Following a thematic inspection of the sale of gadget insurance, the Central Bank has published a letter to industry calling on firms providing non-life insurance products to ensure that their manufacturing and distribution operations meet the expectations of the Central Bank.
Gadget insurance was identified as a priority risk because it is generally sold as add-on insurance at the point of sale. ESRI research has shown that consumers may agree to buy add-on products due to “decision fatigue” arising from the circumstances surrounding the sale of such products.
Though the inspection related to gadget insurance, the feedback applies to all firms providing non-life insurance products. The Central Bank stressed that firms need to ensure that products meet the needs of consumers and that the cost is properly explained during the sale process.
The Central Bank identified a number of consumer protection risks during the inspection and identified some of its key expectations with regard to those risks:
The Central Bank expects insurers to provide adequate information to consumers both at the point of sale and afterwards. An annual statement should be provided reminding consumers that the policy is still in force and incorporating key features and exclusions, the total annual cost, the claims process and contact details.
- Insurers should identify the target market for products and conduct a suitability assessment. The target market should exclude those who already have insurance covering the product to ensure that consumers do not buy insurance they do not need.Information to assess suitability should be sought at the point of sale.
- The price of the insurance product should be given on an annual, not just monthly, basis and information on the total cost based on the maximum duration of the product should be provided.
- Procedures must be put in place to properly and effectively handle claims and the documentation provided to consumers should set out clearly how to make a claim.
Clear and understandable information explaining the product should be given to ensure that consumers understand what is covered, what is not covered and how much the product costs.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.