20 | June 2020
Scope of the Act
Unless otherwise provided, the Act shall apply to life insurance and
non-life insurance contracts that are agreed, varied or renewed
post commencement of the Act. The Act disapplies the Marine
Insurance Act 1906 and the Life Insurance (Ireland) Act 1866
to those contracts that come within its scope. The Act applies to
insurance contracts with consumers as defined in the Financial
Services and Ombudsman Act 2017, which includes individuals,
unincorporated and incorporated bodies with a turnover of less than
€3 million (provided such businesses are not members of a group
with combined turnover greater than €3 million).
The Act will significantly impact all those who distribute insurance
products. The Act is intended to improve the position for consumers
and to make it more difficult for insurers to decline claims, with new
proportionate remedies for misrepresentation and for dealing with
claims, the replacement of the concept of warranties and the altering
of the concept of insurable interest. The Act is intended to correct
what has been considered by some to be an imbalance in the pre-
contractual burden imposed on consumers and shifts the burden to
the underwriter to make sufficient and appropriate enquiries when
considering whether and on what terms to write a risk. The Act
makes significant changes to the pre and post contract stages of
the insurance transaction, as well as the claims process. It provides
that in certain circumstances third parties will be able to claim under
policies of insurance.
Pre-contractual duty of disclosure – replacement of utmost
good faith
The long-standing principle of utmost good faith (uberrima fides)
will no longer apply to consumer insurance contracts. Instead,
consumers will have to take reasonable care in answering specific
questions asked by insurers, with no obligation on the consumer to
supply any other information. There will therefore be an obligation on
insurers to frame questions such that all information required to write
a risk is extracted from the consumer.
There will be a presumption that when answering the questions
asked by an insurer a consumer knows that the question is relevant
to the risk, or the premium, or both. Ambiguity is to be resolved in
favour of the consumer. It should be noted by Brokers that when
determining whether a consumer has complied with the duty to use
reasonable care, one of the factors to which regard will be had will
be whether they were represented by an agent (i.e. a Broker).
Suspensive conditions – replacement of warranties
The Act replaces the concept of insurance warranties. Any term in a
contract of insurance that imposes a continuing restrictive condition
on the consumer during the course of the contract will be treated as
a “suspensive condition”. The effect of a suspensive condition will be
that for the duration of the condition’s breach, the insurer’s liability
will be suspended and if the breach is remedied at the time of the
occurrence of the loss then the insurer will be liable to pay the claim.
Once the Act is operative, statements of opinion by consumers will
be treated as representations and not as warranties as is generally
the case at present.
New proportionate remedies for misrepresentation
The Act introduces proportional remedies for misrepresentation and
an insurer will not be permitted to avoid a contract because of an
innocent misrepresentation. For fraudulent misrepresentation, an
insurer may still avoid a contract. However, for a misrepresentation
that is merely negligent, account is to be had of what the insurer
would have done if aware of the full facts at the time the policy was
taken out. This would allow an insurer to avoid a contract and return
premiums to the consumer if they would never have insured the
risk had they known the true position, or provide a reduction of the
amount to be paid on a claim. These provisions have the merit of
providing clarity, but they also set a high standard for insurers to
satisfy before they are able to avoid a contract,
Insurers may consider they will encounter difficulties in having to
make a determination of whether a misrepresentation is innocent,
negligent or fraudulent before being able to decide what if any
Mary Smith, Senior Associate,
Caytons Law
Cathie Shannon, Director of General
Insurance, Brokers Ireland
Consumer Insurance Contracts Act 2019
The Consumer Insurance Contracts Act 2019 (“The Act”) was signed into law on 26 December 2019, with
many of the recommendations made by the Law Reform Commission in its July 2015 report on Consumer
Insurance Contracts finding a place in the Act. Speaking in the Dáil on 13 May 2020, the Minister for Finance
made it clear that commencing the Act will be a matter for the next Government. The insurance industry has
lobbied extensively to ensure that sufficient time is allowed for the necessary significant changes to be made to
policy documentation, work processes and EDI systems. In this article, Cathie Shannon, Director of General
Insurance, Brokers Ireland, and Mary Smith of Caytons Law , examine some of the key changes and the
anticipated impact on the insurance industry.
“The long-standing principle of utmost good faith (uberrima fides) will no longer apply
to consumer insurance contracts. Instead, consumers will have to take reasonable care in
answering specific questions asked by insurers, with no obligation on the consumer to supply
any other information. There will therefore be an obligation on insurers to frame questions
such that all information required to write a risk is extracted from the consumer.”
June 2020 | 21
remedy may be available to them. Whilst the Act includes a definition
of what will constitute a “fraudulent misrepresentation”, there is none
for “negligent misrepresentation”, so it is arguable that the existing
common law principles will apply.
The equivalent UK legislation, instead of using fraudulent
misrepresentation has used a standard of “deliberate or reckless
misrepresentation”, which though high, may arguably be easier for
an insurance company to meet. Proving that a representation by a
consumer was definitely fraudulent may pose a difficulty.
14-day cooling-off period
The Act provides a new 14 day cooling off period for some contracts
of insurance, with the consumer being given a right to cancel with no
cost other than the premiums applicable to that period.
Post-contractual
The Act applies the EU (Unfair Terms in Consumer Contracts)
Regulations 1995 to consumer insurance contracts. These
Regulations provide that a contractual term shall be regarded as
unfair if it causes a significant imbalance in the parties’ rights and
obligations under the contract to the detriment of the consumer.
The post-contractual duties of insurer and consumer listed in the
Act replace the duty of utmost good faith. The consumer will be
under an obligation to pay premiums within reasonable time or in
accordance with the contract. The Act will allow an insurer to include
an “alteration of risk” clause in a contract, which may be grounds for
declining a claim. However, it should be noted that such a clause will
be void where the change merely modifies the risk, as opposed to
altering the subject matter of the contract of insurance. A “material
change” will be taken as being a change taking the risk outside what
was in the reasonable contemplation of the contracting parties when
the contract was entered into. Exclusions from coverage must be
explicit and in writing before the contract has commenced.
Renewal
For non-life renewals, an insurer must provide the consumer with a
schedule outlining premiums paid by the consumer to the insurer in
the preceding five-year period, as well as a list of claims paid out on
foot of the contract by the insurer to the consumer during a five-year
period (except for health insurance contracts). Where there has been
a mid-term adjustment to the policy during the previous five years,
the information to be provided is to include an annualised premium
figure (for the relevant year) excluding fees or charges applied at the
time and a statement indicating that the annualised premium figure
shown may not reflect the actual premium paid during that year.
These obligations are more onerous than the obligations within the
Renewal Regulations (S.I. No .577 of 2018 – Non-Life Insurance
(Provision of Information) (Renewal of Policy of Insurance)
(Amendment) Regulations 2018). For Brokers, EDI quote systems
will have to be amended to accommodate these changes.
This section of the Act would seem to overlook the fact that most non-
life contracts of insurance are renewable on an annual basis and
that in a five-year period a consumer might have had five different
insurers, particularly if the consumer has used a Broker who will
have re-broked the business to find the most suitable policy of the
consumer. However, the intent of the section would seem to be that if
a consumer has remained with an insurer for a number of years then
the insurer will have to provide information on premiums paid and
claims going back up to five years. The wording in this section refers
only to “the insurer”, suggesting that there is no broader obligation
to provide information that “the insurer” will not have.
For life and non-life, on renewal of a contract of insurance, the
consumer will once again be under a duty to respond honestly
and with reasonable care to requests by the insurer, but under no
obligation to volunteer information. If no new information is provided,
the previous information shall be taken not to have altered. An
insurer must notify the consumer of any alteration of the terms and
conditions of the policy at least 20 working days before the renewal
date.
Claims
As the Act modifies the concept of insurable interest, an otherwise
valid claim cannot be rejected by the insurer only because the party
claiming is deemed not to have an interest in the subject matter of
the contract. The Act will require an interest where the contract of
insurance is also a contract of indemnity, but this is not to extend
beyond a factual expectation of the economic benefits or losses that
would arise in the ordinary course of events. The Act puts an obligation
on the consumer to cooperate with the insurer in investigation
of insured events, including responding to reasonable requests
for information in an honest and reasonably careful manner and
notifying the insurer of occurrence of an insured event in reasonable
time. However, unless non-notification within such reasonable time
prejudices the insurer, it will not be a valid ground for the insurer to
refuse liability. The insurer must inform the consumer where a claim
is settled or otherwise disposed of and the amount of the settlement.
Following the making of a claim, where either party becomes aware of
information that could support or prejudice the claim, this information
must be disclosed. If a consumer knowingly or fraudulently provides
false or misleading information, or consciously disregards whether
information is false or misleading, then an insurer will still be entitled
to decline to pay a claim and to terminate the contract. Where criminal
or intentional acts or omissions are excluded from property damage
cover, only the claim of the person whose act or omission caused
the loss or damage will be affected. For a consumer whose claim is
excluded as a result of a criminal or intentional act or omission, the Act
obliges them to cooperate with the insurer in respect of investigation
of loss (claimed by another party) by submitting statutory declaration
or producing documentation as requested by the insurer. a court
of competent jurisdiction can reduce the pay-out to the consumer
where they are in breach of their duties under the Act, in proportion
to the breach involved.
The Act allows third parties to benefit from the rights of the insured
party in limited circumstances (e.g. where the insured party is
deceased) where liability is incurred by the insured party to a third
party. Policy proceeds are to be ring fenced in the event of the
insolvency or bankruptcy of the insured. In such circumstances,
the third party has the right to seek to recover loss suffered against
the insurer and may commence an action against the insurer before
liability against the insured party has been established.
What does this Act mean for those distributing insurance?
Significant changes will have to be made by providers to policy terms
and conditions, other contract documentation and question sets. It
“The Act puts an obligation on the consumer to cooperate with the insurer in investigation of
insured events, including responding to reasonable requests for information in an honest and
reasonably careful manner and notifying the insurer of occurrence of an insured event in reasonable
time. However, unless non-notification within such reasonable time prejudices the insurer, it will
not be a valid ground for the insurer to refuse liability. The insurer must inform the consumer
where a claim is settled or otherwise disposed of and the amount of the settlement.”
“Significant changes will have to be made by providers to policy terms and conditions, other contract
documentation and question sets. It is reasonable to assume that question sets will become longer for all
classes of business, as the onus will now be on insurers to ask all relevant questions and there will be no
onus on the consumer to volunteer information that might be relevant. This may impact the number of
policies that a Broker or direct channel salesperson will be able to sell in the course of the working day.“
l Continued overleaf
22 | June 2020
A
mundi, the leading European asset manager, announces
that the Central Bank of Ireland confirmed Amundi as a
‘Super’ Management Company in Ireland. It complements
a range of existing authorisations held by the firm including,
individual portfolio management and investment advice. With the
full scope of AIFMD and UCITS permissions in Ireland, Amundi
can now draw on its four major hubs for fund hosting services:
France, Luxembourg, Austria and Ireland.
Amundi leverages on local and international experts to assist
clients around the world with the launch and maintenance of
both UCITS and AIFs. With significant operations in Luxembourg
and Ireland, the two leading cross-border fund domiciles, as well
as in all major European investment centres, Amundi offers a full
suite of hosting solutions ranging from fund structuring through
operational support to marketing and distribution.
This new capability in Ireland will also benefit Amundi Services,
one of Amundi’s business lines, which provides third-party
asset managers, distributors and institutional investors with
comprehensive management company, compliance and
risk management solutions. Indeed, Amundi’s dedicated
team of experts takes care of the day-to-day governance and
administration required to ensure an effective supervision of
delegated activities. Amundi offers a robust and scalable legal
and technology platform, flexible outsourced solutions with a
broad range of traditional and alternative fund vehicles, decades
of collaborative work with third-party asset managers and first-
hand experience in most asset classes.
Guillaume Lesage, Head of Operations,
Technology and Services Division
comments, “With a team of over 350
professionals in Ireland, Europe’s second
largest fund domicile, this development will
enable Amundi to offer its fund hosting clients
the substance, expertise and service levels
that they require to support their business.
This is also a new step in the development of
Amundi Services which integrates this new capability of Super
ManCo as part of its range of services and fund hosting platform.”
is reasonable to assume that question sets will become longer for
all classes of business, as the onus will now be on insurers to ask
all relevant questions and there will be no onus on the consumer to
volunteer information that might be relevant. This may impact the
number of policies that a Broker or direct channel salesperson will
be able to sell in the course of the working day. For personal lines
products transaction via EDI, Brokers may expect changes to be
made to the question sets via Applied and Open GI.
For Brokers, the Act will also impact the Broker / client relationship.
Brokers should carefully explain to their clients the nature and effect
of the obligations being placed on the consumer as a result of the
Act. In particular, the pre-contract duty of disclosure and that they
are under a duty to take reasonable care in answering the questions
asked by the Insurer. Brokers should ensure that their clients are
aware that it is to be presumed that a consumer knows that if an
insurer asks a specific question that this is material to the risk, or the
calculation of premium, or both. Brokers should consider revising
their terms and conditions of engagement with their clients to ensure
that the consumer’s obligations are acknowledged there, given the
Act expressly states that whether the consumer has used a Broker
will be relevant to the question of whether the consumer has taken
reasonable care.
The UK experience
The UK is well ahead of this curve, having enacted the Consumer
Insurance (Disclosure and Representations) Act 2012 on 6 April
2013. This similarly removed the duty of disclosure upon individual
consumers, replacing it with the obligation on insurers to ask
questions, and provided for proportional claims payment remedies.
Further provisions are also contained in the subsequent Insurance
Act 2015, which came into force on 12 August 2016. The Insurance
Act 2015 has provisions analogous to those in the Consumer
Insurance Contracts Act 2019, particularly the disclosure obligations
of the policyholder and insurers’ remedies where the policyholder
has not complied with their obligations.
The changes in the UK have generally been well received by both
insurers and consumers. That said, that legislation was introduced at
a time when the market was soft, as opposed to a hardening market
as we have now and as such it did not lead to a reduction in premiums.
When the measures were introduced in the UK, the insurance team
of Caytons UK office advised those insurers that wanted to reflect
the terms of the Act into their policies. This was even though legally
that was not strictly necessary, because the default position is that
the 2015 Act applies: (a) to consumer policies save to the extent
the policy is more advantageous and (b) to non-consumer policies
(such as PI) save to the extent the policy is more advantageous
than the Act or unless there has been a contracting out (such that
the policy can be less advantageous than the Act). The legislative
changes brought no major shocks to the UK insurance market and
the provisions have been found to be relatively uncontroversial. The
net result was that the legislation was generally already accepted
to be industry good practice and in line with the approach taken to
good practice by the Financial Ombudsman Services (FOS) in the
UK in any event. The general view in the UK is that the impact helped
to restore and increase consumer confidence in purchasing policies
relating to motor, health, travel and property.
In Ireland, it will likely take some time after the Act has commenced to
ascertain whether the changes will have the desired effect. Some in
the industry consider that the Act tilts the balance too much in favour
of the consumer and that the increased costs to insurers may simply
mean that consumers will end up paying more for their policies.
This article was compiled by Brokers Ireland in collaboration
with Mary Smith, Senior Associate, Caytons who provide
specialist legal services to the Irish and UK insurance market.
Amundi has obtained ‘Super’ ManCo status in Ireland
“The legislative changes brought no major shocks to the UK insurance market and the provisions have been
found to be relatively uncontroversial. The net result was that the legislation was generally already accepted to
be industry good practice and in line with the approach taken to good practice by the Financial Ombudsman
Services (FOS) in the UK in any event. The general view in the UK is that the impact helped to restore and
increase consumer confidence in purchasing policies relating to motor, health, travel and property.”
“For Brokers, the Act will also impact the Broker / client relationship. Brokers should carefully
explain to their clients the nature and effect of the obligations being placed on the consumer as a
result of the Act. In particular, the pre-contract duty of disclosure and that they are under a duty
to take reasonable care in answering the questions asked by the Insurer. Brokers should ensure
that their clients are aware that it is to be presumed that a consumer knows that if an insurer asks
a specific question that this is material to the risk, or the calculation of premium, or both.”
Flexible solutions
to handle cyber
risk
When private information is compromised, the repercussions for
your clients can be serious and costly. That’s why there’s CyberEdge.
From crisis management to legal investigations to identity restoration
services, we can help manage and mitigate the effects of a breach.
For more information, please contact your AIG Cyber or Business
Development contact.
AIG Europe S.A. is authorised by the Luxembourg Ministère des Finances and supervised by the Commissariat aux
Assurances, and is regulated by the Central Bank of Ireland for conduct of business rules.
IRLR00003674 AIG Flexible solutions for cyber risk_A4 May 20.indd 1IRLR00003674 AIG Flexible solutions for cyber risk_A4 May 20.indd 1 15/05/20 2:54 PM15/05/20 2:54 PM
