Major changes to the rules on disclosure for insurance from Sept 1st

coylemj

Summary: The rules on disclosure when taking out life and non-life insurance (new policies and renewals) will be turned upside down on Sept 1st next. Instead of the customer being required to disclose anything and everything that might constitute a 'material fact', the insurance companies have to ask you the right questions. Once you answer their questions truthfully, you are under no obligation to volunteer anything.

For general insurance which is subject to annual renewal (e.g. house and motor), the same rules will apply at renewal time. So I would expect that from Sept 1st, everyone renewing their motor insurance will be asked to make a declaration concerning penalty points or convictions they may have picked up in the previous 12 months.

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I got an e-mail from AIG last week. The gist of it is that, from Sept 1st, 2021, the rules concerning disclosure for new and modified policies of insurance will be subject to the Consumer Insurance Contracts Act 2019 (CICA). Which applies to both life and non-life insurance.

From Sept 1st next, the onus on the part of the consumer to volunteer information which the insurer may consider to constitue a 'material fact' is scrapped. Once you provide truthful answers to the questions they ask, you're covered. And Section 8.5 (b) states that: 'Where there is an ambiguity or a doubt about the meaning of a question the interpretation most favourable to the consumer shall prevail.'

This is AIG's summary of the effect on consumers....

For consumers, their pre-contractual disclosure obligations have been changed. CICA removes the duty to disclose all material facts on consumers and replaces it with an obligation for consumers to answer all questions the insurer asks honestly and with reasonable care. Failure to do so can result in the Insurer being able to rely on 'proportionate remedies' for misrepresentation.

https://www.aig.ie/cica

Below is the relevant section of the act. Although it was passed in 2019, section 8 and a few other sections only come into effect this Sept 1st....

 8. (1) The duties in this section replace, at the pre-contractual stage of a contract of insurance, the principle of utmost good faith (uberrima fides) and any duty of disclosure of a consumer (including any duty on the consumer to volunteer information) that applied prior to the commencement of this section (whether that principle or duty arose at common law or under an enactment).

(2) The pre-contractual duty of disclosure of a consumer is confined to providing responses to questions asked by the insurer, and the consumer shall not be under any duty to volunteer any information over and above that required by such questions.

And the insurer cannot sidestep this new law by throwing a general 'catch all' question at the bottom of the proposal form, along the lines of 'is there anything you'd like to tell us that we didn't ask about and which may affect our decision to provide you with cover?' ....

(3) Where the insurer requests the consumer at the pre-contractual stage to provide information to the insurer, the insurer shall be under a duty to ask specific questions, on paper or on another durable medium, and shall not use general questions.

http://www.irishstatutebook.ie/eli/2019/act/53/section/8/enacted/en/html#sec8

https://www.aig.ie/cica

The full act: http://www.irishstatutebook.ie/eli/2019/act/53/enacted/en/html

The term 'Proportionate Remedies' is described at the AIG link above. And in a William Fry (Solicitors) online document as follows....

In addition, the Act introduces proportionate remedies for misrepresentation, be they innocent, negligent or fraudulent. For fraudulent misrepresentation, an insurer may still deem a contract void; however, in circumstances where a misrepresentation is merely negligent, the remedy available to the insurer concerned must reflect what the insurer would have done if had been aware of all the facts. For example, where the insurer would not have entered into the contract had it known the true facts, the insurer may avoid the contract, refuse all claims and return premiums to the consumer. However, if the insurer would have entered into the contract but would have charged a higher premium, the insurer can reduce proportionately the amount to be paid on any claim. It seems likely that insurers will encounter challenges in determining if a misrepresentation is innocent, negligent or fraudulent in many circumstances before being able to decide what, if any, remedy may potentially be available.

https://www.williamfry.com/newsandinsights/news-article/2020/07/13/consumer-insurance-contracts-act-2019-the-funeral-bell-for-existing-duty-of-disclosure