Legal

Insurance (Miscellaneous Provisions) Bill 2021 UpdateOn 20 October 2021, the General Scheme of the Insurance (Miscellaneous Provisions) Bill 2021 (General Scheme) was published. The General Scheme will address several insurance-related issues highlighted in the Action Plan for Insurance Reform.

The Action Plan for Insurance Reform was published by the Department of Finance to reflect the insurance-related commitments made in the  Programme for Government.

The main amendments relate to:

  • The power of the National Claims Information Database (NCID) to collect data concerning deductions relating to public money from insurance compensation payments;
  • Price-walking;
  • Disclosures in claims handling; and
  • Amendments to the Temporary Run-off Regime under the European Union (Insurance and Reinsurance) Regulations 2015.

1. Data collection by the NCID

The NCID was established by the Minister for Finance in 2016.  It serves as a repository for aggregate claims data collected from insurers to increase transparency around the costs of insurance claims, policies and premiums. The NCID currently collects data concerning private motor insurance, and employers' and public liability insurance.

The General Scheme proposes to amend the Central Bank (National Claims Information Database) Act 2018, to enhance the types of data that the NCID can collect, to include data relating to any deductions of public money (i.e., State supports) from insurance compensation or claims payments.

This amendment will allow the Central Bank of Ireland (CBI) to examine the nature of any public money that insurers deduct from compensation payments (except for payments made under the Social Welfare and Pensions Act 2013), as well as the costs associated with dealing with relevant claims.

The rationale behind the proposed amendment arises from the practice of some insurers deducting  government payments from COVID-19-related claims settlements.
The CBI believes that this will enhance transparency and allow policymakers to address such practices in future situations, thus protecting the interests of the taxpayer.

2. Price-walking

Price walking, also known as the ‘loyalty penalty’, is a form of differential pricing. Customers are charged higher premiums relative to the expected costs, the longer they remain with an insurance provider. This practice is controversial as it discriminates against less sophisticated customers who may not be able to seek alternative quotes before renewing their motor or home insurance.

The General Scheme proposes to impose a new requirement on the CBI to submit a report to the Minister for Finance within 18 months of commencement of the Act, setting out:

  • any measures taken to regulate the practice of price walking in motor or home insurance policies, and automatic renewals for non-life insurance contracts, sold to personal consumers, and
  • whether any further legislative action is required.

This follows the publication of the CBI’s Review of Differential Pricing in the Private Car and Home Insurance Markets (Review).  The Review showed that the premiums paid by certain policyholders deviate significantly from the expected costs. It also found that oversight of pricing practices is lacking and that the automatic renewals process, which is a common feature of the insurance market, lacks transparency.

The CBI is currently proposing to ban the practice of price walking through the introduction of measures requiring insurers to review their pricing policies annually and strengthen the provisions regarding automatic renewals of all personal non-life insurance contracts.

3. Disclosures in claims handling under the Consumer Insurance Contracts Act 2019 (2019 Act)

The General Scheme aims to address concerns around the disclosure requirements of section 16(10) of the 2019 Act, which may have the unintended consequence of encroaching on legal professional privilege. The General Scheme proposes to replace the section with a new Section 16A that will clarify the scope of the disclosure requirements under the 2019 Act.

Further, the General Scheme proposes that insurers notify a claimant of any deduction, and its rationale, from a final claim settlement (excluding amounts the State may recover through the Recovery of Benefits and Assistance Scheme). This requirement will apply to both individual consumers and smaller businesses, in respect of non-life insurance contracts only.

The General Scheme also proposes to amend the current wording of section 18(4) of the 2019 Act to ensure that a fraud perpetrated by one co-insured will not exclude a claim made by an innocent co-insured.

4. Amendments to the Temporary Run-off Regime (TRR)

The General Scheme proposes technical amendments to the European Union (Insurance and Reinsurance) Regulations 2015 (2015 Regulations).  The amendments will address issues identified by the CBI. Following Brexit, UK and Gibraltar insurers lost the ability to write new business in the EU. However, in order to protect Irish policy holders, the TRR allows qualifying UK and Gibraltar insurers to run-off their existing insurance contracts post-Brexit, before ultimately terminating their activities in Ireland. 

The CBI is of the view that if an insurer is in the TRR, it cannot lawfully carry out new reinsurance activity in the Irish market from outside Ireland (although many practitioners do not share the CBI's view). It is proposed that the 2015 Regulations will be amended to clarify that UK and Gibraltar insurers in the TRR, which are in the process of running off their insurance books in Ireland, may continue to provide reinsurance cover to Irish cedants from outside Ireland.

The General Scheme also proposes amendments to the 2015 Regulations to clarify that the CBI will not withdraw the TRR authorisation of an insurance undertaking that enters liquidation.

By Vicky Eckel of William Fry