On 26 March 2024, the Central Bank of Ireland (CBI) published its first quarterly Insurance Newsletter for 2024 covering several topics of note for Irish (re)insurers (Newsletter).

In this article, we have highlighted what we consider to be the two main takeaways from the Newsletter:

• the CBI’s recent review of pricing and claims practices in the Irish motor insurance market; and
• CBI feedback on the quarterly reporting experience and observations for (re)insurers to incorporate in reporting processes.

1. Pricing and Claims Practices in the Motor Insurance Sector

The CBI recently conducted a review of pricing and claims practices used by domestic motor insurance providers in the Irish market. Notably, the CBI clarified its expectations in terms of how the consumer should be informed of these practices and their implications. In summary, the CBI’s review identified the following practices and findings:

• Payment Methods – The impact of payment methods chosen by the consumer on premium calculation is not always clear or upfront. The CBI acknowledges that information on charges and conditions related to payment options may be included in various formats in policy documentation and the online customer journey. However, it notes that the lack of clarity is particularly evident where the payment method chosen is regarded by the insurer as a risk rating factor e.g. paying by instalments can increase the premium charged. Accordingly, the CBI makes clear that insurers should take action to bring their processes in line with the following requirements:
  • When presenting cost comparisons for full payment versus paying by instalments, insurers must ensure that they do so in a way that seeks to effectively inform the consumer (e.g. a clearly presented side-by-side comparison).
  • Where insurers use payment methods as a risk-rating factor, this key information should be clearly disclosed to consumers during the quotation/renewal journey to enable the consumer to make an informed decision.
  • Where a payment method is used as a risk-rating factor, the insurer must ensure that this rating factor, and its weighting, can be isolated and evidenced by its’ pricing models.
• No Claims Discounts – A notified incident can typically lead to an increased renewal premium due to the impact on the consumer’s No Claims Discount (NCD) even where no claim ultimately materialises. The CBI’s review indicated that in certain instances over several years insurers had not provided to policyholders premium refunds and/or NCDs were not reinstated to the correct levels in these circumstances. Therefore, the CBI advises insurers to ensure the operating effectiveness of their processes and controls in this regard to ensure that they have correctly issued refunds and reinstated NCDs where applicable. Regarding the operation of full/partial NCD protections, the CBI also observed a lack of formalised processes and staff training concerning certain procedures and noted that this should also be reviewed and updated by insurers.
• Claims Valuation Basis – The CBI highlights that in circumstances where insurers regard the basis of indemnity in a total loss scenario as being the lower of market value or the value stated in the policy schedule, consumers may find themselves under-insured through no fault of their own owing to the impact of inflation in the used car market. The CBI emphasises its expectation, as previously articulated in respect of under-insurance in the home insurance market, that insurers should adopt “a consumer-focused approach at the point of claim” to ensure that settlement offers made to claimants are fair and reasonable.

2. Feedback on the Implementation of SII Taxonomy 2.8.0, Q4 Reporting

In the Newsletter, the CBI provides some useful feedback arising from its data quality review of Q4 reporting received following (re)insurers’ first set of submissions under the new Solvency II Taxonomy 2.8.0 (New Taxonomy) which commenced on 31 December 2023. The CBI highlights the fact that 93% of (re)insurers received individual feedback on their Q4 reporting submissions and 39% subsequently revised their submission. The latter figure compares with 20% resubmission rates in each quarter in 2023 reflecting the challenges involved in implementing the new reporting framework.

From an operational standpoint, the CBI also highlights the increased number and complexity of file validations which have resulted in longer processing times. The CBI notes that early submissions are likely to benefit from quicker processing. In terms of the recent reporting period, the CBI informs that the most common queries arising relate to the new data requests introduced by the New Taxonomy such as a misinterpretation of reporting requirements (e.g. where a mandatory field was left blank). Helpfully, the CBI points out that most of the common ambiguities have already been clarified in the EIOPA Q&A repository and directs (re)insurers to use this EIOPA facility for any clarifications required.

Aside from the issues identified in the Newsletter, the CBI notes that it may be useful for (re)insurers to proactively raise other data quality issues with their CBI supervisory team in advance of the submission deadline. The CBI expects that the volume of data queries issued to (re)insurers will decline as the New Taxonomy becomes more embedded in (re)insurers’ reporting processes.

Other Topics

In addition to the two main takeaways outlined above, other topics of interest in the Newsletter include updates on the CBI’s upcoming schedule of stakeholder engagements, the latest EIOPA developments relevant to the (re)insurance sector as well as a brief recap of recent CBI activities (e.g. the publication of the CBI’s Regulatory and Supervisory Outlook 2024, the Consumer Protection Code Consultation Paper (CP-158), etc.).

To view the Newsletter in full, please click here. If you have any questions on any item covered in the Newsletter, please contact any member of the Insurance & Reinsurance team or your usual William Fry contact.

Contributed by Catherine Carrigy & Ciaran Kenny