Consumer Insurance Contracts Bill 2017: Second Stage [Private Members]

I move: "That the Bill be now read a Second Time."

Tá áthas mór orm bheith i mo sheasamh anseo mar bhall den choiste airgeadais, mar bhall de Shinn Féin agus mar ionadaí poiblí. Tá sé feicthe agam thar na blianta an dóigh ina gcaitheann cuid mhór comhlachtaí árachais leis na gnáthdhaoine. Tá sé seo le feiceáil ó thaobh mótarárachas, mar shampla. Níl daoine áirithe ábalta clúdach árachais a fháil dá gcuid tithe nó dá gcuid gnóthaí agus iad i mbaol tuilte. Is léir go bhfuil na comhlachtaí árachais ag plé go scannalach leis na daoine seo le blianta anuas.

The House has discussed the issue of motor insurance previously and has made it clear that the industry is not fulfilling its side of the arrangement, whereby the private sector is given sole responsibility for insurance. We have also seen areas in which the insurance industry behaves despicably when, for example, it fails to insure households and businesses that are not even likely to be at risk of flooding as a result of a 100-year event.

Another issue relates to the contracts individuals enter into in terms of how the balance is shifted towards the companies as opposed to the consumer. This legislation, the Consumer Insurance Contracts Bill 2017, attempts to provide a level playing field. The Judiciary has been crying out for this legislation and has found itself, time and time again, siding with the insurers because it must follow the letter of the law but has expressed time and time again regret to the consumer in doing so.

The question we must ask revolves around why there is a need for this Bill. As a Parliament, we have the power to act. We make the law within which the insurers must act. At least, we should be doing that but, in fact, decades and even centuries of complacency have left us with laws on insurance contracts that are hundreds of years old and no longer fit for purpose. I previously won support for a Bill I introduced that would have ended the six-year rule, by means of which consumers were banned from taking complaints in respect of financial products sold to them more than six years ago.

More recently, I won support in respect of support for tracker mortgage victims. Now this Bill can mark a huge win for consumer protection when it comes to insurance claims. I wish to acknowledge the work and expertise of the Law Reform Commission in producing the report on this Bill. Its report, published in 2015, makes a powerful argument that reform in this area is long overdue.

In its 2011 report the Law Reform Commission quoted the expert Buckley who said, referring to a code of conduct for the insurance industry a code of conduct, or statement of self-regulatory practice, is not a substitute for reform of the law. The need for reform is confirmed by the very existence of the code and by the recent repudiation of it in open court by a major insurer. For decades, the need to legislate has been identified. There is no reason to delay any more. I hope all Deputies can support my Bill and bring about that reform.

This is a medium length Bill but it is dense in content. Section 1 Bill defines a consumer along the lines used for the purposes of the Financial Services Ombudsman jurisdiction and the consumer protection code. There are valid arguments why in other contexts such as the Financial Services Ombudsman scope why this definition might be considered too broad. While in that case the argument is that very large companies can access the Ombudsman when the commercial court might be more suitable, in this case I believe the definition is well suited because small and medium enterprises are the core beneficiaries here alongside the individual consumer. The section also defines an "average consumer" and "fraudulent misrepresentation" and other technical terms used throughout.

The purpose of section 2 is to clarify the relationship between this Act and other Acts already in force, such as the Marine Insurance Act 2015. No provision of these Acts applies to contracts covered by this Bill.

Section 3 allows the Minister to make necessary regulations and the Central Bank codes as required. Section 4 allows any such code of practice to be admissible for consideration by the Financial Services Ombudsman, a court or any other adjudicating bodies.

Section 5 abolishes the outdated concept of "insurable interest" with only a very small exception where the contract is also a contract of indemnity. Insurers would no longer be able to avoid a claim because after the fact they decide that the insured had no interest in the policy. Here we see how out of date some of the existing law provisions are. The "insurable interest" concept goes back to naval insurance and was designed to prevent gamblers or speculators from betting on the non-arrival of ships at their destinations. In 2017, however it has the effect that where for example a child would take out insurance on the parent's home because for whatever reason the parent deems it not necessary to insure the family and subsequently the home burns down the child would not be able to make valid claim because he or she has no insurable interest despite having paid premiums to the insurance company for many years. Modern contracts have developed beyond the point where such gambling would be profitable or exploitable. The Bill therefore abolishes the concept of "insurable interest" and replaces it with a legislative provision suitable to the modern day.

Section 6 is one of the most important aspects of the Bill. It shifts the burden of disclosure away from the consumer and to a degree places the responsibility on the insurer to asks questions. What is more, the questions the insurer asks must be in plain, intelligible language. On average, although the detail is confidential, we know that duty of disclosure features in nearly 100 cases a year that the Financial Services Ombudsman deals with. Again, outdated concepts that work only in favour of the insurer such as utmost good faith are replaced. The invisible duty of the consumers to volunteer information that they know is relevant is removed. This is a real shift in the power relationship between consumer and insurer. All the duty and obligations are shifted from the shoulders of the consumer. The consumer must, of course, answer all questions honestly and with reasonable care.

Section 7 flows from section 6. It introduces the concept of proportionate remedies for misrepresentation. In layman's terms a small omission with little material impact should not lead to a complete refusal of a claim. Common sense and proportionality must come into play. A simple innocent misrepresentation should not lead to families and businesses being left completely empty handed when a fire breaks out or some other insurable event occurs. Consumers who are found to be negligent in the information given likewise are to be treated proportionately under the legislation. Again, the key is proportionality. This section ensures mistakes or even negligent replies to questions do not lead to a blank cheque for insurers to avoid all responsibility. It is a question of balancing the power relationship between consumers and insurer.

Section 8 tidies up what forms and paperwork that must be supplied to the consumer. The various provisions around this scattered throughout different Acts are collated together into the Bill. The clarity in the section about the exact information to which the consumer is entitled benefits the consumer. Insurers must make this documentation intelligible to the average consumer. If there is any dispute over language the benefit of the doubt lies with the consumer.

Section 9 allows a 14 day cooling off period for non-life insurance and 30 days for life assurance contracts in which consumers can withdraw from a contract without penalty. There are some sensible exceptions such as very short-term contracts. There are already some Acts regarding consumer credit where a cooling off period is in place. The concept is one that favours the consumer and should be included in insurance contract law. Section 10 puts into law the obligations of an insurer regarding renewals. The 15-day notification period is already found in regulations and it is sensible that it is being placed in primary legislation. The main focus of this section is in listing the information that insurers must make available in the case of life insurance policies. This list includes surrender and maturity values, investment growth and charges deducted among other things. This approach could be considered for non-life insurance too given the darkness motor insurance consumers can be kept in regarding the reasons for some of the massive increases that seem to be popping up for consumers in that sector. I would be willing to consider amendments on Committee Stage if this Bill passes Second Stage.

Section 11 brings the duty of the insurer into the twenty first century when it comes to cancelling a contract because of, for example, failure to pay. The duty will now be on the insurer to make sure the cancellation notice has been received. This can be an e-mail or text message as long as there is proof that it was received.

Section 12 is linked to section 6 and carries the logic of putting the onus on the insurer to ask the questions and not the consumer to guess which information he or she should be volunteering. A renewal does not mean the consumer has to give additional information unless explicitly requested to do so. Many individuals would not be aware that when they renew their insurance contract they are entering into a new contract and many of their insurance contracts will require them to give additional information. Failure to do so will mean that the insurance company will not pay out on the claim. In this section the insurance company will have to ask specific questions to be answered by the consumer upon renewal if it wants additional information. The Law Reform Commission report gives an example of why this is important. A more extreme example arose in the High Court decision of Hanna J. in Flynn v. Financial Services Ombudsman and Allianz Plc, where the respondent insurer had declined to indemnify the appellant under a household policy on the basis that he had failed to disclose, at the renewal of the policy, that he was facing pending criminal charges in relation to alleged possession of cocaine. Although the charges were subsequently dismissed, the Financial Services Ombudsman, FSO, held that the pending charge was a material fact that should have been disclosed to the insurer. In the High Court, Hanna J. dismissed the appellant's appeal on the basis that the correct test of materiality had been applied by the FSO and that the insurance contract in question had converted the non-disclosure into a "basis of contract" warranty. Hanna J. added that it was "regrettable" that the appellant who stands wholly innocent of the drugs charges which were levelled against him, must find himself in a position where he cannot recoup insurance on a premises seriously damaged in wholly innocent circumstances. That is how bizarre our insurance laws are today.

It is completely unjust that an individual who does not inform his or her insurance company when he or she is renewing his or her insurance contract that charges are pending against him or her in respect of untrue allegations can lose €200,000, €300,000 or €400,000 if his or her house burns down because the insurance company is able to walk away without having to pay the claim. This legislation fixes that.

Section 13 is important because it removes much of the ground which insurers can use to avoid paying out. It takes the logic of the duty of disclosure to changes in circumstances. It distinguishes between cases in which there is a new risk about which the insurer did not originally know and cases in which there is an alteration of risk. In other words, a house insurer will not be able to refuse to pay out after someone's house burns down on the basis that he or she did not mention that he or she lights candles in his or her house. However, substantive changes made without the insurer’s knowledge that would have changed the decision on whether to insure the house are still grounds for a refusal to pay out.

Section 14 deals with what happens after an insurable event occurs. This means that the duties of the consumer to co-operate fully and respond to reasonable requests from the insurer are provided for in law. In return, the insurer is legally bound to pay out in a reasonable time period. In addition, neither party can hide any information it has that might be relevant to a decision on compensation.

Section 15 allows the consumer to seek extra compensation if the insurer unreasonably delays a valid claim. It asserts the principle that insurers do not have to pay out on fraudulent claims, but, importantly, it does not allow for a party making an innocent claim to have that claim disallowed because a second party may have acted fraudulently, for example, in a joint claim.

Section 16 deals with warranties which have been described in the courts as vicious devices and traps for the unwary. I refer to the small print used to prevent legitimate claimants from receiving compensation. Until we pass this Bill, insurers will continue to have the power to include in contracts so-called "warranties" which form the basis of a contract. These warranties have rightly been criticised by the Judiciary. In an infamous case the court found in favour of an insurer after a pizzeria had burned down because there had been some waste on the premises. That was enough to trigger an avoidance of the claim because it was in the small print that all waste should have been removed from the premises at night. Warranties should be abolished and replaced with specific reforms. That is what is being dealt with in this legislation. I will give an example. There may be a condition or a warranty in a contract of home insurance which requires the homeowner to maintain a burglar alarm at his or her premises. If the house burns down after the burglar alarm had malfunctioned for a period of time before subsequently being fixed, an insurance company can refuse to pay out, even though the burglar alarm had nothing to do with the fire at the property.

Section 17 places an onus on the insurer to bring to the attention of the consumer terms that might be considered "unfair or otherwise". Such terms need to be explained in order that they are not hidden.

Section 18 concerns the right of a third party to make a claim directly against an insurer in certain cases; for example, where the owner of a shop has passed away or where a shop is in liquidation. In such cases the insurer would be treated in the same way as the insured party.

Sections 19 to 21, inclusive, cover the issues of subrogation or substitution. Insurers will no longer be able to step into the shoes of a family in certain circumstances. For example, if a home has been damaged by a visiting relative, the insurer will not be able to sue that relative if the family do not wish that to happen. Exceptions are built into the legislation. Wilful damage, for example, is excluded. Similarly, an insurer cannot seek to go after an employee who causes damage to an insured party, unless it was done on purpose. The Bill codifies the common law "recovery down" principle for the distribution of funds where subrogation is used.

This Bill is what we need. It is about moving forward. It is about a new culture that will protect consumers from banks and other financial institutions. We need only look at the laws we have, some of which date back to the 1870s, to see that this is required. Some of them were introduced to deal with the 19th century practice of gambling on whether the cargo of naval ships would be landed in port. These are the laws judges are currently under an obligation to pass and adjudicate on. It is time for us to do what the Judiciary is demanding by bringing our laws into the 21st century. I hope all Members of the House can support this legislation.

I welcome the opportunity to address the House on the Consumer Insurance Contracts Bill 2017 which was introduced by Deputy Pearse Doherty in the Dáil on 19 January. I will begin by expressing my support in principle for the objectives of the Bill which is aimed at reforming and modernising the law on consumer insurance contracts. Like cré na hÉireann, we are creating common ground.

As Deputy Pearse Doherty outlined, the Bill is based on the Law Reform Commission's 2015 report on consumer insurance contracts. The rationale for the Law Reform Commission's review was that insurance contract law principles and rules had been developed in the 18th and 19th centuries when insurance contracts involved wealthy landowners and ship owners. There was a need to review these principles and rules to determine their appropriateness in the 21st century. Of particular concern to the Law Reform Commission is the current state of the bargaining powers of insurers and consumers. Most insurance contracts are concluded between large corporate bodies, with vast resources and expertise, and consumers with limited financial, technical and other resources. The Law Reform Commission concluded that while recent EU and domestic legislation on the regulation of insurance contracts had benefited ordinary people and small businesses in Ireland, there was a need for further reform and that the relevant provisions should be consolidated into a single statutory framework. It undertook extensive research which culminated in a report with 105 recommendations, including the abolition of some laws and their replacement with specific legislative measures. Draft legislation to give effect to these recommendations was included in the report and provided the basis for this Private Members' Bill.

The Government agrees that the Bill is relevant to the lives of virtually all citizens. A contract of insurance is something that most, if not all, of us will enter in to at some stage of our lives. This is particularly clear in the light of the wide range of areas of insurance cover, including motor, health, property and business insurance. The research of the Law Reform Commission which plays an important role in Ireland’s legal landscape reflects this wide scope. I take the opportunity to thank the commission for its work and acknowledge the high quality report it has produced in this complex area. I understand the report is the result of a number of years of work and follows a consultation process involving the consumer protection side of the Central Bank of Ireland, the Financial Services Ombudsman and the Department of Jobs, Enterprise and Innovation as the Department responsible for consumer protection matters. The Department of Finance did not participate in this process and, therefore, had no opportunity to work with the Law Reform Commission while it was completing its report. Since the publication of the report, the Department of Finance's priority focus in the insurance area has been on a range of issues such as a review of the insurance compensation fund legislation, flood cover and the cost of insurance project. While some consideration has been given to the Law Reform Commission's report, up to now it has not been a matter of priority. Nevertheless, the Government supports what the Bill is trying to achieve and we intend to engage constructively in advance of Committee Stage.

The wide-ranging scope of the Bill covers many issues which the Government acknowledges have caused an immense amount of frustration for many ordinary policy holders, including small businesses, when dealing with insurance companies. One of the key issues addressed by the Law Reform Commission which is recognised in the Bill is the imposition by the current law of onerous requirements on the consumer to disclose information on which a hypothetical prudent insurer might rely when deciding whether to insure him or her. By definition, this requires the consumer to try to anticipate what the insurance company needs to know, even if he or she is unsure what information is relevant. Consequently, it puts the insurer in a position where it can refuse a claim if it has not received a full and complete disclosure, even in circumstances in which such information, if it had been disclosed, would have had minimal or no impact on the decision to provide cover in the first place. The Bill proposes to replace the current pre-contractual duty of disclosure imposed on consumers with a statutory duty to answer carefully and honestly specific questions posed by an insurer that identify the material risks and the relevant information relied on by the insurer. Directly related to this is a provision that proposes to provide for proportionate remedies for innocent or negligent mistakes by consumers, while continuing to allow insurers to be able to repudiate liability completely in cases of fraud.

Other provisions in the Bill include its application to insurance contracts between insurance companies and individual consumers or SMEs with a turnover of less than €3 million. The concept of insurance warranties is being replaced with statutory provisions allowing insurers to include provisions that precisely identify or define the risk insured but which also protect consumers from unfair and unjust outcomes. As Deputy Pearse Doherty mentioned, in the example given by the Law Reform Commission a consumer wrongly warranted that a particular type of burglar alarm had been installed - this is referred to as the "basis of the contract" - and the premises subsequently burned down as a result of faulty electrical wiring. In such a case, an insurer would probably be able to repudiate liability under the policy, even though there was no connection between the breach. The requirement for a consumer to have an insurable interest in the risk insured is being abolished and replaced with legislation that requires a consumer to prove actual loss when making a claim and also applies the principle of indemnity to ensure a policyholder cannot make a profit on any claim.

The Bill also permits third parties intended to benefit under an insurance contract to make a direct claim against the insurer. It reforms and modifies the current laws governing subrogation in order to avoid unintended consequences for family and employer-employee relationships. Subrogation is the means by which an insurer can step into the shoes of a policyholder after it has paid out on a claim in order to take action to recover the compensation from the person responsible for the claim being paid out in the first place.

The Bill would replace the post-contractual duty of good faith with specific statutory duties, including a duty on consumers to pay premiums within a reasonable period and a duty on insurers to handle claims and complaints promptly and fairly. It would also adapt the existing legislation on unfair terms for insurance contracts and include the consolidation and reform of existing legislation to ensure policyholders receive clearly written information on the essential terms of the insurance contract, including policy documents.

As indicated at the outset, the Government is supportive in principle of the Bill and willing to engage constructively. As part of this process, however, we must be able to develop a better understanding of its potential impact on consumers and insurers. The one certainty about this Bill is that it is legally complex and cuts across a number of fundamental and well-established legal principles such as subrogation, for example. We, therefore, need the time to closely review it in order to ensure that there is no unnecessary replication of existing provisions and no unintended consequences arising from its implementation. The type of elements we will have to consider include what elements of the Bill are currently catered for in the Central Bank’s consumer protection code, which is an important tool in the protection of consumers and needs to be considered in full, and any legislative developments since the publication of the Law Reform Commission’s report, which will require an analysis of whether any the provisions of the Bill are already on the Statute Book. If they are, it would be superfluous to address them once again through legislative means.

We must consider whether any provisions in the Bill conflict with current legislation, as appropriate amending legislation would be required in that case. For example, there may be some repetition between the Bill and SI 74 of 2007, (Non-Life Insurance (Provision of Information) (Renewal of Policy of Insurance) Regulations 2007. We must consider whether any provisions are likely to add unnecessary legal complexity and may result in higher litigation costs, as well as the work of the cost of insurance working group. There is potential for the recommendations in the report of the working group to overlap and if this is the case, the work will need to be streamlined to avoid duplication or conflict. For example, the working group report contains recommendations on providing additional information on premium breakdowns to consumers and an extension of the notification period for renewals.

We will also examine developments at European Union level since the Law Reform Commission concluded the 2015 report. For example, the Insurance Distribution Directive was agreed in 2016. This directive will replace the insurance mediation directive 2002/92/EC, which was transposed by the European Communities (Insurance Mediation) Regulations 2005. It applies to the entire insurance distribution chain, which includes both undertakings and intermediaries, with intermediaries being distributors who are not reinsurance undertakings selling directly. The main aim of the directive is to facilitate market integration by the enhancement of retail insurance regulation and increasing the level of policyholder protection. It will also seek to identify and mitigate conflicts of interest, in particular in the area of commissions, and strengthen administrative sanctions. The Department of Finance has commenced its transposition work, which is required to be done by February 2018, with some transitional provisions applying until February 2019.

Several Departments and agencies will need to be involved with this process. For example, while the Department of Finance is responsible for insurance regulation, it will be necessary to engage with the Department of Jobs, Enterprise and Innovation to gain its perspective on consumer protection matters. Engagement will almost certainly be required with the Department of Justice and Equality, which I understand has responsibility for general contract law-related matters in order to ensure there are no unintended consequences on the broader contract law area. In addition, the Central Bank will play a central role given its expertise in the area. The Financial Services Ombudsman Bureau must also be consulted.

It should be noted that the Central Bank has provided some high level views on the Law Reform Commission’s report in which it expressed broad support for the recommendations in the report. However, it has raised concerns that some elements of the recommendations may prove legally difficult to implement and may result in increased litigation and costs. Thus, given the nature of the reforms being proposed, they need to be given proper consideration and analysis in order to ensure that we get the legislation right. The Government supports the Bill in principle but due to its complex legal and wide-ranging nature, along with the breadth of its impact, an in-depth review of the Bill will be necessary. This will take a certain amount of time and I would be grateful, therefore, if the Deputy could take this into account when thinking about the scheduling of the Bill for Committee Stage. It should also be noted that the Government is likely to submit substantive amendments on Committee Stage.

Insurance is an essential part of society that affects almost every walk of life. Insurance has a direct impact on the security and peace of mind of individuals and businesses, large and small throughout the country. It is essential for providing people with protection and security against the risks of everyday life. As we know, the insurance market in Ireland is dysfunctional in many respects. As far back as the collapse of PMPA, there have been serious issues with the insurance market. More recently there was the collapse of Setanta, where three years on, over 1,600 claims are still unsettled. Last year, Gibraltar-based Enterprise Insurance Company collapsed with 14,000 motorists left to find alternative insurance. The customer has faced exceptional increases in motor and health insurance premiums over the past number of years. We have long been calling for the Government to act on the rising cost of motor insurance. In 2014, motor insurance premiums increased at an annual rate of 11.6%, while in 2015 the rate rose by 30.8%. In the 12 months to August 2016, motor insurance increased by 28%. We have seen similar increases in the health insurance market.

With motor insurance, we have welcomed the recommendations from the Government's working group and we now eagerly wait for action on this issue. In addition, we have had issues regarding flood insurance, whereby insurance is been denied to people and businesses where flood protection has been installed. These are just some of the issues with the insurance market in Ireland. It is in this context that the Law Reform Commission began to look at the legal area surrounding the insurance contract. In July 2015, the commission published a detailed and comprehensive report on consumer insurance contracts. This Bill, brought forward by Sinn Féin, essentially mirrors the output from the Law Reform Commission. We commend Sinn Féin on bringing it forward and the Law Reform Commission on its work in this area. Fianna Fáil will support this Bill on Second Stage and will engage constructively thereafter, bringing forward amendments if appropriate.

The commission's report brings together a vast array of law ranging from legislation to court judgments, many of which date as far back as the 16th and 17th centuries. The commission produced recommendations that would consolidate existing law and update it for the 21st century. One of the key areas identified by the Law Reform Commission was to abolish what is known as insurable interest. This concept dates back to the 18th century and it stipulates that a consumer must have an identifiable interest in the property or risk being insured. This means that a consumer would not be able to obtain compensation if he or she did not own or had no interest in the property. Even in a case where loss has been established, compensation would not be payable because of the concept of insurable interest. The Law Reform Commission recommended the removal of insurable interest and replacing it with a law that requires a customer to prove actual loss, applying the principle of indemnity. This would make it a fairer system for the customers, whereby they are compensated for loss, and the insurers, whereby they are protected from the consumer making a profit on the claim.

In many cases compensation is not paid to a customer because of pre-contractual duties and obligations to disclose any information that may affect the risk of damage or loss. The Law Reform Commission in its report recommended the removal of this standard and replacing it with statutory pre-contractual requirements for both the consumer and the insurer. Under this proposal, as set out in section 6 of the Bill, the consumer will only be required to disclose information that is directly asked for by the insurer and the questions set out for the consumer cannot be general in nature. The consumer is still obliged to provide truthful and detailed information in response to the questions asked by the insurer. This has the potential for clearing up a grey area whereby a consumer can be punished for not providing an exhaustive amount of information at the pre-contractual stage.

The recommendations from the commission also extend to circumstances whereby the consumer unintentionally fails to disclose certain information. Under the current system, there is an all or nothing approach whereby if the consumer does not disclose certain information, he or she will not receive compensation, even if the omission was made in good faith or unintentionally. This is unfair to consumers as certain misrepresentations are innocent or negligent. Not all misrepresentations are done intentionally or fraudulently. However, it is important to note that the recommendations from the Law Reform Commission do not remove all the protections for the insurers. In the case of fraudulent misrepresentation, the insurer will not have to pay compensation.

Section 8 of the Bill deals with the form of the contract of insurance and the information to be provided by the insurer. The information to be provided by the insurer to the customer includes the subject matter of the insurance and the risks covered, the sum insured and any deductibles and the method of calculating the premium. In addition, the insurer would need to outline the right to revoke the application or terminate the contract. This will make the contract of insurance more accessible and clear for the consumer, which is to be welcomed. Sections 9, 10 and 11 deal with the right to withdraw from the contract of insurance, the renewal of the contract of insurance and the cancellation of the contract of insurance. These sections clear up many issues around the signing and renewal of insurance contracts. Section 9 in particular would require a cooling off period of 14 days for non-life insurance and 30 days for life insurance. This would allow the customer to carefully consider all the issues before signing the contract of insurance. Sections 12 and 13 cover the duties of both the insurer and the consumer at the renewal stage and in the post-contractual period.

This deals with any new information the insurer wishes to obtain at the point of renewal and the alteration of risk that occurs during the post-contractual period. At the moment it is unclear what information the consumer must declare at the point of renewal. This increases the risk for the consumer of mistakenly not disclosing certain information.

With section 12 any new information required by the insurer must be asked specifically from the customer. Sections 14 and 15 deal with claims handling and the duties of the consumer and the insurer. This would stipulate that a consumer must co-operate fully with the insurer in the investigation of the insured event. This is a strong tool for the insurer in cases where the consumer is un-co-operative. It would also compel the consumer to report an insurable event in a timely manner and would compel the insurer to process the premium promptly. This is essential as we have witnessed cases where insurers take a considerable time to pay compensation. Section 17 would protect the consumer from the insurer inserting unfair or onerous terms in the contract of insurance. This section has regard to the strength of the bargaining positions of the insurer and the consumer and whether the consumer had an inducement to agree to the term.

Subsection 4 outlines specific items that would be deemed unfair or onerous on the consumer. This section would be an essential tool to protect consumers from insurers placing terms in the contract that are overly unreasonable.

The remainder of the Bill deals with the right of third parties to claim against the insurer and the subrogation by insurance companies. In summary, the Bill brings together and updates the law that is currently disjointed and outdated. We will support the passage of this Bill through Second Stage and will engage constructively on Committee Stage and, if appropriate, we will bring forward amendments. We believe the work of the Law Reform Commission was extensive and detailed and the recommendations, if enacted, would be good for consumers and insurers alike.

Let us make no mistake. This Bill, if enacted, will not solve the problems individuals experience with the current insurance market. They are continuing to experience exceptionally large increases in their premiums, whether it be motor insurance or health insurance. Small businesses and households will continue to struggle to get flood insurance in areas where flood protections have been installed. We simply have not seen the urgency from Government in addressing the main issues involving insurance in this country. This Bill, if enacted, will not solve all the problems but it will help solve some issues in the market surrounding the insurance contract.

I repeat that the Government welcomes the Private Members’ Bill. It is in line with the Government priorities in our focus on the insurance area to date. Much work has already been done recently by the Minister for Finance, Deputy Noonan, relating to the review of the framework for motor compensation and the publication of that review. A transposition of Solvency II is taking place. Work has been ongoing in respect of flood insurance. We have seen the publication of the report of the work on the cost of motor insurance. The implementation of that report has begun. Each of these segments of work along with the Bill Deputy Doherty has introduced will help us to deliver what we want to see, that is, a stable properly functioning insurance market that delivers fairer premiums and contracts for consumers without any unnecessary delay.

We will engage constructively. We believe it will take some time to consider each of the elements of the Bill. It is likely that we will have substantive amendments on Committee Stage. We support the Bill in the move to Committee Stage.

I thank the Minister of State, Deputy Murphy, and Deputy Collins for their contributions to the debate and for their support for the legislation. I imagine the others who did not use their slots are fully satisfied with the legislation and took the view that they had no need to make comments in the Dáil. We will take their absence as consent.

Indeed, that is what the legislation does. If people do not answer the question, then the insurer waives the right to hold that against a customer in a court of law in terms of voiding the contract. We can take the fact that others have not said anything as agreement with the legislation.

I wish to remark on comments by the Minister of State, Deputy Murphy. His comments are sensible and right. We are under no illusions: this legislation is the culmination of a large number of years of work by the Law Reform Commission. In 2011 the commission produced the first report. In 2015 the report which is the basis for this legislation was produced. We have engaged with the Law Reform Commission in respect of the changes to subsequent legislation since the publication of the Act. We have accommodated the changes into the Bill as presented.

There needed to be detailed scrutiny of this legislation. This is not legislation that will affect only one sector or a group of individuals. This will affect every person in the State, if not now, then at some point in future. It will have an effect when people renew motor policies or house insurance or life insurance. This legislation will have a serious impact on those events. The legislation states that, upon renewal, customers will no longer be required to furnish information to the insurer unless the insurer asks specifically for information. Moreover, that has to be done in plain and simple language. It has wide-reaching effects.

It balances the scales in terms of the consumer. There is no doubt about it. However, it is not something the insurance industry should be overly fearful about. We have cited cases in terms of the burglar alarm. The Minister of State referred to a similar case in which a customer is warranted. A customer does not see the term “warranted” on the insurance contract, but it is under the terms and conditions. People must maintain a type of burglar alarm. If the alarm is not maintained and the house floods, then the customer cannot claim. Worse, if the burglar alarm was broken for six months, then was repaired and was working again and six months later the house burned down, the insurance company could still void the claim. To be fair to the insurance industry, under its code of practice it says that is not acceptable and that only if it was a reason for the risk relating to the claim in the first place should it be acceptable. Only in the case of theft would a company decide not to pay out because of the burglar alarm not working. However, that has not always been the case. I referred earlier to a quote from Buckley. One large insurance company went to court in contravention of the industry's own codes. That is why there is a requirement on us as legislators to ensure that practices widely accepted in the insurance industry as unfair are no longer allowed to be part of codes and dependent on the goodwill of insurers but are provided for in law. That is the intention of the Bill.

Consultation will need to take place with the Central Bank, the Financial Services Ombudsman, the insurance industry and advocates for consumers. This is wide-ranging and affects millions of people across the State. It is long overdue.

I note what the Minister of State has said in terms of the scheduling of the Bill. I will keep that in mind as we deal with this in the committee. My intention is to work with other parties, including the Minister of State and his officials who have a depth of knowledge, while conscious of the other work the Minister is bringing forward, particularly in respect of motor insurance. I suggested that we could consider amendments to one of the sections which could enable this Bill to be a vehicle to deal with some of the implementation of the measures the Minster of State intends to bring forward.

I thank the Members for their support for this legislation. When enacted it will be a major step forward in terms of consumer rights.

I commend all those who have worked on the legislation in the Law Reform Commission over a substantial period. They carried out the consultation and looked at the practices internationally and produced the first report. They developed the second report and the legislation. I thank my own staff, including Declan O’Farrell, who helped me to bring the Bill to this point.

Question put and agreed to.