Insurance (Miscellaneous Provisions) Act 2022

With effect from 8 July 2022, the Insurance (Miscellaneous Provisions) Act 2022 (the Act) was implemented into Irish law.  

The Act aims to address several insurance-related issues set out in the Action Plan for Insurance Reform which was published by the Department of Finance to reflect the insurance-related commitments made in the Programme for Government. In addition to dealing with specific consumer issues such as price walking and claims-related disclosures, the Act provides some welcome clarifications on anomalies caused by recent legislative changes. 

Key Changes 

The key amendments introduced by the Act are:

• The Central Bank of Ireland (CBI) now has power to collect and publish data on insurers deducting the value of state supports from insurance settlements via the National Claims Information Database (NCID).
• Insurers are required to formally notify claims of what deductions (including state supports) are made from settlement payments (excluding Recovery of Benefits and Assistance scheme payments).
• The CBI is required to exercise oversight in respect of insurance pricing practices (e.g. price walking) and file a public report within 18 months.
• The provision introducing a mutual duty of disclosure during the claims handling process under Section 16(10) of the Consumer Insurance Contracts Act 2019 (CICA) is clarified such that any disclosure should not impact upon the concept of legal professional privilege.
• Technical changes clarifying certain aspects of the Temporary Run-off Regime (TRR) for UK and Gibraltar insurers provided for under the European Union (Insurance and Reinsurance) Regulations 2015 (as amended) (2015 Regulations) are introduced. 

1. Data collection by the NCID 

The NCID was established by the Minister for Finance in 2016.  It serves as a repository for aggregate claims data collected from insurers to increase transparency around the costs of insurance claims, policies and premiums. The NCID currently collects data concerning private motor insurance, and employers’ and public liability insurance. 

The Act amends the Central Bank (National Claims Information Database) Act 2018, to enhance the types of data that the NCID can collect, to include data relating to any deductions of public money (i.e., State supports) from insurance compensation or claims payments. 

This amendment allows the CBI to examine the nature of any public money that insurers deduct from compensation payments (except for payments made under the Social Welfare and Pensions Act 2013), as well as the costs associated with dealing with relevant claims.

The rationale behind the proposed amendment arises from the practice of some insurers deducting government payments from COVID-19-related claims settlements. 

The CBI believes that this will enhance transparency and allow policymakers to address such practices in future situations, thus protecting the interests of the taxpayer.

2. Disclosures in claims handling under CICA 

The Act aims to address concerns around the disclosure requirements of section 16(10) of CICA, which may have the unintended consequence of encroaching on legal professional privilege. It replaces the section with a new Section 16A that clarifies the scope of the disclosure requirements under CICA. This change takes effect from 1 October 2022. 

Further, the Act also requires that insurers must notify a claimant of any deduction, and its rationale, from a final claim settlement (excluding amounts the State may recover through the Recovery of Benefits and Assistance Scheme). This requirement will apply to both individual consumers and smaller businesses, in respect of non-life insurance contracts only. This duty to notify takes effect from 1 January 2023. 

The Act also amends the current wording of section 18(4) of CICA to ensure that a fraud perpetrated by one co-insured will not exclude a claim made by an innocent co-insured. 

3. Insurance Pricing Practices

Price walking, also known as the ‘loyalty penalty’, is a form of differential pricing. Customers are charged higher premiums relative to the expected costs, the longer they remain with an insurance provider. This practice is controversial as it discriminates against less sophisticated customers who may not be able to seek alternative quotes before renewing their motor or home insurance. 

Following the publication of the CBI’s Review of Differential Pricing in the Private Car and Home Insurance Markets (Review), the CBI introduced regulations to ban the practice of price walking in in these markets with effect from 1 July 2022 (see our detailed article here).  

The Act now imposes a new requirement on the CBI to submit a report to the Minister for Finance within 18 months of commencement of the Act, setting out:

• any measures taken to regulate the practice of price walking in motor or home insurance policies, and automatic renewals for non-life insurance contracts, sold to personal consumers, and
• whether any further legislative action is required. 

The objective of this provision is to allow the Irish government proactively plan if further action is required to address unfair pricing practices. 

4. Amendments to the Temporary Run-off Regime 

The Act introduces some technical changes to the 2015 Regulations to address issues identified by the CBI, and indeed by (re)insurers in their engagements with the CBI. Following Brexit, UK and Gibraltar insurers lost the ability to write new business in the EU. However, in order to protect Irish policy holders, the TRR allows qualifying UK and Gibraltar insurers to run-off their existing insurance contracts post-Brexit, before ultimately terminating their activities in Ireland.  

The CBI was of the view that if an insurer is in the TRR, it could not lawfully carry out new reinsurance activity in the Irish market from outside Ireland (although many practitioners did not share the CBI’s view). The Act amends the 2015 Regulations to clarify that UK and Gibraltar insurers in the TRR, which are in the process of running off their insurance books in Ireland, may continue to provide reinsurance cover to Irish cedants from outside Ireland. 

The Act also amends the 2015 Regulations to clarify that the CBI will not withdraw the TRR authorisation of an insurer that enters liquidation. 

Conclusion 

While the clarifications to CICA and the 2015 Regulations introduced by the Act are welcome from an industry perspective, the changes introduced by the Act in the areas of pricing practices and enhanced disclosure requirements will further add to insurers’ busy desks and will inevitably lead to more regulatory engagement with the CBI on these topics in the future. 

For more information on any of the matters discussed in this article, please contact John Larkin, Eoin Caulfield, Ian Murray or your usual William Fry contact.

Contributed by Hannah Garvey & Catherine Carrigy