Majority of provisions to commence 1 September 2020 with some monumental changes delayed to September 2021.
It has been revealed that the Consumer Insurance Contracts Act 2019 (the "Act") will commence shortly. In response to a parliamentary question from sponsor of the legislation, Pearse Doherty TD. The Minister for Finance confirmed Thursday that he intends for most of the provisions of the Act to begin 1 September 2020, but certain more significant changes will be delayed for 12 months.
No ministerial order has been published formally setting out the commencement, but we expect same will be signed presently.
Background and Scope
Designed to address a perceived imbalance in favour of insurers and to change the unique treatment of insurance in contract law, the Act introduces significant changes both to how consumer insurance contracts are created (particularly in relation to the insured's duty to disclose) and in what way disputes will be handled.
The Act applies to consumers and small businesses (with a turnover of up to €3m, subject to some exemptions).
Commercial insurance contracts will, for the most part, be unaffected.
Six Weeks Countdown
The Minister announced that the majority of the provisions of the Act will commence on 1 September 2020.
Commencement of certain more complex or labour- intensive sections of the Act is being postponed to 1 September 2021. These are:
- Introducing proportionate remedies for misrepresentation (s. 9 of the Act)
- Changes to the duties of consumers and insurers both pre-contract (s. 8 of the Act) and on renewal (the majority of s. 14 of the Act) such as the abolition of the principle of utmost good faith (same will be abolished post-contract on 1 September 2020, however)
- The obligation ahead of renewal for insurers upon renewal to furnish a schedule outlining five years premiums and claims paid (s. 12 of the Act)
The delay in commencement of the above three areas was well flagged before the Minister's announcement Friday and will be welcomed by insurers as they create some of the largest demands in workload and preparation.
In any event, there are numerous other parts of the Act commencing 1 September 2020 that shall require considerable effort to prepare for on a short timeline, particularly in cases of renewals. These include the:
- Introduction of 14 working day cooling off-periods (s. 11 of the Act)
- Obligation to notify an insured at least 20 working days ahead of the renewal date of any alterations to the terms and conditions of the policy (s. 14(6) of the Act) and to do so in plain, intelligible language
Significant changes to claims handling and certain aspects to policy response shall also commence on 1 September 2020, such as the:
- Removal of the right to refuse indemnity solely due to late notification (s. 16 (3) of the Act)
- Requirement to pay all sums due to the insured within a reasonable time, including part-payment (s. 16 (8) and (9) of the Act)
- Limitations on deferring payments in property claims (s. 17 of the Act)
The provisions introducing what are termed proportionate remedies for claims handling (s18 of the Act) are also being commenced 1 September 2020, notwithstanding the delay in the commencement of the proportionate remedies for misrepresentation provisions until 1 September 2021.
Some other significant changes from 1 September 2020 will be the:
- Abolition of the requirement of insurable interest (s. 7 of the Act)
- Abolition of the principle of uberrima fides (utmost good faith) post-contract (s. 15 of the Act)
- Substitution of representations for warranties (s. 19(2) of the Act)
- Abolition of "basis of contract clauses" (s. 19(3) of the Act)
- Conversion of continuing restrictive conditions into suspensive conditions (s. 19(4) of the Act)
- Limitations on subrogation rights (s. 23 of the Act)
- Extension of the unfair terms in consumer contract regulations (s. 20 of the Act) to all "consumers" as defined in the Act
The extension of new rights to third parties will also commence 1 September 2020 (s. 21 of the Act) where an insured is dead, cannot be found or insolvent. Third-party rights may have more significant implications for many insurers who can expect to see an increase in insolvent commercial insureds owing to the economic consequences of the coronavirus pandemic.
Finally, the Central Bank will be entitled to not only issue a new code of practice from 1 September 2020 (s. 5 of the Act) but all relevant codes of practice will be admissible before the courts and the Financial Services and Pensions Ombudsman (s. 6 of the Act) from that date.
The commencement of most of the Act's provisions on a relatively short timeframe and during the coronavirus pandemic shall create considerable pressure for insurers. Almost all of the provisions of the Act are burdensome, but the one-year delay in commencement of the sections altering the pre-contractual duties of the consumer and insurer and the new requirements in relation to renewals will, however, be welcomed.
Insurers, brokers and insureds will need to study these changes carefully and receive give some careful consideration to policy and proposal form wordings and how these changes will impact them now on and urgent basis.
For more information, our summary of the key changes of the Act is available on our website.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.