Insurance (Miscellaneous Provisions) Bill 2021 Update – Insurance

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Ireland:

Insurance (Miscellaneous Provisions) Bill 2021 Update


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On 20 October 2021, the General Scheme of the Insurance
(Miscellaneous Provisions) Bill 2021 (General
Scheme
) was published. The General Scheme will address
several insurance-related issues highlighted in the Action Plan for
Insurance Reform. The Action Plan for Insurance Reform was
published by the Department of Finance to reflect the
insurance-related commitments made in the  Programme for
Government.

The main amendments relate to:

  • The power of the National Claims Information Database
    (NCID) to collect data concerning deductions
    relating to public money from insurance compensation payments;

  • Price-walking;

  • Disclosures in claims handling; and

  • Amendments to the Temporary Run-off Regime under the European
    Union (Insurance and Reinsurance) Regulations 2015.

1. Data collection by the NCID 

The NCID was established by the Minister for Finance in
2016.  It serves as a repository for aggregate claims data
collected from insurers to increase transparency around the costs
of insurance claims, policies and premiums. The NCID currently
collects data concerning private motor insurance, and
employers’ and public liability insurance. 

The General Scheme proposes to amend the Central Bank (National
Claims Information Database) Act 2018, to enhance the types of data
that the NCID can collect, to include data relating to any
deductions of public money (i.e., State supports) from insurance
compensation or claims payments. 

This amendment will allow the Central Bank of Ireland (CBI) to
examine the nature of any public money that insurers deduct from
compensation payments (except for payments made under the Social
Welfare and Pensions Act 2013), as well as the costs associated
with dealing with relevant claims.

The rationale behind the proposed amendment arises from the
practice of some insurers deducting  government payments from
COVID-19-related claims settlements. 

The CBI believes that this will enhance transparency and allow
policymakers to address such practices in future situations, thus
protecting the interests of the taxpayer.

2. Price-walking

Price walking, also known as the ‘loyalty penalty’, is a
form of differential pricing. Customers are charged higher premiums
relative to the expected costs, the longer they remain with an
insurance provider. This practice is controversial as it
discriminates against less sophisticated customers who may not be
able to seek alternative quotes before renewing their motor or home
insurance.

The General Scheme proposes to impose a new requirement on the
CBI to submit a report to the Minister for Finance within 18 months
of commencement of the Act, setting out:

  • any measures taken to regulate the practice of price walking in
    motor or home insurance policies, and automatic renewals for
    non-life insurance contracts, sold to personal consumers, and

  • whether any further legislative action is required. 

This follows the publication of the CBI’s Review of
Differential Pricing in the Private Car and Home Insurance Markets
(Review).  The Review showed that the
premiums paid by certain policyholders deviate significantly from
the expected costs. It also found that oversight of pricing
practices is lacking and that the automatic renewals process, which
is a common feature of the insurance market, lacks
transparency.

The CBI is currently proposing to ban the practice of price
walking through the introduction of measures requiring insurers to
review their pricing policies annually and strengthen the
provisions regarding automatic renewals of all personal non-life
insurance contracts. 

3. Disclosures in claims handling under the Consumer Insurance
Contracts Act 2019 (2019 Act)

The General Scheme aims to address concerns around the
disclosure requirements of section 16(10) of the 2019 Act, which
may have the unintended consequence of encroaching on legal
professional privilege. The General Scheme proposes to replace the
section with a new Section 16A that will clarify the scope of the
disclosure requirements under the 2019 Act. 

Further, the General Scheme proposes that insurers notify a
claimant of any deduction, and its rationale, from a final claim
settlement (excluding amounts the State may recover through the
Recovery of Benefits and Assistance Scheme). This requirement will
apply to both individual consumers and smaller businesses, in
respect of non-life insurance contracts only.

The General Scheme also proposes to amend the current wording of
section 18(4) of the 2019 Act to ensure that a fraud perpetrated by
one co-insured will not exclude a claim made by an innocent
co-insured. 

4. Amendments to the Temporary Run-off Regime (TRR)

The General Scheme proposes technical amendments to the European
Union (Insurance and Reinsurance) Regulations 2015 (2015
Regulations
).  The amendments will address issues
identified by the CBI. Following Brexit, UK and Gibraltar insurers
lost the ability to write new business in the EU. However, in order
to protect Irish policy holders, the TRR allows qualifying UK and
Gibraltar insurers to run-off their existing insurance contracts
post-Brexit, before ultimately terminating their activities in
Ireland.  

The CBI is of the view that if an insurer is in the TRR, it
cannot lawfully carry out new reinsurance activity in the Irish
market from outside Ireland (although many practitioners do not
share the CBI’s view). It is proposed that the 2015 Regulations
will be amended to clarify that UK and Gibraltar insurers in the
TRR, which are in the process of running off their insurance books
in Ireland, may continue to provide reinsurance cover to Irish
cedants from outside Ireland. 

The General Scheme also proposes amendments to the 2015 Regulations
to clarify that the CBI will not withdraw the TRR authorisation of
an insurance undertaking that enters liquidation. 

Co author by Vicky Eckel

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.

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