Consumer Insurance Contracts Act – Commencement Update

Dear Member,

The Minister has signed the commencement order for the Consumer Insurance Contracts Act, with the majority of sections coming into effect today. The commencement order will be published in the coming days.

The Commencement Order sets out the following:

1. The 1st day of September 2020 is appointed as the day on which the Act shall come into operation, other than subsection (4) of section 18, and the provisions of sections 8, 9 and 12 and subsections (1) to (5) of section 14.
2. The 1st day of September 2021 is appointed as the day on which sections 8, 9 and 12 and subsections (1) to (5) of section 14 of the Act shall come into operation

Brokers Ireland held a webinar on the Consumer Insurance Contracts Act 2019, on 12 August 2020, which provided members with the update on the commencement of the Act.

Most of the provisions of the Act are due to commence from 1 September 2020 with the exception of Section 8, 9, 12 and 14(1-5), which do not come into effect until 1 September 2021.  This is to allow insurers time to put in place systems and processes to enable them to implement these provisions.

The Act applies to life and general insurance contracts entered into and any changes made to those contracts, after the effective date(s) of the various provisions of the Act.  Certain classes of general insurance are excluded^[1].   The Act does not apply to policies already in place before 1 September, or to MTAs made to those policies.

The Act will have significant impact on all those who distribute insurance products, including brokers transacting both life and general business.   The Act is intended to improve the position for consumers and to make it more difficult for insurers to decline claims.  The Act imposes duties on both the consumer and insurer pre and post contract stage, as well as in respect of claims handling.

We recommend that Brokers should amend their Terms of Business documents to advise their consumer clients of their duties under the Act, post contract stage. Brokers act as the consumer’s intermediary to obtain insurance, dealing with their mid-term adjustments, renewals and claims.  The relationship is between the Broker and the client, and therefore we recommend that Brokers include in their Terms of Business what the consumer’s duties are at the various stages of the process, to avoid or mitigate the risk of the consumer saying that they were not properly advised by the Broker.

Brokers need to be mindful that the new legislation expressly states that in determining whether the consumer has acted with reasonable care, one of the factors that will be considered is whether or not the consumer was represented by an agent and the circumstances of that representation.

The updated Brokers Ireland Terms of Business template is available in the Compliance SupportSection of the members’ area of the websiteAll notes to members are highlighted in green and should be deleted.

The Privacy Notice template has also been updated as a result of Section 21(3) of the Act.  See page 3 with change highlighted in red.  This applies to liability insurance only.  It therefore does not apply to life policies.  This document is also available on the website under the GDPR section.

Any template letters you use, such as New Business Quote letters, or Renewal Quote letters, will have to be reviewed and amended where necessary, for example, a description of “material change” may need to be included where you ask the consumer to advise of any material changes to the risk.

We have also made available in the members area/Compliance Support section of the website, the updated Summary and Guidance document of the Consumer Insurance Contracts Act which members should find helpful.

Correction of Error Notice

Within Brokers Ireland guidance communication to members (20th August 2020), we included information on the provisions of the Act on Section 11 of the Act which was incorrect. It should have read:

Section 11: Right to withdraw from contract of insurance by notice: cooling off period

‘A consumer may cancel a contract of insurance, by giving notice in writing to the insurer, within 14 working days[1] after the date the consumer was informed that the contract is concluded. This does not affect the notice periods already provided under European Union (Insurance and Reinsurance) Regulations 2015 ( S.I. No. 485 of 2015 )[2] or the European Communities (Distance Marketing of Consumer Financial Services) Regulations 2004 ( S.I. No. 853 of 2004 ) which is 30 days in respect of life policies, irrespective of whether the sale took place on a non-face to face basis, and 14 days in respect of general policies only on sales that took place on a non-face to face basis (distance sales).

The giving of notice of cancellation by the policyholder will have the effect of releasing them from any further obligation arising from the contract of insurance. The insurer cannot impose any costs on the consumer other than the cost of the premium for the period of cover.

This right to cancel does not apply where, in respect of a life insurance policy the contract is for a duration of six months or less[3], or in respect of general insurance policies, the duration of the contract is less than one month’.

The Act will put extra responsibilities on Brokers, especially, next year, when the rest of the requirements commence i.e. the extra-long question sets. But Brokers Ireland is engaging with Insurance Ireland, Insecom and Insurers to ensure that there is a practical common approach where appropriate, and that Brokers’ interests are protected.

If you have any queries or observations in respect of this subject, please advise us at compliance@brokersireland.ie.

Brokers Ireland Compliance Support