Consumer Insurance

2019 Act

The Consumer (Insurance Contracts) Act 2019 applies to life and nonlife insurance. There are a limited number of exceptions whereby certain limited categories of insurance are outside the scope of the Act.

A consumer for the purpose of legislation is defined in the same manner as in the Financial Services and Pensions Ombudsman Act. This includes smaller businesses with turnover less than €3 million per annum.

The legislation provides an enhanced basis for codes of practice by the Central Bank in relation to matters affecting insurance within the scope of the legislation.

Where there is an ambiguity or doubt about the meaning of a term in any document referred to above the rule of law applicable to contracts of insurance, namely that the interpretation most favourable to the consumer, or beneficiary, as appropriate, shall prevail, applies.

Insurable interest

A claim by a consumer under an otherwise valid contract of insurance shall not be rejected by the insurer by reason only that the consumer does not have or did not have at the time when the contract was entered into, an interest in the subject-matter of the contract.

Where the consumer is required, because the contract of insurance is also a contract f indemnity, to have an interest in the subject-matter of the contract, the interestrequired shall not extend beyond a factual expectation either of an economic benefit from the preservation of the subject matter, or of an economic loss on its destruction,damage or loss that would arise in the ordinary course of events.

An insurer is not relieved of liability under the contract of insurance by reason only that the name of the person who may benefit under the contract is not specified in a policy document.

Duty of Disclosure

The following provisions replace the precontract duties of the insured. In particular, they replace the common law duty is of utmost good faith and disclosure.

Every insurer shall, before a contract of insurance is entered into, or renewed, inform the consumer on paper or on another durable medium of the general nature and effect of the pre-contractual duty of disclosure.

An insurer shall be deemed to have waived any further duty of disclosure of the consumer where it fails to investigate an absent or obviously incomplete answer to a question. This  waiver does not apply where the non-disclosure arises from fraudulent, intentional or reckless concealment.

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.

Insurer’s Obligations

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. It shall be presumed, unless the contrary is shown, that the consumer knows that a matter about which the insurer asks a specific question is material to the risk undertaken by that insurer or the calculation of the premium by that insurer, or both.

Where the insurer asks questions, these shall be drafted in plain and intelligible language, and the onus of proving that the questions are plain and intelligible rest with the insurer. Where there is an ambiguity or a doubt about the meaning of a question the interpretation most favourable to the consumer shall prevail.

An insurer may use the remedies available under this Act (including the remedy to repudiate liability or to limit the amount paid on foot of the contract of insurance) only if it establishes that non-disclosure of material information was an effective cause of the insurer entering into the relevant contract of insurance and on the terms  on which it did.

Within a reasonable time after concluding a contract of insurance, the insurer shall, where such is relevant to the particular contract, provide the consumer on paper or another durable medium with the completed application or proposal form.

Duty to Answer

The consumer shall be under a duty to answer all questions posed by the insurer honestly and with reasonable care (the test of reasonable care being by reference to that of the average consumer). In determining whether the consumer has complied with this duty, regard shall be had to, amongst other matters, the following:

• the type of insurance contract in question and its target market;
• any relevant explanatory material or publicity produced or authorised by the insurer;
• how clear and specific are the insurer’s questions;
• whether the consumer is represented by an agent and the circumstances of that representation; and
• that some consumers can be expected to be in possession of more information than others

The question of what is material and the scope of the questions which an insurer may ask does not limit its obligations in respect of data protection and privacy and the provisions of the spent convictions legislation.

Remedies

The legislation provides for remedies for misrepresentation which are to be proportionate to the effects of the misrepresentation or by reference to whether the misrepresentation is innocent, negligent or fraudulent.

Where a claim is made under an insurance contract and the consumer has discharged the above statutory duty to answer questions honestly and with reasonable care, but the answer involves an innocent misrepresentation the insurer shall be required to pay the claim made and shall not be entitled to avoid the contract on the ground that there has been misrepresentation.

Where there has been negligent misrepresentation i.e., not fraudulent the remedy available to the insurer shall reflect what the insurer would have done if it had been aware of the full facts and shall be based on compensatory and proportionate test.

Without limiting the above, where an answer given by the consumer involves a negligent misrepresentation—

• if the insurer would not have entered into the insurance contract on any terms, the insurer may avoid the contract and refuse all claims, but shall return the premiums paid,
• if the insurer would have entered into the insurance contract, but on different terms (excluding terms relating to the premium), the contract is to be treated as if it had been entered into on those different terms if the insurer so requires,
• if the insurer would have entered into the insurance contract (whether the terms relating to matters other than the premium would have been the same or different), but would have charged a higher premium, the insurer may reduce proportionately the amount to be paid on a claim,
• where there is not any outstanding claim under the insurance contract, the insurer may either—
  • give notice to the consumer that in the event of a claim it will exercise the remedies above or
  • in the case of a non-life insurance contract only, terminate the contract by giving reasonable notice to the consumer.

Where a claim is made under a contract of insurance and where an answer by the consumer involves a fraudulent misrepresentation or where any conduct by the consumer (relative to the contract or the steps leading to its formation) involves fraud of any other kind, the insurer shall be entitled to avoid the contract of insurance.

Cancellation

A consumer may cancel a contract of insurance by giving notice in writing within 14 working days after the date when he has been informed that the contract has been concluded. The effect of cancellation is to release the person from further obligations under the contract. The right to cancel does not apply with the duration is less than one month. Where the consumer cancels the contract, the insurer shall not impose any financial costs of the cost of the premium for the period of cover.