Having been previously presented by the Minister for Finance at the beginning of April 2022, the Insurance (Miscellaneous Provisions) Bill 2022 progressed expeditiously through the legislative stages of the Oireachtas. With the Insurance (Miscellaneous Provisions) Act 2022 (IMPA 2022) taking effect since 8 July, many expect it to be the final death knell to the practice of overcharging loyal customers, known as ‘price walking’ or the ‘loyalty penalty’. This will likely have a positive impact on thousands of car and home owners. The Act has also tidied up some anomalies created by recent legislation which will benefit insurance undertakings and consumers alike.
Key Changes
The following is a short summary of the some of the key amendments made by this Act:
- The Central Bank of Ireland (CBI) will now collect and publish data relating to deductions made by insurance undertakings from settlement monies (i.e. State subsidies).
- The CBI has been tasked with oversight of insurance pricing practices and will publish a report which will be shared with both houses of the Oireachtas within 18 months.
- The mutual duty of disclosure during the claims handling process as introduced by the Consumer Contracts Act 2019 is subject to legal professional privilege.
- Insurance undertaking must now formally notify claimants of what deductions are made from settlement monies (except RBA).
- It extends the scope of the Temporary run-off regime (TRR) scheme for UK and Gibraltar insurance undertakings that are winding up or in liquidation.
- Standard policy exclusions for criminal damage such as acts of terrorism are still operational.
CBI to publish data relating to deductions from settlement monies, i.e. State Supports
The stated purpose of the National Claims Information Database, as implemented by the Central Bank (National Claims Information Database) Act 2018 was to increase transparency around the costs of claims by aggregating claims data.
IMPA 2022 amends the Central Bank (National Claims Information Database) Act 2018 and provides that the CBI can collect and publish data on any deductions from insurance claim settlements by insurance undertakings that relate to public monies (the definition of public monies being extended by IMPA 2022 to accommodate this). It is anticipated that this information will be given by insurance undertakings as part of their regular annual returns to the CBI pursuant to their existing reporting obligations under the Act.
Increased focus on insurance undertakings pricing practices – the Insurance Measures Report
Price walking refers to a practice whereby an insurance undertaking increases the price at renewal, notwithstanding that there may not have been an increase in risk at renewal. This is sometimes referred to as a “loyalty penalty” as this practice could result in differential pricing whereby new customers are offered a more competitive and cheaper premium than existing customers at renewal. In that way, consumers who stayed with the same insurance undertaking were being charged more than those who switched regularly. This practice has already been targeted by the CBI and regulations were introduced to ban it in the home and motor insurance markets.
These regulations, Central Bank (Supervision and Enforcement) Act 2013, Section 48(1) (Insurance Requirements) Regulations 2022) took effect on 1 July 2022.
As a result of these regulations, an insurance undertaking cannot charge customers at renewal a premium that is higher than they would have charged an equivalent year one consumer renewing their policy. However, the Regulations still allows for new customer discounts to support competition in the marketplace.
IMPA 2022 can be seen to be doubling down on these regulations and introducing a review mechanism of their efficacy by the CBI. Within 18 months of the enactment of IMPA 2022, the CBI, as watchdog, must provide a report to the Minister for Finance detailing inter alia the steps the CBI will take to tackle the practice of price walking and other differential pricing practices, its views in relation to oversight of pricing practices and its views on whether further regulatory action is required. This report will then be put before both houses of the Oireachtas.
Duties of Disclosure and amendment of the Consumer Insurance Contracts Act 2019 (CICA 2019)
There was perhaps warranted fear created by section 16(10) of CICA 2019. This section provided for mutual disclosure obligations on consumers and insurance undertakings of information which supported or prejudiced the validity of a claim made under a policy, even if this information ‘would otherwise be subject to privilege’. This anomaly has been somewhat remedied by IMPA 2022 which inserts section 16(A) into CICA 2019 and clarifies that any such disclosure should not encroach upon the broad concept of legal professional privilege. This amendment will take effect on 1 October 2022.
IMPA 2022 also introduces section 16(B) which creates a duty on insurance undertakings to notify claimants, in writing, of any deductions made from insurance claim settlements, including deductions made in line with State supports received by the claimant. This duty to notify does not extend to deduction made under the Recovery of Benefits and Assistance scheme (RBA). This duty to notify will come into effect on 1 January 2023.
Amendments to the Solvency II Regulations related to the Temporary run-off regime (TRR) for UK and Gibraltar-based insurers
The TRR was put in place following Brexit to allow for a regulated withdrawal of UK and Gibraltar insurance undertakings from the Irish market. The purpose was to ensure that customers of insurance products with UK and GI policies would not suffer a detriment and that their existing policies would continue to be serviced after the implantation period had ceased i.e. 31 December 2020. IMPA 2022 now makes provision for the continued operations of undertakings in the process of winding up and in liquidation. As such, this was a technical amendment to ensure the efficacy of the TRR.
Clarification on criminal damage standard exclusion provisions
The Act also provides for an amendment to section 18(4) of CICA 2019. This section was brought in to deal with a scenario whereby more than one consumer is named on a policy and damage is caused by one of the insured. In those circumstances, it was intended that a claim could be taken by the ‘innocent’ consumer under the policy. The issue with the section was that it was too broadly constructed and did not limit the damage to damage caused by a co-insured. This has now been corrected and the intention behind the section is now reflected in the wording. In addition, section 18(4)(b) quashes any concern that section 18(4) was capable of nullifying standard policy exclusions for criminal damage such as damage caused by war, an act of terrorism, a nuclear attack or cyber-attack.
Conclusion
The Act has plugged some gaps created by previous legislation, which is to be welcomed. However, it has also increased the oversight the CBI has on the insurance industry. Insurance undertakings should expect increased and further engagement with the CBI in the industry as a result of the enhanced disclosure requirements introduced.
For more information on how the Act will materially change how insurers’ operations, contact a member of our Insurance & Risk team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.
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