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

coylemj

Summary: The rules on disclosure when taking out 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.

The same will apply at renewal time, which means that you will no longer be required to volunteer that you picked up 6 penalty points since your last renewal. 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.

===== End of summary ===============

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).

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. CIA 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

beachhead

Will be very interesting to read my insurers interpretation of the new regs at my next renewal.Do the regs imply that brokers disclose all their T&Cs at time of paying like the various excesses or exclusions.I was caught with an e40 excess on a windscreen replacement-never paid one before or liable to a charge on a policy before.I change insurers regularly.I do not like to depend on the 14 day cooling off period to spot the "catches"

GM228

Also worth noting the 1164 year old common law uberrima fides doctrine (acting in upmost good faith) has been removed from both the pre and post contractual period.

Perhaps the most interesting aspects are the changes to post contractual duties concern alteration of risk clauses and material change provisions and the potential problems it will cause as noted in an Irish Judicial Studies Journal [2020] Vol 4(1) article I read last year.

Alteration of risk clauses will be void where they purport to apply in situations "where there  is a modification only of the risk insured’". The term modification appears to bear its ordinary dictionary meaning but is sufficiently vague as to seem likely to prompt disputes. Additionally, any clause in a consumer insurance contract that refers to a material change will be taken to refer "to changes that take the risk outside that which was within the reasonable contemplation of the contracting parties when the contract of insurance was concluded".

there would seem to be scope for considerable dispute over what was within the reasonable contemplation of the parties.

on_the_roots

Be prepared now to be asked tons of questions when getting a quote.

Del2005

So this is going to make it harder to shop around for insurance now. It's already a pain going to multiple sites at renewal but now you'll need to answer lots of specific questions on each site to get a quote. So it's going from a few hours to shop around to most of a day.

Who's this supposed to benefit? All I can see is scammers getting away with more while the honest person has a lot more work.

Eggs For Dinner

It's one of those changes which falls in to the category of being seen to improve things when it can have the opposite effect.

The current situation requires the proposer to disclose facts which a reasonable person would deem relevant to the acceptance, pricing and conditions in obtaining an insurance policy. The new requirements mean an insurer must ask specific questions it considers important to offer cover. It remains to be seen if this will mean dozens more questions.

As for going through all the terms and conditions at renewal, I don't see how that will work without your eyes glazing over. Basically, you will have to explain everything in the policy book

Yeah I don't welcome this change at all. It somewhat invites all sorts of other questions to be asked, likely based on very specific data crunched by the insurance company in advance, all about limiting their risk on the policy and increasing the premium to the consumer. I don't see how anyone would think it protects the consumer. I would have much preferred to see guidance around what questions were quite simply off limits for the insurance company to ask - Data driven decision making is and will become so much more significant into the future- and this means there's the potential to be asked all sorts of questions that really shouldn't be necessary to obtain standard motor insurance.

My latest motor policy taken out with a new insurer after me realising I was the victim (I know a strong word :D) of customer loyalty loading, asked me about penalty points and convictions (motoring and otherwise), refusal of past insurance policy incidents, value of the car, where the car is normally kept, milage per annum etc- these would be standard on all motor policies, at least in my experience they are.

What other questions or areas will insurers now cover and what type of information could the consumer be withholding currently?

Fogmatic

https://www.boards.ie/discussion/comment/117787703#Comment_117787703

The Germans have a word for that; verschlingbesserung; roughly meaning worsen-bettering (sorry - been waiting for a chance to say it!)