 1980.
Ireland has a strong and efficient risk-based prudential regulatory framework, focusing on the application of the proportionality principle.
The CBI has primary responsibility for the prudential supervision and regulation of insurance and reinsurance undertakings in Ireland. It carries out its role through monitoring and ongoing supervision and issues standards, policies and guidance, with which (re)insurance undertakings are required to comply.
The CBI oversees corporate governance functions, risk management and internal control systems of (re)insurance undertakings without placing burdensome administrative requirements on their operators. Such undertakings are required to submit annual and quarterly returns on solvency margins and technical reserves for supervisory purposes. The CBI also conducts regular themed inspections across the (re)insurance sector.
The CBI operates a rigorous authorisation process and conducts fitness and probity assessments of individuals who are to hold certain designated management functions and positions within authorised firms. It also has responsibility for consumer protection issues.
Risks and risk ratings
An administrative sanctions regime provides it with a credible enforcement tool, and acts as an effective deterrent against breaches of financial services law. The CBI’s supervisory framework, “Probability Risk and Impact SysteM” (PRISM), is a risk-based framework that categorises regulated firms by the potential impact of their failure on the economy and the consumer. Under PRISM (re)insurance undertakings are allocated a risk rating on a scale of high (including ultra-high), medium-high, medium-low or low. PRISM recognises that the CBI does not have infinite resources, and selectively deploys supervisors according to a firm’s risk rating.
Although relatively few in number, high-impact firms are recognised as the most important for ensuring financial and economic stability and are therefore subject to a higher level of supervision.
The CBI’s Consumer Protection Risk Assessment (CPRA) model aims to enhance the manner in which regulated entities manage “the risks they pose to consumers and ensure they have appropriate risk management frameworks to deliver for their customers”. (Re)insurance companies are required to implement a consumer protection risk management framework that is tailored to the nature, scale and complexity of their business. The CBI assesses the effectiveness of these internal management frameworks through targeted CPRAs, which are in addition and supplementary to the CBI’s PRISM and regular thematic inspections.
II Code and the 2015 Regulations
The Insurance Institute’s Code of Ethics and Conduct (“II Code”) is also relevant to the regulation of insurance and reinsurance undertakings. The II Code is a voluntary code of conduct aimed at protecting policyholders resident in Ireland. It has been adopted by members of Insurance Ireland, which is the representative body for (re)insurance undertakings in Ireland.
EU Directive 2009/138/EC (“Solvency II”) introduced a common regulatory framework for EEA insurance and reinsurance undertakings and was transposed into Irish law by the European Union (Insurance and Reinsurance) Regulations 2015 (the “2015 Regulations”). The 2015 Regulations impose harmonised capital and solvency requirements, valuation techniques and governance and reporting standards, and also impose certain restrictions on shareholders of (re)insurance undertakings, as the CBI will not grant an authorisation to an undertaking if it isn’t satisfied as to the suitability, fitness and probity of “qualifying” shareholders.
For the purposes of the 2015 Regulations, a qualifying shareholding means a direct or indirect holding in an undertaking that represents 10% or more of the capital or voting rights of the undertaking, or that makes it possible to exercise a significant influence over the management of the undertaking.
The European Union (Insurance Distribution) Regulations 2018 (IDR) transposed the Insurance Distribution Directive 2016/97 (IDD) into Irish law, harmonising the distribution of insurance and reinsurance products within the EU, with the aim of facilitating market integration and enhancing consumer protection. The IDR aims to enhance consumer protection and ensures a level playing field across the sector by extending the scope of application to include all participants in the distribution of insurance products, seeks to identify and mitigate conflicts of interest, particularly in the area of remuneration, and introduces increased transparency and conduct of business requirements.
See 2.1 Regulatory Bodies and Legislative Guidance.
Insurance undertakings and intermediaries authorised by the CBI or in another EU/EEA member state carrying on business in Ireland are required to comply with certain Irish general good requirements, including the CPC. The CPC contains general and specific provisions relating to insurance, including requirements relating to premium handling and contact with consumers, including information that must be provided to consumers before entering into a contract for a product or service, records, errors, rebates and claims processing. Persons carrying out a “controlled function” on behalf of financial service providers are also expected to satisfy the minimum professional knowledge and competency requirements set out in the Minimum Competency Code and Regulations 2017 (MCC).
A range of taxes, levies and duties are applied to insurance policies:
Overseas-based Insurers and Reinsurers Licensing of (Re)insurance Companies
Undertakings wishing to carry on (re)insurance business in Ireland must obtain authorisation from the CBI or another EU regulator through the “single passport” regime. The CBI has has published both a checklist for completing and submitting applications for authorisation under the 2015 Regulations (the “Checklist”), and a guidance paper to assist applicants. The application comprises the completed Checklist and a detailed business plan, together with supporting documents (the “Business Plan”), submitted after a preliminary meeting with the CBI.
The principal areas considered by the CBI in evaluating applications include:
A high-level overview of the application for authorisation process is as follows:
The CBI will issue a formal authorisation once it is satisfied that the capital requirements and any pre-licencing requirements have been met. Throughout this process there will be multiple meetings, and the CBI may request additional information. The process can take between four to six months. The CBI does not currently charge a fee for licence applications.
The Position of UK-based Insurers Post 31 December 2020
The Brexit Deal struck at the final hour on 24 December 2020 between the UK and the EU was largely silent on financial services. The effect of same is that as at the end of the transition period on 31 December 2020, the UK is now a third country and UK authorised insurers can no longer rely on the EU passporting regime to access the Irish and wider EU market.
In anticipation of this happening, the Irish Government introduced, through Part 10 of the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2020 (the “Brexit Omnibus 2020 Act”), a Temporary Run-Off Regime (the TRR) which has become crucially important for those UK/Gibraltar (GI) insurers and insurance intermediaries with Irish customers, which decided against establishing an EU authorised entity to access Ireland post Brexit.
Part 10 of the Brexit Omnibus 2020 Act addresses the issue of insurance contract continuity and inserts additional provisions into the 2015 Regulations and the IDR, permitting a UK firm to administer its run-off business in Ireland for a period of 15 years from 31 December 2020 "in order to terminate its activity" in Ireland. Crucially, no new business will be permitted but compliance with the general good requirements will remain a requirement.
In order to avail of this regime, a UK firm will have to, not later than three months from 31 December 2020 notify the CBI that the relevant regulation will apply to its business. On 1 January, the CBI released a webpage fully dedicated to the TRR in which it clarifies how the TRR will operate, provides answers to a number of questions which have arisen since the publication of the Brexit Omnibus 2020 Act and outlines the steps that need to be taken by impacted firms.
See below 3.1 Overseas-Based Insurers or Reinsurers: Establishing a Third-country Insurance Branch in Ireland.
Third-country reinsurers are excluded from the application of the 2015 Regulations where the following conditions are satisfied:
The effect of this exclusion is that a third-country reinsurer is not required to be authorised in accordance with the 2015 Regulations in order to carry on reinsurance business in Ireland.
Freedom of Establishment or Freedom of Services basis
(Re)insurance undertakings authorised in an EU/EEA member state may carry on business in Ireland on a freedom of establishment basis, through a local branch or operate in Ireland on a freedom of services basis, provided that their home state regulators notify the CBI. Passporting undertakings must comply with the Irish general good requirements.
Special Purpose Reinsurance Vehicle
A reinsurance provider can establish a special-purpose reinsurance vehicle, which provides a quicker and simpler route to authorisation and reduces the extent of supervision compared with fully regulated reinsurers.
Establishing a Third-country Insurance Branch in Ireland
The 2015 Regulations facilitate a non-EEA insurer establishing a branch in Ireland (a “Third-Country Branch”), subject to the fulfilment of specific regulatory requirements. The 2015 Regulations impose standalone capital requirements on a Third-Country Branch and require the Third-Country Branch to hold assets in Ireland of at least 50% of the absolute floor prescribed in the 2015 Regulations in respect of the Minimum Capital Requirement (currently EUR3.7 million) and deposit 25% of that amount with the Irish High Court as security. The local substance requirements for a Third-Country Branch will depend on the nature, scale and complexity of its operations.
The CBI will expect an appropriate number of senior management in Ireland to demonstrate a sufficient level of local oversight and control; as a minimum, a branch manager and a branch management committee in Ireland, with day-to-day responsibility for corporate governance of the branch, will be required. To date, no Third-County Branches have been authorised in Ireland but the CBI guidelines and checklists for third-country insurers applying for branch authorisation have been effective since May 2018.
Significantly, a Third-Country Branch does not have the right to passport into other EU/EEA jurisdictions and, accordingly, is only permitted to write business in the jurisdiction in which it is established. Therefore, a Third-Country Branch is not suitable for third-country insurers seeking to write business across the EU/EEA. Within the current context of Brexit, establishing a Third-Country Branch may not represent a comprehensive solution for UK insurers seeking to maintain access to the single market, and establishing an EEA-authorised subsidiary has been the preferred option.
The CBI does not currently permit 100% reinsurance arrangements.
Overall M&A activity in 2020 remained robust and increased in the second half of the year, in spite of significant headwinds following the COVID-19-related downturn. Mergers and acquisitions in the overall domestic market amounted to approximately 65 deals in the first half of 2020, with a total deal value of circa EUR2 billion (the majority relating to inbound M&A transactions).
This healthy level of transactional activity has been accompanied by encouraging macroeconomic performance; the Irish economy rebounded sharply in Q3 of 2020, growing by 11%, according to some estimates, as the easing of COVID-19 restrictions triggered a resurgence in activity across all sectors.
In 2020, it is expected that macroeconomic issues and geopolitical risks such as divisions within Europe, the ongoing trade dispute between the USA and China, the continuing global financial fallout from COVID-19 responses, and the success of a vaccine roll-out will impact Ireland’s M&A landscape.
The European Union (Insurance Distribution) Regulations 2018 (IDR)
The distribution or sale of insurance products is governed by the IDR, which applies to persons engaged in insurance distribution business in the Irish market, such as agents, brokers and bancassurance operators. However, insurers can also distribute insurance products directly to customers.
Definition of insurance distribution
Under the IDR, insurance distribution is broadly defined as “any activity involved in advising on, proposing, or carrying out other work preparatory to the conclusion of contracts of insurance, of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim, including the provision of information concerning one or more insurance contracts in accordance with criteria selected by customers through a website or other media and the compilation of an insurance product ranking list, including price and product comparison, or a discount on the price of an insurance contract, when the customer is able to directly or indirectly conclude an insurance contract using a website or other media”.
Certain activities are specifically excluded, including claim management on a professional basis, loss adjusting, expert claim appraisal and the mere provision of information if no additional steps are taken by the provider to assist in the conclusion of an insurance or reinsurance contract. The IDR clarifies that “introducing” is not considered a regulated activity under Irish law.
Impact of the IDR
The IDR introduces enhanced information and conduct of business requirements for insurance distributors. “Ancillary insurance intermediaries” are exempt from the application of the 2018 Regulations where certain conditions are satisfied.
The IDR prescribes certain requirements in relation to product oversight and governance (the “POG Requirements”), intended to enhance consumer protection by ensuring that insurance products meet the needs of the target market and aim to mitigate the risk of mis-selling by insurance distributors. Insurance undertakings (and relevant intermediaries) are required to implement product oversight and governance procedures prior to distributing or marketing an insurance product to customers.
The IDR also states that distributors must have Product Distribution Arrangements (PDAs) in place containing appropriate procedures to obtain all appropriate information on the products they intend to offer to their customers from the manufacturer. The PDAshould be a written document made available to their staff with the aim of preventing customer detriment, managing conflicts of interest and ensuring the objectives, interests and characteristics of customers are taken into account.
The Investment Intermediaries Act 1995
Previously, two pieces of legislation governed intermediaries operating in Ireland – the European Union (Insurance Mediation) Regulations 2005 (IMR) and the Investment Intermediaries Act 1995 (IIA). The IDR has brought much needed clarification in relation to the application of IIA to insurance intermediaries by revoking all references to insurance, and the IMR has been repealed in full.
(Re)insurance brokers/intermediaries must be authorised by the CBI in order to carry out (re)insurance distribution or advise consumers in relation to general insurance products, life assurance products, or health and medical insurance products, or to act as an insurance intermediary on behalf of an insurance company with which they have an agreement or carry out certain activities, such as loss assessing or assisting consumers in dealing with claims under insurance contracts.
(Re)insurance brokers/intermediaries are subject to ongoing CBI supervision of their compliance with the registration requirements, which includes completing an annual return and holding an adequate policy of professional indemnity insurance. The CBI maintains a register of authorised (re)insurance intermediaries in Ireland. (Re)insurance undertakings involved in the distribution of insurance products must also comply with the national general good provisions that regulate the manner in which such undertakings may sell and market insurance products to consumers in Ireland, as set out under:
The Position of UK-based Insurance Intermediaries Post 31 December 2020
See 3.1 Overseas-Based Insurers or Reinsurers.
Parties to a non-consumer insurance contract are subject to the duty of utmost good faith (Section 17, MIA). The proposer or insured has a duty to disclose all material facts (a material fact is one which would influence the judgment of a prudent underwriter in deciding whether to underwrite the contracts and if so, on what terms). The duty goes beyond answering questions on a proposal form correctly; every material representation made by the insured or proposer, or their agent, to the insurer must be true.
The 2019 Act replaces the duty of good faith for consumer insurance contracts and the MIA no longer applies to these contracts. From 1 September 2021, the consumer proposer’s duty will be limited to a duty to provide responses to specific questions asked by the insurer honestly and with reasonable care.
The majority of provisions of the 2019 Act took effect from 1 September 2020, and the remaining sections, including Section 8 (duty of disclosure) and Section 9 (proportionate remedies), will commence on 1 September 2021.
Prior to the 2019 Act, the remedy for breach of the duty of utmost good faith was avoidance of the policy. The 2019 Act introduces new proportionate remedies (proportionate to the effects of the misrepresentation, depending on whether it was innocent, negligent or fraudulent) for a breach of the new duty of disclosure, (from 1 September 2021).
Section 8(6) requires an insurer to establish inducement to avail of the remedies under the act for a breach of the duty of disclosure.
Typically, an insurance intermediary is deemed to be acting on behalf of the customer at all times during the negotiation of an insurance contract, except when collecting premiums on behalf of the insurer. However, certain intermediaries act for and on behalf of an insurer as a tied insurance intermediary.
Under the IDR, insurance distributors are required to act honestly, fairly and professionally in accordance with the best interest of their customers. This obligation applies irrespective of whether the intermediary is negotiating an insurance contract as an individual broker, or acting as a tied insurance intermediary of a particular insurer. The information and transparency requirements set out in the IDR require an intermediary to promptly disclose whether it is representing the customer or acting for and on behalf of the insurer, before the conclusion of a contract, and any remuneration received by an intermediary in relation to a contract must also be disclosed to the customer. Additional key ongoing requirements include:
In November 2017, the CBI published a consultation paper on a series of proposed consumer protection measures in relation to commission payments, “Intermediary Inducements – Enhanced Consumer Protection Measures” (“CP116”), following which the CBI made an Addendum to the CPC on 31 March 2020 introducing changes to commission payments, disclosure requirements and some consequential amendments arising from the IDR.
There are no specific rules for the formation of an insurance contract under Irish law, beyond the general principles of contract law, common law and the duty of good faith. There is no statutory definition of an insurance contract and the legislation does not specify its essential legal elements. The main characteristics of an insurance contract were set out in the leading Irish authority of International Commercial Bank plc v Insurance Corporation of Ireland and include:
The 2019 Act defines a contract of insurance as “a contract of life insurance or non-life insurance made between an insurer and a consumer” and reforms the law relating to insurable interests.
No information available.
Consumer contracts are now governed by the 2019 Act. The legal requirements of insurance and reinsurance are the same.
ART transactions are recognised as reinsurance transactions under the 2015 Regulations and are characterised by the CBI in a manner consistent with the Solvency II Regime.
There has been a slow-down in recent years in the number of ART deals in Ireland. The CBI has concerns relating to the viability of ART transactions and the potential risks for insurance carrier, in particular in relation to basis risks. Further, it is not clear if ART transactions entered into by life insurers comply with the requirements to be “fully-funded”. Significant growth is not expected in the coming years.
No information available.
General rules of contractual interpretation apply to contracts of insurance. The principles of construction set out by UK case Lord Hoffman in ICS v West Bromwich Building Society (1998) 1 W.L.R. 896 apply to the interpretation of insurance contracts by the Irish Supreme Court in two judgments, and known as “the modern principles of insurance”.
The Irish courts consider the ascertainment of the meaning that the document would convey to a reasonable person having all the background knowledge that would reasonably have been available to the parties in the situation in which they were at the time of the contract (sometimes referred to as the “matrix of fact”). However, a number of things are excluded from the admissible background, including previous negotiations of the parties and their declarations of subjective intent. The meaning of the document is not the same as the particular meaning of the words; it is what the parties using those words against the relevant background would reasonably have been understood to mean.
The courts apply the words’ ordinary and natural meaning as it is assumed that people ordinarily do not make linguistic mistakes in formal documents. However, if it is clear from the “matrix of fact” and background that something has gone wrong with the language, judges can attribute to the parties the intention they clearly had.
The court takes an objective approach to determine the intention of reasonable persons in the position of the parties. Where a contractual term is genuinely ambiguous, the contra proferentem rule will apply and the interpretation less favourable to the drafter is adopted. The rule also applies to consumer contracts. The Irish courts have not yet considered recent decisions in England that have arguably limited the application of the contra proferentem rule.
In non-consumer contract, no specific wording is required to create a warranty. The word “warranty” is not required but may be considered as evidence of the intention to create a warranty. Further, a warranty may be express or implied (Section 33 of the MIA).
A warranty is treated differently to a contractual term in that it must be exactly complied with, whether it is material to the risk or not, and the insurer is discharged from liability from the date of breach of the warranty, but without any prejudice to any liability incurred before that date.
The Irish courts construe warranties strictly as breach entitles the insurer to repudiate liability even if the breach is not material to the loss. The 2019 Act replaces warranties in consumer contracts with suspensive conditions and abolishes basis of contract clauses.
The effect of a breach of a condition depends on whether the condition is a condition precedent to liability. Conditions precedent to liability relate to matters arising after a loss has occurred, most commonly in relation to notification. The Irish courts will generally not construe an insurance condition as a condition precedent unless it is expressed as a condition precedent, or the policy contains a general condition precedent provision. Breach of a condition precedent means that an insurer can repudiate liability for the claim without any requirement to demonstrate prejudice. There is no requirement for a link between the breach and the damage.
The consequences for breach of a bare condition are in damages.
In consumer contracts, conditions precedent could now be considered “continuing restrictive conditions” following commencement of the 2019 Act.
Insurance contracts typically contain a dispute resolution clause, which requires the insured to raise the dispute with the insurer in the first instance. An insurance contract may contain an arbitration clause, or may stipulate another form of alternative dispute resolution (ADR), such as mediation. A consumer is not bound by an arbitration clause where the claim is less than EUR5,000 and the relevant policy has not been individually negotiated. In the case of a consumer contract, a consumer may make a complaint to the Financial Services & Pensions Ombudsman (FSPO).
“Follow the fortunes” and “follow the settlements” clauses are common in Irish law reinsurance agreements. “Follow the fortunes” is a burden-shifting clause that provides a reinsurer is bound by the reinsured's good-faith decisions regarding payment of settled claims and prevents the parties litigating the matter twice. “Follow the settlement” clauses usually appear in ceding insurance company contracts to deal with the allocation of a settlement to its reinsurers.
Choice of forum, venue and applicable law clauses in (re)insurance contracts are generally recognised and enforced. Where an insured is domiciled in an EU member state, regard should be had to the following European regulations that may limit these provisions:
In Ireland, the monetary value of the claim determines the jurisdiction in which court proceedings are brought. The District Court deals with claims up to a monetary value of EUR15,000, the Circuit Court deals with claims with a monetary value up to EUR75,000 (EUR60,000 for personal injury cases) and the High Court hears claims in excess of this with an unlimited monetary jurisdiction. Insurance disputes before the courts in Ireland are heard by a single judge with no jury.
The Commercial Court is a specialist division of the High Court dealing exclusively with commercial disputes. Where the monetary value of a claim or counterclaim exceeds EUR1 million and the dispute is commercial in nature, either party may apply to have the dispute heard in the Commercial Court. There is no automatic right of entry to the Commercial Court; entry is at the discretion of the judge and can be refused if there has been any delay.
Proceedings in the Commercial Court progress at a much quicker pace. Generally, the length of time from entry to the Commercial Court list to hearing tends to be between one week and six months, depending on the time required. A strong emphasis is placed on ADR and the court can provide for a stay of proceedings for up to four weeks to allow the parties to consider mediation.
Appeals from the High Court are dealt with by the Court of Appeal, except when the Supreme Court believes a case is of such public importance that it should go directly to the highest court in the State.
Evidence is to be given orally, except in the most limited circumstances. Where a party intends to rely upon the oral evidence of a witness, factual or expert, a witness statement or expert report must be filed, unless a judge orders otherwise.
Costs typically will follow the event, whereby the loser pays. However, where the litigation is “complex”, case law from the Commercial Court suggests that an analysis should be carried out by the court, considering whether the winning party has succeeded on all grounds, rather than simply awarding full costs to the winning side.
The general position under Irish law (the Statute of Limitations Act 1957) is that claims for breach of contract must be brought within six years of the datethe date of breach.
Where a complaint is made to the FSPO, there is an extended limitation period applicable to complaints relating to “long term financial services” (products or services where the maturity or term extends beyond five years and one month, or life assurance policies not subject to annual renewal), otherwise a six year rule applies.
An originating High Court summons is required to recognise and enforce a foreign judgment in Ireland. In the case of non-EU and non-Lugano Convention judgments, the High Court must grant leave to issue and serve the proceedings. However, such foreign judgments must be for a definite sum, the judgment must be final and conclusive, and a court of competent jurisdiction must have handed down the judgment. The High Court may refuse to recognise and enforce a judgment on a number of grounds including fraud, lack of jurisdiction, that it is contrary to Irish law or the principles of natural justice.
See 9.7 Alternative Dispute Resolution.
See 9.7 Alternative Dispute Resolution.
Insurance disputes may also be dealt with by ADR and ADR clauses are common. The most common forms of ADR are mediation and arbitration.
Where an insurance contract contains an arbitration clause, a dispute must be referred for arbitration. However, consumers are not bound by an arbitration clause where the claim is less than EUR5,000 and the relevant policy has not been individually negotiated.
The Arbitration Act 2010 (the “2010 Act”) incorporates the UNCITRAL Model Law on International Commercial Arbitration. Under the 2010 Act, the decision of an arbitrator is binding on the parties and there is no means of appeal. Where parties have entered into valid arbitration agreements, the courts are obliged to stay proceedings.
Interim measures of protection and assistance in the taking of evidence may be granted by the High Court; however, the arbitral tribunal may also grant most interim measures. Jurisdiction of the dispute is passed from the court to the arbitrator once an arbitrator is appointed and the parties agree to refer their dispute for the arbitrator’s decision. Although there are additional costs incurred for an arbitration, there is the benefit of confidentiality.
Ireland is party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, allowing Irish arbitral awards to be enforced in any of the 157 countries party to the Convention.
The courts can set aside an arbitral award under Article 34 of the 2010 Act, but only on very limited grounds. The party seeking to have the arbitral award set aside must furnish proof of the following:
The Mediation Act 2017 (“Mediation Act”) came into force on 1 January 2018. Under the Mediation Act, solicitors in Ireland must advise their clients of the merits of mediation as an ADR mechanism before proceedings are issued.
The Mediation Act makes provision for any court to adjourn legal proceedings to allow the parties to engage in mediation. The court can make such order on its own initiative or on the application of either party to the proceedings. There may be costs implications where either party fails to engage in ADR following such a direction from the court.
The Financial Services and Pensions Ombudsman
The FSPO is the amalgamation of the Financial Services Ombudsman and the Pensions Ombudsman, pursuant to the FSPO Act 2017. The FSPO is an independent body, established to resolve disputes between consumers and insurance providers either through informal means, such as mediation, or by way of formal investigation. The FSPO’s decision is legally binding, with a right of appeal to the High Court.
There is no cause of action in damages for the late payment of claims in Ireland. However, under Section 26 of the 2019 Act, where an insurer is in breach of any of the duties under the act, the court has a discretion to order that a sum payable in a claim under a contract of insurance shall be increased in proportion to the breach involved.
Insurers have subrogation rights at common law and subrogation provisions in insurance policies are common. Generally, an indemnity must have been provided before the insurer is entitled to subrogate. The 2019 Act has introduced certain restrictions on subrogation rights in the context of family and personal relationships, where the consumer has consented to the use of their vehicle, and employment scenarios.
Irish Government bodies, such as Enterprise Ireland (EI) and the Industrial Development Authority Ireland (IDA), work in tandem to attract and support foreign direct investment in Ireland and have been promoting Ireland as a destination for companies in the insurtech industry. EI note that there are currently 30 insurtech companies as well as more than 200 fintech companies operating in Ireland. Of the top 15 global insurers, 11 are located in Ireland. The Irish Government invests EUR700 million annually in research and development in strategic areas such as software, data analytics, machine learning and cyber security.
Insurance Ireland, the organisation representing 95% of Ireland’s domestic market, is currently liaising with Massachusetts Institute of Technology to examine innovative new approaches to blockchain technology as well as forming part of the IDA Blockchain Expert Group. Carlow IT has a dedicated insurtech hub which is gaining in momentum.
Insurtech offers those operating within Ireland’s domestic and international insurance industry the possibility to take advantage of new and emerging opportunities. Many insurers have entered into industry carrier-start-up partnerships in Ireland, which leverage technologies in a manner that delivers personalised and unique policies tailored to the consumer.
One of the most significant Irish insurtech firms is Blink which was founded in 2016 to build data-driven travel disruption insurance solutions. On the back of this success, it launched Blink Parametric in 2020, offering a full suite of parametric insurance solutions. Blink Interruption –designed to address fast payments providing liquidity quickly to SMEs faced with temporary business closure as a result of an insured risk event occurring is the latest product in its portfolio. Additionally, in 2020, Blink made it onto The InsurTech100 for a second consecutive year.
In Ireland, the CBI is responsive to the challenges posed by the regulatory treatment of financial innovations. It is a robust regulator, and acknowledges the need to strike the appropriate balance between encouraging innovation-related entry to the market and ensuring that new entrants are sufficiently ready to fulfil all their regulatory obligations in relation to financial stability and consumer protection. It is cognisant of the requirement to keep abreast of the changing technological environment and has committed significant resources to improving its data architectures and establishing quantitative analytical teams in its banking, insurance and markets directorates.
The CBI has taken a range of measures in relation to FinTech including establishing an Innovation Hub in 2018 for engagement with fintech companies, creating an Innovation Steering Group and a fintech network within the CBI and engaging with the European Supervisory Authorities (ESAs) and the SSM on European Commission’s FinTech Action Plan.
“Emerging risks” refers to new and evolving risks that are difficult for insurers to assess and typically carry with them a high degree of uncertainty in regards to their impact, probability and amount of losses expected. The CBI expects Irish insurance undertakings to give appropriate consideration to assessment of emerging risk (particularly in relation to climate change) and adopt a longer term perspective than typical business planning and strategy setting processes. The CBI expects to see evidence of robust analysis and challenge and timely and effective action in relation to emerging risks.
Cyber-risk, longevity risk and climate risk appear to be the most formidable emerging risks in Ireland.
In Q4 of 2020, the CBI issued a Climate Change and Emerging Risk Survey to better understand Irish insurance undertakings' exposure to, and management of emerging risks. The survey focused particularly on climate risk and cyber-underwriting risks. Following its analysis of the responses received to the survey the CBI has indicated that it will provide its feedback and key observations to the industry. This exercise will highlight areas of potential vulnerability on which to frame future arrangements with the insurance sector and provide relevant guidance.
Digital innovation and the growing sophistication of digital technology have led to increased cybersecurity threats and risk of data breaches. The market for cyber-insurance is seen as one of the biggest growth areas in the insurance industry, globally.
Cyber-risk was ranked by national supervisors as the second biggest risk for the insurance sector and the sixth for the pensions sector in the EIOPA Autumn 2019 Qualitative Survey.
The CBI published cross-industry guidance in respect of IT and cybersecurity risks in 2016, which highlighted a variety of emerging threats, focusing on four areas: governance, risk management, cybersecurity and outsourcing. The guidance focuses on the areas that the CBI deems most pertinent. This guidance notes that the risks associated with IT and cybersecurity are a key concern for the CBI, given their potential to have serious implications for prudential soundness, consumer protection, the reputation of the Irish financial system and financial soundness.
The CBI also has a dedicated IT risk inspection team, operational since April 2015. In addition to the recent prolific hackings and ransomware attacks, the CBI also drew attention to the deficiencies regarding IT outsourcing and IT governance. The CBI is of the opinion that cybersecurity risks are exacerbated by boards not monitoring service levels or performance of service providers, as well as inadequate due diligence being carried out to ensure robust agreements.
Longevity risk is the potential risk of an individual living longer than expected. The financial implications of exponentially increasing lifespans are colossal. If the average life expectancy were to increase by three years, the cost of supporting the aging population would increase by 50%. As the mortality risk continues to decrease, it is clear that understanding the associated risk is of crucial importance to insurers. The IMF has even highlighted the grave implications for global fiscal stability in its Global Financial Stability Report.
Considering how quickly life expectancy is increasing, projecting future liabilities based solely on data extrapolated from the past is imprecise at best. To address this, certain companies have created insurance subsidiaries to run their pensions schemes who then reinsure its longevity risk with a reinsurer; this is expected to be a common trend in the future. From a reinsurance perspective, buying this longevity risk may be an attractive financial transaction as it lowers mortality risk and thereby helps balance life insurance risks. However, the IMF has stated that the longevity risk should be appropriately shared between insurers and governments, as insurers and reinsurers alone may be constrained by capital.
Regulatory focus on climate risks has intensified in the past 12 months, culminating with the Taxonomy Regulation entering into force on 12 July 2020. In October 2020, EIOPA published a consultation paper on the draft Opinion on the supervision of the use of climate change risk scenarios in the Own Risk and Solvency Assessment (ORSA), a follow-up to its 2019 Opinion on Sustainability within Solvency II. The draft Opinion outlines EIOPA’s expectations to national competent authorities (NCAs) on how to supervise the integration of climate change scenarios by insurers in their ORSA. The consultation closes in January 2021.
It is generally accepted that there are three strands to climate risk which are impacting and will impact the insurance industry: physical risks, transition risks and liability risks. On the physical risks side, weather-related insured losses have increased from an average of around USD10 billion per annum in the 1980s to an average of around USD58 billion per annum in the period 2010-2019. Pricing climate related risks is extremely difficult as relying on historical data to assess the risk of catastrophe is unlikely to be a good guide into the future. Transition risk looks to the what can be described as the “unknowns” about how society will adjust to a low carbon economy and what that will mean in terms of regulation, social requirements, policy and technology developments.
From an Irish regulatory perspective, the CBI has indicated that it will be focussing heavily on climate change risk in 2021. Gerry Cross, Director of Financial Regulation Policy & Risk noted in November 2020 that the CBI’s climate risk priorities were focused on addressing the prudential and financial stability risks associated with climate change, addressing conduct issues and the implementation of a financial regulation to adapt to climate issues. He further noted that the CBI expects Irish insurers to give appropriate consideration to the assessment of climate change and adopt a longer-term perspective compared to typical business planning and strategy setting processes.
The CBI is also establishing a centralised Climate Change Unit to operate as a motor and spokes model for the CBI’s climate change strategy. The establishment of this new dedicated unit, further reflects the importance the CBI is placing on its role in relation to climate risk and the financing of a sustainable economy more generally.
Warranty and Indemnity Insurance
Warranty and indemnity insurance is being used more frequently in commercial transactions, as are other bespoke transactional products such as litigation buy-out policies.
Addressing the Emerging Risks
Cyber-insurance is still a relatively new product on the Irish market, but it has become more popular in recent times and a number of insurers are now offering new cyber products in Ireland. PwC reported that 71% of Irish insurance CEOs believe that the majority of businesses will have cyber-insurance in five years. It is expected to be a growth area in Ireland in the coming years.
Many financial services companies have established subsidiaries or headquarters in Ireland and other EU Member States in order to avoid loss of access to the Single Market or EU passporting rights. Ireland is a desirable location for the insurance industry, due to its highly educated English-speaking workforce, its well-known prudential regulation, common law jurisdiction and fast-track Commercial Court, as well as its proximity to the UK.
See 3.1 Overseas-based Insurers or Reinsures for further detail on the position of UK-based insurers post 31 December 2020.
Consumer Insurance Contracts Act 2019
In addition to the changes highlighted above in relation to the duty of disclosure, remedies and warranties, there are other reforms that will be introduced by this act once commenced in its entirety, including:
The response to the COVID-19 pandemic, in line with many countries worldwide, involved public health measures to reduce the spread of the virus and the closure of non-essential businesses and the loss of income for many households and businesses.
The CBI’s focus throughout the crisis was to ensure “the financial system operate[s] in the best interests of consumers and the wider economy”. To that end, the CBI, aligned with other supervisory authorities in Europe, issued a number of communications and statements to the financial services sector on its response to the crisis and its expectations of firms in their response to the crisis. The following is a brief account of its response:
There is litigation before the Irish courts on the interpretation of BI policies and High Court pronouncements on this issue anticipated in early 2021. Complaints by consumer policyholders are also being dealt with by the FSPO
Health Insurance (Amendment) Bill
This proposal will provide for revised risk equalisation credits and corresponding stamp duty levies to apply to health insurance policies, as well as making some technical amendments to the Health Insurance Acts 1994-19. The bill has been passed by the Irish Parliament and is awaiting signature into law by the Irish President.
Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Bill 2020
This bill has been introduced to transpose the Fifth Money Laundering Directive (MLD5) in Irish law. It seeks to propose measures that will prevent terrorist groups from gaining access to international financial institutions and enhance the accessibility of beneficial ownership registers. It also extends the scope of MLD4 so as to include virtual currency exchange platforms and custodian wallet providers. The bill is expected to be enacted in early 2021.
Heightened Regulatory Scrutiny
Discussion Paper 9: Use of Service Companies in the Insurance Sector
In November 2019, the CBI released Discussion Paper 9 – Use of Services Companies in the Insurance Sector. The CBI notes that it has observed a number of insurers seeking to enter arrangements with services companies for the provision of extensive staffing, and sometimes other services, to the insurer. Insurers have cited various reasons for seeking to enter such arrangements, including: flexibility, costs and tax efficiencies. While the CBI appreciates these factors, it considers that they are likely to introduce new and increased risks for the insurer, which need to be appropriately managed.
Differential Pricing Proposals
On 21 November 2019, the CBI wrote to the insurance sector outlining the potential risk to consumers arising from the practice of differential pricing and informing firms of its intention to conduct a multi-phase review of differential pricing in the private car and home insurance markets (the "Differential Pricing Review"), which is being conducted in three phases:
On 8 September 2020, following the conclusion of the first phase of the Review, the CBI issued a letter to the insurance sector setting out its expectations in respect of the pricing of insurance policies. Director of Consumer Protection, Grainne McEvoy noted that “while work on the Review is ongoing, the issues we identified during our evidence-gathering phase are of sufficient concern that we are requiring action now from relevant firms. For this reason, we have written to firms instructing them to implement the CBI’s requirements with immediate effect”.
The Review is expected to conclude in 2021, determining further actions.
The proposed introduction of an Individual Accountability Framework and, in particular, the Senior Executive Accountability Regime (akin to the Senior Managers Regime in the UK) will bring clarity to the expected standards, regulatory responsibilities and accountability of senior management. The Governments’ 2020 Autumn Legislative Programme, released in September 2020, lists a CBI (Amendment) Bill to support the advancement of an improved culture in the Irish financial system through greater accountability in the regulated sector as undergoing pre-legislative scrutiny.
To date, there has been no further information provided beyond this. The CBI has indicated that it will engage in a public consultation process in respect of the proposal once the legislation has been enacted.
Fitness and Probity
In November 2020, the CBI issued a Dear CEO letter to the management of regulated firms addressing their obligations under the Fitness and Probity Regime. In the letter the CBI noted a lack of general awareness among firms of their obligations under the Fitness and Probity Regime and highlighted some of the areas where compliance had been found to be lacking. In particular, the CBI noted compliance to be lacking in relation to the role of the board, the conduct of due diligence and the outsourcing of CF roles.
Consultation Paper 131 - Regulations for Pre-emptive Recovery Planning for (Re)insurers
On 25 June 2020, the CBI published consultation paper CP131 to consult on proposals to introduce formal recovery planning requirements for (re)insurers under section 48 of the CBI (Supervision and Enforcement) Act 2013.
The CBI sought feedback on the proposed regulations and, in particular, what other areas should be covered in the guidelines or in future potential guidance and whether there are any areas where the application of proportionality can be improved or clarified. In a recent speech delivered by Domhnall Cullinan, Head of the Insurance Directorate at the CBI, he indicated that “the Bank anticipates finalising the Regulations in early 2021 with a view to having plans in place by late 2021”, so insurers should expect clarity on this in 2021.
CBI Thematic Assessment of Diversity and Inclusion in Insurance Firms
In July 2020, the CBI published the outcomes of its "Thematic Assessment of Diversity & Inclusion (D&I) in Insurance Firms". The assessment considered D&I practices in a sample of 11 insurance firms. The assessment found deficiencies in firms’ D&I strategies and in the prioritisation of D&I. In its report, the CBI noted that there was clear evidence of significant gender pay gaps in most firms. On the CBI’s future expectation of the industry, Ed Sibley, Deputy Governor of the CBI has noted that progress was too slow and advised that “the inadequate focus on diversity in all its forms in succession planning and the absence of plans to solve remuneration issues need to be addressed.”
CBI Additions to the List of PCF Roles
Part 3 of the CBI Reform Act creates the system for the regulation of persons performing “controlled functions” (CF) or “pre-approval controlled functions” (PCF) within Firms (with the exception of credit unions). Since enactment, the CBI has issued a number of statutory instruments (the “Regulations”) which designate which roles are considered CF and PCF roles. In October 2020, S.I. 410 of 2020 was enacted which amends the Regulations and introduced three new PCFs roles, one of which is relevant to the insurance industry - PCF-49 CIO. The CBI has explained that the creation of the role of CIO as a PCF is in response to the increased role which IT is playing in financial services firms and the associated exposure to IT related risks
The Consumer Insurance Contracts Act 2019 (the “Act”) represents the most significant reform of Irish consumer insurance law in the past hundred years. The Act impacts all aspects of the life cycle of an insurance contract from the pre-contract stage, to inception and administration of the contract, and to renewals and claims. The Act applies the legislative reform recommendations of the Law Reform Commission to modernise consumer insurance law in Ireland, enacting largely pro-consumer measures including the abolition of the duty of good faith, and providing proportionate remedies for misrepresentation and non-disclosure.
The majority of the Act commenced on 1 September 2020 but the most onerous sections will come into force on 1 September 2021. The extended implementation of these sections is intended to enable the insurance industry to implement the changes necessary to give effect to those provisions and to avoid any unintended consequences for the consumer which might have arisen without such lead time being permitted.
Most insurers have put in place systems and processes required by the sections implemented on 1 September 2020. However, as if often the case with major legal reforms, there are some uncertainties regarding implementation of aspects of the Act. The application of some provisions of the Act might give rise to disputes in the future and further clarification may come through interpretation by the Courts. The insurance industry will therefore be closely monitoring developments in relation to the Act, including the compliance approaches taken by their competitors, to identify practical issues arising from the Act. Insurers must also now prepare to implement the most onerous sections of the Act, which will come into force later this year.
The Act requires insurers to update their systems and processes as well as their key documentation including policy terms and conditions, proposal forms and renewal notices. However, the Act also brings some benefits for insurers. In particular, the Act sets out more flexible remedies for misrepresentation and non-disclosure.
Scope of the Act
Each provision of the Act applies to life and general insurance contracts entered into after the provision is commenced. The provisions also apply to any variations to such insurance contracts from the commencement date. The Act excludes reinsurance contracts, contracts of insurance involving SPVs, and certain classes of general insurance.
Importantly, the Act does not apply to non-consumers. The Act only applies to insurance contracts agreed with “consumers”, as defined in the Act, which includes individuals and small businesses with a turnover of less than EUR3 million (provided that these persons are not a member of a group having a combined turnover greater than EUR3 million).
The Act imposes obligations on consumers and insurers, but not directly on insurance brokers. Any act or omission by an agent (including insurance intermediaries) on behalf of an insurer is regarded as an act or omission by the insurer. For this reason, insurers are continuing to liaise with brokers to monitor their compliance with the Act.
There have been questions regarding the territorial scope of the Act. The UK’s Insurance Act 2015, which represented a major reform of UK insurance law and a significant divergence from Irish insurance law, specifies that it applies to insurance contracts governed by the law of England and Wales, Scotland and Northern Ireland wherever they are underwritten. By comparison, the Act is silent regarding territorial scope. However, a general consensus is emerging that it is considered the Act applies only where insurers are selling policies to Irish-resident consumers.
Key Changes Introduced in 2020 and Related Developments
Provision of information to consumers
Insurers are now required to provide the completed application or proposal form to the consumer within a reasonable time after concluding an insurance contract. Insurers are continuing to review their processes to ensure compliance with this requirement, including in the case of variations of contracts predating the Act and in circumstances where the contract is concluded through brokers or online portals.
A 14 working day cooling-off period was introduced to cover contracts not covered by existing cooling-off periods, particularly for face-to-face sales of non-life insurance. When a consumer cancels within the cooling-off period, the only financial cost that can be imposed on the consumer is the cost of the premium for the period of cover. Cooling-off periods provided for in other legislation differ regarding the requirement to refund so insurers are closely examining how refunds should be approached when the cooling-off period in the Act applies (for example, what happens following cancellation after a claim is made during the cooling-off period).
Cancellation by insurer
If the insurer cancels an insurance contract at any time, the only financial cost that can be imposed on the consumer is the cost of the premium for the period of cover.
The requirement for insurable interest was largely abolished for consumer contracts. However, contracts of indemnity can require consumers to have a factual expectation of benefit from the preservation of the insured subject matter, or of an economic loss on its destruction.
Notification of alterations at renewal
Within a reasonable time before renewal (and no later than 20 working days before renewal), insurers must notify the consumer in plain language of any alteration to the terms and conditions of the policy.
Post-contractual duties and “alteration of risk” clauses
The post-contractual duty of good faith for both consumers and insurers has been abolished. However, “alteration of risk” clauses are permitted, but will only be valid if they apply to alteration of the subject matter of the insurance. “Alteration of risk” clauses will be void if they apply to modifications of the insured risk. In practice, it is sometimes difficult to distinguish between alteration of the subject matter and modifications of the insured risk, which should be an area of focus for insurers seeking to bring their policy wordings in line with the Act.
Consumers are required to notify insurers of an insured event within a reasonable time or in accordance with the contract. However, where a breach of this duty does not prejudice the insurer, the insurer shall not be entitled to refuse liability for late notification alone. This means that an insurer is not entitled to rely on an existing condition precedent in relation to notification to decline cover without establishing prejudice, which it currently would not have to do if relying on a condition precedent.
In relation to claims co-operation, the consumer must co-operate with insurers in the investigation of insured events, including by responding to reasonable requests for information in an honest and reasonably careful manner. Unlike with the notification provision, this section does not say that an insurer cannot rely on a condition precedent where there is no prejudice. The insurer’s remedy for breach of this obligation by a consumer would likely be an adjustment of the consumer’s claim, at the discretion of the court or Financial Services and Pensions Ombudsman.
Significantly, the Act provides that if a consumer or insurer becomes aware of information after the claim is made (including information that would otherwise be subject to privilege) that would either support or prejudice the claim, there is a duty to disclose such information to the other party. The rationale behind this was that mutual disclosure could make an important contribution to claims settlements within a reasonable period because the settlements would be based on all the information that is available to both parties. However, the extent of the duty remains to be seen.
Deferring payment of claims in property contracts
The Act voids any term that provides that an insurer is not obliged to pay a full claim settlement amount until repair, replacement or reinstatement work has completed and specified documentation (such as receipts) have been provided, unless that terms has been brought to the consumer's notice in clear and unambiguous terms before entering into the contract. This section of the Act is applicable to any policy which provides insurance in respect of damage to property (in addition to other covers or not).
An insurer is entitled to refuse to pay a fraudulent claim and terminate the contract without returning the premium. A fraudulent claim is a claim which contains information that is false or misleading in any material respect and which the consumer knows is false and misleading or consciously disregards whether it is false and misleading. A pre-existing valid claim is not affected. The insurer must notify the consumer of termination and such termination is from the date of the submission of the fraudulent claim. The insurer cannot claim the cost of investigating a fraudulent claim from the insured.
Warranties and basis of contract clauses
Firstly, the Act abolishes basis of contract clauses. With regard to other warranties, any statement made by or attributable to a consumer with respect to the existence of a state of affairs or a statement of opinion shall have effect solely as a representation prior to entering into the contract.
Any term purporting to convert a statement into a warranty is invalid. Any contract term (howsoever described) that imposes a continuing restrictive condition on the consumer shall be treated as a suspensive condition. Where there is a breach of a suspensive condition, the insurer’s liability is suspended for the duration of the breach but, if the breach has been remedied by the time a loss has occurred, the insurer shall (in the absence of any other defence) be obliged to pay any claim. Not all breaches will be capable of being remedied. In practice, a number of insurers have dealt with matters that would have been covered by warranties prior to the Act as suspensive conditions.
Liability is not suspended if the breach does not increase the risk of a loss that has occurred. Where a term has the effect of reducing the risk related to a particular type of loss, loss at a particular time or loss in a particular location, liability will only be suspended in respect of that particular type of loss, loss at a particular time or in a particular location.
The Act sets out the right of a consumer third party with a claim against an insolvent insured to bring a direct claim against the insured's liability insurer. The Act goes further than the common law in a number of ways, including by actually transferring the rights of the insured to the third party, and vesting them in the third-party consumer. There are three main changes of note. Firstly, consumer third parties can issue proceedings directly against the insurer to enforce the terms of the insurance contract without first having established the liability of the insured, but liability will have to be established before the policy can be enforced against the insurer, by award, arbitration or agreement. Secondly, third parties will also be able to fulfil conditions of the policy itself, such as payment of an excess.
The third, and quite significant change, is that the third party has a right to obtain information regarding the insurance position. Where a third party “reasonably believes” that the person has incurred a liability to which the section applies, that third party can seek and obtain information from the insurer or “from any other person who is able to provide it”, neither of whom can unreasonably refuse such information, concerning:
This could result in an increase in information requests to insurers, and may raise data protection issues.
An insurer’s subrogation rights are restricted against a family member or cohabitant, or where the consumer consented to the use by the person of the car insured by the policy. The insurer does not have the right to subrogate if that other person is uninsured. If that other person is insured, the recovery is limited to the indemnity available under the person’s policy. The restriction on subrogation does not apply where the conduct of the other person giving rise to loss was serious or wilful misconduct (for example, in the case of arson).
A policy condition requiring a consumer to assign subrogation rights to the insurer in order to obtain payment is void. An insurer also has no right of subrogation against an employee of an insured employer except where it is proved that the loss was caused intentionally or recklessly and with knowledge that the loss would probably result. The Act puts the “recover down” common law principle for the distribution of recovered funds on a statutory footing.
Before the contract is entered into, the insurer must bring the consumer’s attention to any provision which excludes or limits cover because a consumer has entered into a contract with a limitation on liability preventing the consumer from recovering damages from another person.
Key Changes Commencing on 1 September 2021
Utmost good faith and duty of disclosure
The principle of utmost good faith will be abolished and the duty of disclosure by a consumer will be replaced. This is arguably the most significant change to be introduced by the Act. The new duty is limited to answering the insurer’s specific questions honestly and with reasonable care.
Insurers may not use general questions and shall be deemed to have waived any further duty of disclosure where they fail to investigate an absent or obviously incomplete answer (unless there is fraudulent, intentional or reckless concealment). In addition, an insurer can only rely on a breach of a consumer’s duty of disclosure where non-disclosure of material information induced the insurer to enter into the contract.
Consumer and insurer duties at renewal
Consumers will not be required to provide additional information to the insurer at renewal unless requested to do so. In order to request further information the insurer can either:
As is the case at inception of the contract, the consumer’s duty will be limited to answering the insurer’s specific questions honestly and with reasonable care.
The current law provides that the only remedy for a non-disclosure or misrepresentation is avoidance ab initio. This is considered to be a draconian remedy, and one which insurers are at times reluctant to rely on. The Act provides insurers with alternative remedies to avoidance in the event of a misrepresentation, proportionate to the effects of the misrepresentation. The remedies available vary depending on whether the misrepresentation was innocent, negligent or fraudulent.
Renewal notices will need to include a schedule outlining premiums paid and claims made over the previous five years. These requirements are in addition to the obligations relating to renewal recently introduced in the context of private motor insurance renewals by the Non-Life Insurance (Provision of Information) (Renewal of Policy of Insurance) (Amendment) Regulations 2018.
As is clear from the above, the Act is a major reform affecting all aspects of consumer insurance business. Insurers that write consumer insurance business in Ireland should continue to monitor their compliance with the provisions implemented last year, and urgently prepare for the more onerous provisions coming down the track. As the previous regime continues to apply to non-consumer contracts, this has created a divergence and may require a different approach for different categories of customer.