Nina Gaston, Partner at DWF, discusses the significant changes proposed to Irish insurance contracts by the Consumer Insurance Contracts Bill 2017.
If you work in the insurance industry, you will be aware of significant changes in insurance law in the UK. The Consumer Insurance (Disclosure and Representations) Act 2012 ("CIDRA") and the Insurance Act 2015 have, together, radically altered how insurers do business. Until now, none of these changes applied under Irish law, which retained the application of avoidance for material non-disclosure.
However, in January 2017 a private members' Bill was introduced in Ireland entitled the Consumer Insurance Contracts Bill 2017. Although it is in the early stages, if the Bill is ultimately passed in its current form, it will lead to huge changes to Irish insurance contracts.
The Bill combines elements of at least four UK Acts: CIDRA, the Insurance Act 2015, Third Parties (Rights against Insurers) Act 2010 and the Enterprise Act 2016. Its provisions will apply to all insurance contracts with any 'consumer' that uses the same definition as the Financial Services Ombudsman: individuals and groups of persons in business with a turnover of less than €3 million.
The following is a brief summary of some of the key changes.
1. Duty of a consumer
- The duty of utmost good faith is replaced.
- The only pre-contractual duty of disclosure on a consumer is to provide responses to specific questions, in writing, asked by the insurer. All answers must be answered honestly and with reasonable care.
- At renewal, the only duty on a consumer is to answer specific questions in writing (again honestly and with reasonable care). If the insurer does not ask specific questions, the consumer is under no obligation to provide additional information, whether matters have changed or not since inception.
- A consumer must notify the occurrence of an insured event within a reasonable time or in accordance with the contract, providing the contract term is not unfair or onerous.
- If a consumer does not comply with a specified notification period, providing the insurer does not suffer prejudice, the insurer cannot refuse indemnity on that basis alone.
2. Duty of an insurer
- An insurer must ask specific, not general, questions in plain and intelligible language.
- An insurer must inform a consumer of the general nature and effect of
- the pre-contractual duty of disclosure.
- If a consumer provides no answer or an incomplete answer, and the insurer fails to investigate further, the insurer is deemed to have waived any further duty of disclosure of the consumer. This does not apply if the consumer has acted fraudulently, intentionally or recklessly.
- An insurer must provide pre-contractual information to the consumer before the consumer is bound by the contract.
- An insurer must handle claims "promptly and fairly".
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