In October 2021, the Department of Finance published the General Scheme of the Insurance (Miscellaneous Provisions) Bill (the “Bill”) with an accompanying regulatory impact analysis (“RIA”) (here). The Department of Finance states that the Bill is intended to address a number of insurance-related issues that have arisen since publication of the Government’s ‘Action Plan for Insurance Reform’ in December 2020 (here).
Price walking
A principal focus of the Bill is the matter of ‘price walking’. Price walking refers to the practice whereby an insurance undertaking or insurance intermediary sets a subsequent renewal price that is higher than the equivalent first renewal price the effect of which is that (i) existing policyholders pay more at each renewal date even though the underwritten risk stays the same and/or (ii) new insurance customers are offered a more competitive and cheaper premium than compared to long-standing policyholders renewing their cover. In those circumstances, the consumer as an existing customer may be seen to experience a ‘loyalty penalty’. Price walking is generally seen as being of relevance for the motor and home insurance markets.
It should be noted that the Central Bank of Ireland (the “CBI”) has already proposed a ban on price walking in its ‘Review of Differential Pricing in the Private Car and Home Insurance Markets Final Report and Consultation’ which closed for comments on 22 October 2021 (here). In this consultation, the CBI proposes to implement a ban on price walking through amendments to its Consumer Protection Code 2012 (with such amendments applying from 1 July 2022).
In this context, the Bill may be seen as providing for a ‘belts and braces’ approach to ensure the issue of price walking is addressed. The Bill proposes that the CBI provide1 a report to the Minister for Finance on (a) any steps it takes to address the practice of price walking, (b) the CBI’s views in relation to oversight of pricing practices and (c) the CBI’s views on whether further legislation or regulatory action is required. The general scheme of the Bill explains that the CBI’s report will allow the Department of Finance to “similarly analyse these developments, to facilitate robust policy formulation in the future”.
Collection of data in respect of State supports deducted from claims payments
The Bill also includes a requirement for insurers to inform consumers of any State supports2 deducted from claims payments and provides for the collection of such data by the CBI through the National Claims Information Database (“NCID”).
The impact of the COVID-19 pandemic and the deduction by a number of insurers of COVID-19-related State supports from final settlements arising out of business interruption insurance claims led to this proposal. The rationale behind collecting data on State supports deducted from such claims is to provide for greater transparency regarding the prevalence of this practice by insurers. The RIA states the proposal would ensure that the taxpayer does not cover losses already covered by insurance and/or can recover any such moneys. The RIA also notes that insurers may submit this data via their regular annual returns to the CBI as part of their reporting requirements under existing NCID legislation.
Technical amendments to the Consumer Insurance Contracts Act 2019
The Bill also provides for technical amendments to the Consumer Insurance Contracts Act 2019 including an amended mutual disclosure requirement to clarify that any disclosure required to be made by an insurer or consumer after a claim is made should not encroach on legal professional privilege.
Amendments to the European Union (Insurance and Reinsurance) Regulations 2015
The Bill also contains amendments to address issues identified by the CBI with the temporary run-off regime (“TRR”) for UK and Gibraltar-based insurers. These amendments clarify that (i) third-country firms in the TRR, which are in the process of running off their insurance contracts in the State, may provide third-country reinsurance business in the State and (ii) firms in liquidation, that otherwise satisfy the conditions of the TRR, may run-off their insurance contracts without the CBI being required to withdraw their TRR authorisation.
Next steps
The Department of Finance confirms that the next step is for the Minister of State with responsibility for Financial Services, Credit Unions and Insurance to write to the Chair of the Committee on Finance, Public Expenditure and Reform and the Taoiseach regarding pre-legislative scrutiny.
The Department of Finance confirms that officials will engage with the Office of the Parliamentary Counsel to the Government to begin drafting the legislation on the basis of the Bill.
As noted above, the CBI’s consultation on the matter of differential pricing (including price walking) closed on 22 October 2021, therefore we can expect that the CBI will continue its progress on these matters in parallel to the legislative development of the Bill.
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