We are now dealing with consideration of the Consumer Insurance Contracts Bill 2017, a Private Members' Bill in the name of Deputy Doherty.
Consumer Insurance Contracts Bill 2017: Committee Stage
I wish very briefly to highlight a few points. The Bill as introduced is broad and wide-ranging legislation. It potentially cuts across existing domestic and European legislation in several areas. The Attorney General has advised that further detailed consideration of the complex legal issues involved in the Bill is required. Specialist legal counsel has been sought on the Bill overall and on specific legal issues to ensure the enactment of the Bill's provisions will have no unforeseen or unintended consequences. In particular, advice has been sought on the following issues: insurable interests in section 5; the cutting-off period in section 9; post-contractual duties of consumers and insurers in section 13; replacing insurance warranties in section 16; unfair and onerous terms in section 17; and subrogation in sections 19, 20 and 21. Once the legal advice has been received, I may put forward further amendments to these sections on Report Stage to ensure the Bill is legally sound when enacted. At this stage, however, I cannot predict the outcome of the legal advice. After reviewing the entire Bill, counsel may raise further issues on different aspects, requiring amendments to other sections.
Can we have a copy of the Minister of State's note for each of the committee members? We do not have it now.
I will very briefly set up the meeting if I may. As the proposer of the Consumer Insurance Contracts Bill 2017, I thank the Law Reform Commission for its work on consumer insurance contracts and its report and draft legislation. I also thank the Minister of State and his officials for their engagement with me on amendments. This legislation, which will radically inform insurance contracts and tip the balance in favour of the consumer, is timely and welcome. I look forward to Committee Stage.
We are circulating the Minister of State's note. Sixty-eight amendments have been tabled. One of these amendments, in the name of Deputy Doherty, has been disallowed due to a potential charge on the Exchequer. I believe Deputy Doherty received a note on that. Is the intention of the committee to conclude the Bill?
That is my intention.
It is mine too.
I suggest that we can move speedily through some of the amendments, which are quite technical, and others which are obviously needed. Some of the amendments merely comprise a reshaping of language. The same intention is there.
We will go straight to the amendments.
Amendments Nos. 1, 2 and 4 to 9, inclusive, are related and may be taken together.
I move amendment No. 1:
In page 3, to delete lines 10 to 18 and substitute the following:
“ “average consumer” has the meaning given to it by Directive No. 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No. 2006/2004 of the European Parliament and of the Council;”.
This group of amendments includes definitions to be deleted. Are we proceeding section by section or considering the amendments?
We are discussing amendments Nos. 1, 2 and 4 to 9, inclusive.
I propose that some definitions be deleted, some replaced and some introduced. I propose to delete the definition of "groups of persons", as the term is only used in the definition of "consumer", which it is proposed to replace. I propose to delete the definition of "turnover" as the term is only used in the definition of "consumer", which it is proposed to replace. I also propose to delete the definition of "writing" as it is proposed that it will be replaced by a definition of "durable medium" which would render this definition unnecessary if accepted.
The following definitions are to be replaced by this group of amendments. The definition of "average consumer" is to be replaced to mirror the approach taken elsewhere in Irish law, such as in the Consumer Protection Act 2007. The definition of "consumer" is to be replaced to align it with the definition in the Financial Services and Pensions Ombudsman Act 2017. This change means that should there be any change to the definition in the Financial Services and Pensions Ombudsman Act 2017, it will automatically follow through to this Act. It is proposed to delete the definition of "insurer" and replace it with a definition of "insurance undertaking" to align it with other Irish and EU law. If accepted, this change will result in consequential amendment throughout the Bill.
I now turn to definitions to be introduced. The amendments propose to introduce a definition of "durable medium". This is the well-established wording used in the consumer protection code and financial services legislation deriving from EU law. It replaces the term "writing". If accepted, this change will result in consequential amendment throughout the Bill. The amendments propose to introduce a definition of "insurance intermediary". This is necessary to bring intermediaries within the scope of the Bill. The amendments propose to introduce a definition of "life insurance" that is aligned with Irish law, because it is currently undefined in the Bill.
It is proposed to introduce a definition of "non-life insurance" which is aligned with Irish law, as the term is currently undefined in the Bill.
I am happy to accept amendments Nos. 1, 2 and 4. In accepting amendment No. 2, which brings the definition in line with the definition in the Financial Services and Pensions Ombudsman Act 2017, I am considering whether a broader definition of small and medium-sized enterprises, SMEs, would be appropriate for the purposes of the Bill. The Law Reform Commission examined this issue and concluded that the approach taken in the Financial Services and Pensions Ombudsman Act 2017, which was in the original legislation and is included in the Minister of State's amendment, is the appropriate one. I am aware of submissions from businesses seeking that all SMEs be included. I am also aware that Insurance Ireland wants to exclude all businesses. While I disagree with Insurance Ireland's approach, consideration is needed of whether to include all SMEs in the definition at European level. I will consider this matter further before Report Stage.
If I may respond, we will be happy to consider that on Report Stage.
I move amendment No. 2:
In page 3, to delete lines 19 to 29 and substitute the following:
“ “consumer” has the meaning given to it by paragraph (a) of the definition of that expression (as it is defined in relation to a financial service) in section 2(1) of the Financial Services and Pensions Ombudsman Act 2017 but, for the purposes of this Act, that paragraph (a) shall apply as if references in it to “financial service” and “financial service provider” were construed, respectively, as references to “consumer insurance contract” and “insurer” within the meaning of this Act;”.
Amendments Nos. 3, 10, 20, 24, 32 to 35, inclusive, 38, 44, 54 and 62 are related and may be discussed together.
I move amendment No. 3:
In page 3, between lines 31 and 32, to insert the following:
“ “durable medium” means any instrument that enables a recipient to store information addressed personally to the recipient in a way that renders it accessible for future reference for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored;”.
This grouping involves deleting the definition of "writing" as it is proposed that it will be replaced by a definition of "durable medium" which, if accepted, would render this definition unnecessary. This generates a whole series of consequential amendments throughout the Bill which are covered by this grouping. This is a technical amendment because the definition of "durable medium" is the well-established wording used in the consumer protection code and financial services legislation deriving from EU law.
I move amendment No. 4:
In page 4, to delete lines 4 to 6.
I move amendment No. 5:
In page 4, between lines 6 and 7, to insert the following:
“ “insurance intermediary” has the meaning given to it by Regulation 2 of the European Union (Insurance Distribution) Regulations 2018 (S.I. No. 229 of 2018);”.
I move amendment No. 6:
In page 4, to delete lines 7 to 9 and substitute the following:
“ “insurer” means an insurance undertaking, that is to say, an insurance undertaking within the meaning of, as appropriate, Regulation 3 of the European Union (Insurance and Reinsurance) Regulations 2015 (S.I. No. 485 of 2015), Regulation 2 of the European Communities (Non-Life Insurance) Framework Regulations 1994 (S.I. No. 359 of 1994) or Regulation 2 of the European Communities (Life Assurance) Framework Regulations 1994 (S.I. No. 360 of 1994);”.
I move amendment No. 7:
In page 4, between lines 9 and 10, to insert the following:
“ “life insurance” has the meaning given to it by Regulation 3 of the European Union (Insurance and Reinsurance) Regulations 2015 (S.I. No. 485 of 2015);”.
I move amendment No. 8:
In page 4, between lines 10 and 11, to insert the following:
“ “non-life insurance” has the meaning given to it by Regulation 3 of the European Union (Insurance and Reinsurance) Regulations 2015 (S.I. No. 485 of 2015);”.
I move amendment No. 9:
In page 4, to delete lines 11 to 13.
I move amendment No. 10:
In page 4, to delete lines 14 to 16.
Amendments Nos. 11 and 12 are related and may be discussed together.
I move amendment No. 11:
In page 4, lines 18 and 19, to delete all words from and including “(1) Except” in line 18 down to and including line 19 and substitute the following:
“(1) Except where otherwise provided, each provision of this Act applies to life and non-life contracts of insurance entered into, and variations to such contracts of insurance agreed, between an insurer and a consumer after the commencement of the provision concerned.”.
This group covers the amendments to section 2, which determines the scope of the Act. The proposed amendments clarify the scope of Act to ensure it applies only to contracts, or variations made to existing contracts entered into after the Act comes into force, such that it is prospective rather than retrospective. The provisions also ensure that insurance intermediaries are within the scope of the Bill. This is done by deleting section 2(2)(a) which had provided that they were outside its remit. It is also proposed to amend the terminology "marine, air transport insurance" to refer instead to the appropriate categories within the regulations transposing solvency. This is designed to provide more clarity for industry. It is further proposed to introduce a new subsection to exclude contracts entered into by special purpose vehicles from the scope. The proposed amendments also introduce a new section to clarify that the Bill does not impact on the duties of the Motor Insurers Bureau of Ireland, MIBI, specifically in relation to subrogation.
I have two issues. Do the amendments provide that existing contracts will not be affected in any way by the legislation or any section within it? Amendment No. 11 also allows for the commencement of different sections. What is the Minister of State's intention in respect of the commencement of sections of the Act?
The intention would be that the Act would be commenced as one. That is to be decided by the Minister afterwards.
The insurance industry is arguing for a three-year period during which it would not be enacted. Has the Department a view on how soon it can be enacted?
My view is sooner rather than later. If the Deputy is asking me if I agree with the three-year period of the insurance companies, I do not.
What effect will the provision have on existing contracts?
This legislation is prospective rather that retrospective. We have asked the Attorney General for clarity on that. We have not got a conclusive position yet but we will have one for Report Stage. Most insurance is for a one-year period. Anything that would lapse prior to enactment of this Bill would lapse without this provision attached to it, but on renewal it would subsequently be live.
As long as it is commenced, obviously. I want to stress the urgency of commencing this Act for making sure insurance contracts are fairly balanced and that they cannot use exemptions dating back to the 1600s to avoid an insurance claim or use language that is not comprehensible for an ordinary consumer. It is important that we move quickly. I note the Minister of State's indication that he is hopeful to go in that direction.
I will put it like this. The objective is to improve the interaction between the insured and the insurer and to improve the balance. We are not doing this just to leave it sit on the table. My expectation is that it will be sooner rather than later.
I move amendment No. 12:
In page 4, to delete lines 20 to 23 and substitute the following:
“(2) This Act does not alter or affect any rights or obligations concerning or arising from—
(a) a contract of reinsurance,
(b) a contract of insurance that falls within class 1(d), 4, 5, 6, 7, 11 or 12 referred to in Schedule 1 to the European Union (Insurance and Reinsurance) Regulations 2015 (S.I. No. 485 of 2015),
(c) a contract of insurance involving a special purpose vehicle within the meaning of the European Union (Insurance and Reinsurance) Regulations 2015 (S.I. No. 485 of 2015), or
(d) the duties of the Motor Insurers’ Bureau of Ireland in the conduct of its activities in relation to sections 19 to 21.”.
Amendments Nos. 13 to 16, inclusive, are related and may be discussed together.
I move amendment No. 13:
In page 4, between lines 28 and 29, to insert the following:
"Amendment of Schedule 2 to Central Bank Act 1942
3. The Central Bank Act 1942 is amended in Part 1 of Schedule 2 by the insertion of the following:
No. ___ of 2019
Consumer Insurance Contracts Act 2019
Sections 8, 9, 11 and 14
This group of amendments covers the roles of the Central Bank and of the Financial Services and Pensions Ombudsman, FSPO. With amendment No. 13, I propose to insert a new section 3 that will provide that certain sections of the Bill are designated enactments under the Central Bank Act 1942. The particular sections of the Bill that the Central Bank will have a role in are section 8 - form of contract of insurance and information to be provided by insurer; section 9 - right to withdraw from contract of insurance by notice: cooling-off period; section 11 - cancellation of contract of insurance; and section 14 - claims handling: duties of consumer and insurer. The purpose of this new section is to ensure that the Central Bank can enforce upon insurers their obligations under the Bill.
With amendment No. 14, I propose to insert a new section 4 which will have the effect of clarifying and preserving the role of the Financial Services and Pensions Ombudsman in the operation of the Act. This is to be achieved by making an amendment to section 60 of the Financial Services and Pensions Ombudsman Act which will refer to the consumer insurance contracts Act 2019; allow the ombudsman to make decisions by referring to this Act; and link section 22 of the 2019 Act - effect of failure to comply with the Act - to the power of the ombudsman to direct compensation. The ombudsman’s powers to direct compensation will not exceed the amount that the ombudsman has jurisdiction to pay out under this Act. This amendment is very important as it confirms the fact that the FSPO should be the first port of call for the resolution of complaints and that this Bill will not undermine this core principle. It is important that the Bill should preserve this parallel jurisdiction and should not inadvertently reserve any new rights granted to consumers to the sole jurisdiction of the courts or diminish the effectiveness of the FSPO as a forum for the resolution of complaints.
Amendment No. 15 is a technical drafting amendment which does not change the underlying substance of the Bill. Amendment No. 16 provides that section 3(2) be deleted. Section 3(2) provides that the Central Bank can issue a code of practice concerning the form of a consumer insurance contract as set out in this Act. However, this provision is superfluous as section 48 of the Central Bank (Supervision and Enforcement) Act 2013 gives the Central Bank the power to make regulations for the proper and effective regulation of regulated financial services providers. Deleting section 3(2) will also involve a consequential amendment to the title of the section to remove the reference to “Codes of Practice”.
There is no issue with amendment No. 13, which is a technical amendment to Schedule 2 of the Central Bank Act. On amendment No. 14, I understand that it means the ombudsman cannot rule that an insurer has to pay out, under sections 7 and 15, proportional remedies even above and beyond the normal limits that apply to the FSPO. The Minister of State might confirm if that is the correct interpretation of amendment No. 14. Amendment No. 15 is technical. Amendment No. 16 is not technical. It deletes the powers of the Central Bank to make regulations and is connected with the deletion of section 4 of the Bill. I am aware that the Minister of State has indicated that the Central Bank is expected to publish a review of the consumer protection code with a view to putting it on a legislative basis. Although that would be welcome, I do not believe that section 4 should be deleted.
If the section is retained, we should have section 3(2) as well. All this does is allow the Central Bank to issues codes of practice if it thinks it would be helpful. If we delete it, we remove the possibility of the Central Bank issuing the code of practice under this law. That issue should not be dealt with.
I am not overly concerned about which direction we go in because both are retained in effect. If we delete the section, the Central Bank has the power to issue the code. Whether it is codified or not, the Central Bank still has the legal authority to do so. Frankly, I am easy with it being deleted or not.
What we want to try to do with this is make sure that the first port of call is the Ombudsman. By doing so, the redress cannot go beyond the Financial Services and Pensions Ombudsman's core legislation.
On the Minister of State's first point, is that an indication that he would be happy to withdraw the amendment that deletes sections 4 and 3(2)?
I am flexible. I am not concerned, whether it is withdrawn or left, that the effect which both the Deputy and I want is changed. It is a whether or which. In my view, it is overdrafting.
I am willing to examine this again. I favour the approach that we leave it in at this point and review it on Report Stage.
That is fine. I would be happy to do that.
I move amendment No. 14:
In page 4, between lines 28 and 29, to insert the following:
"Amendment of section 60 of Financial Services and Pensions Ombudsman Act 2017
4. Section 60 of the Financial Services and Pensions Ombudsman Act 2017 is amended by the insertion of the following subsections after subsection (4):
"(4A) (a) In paragraph (b) and subsections (4B) and (4C) "Act of 2019" means the Consumer Insurance Contracts Act 2019.
(b) Subsection (4B) is without prejudice to the generality of subsection (2) as it operates to enable the Ombudsman to make decisions by reference to, amongst other things, the enactments concerning the financial service concerned, including, as the case may be, the Act of 2019.
(4B) The provisions of section 22 of the Act of 2019 apply in relation to the power of the Ombudsman under subsection (4)(d) to direct the payment of compensation in a complaint involving a contract of insurance as they apply in relation to the power of a court of competent jurisdiction to make an award of damages in a claim under a contract of insurance.
(4C) The power under section 22 of the Act of 2019 shall not be exercised by the Ombudsman to an extent that such exercise would have the result that the total sum payable in respect of the complaint concerned exceeds the amount which, by way of compensation, the Ombudsman has jurisdiction to the direct payment of under this Act.".".
I move amendment No. 15:
In page 4, lines 31 and 32, to delete ", or any other requirements related to, a consumer insurance contract as set out in this Act" and substitute "a contract of insurance or any other requirements related to such a contract contained in this Act".
I am glad that the Minister of State is not amending the section. Based on the submissions, there has been pressure from insurers to amend this. At the core, where an insurer enters into a contract, it should honour that contract. Obviously, an insurer is at any time free not to insure an individual but if it does so, it should pay out on that regardless of the insurable interest.
Equally, the fact that a person is not named in the contract should not be in itself sufficient grounds to avoid the liability. I welcome this section.
I welcome the fact that there is no amendment as a result of pressure.
This will form part of the legal review being carried out by a specialist legal counsel at the request of the Attorney General. This will be one of the key issues to be examined.
I am saying that as of now, we are not amending but, potentially, on Report Stage, because of potential unintended consequences with enactment of this provision, there could be such unforeseen circumstances.
Amendments Nos. 17, 46, 49, 50, 56 and 64 to 66, inclusive, are related and will be discussed together.
I move amendment No. 17:
In page 5, line 19, to delete "consumer".
Group 5 covers a series of similar technical amendments. The amendments are designed to ensure that "contract of insurance" is the used term and not "consumer contract of insurance", an "insurance contract" or "policy".
Amendments Nos. 18, 22 and 23 are related and will be discussed together.
I move amendment No. 18:
In page 5, line 21, after "disclosure" to insert "of a consumer".
The purpose of amendment 18 is to change the wording "any duty of disclosure" to "any duty of disclosure of a consumer", as without these words there is a risk it could be construed as also replacing the duties of disclosure of the insurer which could disapply the insurer's duty of disclosure.
Amendments Nos. 19, 47 and 48 are related and will be discussed together.
I move amendment No. 19:
In page 5, line 22, to delete "coming into force" and substitute "commencement".
Group 7 relates to drafting changes that updates the language used regarding the Act "coming into force" to the "commencement" of the Act. I refer to amendments Nos. 19, 47 and 48.
I move amendment No. 20:
In page 5, line 29, to delete "in writing" and substitute "on paper or on another durable medium".
Amendments Nos. 21, 36, 53 and 60 are related and will be discussed together.
I move amendment No. 21:
In page 6, line 6, to delete "the following matters" and substitute ", amongst other matters, the following".
Group 8 amendments relate to miscellaneous technical drafting changes. The aim is to use language which is consistent with other national and EU legislation. The various drafting changes are as follows: amendment No. 21, in section 6, to delete "the following matters" replace "amongst other factors the following"; amendment No. 36, section 12, to delete "cure" and replace with "remedy"; amendment No. 53, in section 18, delete "liabilities" and replace with "liability"; and amendment No. 60, in section 19, delete "should" and replace with "shall".
I move amendment No. 22:
In page 6, line 11, after "agent" to insert "and the circumstances of that representation".
I move amendment No. 23:
In page 6, line 16, to delete "Data Protection Acts 1988 and 2003" and substitute "Data Protection Acts 1988 to 2018".
I move amendment No. 24:
In page 6, line 20, to delete "in writing" and substitute "on paper or on another durable medium".
It is important to put on the record that this section is hugely important in this legislation. When it is commenced, the unfairness of a consumer having to know what is relevant and what is not when applying for a product will be ended. From that point on, the obligation will be on the insurer to ask the relevant question. It is blindingly obvious when one thinks about it and yet up to now the playing field has been tilted in favour of the insurer.
The section places the onus on the insurer to ask relevant questions instead of being able to avoid or not pay out on a claim because a disclosure has not been made. It is a new start. It is a level playing field for consumers and businesses. It will be transparent to consumers how this will apply in the future. I welcome that the Minister of State is supporting this section.
This is the nub of the Bill. It is the rebalancing of the power between the consumer and the insurer. This will be a positive aspect of it. Anybody who buys an insurance policy receives pages and pages of documentation.
However, the liability all falls on the consumer if there is an issue. This rebalances it so that it is the insurer who has to ask the appropriate questions because the insured person, the consumer, may not have the knowledge and skill set or abilities to know how to give the correct answer. This is the nub of it.
There many cases where claims are not being paid out because of questions posed in what the legislation would describe as plain and intelligible language. As a result, the claims are voided. This places an onus on the insurer not just to ask the question but to ask it plainly and in intelligible language, and where there is ambiguity or doubt about the meaning of a question the interpretation most favourable to the consumer will be taken. This is a rebalancing of an insurance contract where many people complain about the small print.
We see this in cases submitted to us. I dealt with one where a person was asked if their house was in good repair and answered, "Yes", although there was a small hairline crack. Some years later there was subsidence and the house had serious problems. The claim is not being paid out because the person did not mention the hairline crack in one of the rooms. Under this section, that type of practice will never be allowed again.
I welcome this section and the change. Is there any handle on the impact this will have on the forms or will the industry ask every question under the sun to cover itself? Will the forms in consequence be longer?
Forms may be longer but in line with this legislation they should be more simple. The language should be simpler. That is what I hope for and expect. How they formulate that is a matter for the insurance companies but the spirit of the law is to make sure it is more readable and understandable.
Amendments Nos. 25 to 27, inclusive, are related and will be discussed together.
I move amendment No. 25:
In page 6, lines 28 and 29, to delete all words from and including “(1) This” in line 28 down to and including line 29 and substitute the following:
“(1) This section provides for remedies that are proportionate to the effects of any misrepresentation on the interests of the insurer and the consumer by reference as to whether the misrepresentation was—
(a) innocent (that is, one that was neither negligent nor fraudulent),
(b) negligent, or
This group of amendments aims to clarify the provisions of the section dealing with "proportionate remedies for misrepresentation". I propose to amend the wording to clarify the categories of misrepresentation being introduced and to remove potential ambiguity. This includes changes to section 7(1) to clarify the categories of misrepresentation that the Bill is seeking to introduce. It is considered that the original wording of this subsection did not serve any useful purpose. Section 7(3) will be changed by deleting "not a deliberate or reckless misrepresentation" and substituting the words "one that was not fraudulent". This is designed to introduce greater clarity as the existing wording refers to two different categories of misrepresentation neither of which is included in the three categories being introduced. There is potential for confusion in the absence of this change. A further change to section 7(3) in establishing the conduct of a consumer is to add "relative to the contract or the steps leading to its formation". This change is introduced for clarity purposes.
The section provides in steps the different responsibilities and obligations on an insurance company in respect of paying out a claim proportionately. Where there is a fraudulent claim where somebody deliberately misrepresents their claim, there is no requirement to pay but where the misrepresentation is innocent or negligent, there are requirements to pay out claims in certain regards. For example, the insurer will not be allowed to void the contract on the ground that there was a misrepresentation. The remedy available to the insurer for negligent misrepresentation that is not fraudulent shall be what the insurer would have done if it had been fully aware of the facts. This is important because now it cannot dismiss the entire claim regardless because of a technical or innocent misrepresentation.
The change in this amendment from "not a deliberate or reckless misrepresentation" to "one that was not fraudulent", is a wording issue but does not change the substance and it is a message the insurance industry wanted to send to consumers but is there a substantive change in amendment No. 25 as well or is it just the formulation of the section?
It is a clearer use of language. The objective is that if there was a misrepresentation that was made in error or was innocent, somebody who has a large claim could lose the entire claim. If there is some form of penalty, however, this seeks to make that proportionate.
That is what the legislation states. This amendment reshapes the language as opposed to changing any of its substance.
It improves the language.
That is fine. I am happy with that.
I move amendment No. 26:
In page 6, lines 37 and 38, to delete “not a deliberate or reckless misrepresentation” and substitute “one that was not fraudulent”.
I move amendment No. 27:
In page 7, line 21, after “consumer” to insert “(relative to the contract or the steps leading to its formation)”.
I move amendment No. 28:
In page 7, between lines 22 and 23, to insert the following:
“Provision of information relevant to contract of insurance and interpretation of certain terms
8. (1) 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.
(2) Where there is an ambiguity or doubt about the meaning of a term in any document referred to in subsection (1), 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.”.
This is the section the Government has made most change to avoid having superfluous and overlapping provisions with EU law. The Central Bank and the Department of Finance have reviewed the section and have found that most of these requirements are provided for under a mix of different regulations, including: the European Communities (Distance Marketing of Consumer Financial Services) Regulations, European Union (Insurance Distribution) Regulations 2018, European Union (Insurance and Reinsurance) Regulations 2015 and European Communities (Unfair Terms in Consumer Contracts) Regulations 1995.
In advance of this meeting, my officials circulated a background note on this provision. It highlighted in particular that the insurance distribution directive, IDD, has been introduced since the Law Reform Commission, LRC, reported. It has extensive requirements in Part 7 on "Information Requirements and Conduct of Business Rules". For instance, an insurance product information document is required to be prepared in which it is necessary to set out a lot of information about the insurance product being sold. While they do not fully match section 8, the IDD regulations offer very strong and clear protection to policyholders.
While it is acknowledged that we could have instead tried to repeal the relevant provisions in these other regulations and thus consolidate them in the Bill, this could have proved to be a complex task and we would run the risk of finding ourselves not in full compliance with EU law. In addition, it could make any future amending transpositions of IDD very complicated as they would almost certainly have to be done through primary legislation rather than secondary legislation.
It is proposed instead that the requirements that have been identified as not being covered by existing legislation should be included in a significantly revised section 8. These provisions are: the insurer after concluding a contract of insurance should provide the consumer with the completed application or proposal form and when there is uncertainty over any term in a document, the rule of law and interpretation most beneficial to a consumer should prevail.
This amendment has the effect of deleting section 8. It is highly technical, as we have heard from the Minister of State, but the consumer protection code is not on a legislative footing and that creates some grey areas in respect of consumer protection. We should use this Bill to enhance as much as possible, and to put into primary legislation, consumer protection and transparency issues. I will discuss the Minister of State's amendment with experts in this field to ensure it captures all the issues raised in the original report and, if required, I will seek to amend it on Report Stage. It is important not to have crossovers with existing regulations and put them into another Bill because they work against rather than for consumer interests.
I have no desire to replicate anything. I will speak to experts in the field on the matter.
On the substance of the issue, we have a substantial change. The substantial change in the amendment from the Minister of State stems from the expression "within a reasonable time after concluding a contract of insurance". The proposed section 8 then stipulates the need for the insurer to provide a contract on paper or some other durable medium and so forth. In the Bill as drafted, the reference is to within a reasonable time before a consumer is bound by a contract of insurance. There is a substantial difference. Under the amendment, the consumer has to provide all the details after entering into a contract or after concluding a contract whereas originally the consumer had to supply all this information in a clear way before being bound by it. I am aware that we have cooling off periods in the legislation for non-life and life insurance. In some cases a reasonable time could be deemed to be outside the cooling off periods of 15 days or 30 days, depending on the insurance contract. That is a point of substance.
We are saying that after concluding a contract, and where there is uncertainty over any term in the document, the interpretation shall be in favour of the consumer.
Yes, I understand that. We already dealt with it in the context of section 6. It is already provided for. It amounts to a little repetition but that is no harm. The issue is that there is a fundamental change for a consumer entering into an insurance contract. Under the Bill as drafted, before the consumer is bound by the contract there will be a requirement on the insurer to provide the consumer with the information on premiums, deductibles, name and address and any intermediate premiums that fall due. The amendment allows for the same to happen but after the fact.
Equally, the insurance distribution directive has protections prior to the contract being signed.
That takes me to the point. There is a substantive change. I will engage with experts to ensure that the provisions from different directives are captured within the existing amendment.
The way section 8 is drafted represents an opportunity for us as committee members and as Members of the Oireachtas to look at issues that were in the report of the committee on the cost of motor insurance. For example, section 8 refers to what the insurance company would have to inform a customer about in respect of the amount of premium or the method of calculating it. This is a major issue. People wanted to know how their insurance premiums were increasing year on year and what method of calculation was used. I want to signal at this point that we need to examine the matter. Section 8 is being deleted as a result of the Government amendment but the area this section covers provides the opportunity for us to look at transparency for the consumer in insurance contracts.
Yes. I am keen to make a point on this. I have pursued this with insurance companies. There would be a cost to go back and analyse previous agreements. There would be a cost on any look-back on the premiums in previous years. It would be costly to carry out and provide the analysis. There are 2 million motor policies. Even if it cost €1 per policy, that would come to a cost of €2 million straight away.
Everyone wants to ensure we reduce the cost of insurance. We want to put in place as solid a structure as we can. I have put this strongly to insurance companies. They maintain it would have a cost and the cost would be passed on to the consumer. If there is no real strong legitimate case to have the information available, then I would be slow to go down that route. I do not support them often, by the way.
When a consumer gets a motor renewal quote, it is based on the risk but I am sure insurance company officials are looking at a screen with information on what the policyholder was insured with last year.
We are covering that later in the legislation.
The companies do not have to provide the premium that the customer paid last year.
Last year's premium will be provided from 1 November on this year's quote.
If the premium increases, the companies do not have to provide a reason as to why that is the case.
No, they do not.
We could be in the same situation again. In a period of three or four years, there were increases of 70%. Insurance industry representatives simply told us whatever they wanted to tell us. There is no requirement on insurance companies to provide information. Insurance industry representatives will tell us that there will be a cost. They will state that anything we do to regulate the insurance industry will push up premiums. That will be the standard defence. This is an issue nevertheless.
I hear what the Minister of State is saying but I am of the view that the committee should reflect on the matter before Report Stage. We have already agreed that this should happen in the context of the method of calculating the cost and increasing premiums. Now we have an opportunity. We have legislation and we need to do it bearing in mind what the Minister of State said about what has been articulated by the industry.
I hear what the Deputy is saying. If there is an increase, there is a cost for an explanation in respect of that increase. There will be a cost. That is without any question of doubt.
We had insurance companies before the committee. Representatives from three companies were here. They stated that they would consider giving an explanation but they did not mention any costs when they were before the committee in the past week or so. It is something they can do. I get the impression that they do not do it because they all do not do it, but that they could all do it if they decided to do it. They do not want only one company to do it. They actually indicated that they could do it and never mentioned that they were not doing it because of cost. They were doing it mainly because of competition. In any event, that is simply by way of comment on what happened.
I have to attend another meeting so I will ask Deputy Michael McGrath to chair the remainder of the meeting.
I move amendment No. 29:
In page 9, line 5, after “insurance” to insert the following:
“along with a schedule showing the premiums paid, claims paid out and other statistical data related to the record of the policyholder for the past five years where applicable”.
This relates to the previous discussion we had. This amendment would insert an obligation on the insurance companies to provide "along with a schedule showing the premiums paid, claims paid out and other statistical data related to the record of the policyholder for the past five years where applicable". This is about transparency.
We had representatives from soft-play companies before the committee. The Minister of State is well aware of this. We had an industry telling us that there was too much risk and that it was all about claims and so on and so forth. Through considerable hard work, the soft play companies, animal farms and various others have come together to form an organisation of 89 individuals and companies. They created a mutual. This has enabled them to get insurance under a British underwriter. It took a great deal of effort on their part to ask each of the companies how much they paid out in premiums during the previous five years and the number of claims made against the company and so on and so forth. With the data they were able to say that it made sense to create a mutual because they were paying out more in premiums than was being paid out in claims.
A similar measure could provide a level of transparency. If I were to have motor insurance, for example, along with my renewal quote and the premium I paid out last year, I could also have data on how much I paid each year and the claims that I made or that were made during that period. Some of this already happens with certain insurance companies. Consumers get a schedule for house insurance and the insurer will itemise over a period of years what claims were made.
This is about ensuring that the premiums paid and claims made over a five year period are included in a renewal quotation.
I will speak on the section first before responding on Deputy Pearse Doherty's point. I propose to delete the whole of the section as it is considered superfluous due to the provisions of the consumer protection code, the Life Assurance (Provision of Information) Regulations 2001 and the Non-Life (Provision of Information) (Renewal of Policy of Insurance) Regulations 2007. In advance of this hearing, my officials circulated a background note on this provision. Among other matters, it indicated that the Central Bank has recently amended the Non-Life Insurance (Provision of Information) (Renewal of Policy of Insurance) Regulations 2007, following a recommendation of the report of the working group on motor insurance. The timeframe will be 20 days from 1 November 2019. It also indicated that life insurance provisions broadly similar to those found in this section are set out in regulation 6, in respect of life assurance policies, and regulation 9, in respect of industrial assurance policies, of SI 15 of 2004.
Turning to the point made by the Deputy, it was very difficult to get the previous year's quotation added to the current year's quotation. It is now possible to have a quick look on the same page at the previous year's premium for the insurance policy being renewed. I would be willing to consider on Report Stage a requirement to include the previous year's premium for all renewals and a list of claims for the previous three years, rather than five years.
However, before introducing such an amendment on Report Stage, prior consultation would be required with the Central Bank and industry, as would appropriate legislative scrutiny.
That is okay.
Instead of five years, we will provide for three years of claims.
Will that be three years for claims and one year for premiums?
For claims and premiums.
That is helpful. If documentation is provided for several years, people will be able to do the calculations. I thank the Minister of State.
Is the Deputy withdrawing the amendment?
I move amendment No. 30:
In page 9, between lines 35 and 36, to insert the following:
“(6) The Central Bank shall report on the addition of public liability insurance to the Non-Life Insurance (Provision of Information) (Renewal of Policy of Insurance) (Amendment) Regulations 2018 within one month of the passing of this Act.”.
This amendment is intended to allow discussion. The biggest reform we need is transparency. This was meant to be achieved through the national claims information database. I pushed for far more transparency in that database and I am concerned that it is simply an internal database and adds nothing to public transparency. Nevertheless, it is the best facility we have at the moment but it is only taking data for motor insurance. We have discussed this issue on many occasions. We are years into a crisis with public liability for small businesses. It is an emergency in my view, yet we have almost zero transparency in the field of public liability insurance. The Central Statistics Office does not collect those statistics. We have CSO data on motor insurance but not on public liability insurance. We are, therefore, completely blindfolded on this matter and at the mercy of what the industry tells us. In recent days, we have shaken to the core the credibility of that industry. Given that this information is not collected, the amendment proposes that the Central Bank report back within one month on adding public liability insurance to the database. It would not require the bank to provide that data within one month. We need progress to be made on the issue of public liability insurance.
I may not have grasped this correctly or I may be looking at the wrong amendment. This is amendment No. 30 which reads: “(6) The Central Bank shall report on the addition of public liability insurance to the Non-Life Insurance (Provision of Information) (Renewal of Policy of Insurance) (Amendment) Regulations 2018 within one month of the passing of this Act.”. The Deputy is stating that the information is not being collected.
Yes, it is not being collected. The national insurance claims database only has information on motor insurance at this point.
That is the case for the time being but we will start collecting date on employer's liability and public liability insurance in 2020. We hope to have the motor insurance information at the end of quarter three or start of quarter four but by the end of quarter four at the latest. We thought it appropriate to start with motor insurance information, get established and have this done correctly first, before dealing with employer's liability and public liability insurance. We have been dealing with the CSO regarding the compilation of data similar to the information on motor insurance increases and decreases. There is, however, a major variance between employer's liability and public liability insurance calculations because these types of insurance range across everything from a circus to an abattoir. The CSO data for motor insurance is solely concerned with vehicles. This is a difficult problem, on which we do not yet have a handle but we are working on it. We are down to one option and if we cannot get that option to work, we do not believe it will be possible to do a CSO analysis of employer's liability and public liability insurance. We are not trying to pretend that we are able to do something that we are not able to do.
I apologise if I do not fully grasp the meaning of the amendment. It states: “(6) The Central Bank shall report on the addition of public liability insurance to the Non-Life Insurance (Provision of Information) (Renewal of Policy of Insurance) (Amendment) Regulations 2018 within one month of the passing of this Act.”. The purpose of the amendment is to achieve what we are trying to do and what we will do with employer's liability and public liability insurance on the national claims information database in respect of the CSO providing information on increases and decreases. We are not sure, however, that we will be able to do that and I do not think the amendment does that either.
My amendment is about ensuring timely progress is made on the inclusion in the national claims information database of public liability and employer's liability insurance. It provides for the production of a report. As I stated, my intention is not to have this in the legislation but to raise the issue and stress the urgency of achieving progress on this matter. We need transparency in this area of insurance because we are completely in the dark.
On the CSO, I appreciate the Minister of State's remarks regarding this matter being not as simple as motor insurance. Many in motor insurance, however, will also make the point that when we look at CSO data we are not looking at a young driver, for example. It is a certain type of driver that is captured and we are not looking at someone with an old car, etc. It is a standard person. There must be a way around this. While it may be more complicated, we should be able to examine a number of sectors and identify, even if the scope is limited, whether public liability insurance costs are increasing or decreasing over time.
I will get the Deputy a note from the cost of insurance working group on the final option we are examining. There has been a major and legitimate effort to try to do this. I am not sure that we will be able to do it. I am being very frank with the Deputy. We will provide a note to the committee-----
-----and the Deputy can have a look at it. A great deal of work has gone into this to try to get it over the line.
I withdraw my amendment on that basis.
I will agree to the deletion with the caveat that I want to ensure everything is covered as agreed and I will reserve the right to look at this again on Report Stage.
I move amendment No. 31:
In page 9, line 37, to delete all words from and including “(1) Where” and in page 10, to delete lines 1 and 2 and substitute the following:
“(1) Where, in accordance with the contract, an insurer notifies a consumer that the insurer is cancelling a contract of insurance, the insurer shall repay to the consumer the balance of the premium for the unexpired term of the contract and provide to the consumer the reason or reasons for the cancellation.”.
I support the inclusion of the provision in section 11(1) which sets out that when an insurer is cancelling a contract of insurance the balance of the premium for the unexpired period of insurance is refunded to the consumer without any additional costs imposed on the consumer. I propose a number of amendments to section 11(1), some of which are in the second group. This amendment to section 11(1) would also provide that consumers be given a reason for the cancellation of a contract. I propose a new section 11(1) which includes this new provision and other drafting changes. For example, the subsection should state "in accordance with the contract" and not "in accordance with the section".
It is also proposed to delete section 11(2) as the essence is covered by the consumer protection code and the current drafting raises data protection concerns in light of the general data protection regulation, GDPR.
I have no issue with deleting section 11(2).
This section is important because, as drafted, it will provide for a legal obligation on the insurance company to repay the consumer the balance of the premium for the expired period. The Minister of State's amendment is helpful because it will also require the company to explain why it cancelled the contract. As I said, section 11(2) relates to communication. If this is covered in other regulations, I am happy to accept its deletion. Section 11(3) means that the insurance company will not be able to impose any financial burden on the consumer when a contract of insurance is cancelled. That will also be welcome.
I move amendment No. 32:
In page 10, to delete lines 3 to 5.
I move amendment No. 33:
In page 10, line 17, to delete “in writing” and substitute “on paper or on another durable medium”.
I move amendment No. 34:
In page 10, line 18, to delete “in writing” and substitute “on paper or on another durable medium”.
I move amendment No. 35:
In page 10, line 22, to delete “in writing” and substitute “on paper or on another durable medium”.
I move amendment No. 36:
In page 10, line 31, to delete “cure” and substitute “remedy”.
I move amendment No. 37:
In page 10, line 33, to delete “15 days” and substitute “20 days”.
This amendment would change the period from 15 days to 20 days. This will be helpful. It is effectively a working month, five working days per week. This will allow consumers an extra week in which to shop around, if they see fit.
I am conscious that the Alliance for Insurance Reform, which has done stellar work on this issue, is calling for a 30-day period. What are the Minister of State's views in that regard? The alliance has called for 30 days' notice to be provided in the case of changes to terms and conditions. Does the Minister of State have a view on that?
A provision of 15 days is three working weeks. We added an extra week of notice, which is an extra third. Doubling the 15 days to 30 days allows more time than is necessary. If given 30 days, most people will probably start shopping around late in the period anyway.
Are these working days?
Yes. The intention is that it be read as working days. It should be noted that the Central Bank recently amended the Non-Life Insurance (Provision of Information) (Renewal of Policy of Insurance) Regulations 2007, following a recommendation of the motor report. The timeframe will be 20 days from 1 November 2019. These are 20 working days, which is a month.
Neither the Bill nor the amendment refers to working days.
It is in secondary legislation.
If it is not also in the primary legislation, there will be a conflict. Perhaps we should address this on Report Stage.
We can clarify that.
Will the Minister of State also clarify whether consumers have 20 days' notice in respect of changes to terms and conditions under the amendment as opposed to in respect of the premium? Is a renewal with a different premium considered a change to the terms and conditions or is there an opt-out under this legislation as amended? Could an insurer say that it had not changed the terms and conditions in respect of a motor insurance policy so there was no onus on it to comply with the 20-day provision?
I do not know the answer to that question. I will find out and we can review it on Report Stage.
The Minister of State will clarify whether reference to working days needs to be included in the primary legislation.
I move amendment No. 38:
In page 10, lines 33 and 34, to delete “in writing” and substitute “on paper or on another durable medium”.
This section places the same obligations on the insurance company post-contract as pre-contract.
I move amendment No. 39:
In page 11, lines 24 and 25, to delete “, provided those terms comply with the requirements of section 17”.
I propose a number of amendments to section 14. The primary purpose of these amendments is to implement recommendation 8 of the motor insurance report and recommendation 10 of the employer and public liability insurance report to ensure policyholders are notified of claims being made against their policy. In particular, there is a requirement being made for insurers to engage with policyholders on a claim, including by giving them an opportunity to submit relevant evidence to the insurer in regard to the claim. There is also a requirement for the insurer to notify policyholders of the outcome of the claim, including the amount for which it has been settled. It is important to note that this proposal is made on the basis that it cannot prejudice the right of an insurer to make the ultimate determination on such matters.
It is proposed to amend section 14(5) to remove overlaps with the consumer protection code. The new text is found in section 14(6) and (7). It is proposed to delete section 14(6) as the matter is covered in more detail in the consumer protection code.
It should be noted that I propose not to proceed with the first amendment to section 14 for the moment, that is, the deletion of the wording “provided those terms comply with the requirements of section 17”. This is because section 17 is one of the areas the advisory counsel is examining. Therefore, depending on the outcome of this review, I may come back to this matter on Report Stage.
Is the Minister of State withdrawing amendment No. 39?
No. I am saying that we can review it on Report Stage in light of the counsel's opinion.
Am I correct in saying we are only dealing with amendment No. 39?
Yes. According to my notes, it is not grouped. We are moving into a group afterwards.
The Minister of State is withdrawing the amendment. I welcome that because I was about to suggest-----
To clarify, the Minister of State said he is not withdrawing it.
He is withdrawing it.
The whole of section 17 will be subject to review. This section places responsibility on the consumer to notify the insurance company of an accident or an insured event within a reasonable timeframe. The legislation states clearly that the consumer must do so provided the terms of the contract are in compliance with section 17. Section 17 is about unfair and onerous terms. This refers to, for example, a contract that provides that an event must be reported within 30 minutes or something like that. That would be-----
Unfair and onerous.
-----unfair. I do not understand why it was proposed to delete this provision in the first place. If we look to section 13, to which no amendment was proposed, it stated that a consumer shall "be under a duty to pay the premium within a reasonable time", again provided the terms of the contract comply with the requirements of section 17. It should be consistent. The Minister of State is withdrawing the amendment, however, so we will look at it on Report Stage.
Amendments Nos. 40 to 43, inclusive, No. 45 and No. 67 are related and may be taken together.
I move amendment No. 40:
In page 11, to delete lines 29 to 37 and substitute the following:
“(4) Without prejudice to any other duties in this section and to an insurer’s right to make the final determination in relation to a claim, the insurer shall be under a duty to—
(a) handle promptly and fairly any claim made in relation to the contract of insurance (a “claim”),
(b) where it is not made by the consumer himself or herself, notify a consumer of a claim as soon as practicable after the insurer is informed of the claim,
(c) engage with the consumer as regards a claim, and such engagement shall include providing an opportunity to the consumer to submit to the insurer relevant evidence which could inform the insurer’s determination as regards the claim,
(d) where a claim has been settled or otherwise disposed of, inform the consumer of the amount for which it has been settled or otherwise disposed of and the reason or reasons for its being settled or so disposed of.
(5) A reference in subsection (4)(d) to a claim being otherwise disposed of includes a reference to a claim being disposed of by reason of liability, against the insurer, being established in legal or arbitral proceedings in respect of the matter or matters concerned but where the claim is disposed of in that manner the duty under subsection (4)(d) to inform the consumer of the reason for its being so disposed of may be discharged by referring the consumer to the judgment or arbitral award concerned.
(6) In relation to any claim made in relation to a contract of insurance (whether by the consumer or a third party), an insurer shall not, for the purpose referred to in subsection (7), fail to engage in a meaningful manner with the consumer or third party as respects correspondence on the matter (with the insurer) of the consumer or third party.
(7) The purpose referred to in subsection (6) is to dissuade the consumer or third party from exercising contractual rights in respect of the claim.”.
All of these amendments, while in different sections, provide for better management and communication with consumers about their claims and clarify the duties on both sides. The primary purpose of amendment No. 40 to section 14 is to implement recommendation 8 of the motor insurance report and recommendation 10 of the employer and liability insurance report to ensure policyholders are notified of claims being made against their policy. In particular there is a requirement being made for insurers to engage with policyholders on a claim, including by giving them an opportunity to submit relevant evidence to the insurer in regard to the claim. There is also a requirement for the insurer to notify policyholders of the outcome of the claim, including the amount for which it has been settled. It is important to note that this proposal is made on the basis that it cannot prejudice the right of an insurer to make the ultimate determination on such matters.
Amendment No. 41 to section 14 deletes section 14(6) which states that insurers must pay consumers in a reasonable time as this is covered in more detail in the consumer protection code.
Amendment No. 42 is a new section 15 on the issue of insurers retaining claims. After section 14, I propose a new section 15, which aims to limit the issue of retention by insurers in property damage claims. This involves the practice of insurers withholding a percentage of a property claim until the repair has been fully completed and all invoices have been produced. It is proposed that, where an insurer wishes to include retention as a term of the contract, it will ensure the policyholder is made aware of this provision and informed of its application when a claim is submitted. It is further proposed to include limits to be applied to any retention amounts in a proportionate manner as follows. Where the insurer intends to apply a retention amount against a claim settlement offer, the insurer will not retain or withhold more than 5% of the claim settlement offer, where the claim settlement offer is below €20,000, or more than 10% of the claim settlement offer, where the claim settlement offer is €20,000 or above.
Amendment No. 43 proposes to remove section 15(1) about seeking damages if insurer withholds a claim.
Amendment No. 45 proposes to remove from section 15 a subsection about a consumer being excluded from requesting damages if there was fraud. Section 15(1) outlines that consumers may seek damages for consequential loss suffered as a result of any unreasonable delay in paying a claim or withholding payment of a claim. I propose that section 15(1) to be deleted in its entirety. It is not considered necessary and may cause more harm, as well as leading to increased litigation for no discernible justification. The term “unreasonable delay” is ambiguous and could be interpreted in different ways, which could result in disputes arising. This provision could give rise to an increase in complaints about insurers or an increase in policyholders seeking damages or both where there is a view that the payment of the claim is unreasonably delayed.
That is not amendment No. 45. Amendment No. 45 deletes the lines “Notwithstanding any other provision of this Act, where the consumer makes a fraudulent claim or where fraudulent evidence or information is submitted or adduced in its support or”.
The amendment states:
In page 12, lines 31 to 33, to delete all words from and including “Notwithstanding” in line 31 down to and including “where” in line 33 and substitute “Where”.
Yes. There is no reference to unreasonable delays in that provision.
It is referring back to section 15(1).
Which the Minister of State proposes to delete.
Yes. It refers back to section 15(1) on page 12 of the legislation.
Will the Minister of State speak to amendment No. 67?
Amendment No. 67 in section 22 proposes a new section 22(4) that sets out that the sum of claim must not exceed court jurisdiction.
There is much there and some of the amendments have quite a bit of substance.
I welcome amendment No. 40. It places the duty on an insurer to notify a consumer when a claim is made against them. It is madness that the insurance companies will not do that voluntarily and we have to legislate to ensure they must tell somebody a claim is made against them. More importantly, it is not just notification but it is the engagement with the individual. As late as yesterday, a person came to me with what the person stated was a clearly fraudulent claim. The person provided information on three occasions to the insurance company but the insurance company does not want to hear about it. Obviously, the individual in question needs to report this to the Garda. This amendment will actually stop such cases because the insurance companies will have to notify and engage with the individual about a claim against them.
It was one of the first things I tried to get done when I came into this job. We anticipated it would be done on a voluntary basis. That has not been the case, however. This is the only method by which we are able to do this.
There will be an engagement. I have been critical of the insurance companies and their settlement channels because it is easy to settle when one is going to load the premium next year. However, there will be interaction and conversation. This will not prejudice the insurer or the insurance company. They will have the authority and final decision on the matter. At least, it is a step in the right direction.
It provides an obligation to engage with the person that a claim is being made against and to accept material or a submission from that individual which would be of assistance to them in determining the settlement of the case. It is welcome.
Amendment No. 41 deletes the wording that the insurer will pay in a reasonable time. However, the consumer protection code is not on a statutory footing. That is the issue. I do not want to see duplication because it just creates confusion which does not benefit the consumer. This has put in a non-statutory obligation on a statutory footing.
I am happy to accept that.
Amendment No. 42 relates to the deferring of payments of a claim. This limits the retention to 5% of the claim settlement offer, where the claim settlement offer is below €20,000, and to no more than 10% of the claim settlement offer, where the claim settlement offer is €20,000 or above.
I welcome this amendment because some of the activity of holding back claims is scandalous. However, it does not go far enough. There are serious questions as to why insurance companies can hold back 10% for larger claims, which can be a significant amount. This can seriously impact on the consumer. They nearly have to go to a contractor to say the other 10% is coming along. There are questions as to why the insurance companies should even be allowed to hold back that level of a payment. It is a matter which I will look at on Report Stage.
Will the Minister of State inform the committee as to what are the current levels of retention?
There is not a statutory figure on this. This is number which has been built up as a matter of practice over a period of years. It seems to be an Irish practice and is not evident in other jurisdictions.
I do not have a final figure on it, but I have been told that it is quite arbitrary. Some companies do 30%, others do 20% and they can pick and choose as they see fit. I was of the view that when we had the opportunity to put it onto a statutory footing that we should do so. The practice is there and it does lead to the usage of correctly validated operators, quotations, invoices and correct and appropriate payments. I am fine with that. We have selected 5% on €20,000 or less because we thought it was a small amount, but as the Deputy noted, 10% over €20,000 on a very large claim is a very large amount of money. Those are the figures that we have and if the Deputy wishes to select other figures, that is a matter for him. I am not welded to 5% or 10% but those are the figures we thought were reasonable.
It is a welcome amendment because of what the industry is doing in terms of retention. On small claims 5% and 10% are perhaps appropriate, if there is appropriateness to any of this, but on a larger claim that is a substantial amount of money. I will look at the matter again. I signal that I intend to bring possible amendments, in terms of the figures, to this section on Report Stage. I ask the Minister of State to reflect on that as well to see if there is anything there.
In terms of amendment No. 43, I do not understand why section 15(1) is being deleted. It states:
Where an insurer unreasonably withholds payment of a valid claim or unreasonably delays making a payment under a valid claim, the consumer may, in addition to the right to enforce payment of the sums due and any right to interest on those sums, seek damages in accordance with the general law of contract for any consequential loss suffered as a result, and for any non-pecuniary loss and damages, including for stress.
This is something one hopes would never be used, but it tells insurance companies that if they unreasonably delay dealing with a valid claim or unreasonably withhold payment they could be in serious trouble.
We have a view on this. We think that the word used, namely, "unreasonably", could lead to much interpretation. The wording, "unreasonably withholds payment" or "unreasonably delays" could give rise to many potential court dates. On that basis we think that it is not required.
I will ask the opposite question. Without this provision, what is there to protect consumers from an insurer who unreasonably withholds or delays payment of a valid claim?
The starting point is the Financial Services and Pensions Ombudsman and, potentially, a person may have to go to court. The concern we have with the current wording is that one would end up with the insurer arguing that it has not been unreasonable or that the delays were not unreasonable. We are concerned that there is an ambiguity in the section. I know the effect the Deputy wants section 15(1) to achieve, but we think the wording is not correct.
Okay, we will not dwell on it. We might come back to it on Report Stage.
If there is a better way of giving effect to the measure, we are happy to take it but we think the current wording could potentially create a lot of court dates and much legal argument.
Amendment No. 45 is significant. I cannot get my head around why the first part of section 15(5)(a) is being deleted. This section deals with proportionate remedies. The intention is that where an innocent party is part of a joint insurance contract and is completely innocent but the other party to the contract is guilty of insurance fraud, that the innocent party should not have his or her proportion of the claim denied because they were jointly insured. There are examples of partners or husbands burning down the house and even though they could be separated, there is a joint insurance policy and as a result the wife's claim would be nullified.
The bit that is left in is fine because it deals with cover for loss or damage of property caused by criminal or intentional act, but what it does not cover is personal injury as part of an insurance claim. As an example, consider the case where my wife and I had a joint travel insurance policy, we went to a hotel, the hotel was flooded and we both lodged claims. If she was injured on the holiday but my claim stated I had stayed at another hotel, thereby incurring a bill, but I actually had stayed at a friend's house in Málaga or wherever while my wife was in hospital, my claim would be invalidated. So too would her claim, however, because there was no loss to property or damage. The case I outlined was included in a submission we received on the Bill. My concern is that the claim of the innocent party would be validated but only for loss or damage to property.
I am happy to take a look at it on Report Stage.
I will discuss amendment No. 67 as it is not a technical amendment. This group of amendments has substance. Amendment No. 67 states that in the case of awards, that if one fails to comply with the Act, a court can reduce the award made. If the company was going to pay €20,000 but if one failed to comply with a portion of the Act, the award could be proportionately reduced, for example, to €10,000. If an insurer breaches the duty of the Act, the courts can increase the sum for the consumer, which is what the Bill states, but the amendment states it cannot increase awards above the monetary level for which the court has jurisdiction. My only concern in that regard is that in a District Court, if an award of €15,000 was to be paid and an insurance company was in breach of the legislation, nothing could be done because €15,000 is the limit of award payable under the District Court, or €60,000 in the case of the Circuit Court. The court reports from last week show a reduction in awards but they also show that the highest award paid by the Circuit Court was far in excess of €60,000, which can be done where there is agreement between both parties. The courts do, on occasion, pay beyond their limit, and they are allowed to do that when there is agreement between both parties. With that in mind, I am concerned that we are limiting awards. Until I read the report I was not aware that the €60,000 limit, for example, is not hard and fast and it can be breached.
That is a settlement between two parties. The court sanctions the settlement but it does not award it. It is a settlement. If it goes to court, the court is obliged to stay within the guideline limits of the jurisdiction of the court but if the parties to a case go to court and they have settled externally, the court is sanctioning or rather-----
I understand that.
-----it is concluding its portion of it, but it has not directed the settlement.
Is the Minister of State saying there is no way that a Circuit or District Court could award anything in excess of the thresholds that they have or should it not be the case that there should be a separate award? Why would it be seen as one award in that case whereas, if somebody was to-----
Potentially it was two.
There should be an additional award to the person because the insurance company has acted unlawfully or in non-compliance with the Act. Why would there not be a separate award that would allow the combined-----
We will look at that. It must be subject to the limit of the court.
But if there are two awards.
Then that should be two cases.
Say I had an accident and was awarded €15,000 by the District Court. I get that valid claim of €15,000 but if the insurance company, in dealing with my case, was not in compliance with the Act, there should, therefore, be a separate award to me which, both combined, would breach the threshold but would be not breach of it in its individual parts. The section is written-----
The Deputy is referring to two effective damages - one personal and the other is-----
That is what this section provides for.
This section allows for a situation where I have a personal injury claim of €10,000 which is to be paid out, but if the insurance company is in breach of the Act, the courts can raise that to €15,000.
Okay. We will look at it again.
I move amendment No. 42:
In page 12, between lines 6 and 7, to insert the following:
“Limitations on deferring payment of claim until completion of works, etc., in case of property contracts
15. (1) In this section—
“claim settlement amount” means, in respect of a relevant claim—
(a) unless paragraph (b) applies, the amount that is payable under the relevant contract of insurance to the consumer in respect of damage to property, the subject of the claim, or
(b) an amount in respect of such damage that the insurer states to the consumer that—
(i) the insurer is willing to pay to the consumer, based on an estimate of the cost of the repair, replacement or re-instatement work involved, and
(ii) the payment of which (if the consumer agrees to such) will constitute the discharge of the insurer’s liability under the contract in respect of the claim;
“relevant claim” means a claim under a relevant contract of insurance in respect of damage to property covered by the contract;
“relevant contract of insurance” means a contract of insurance that provides insurance in respect of damage to property (whether in addition to other matters or not).
(2) This section applies to any provision of a relevant contract of insurance under which the insurer, in respect of a claim settlement amount, is not obliged to pay the full amount thereof unless and until the following conditions are satisfied, namely, the
repair, replacement or re-instatement work involved has been completed and specified documentation, in respect of such work, has been furnished to the insurer.
(3) In relation to a provision to which this section applies—
(a) the provision shall be void unless, prior to the commencement of the relevant contract of insurance, the provision is brought to the consumer’s notice, on paper or on another durable medium, and in terms that are clear and unambiguous,
(b) notwithstanding that paragraph (a) is complied with but without prejudice to paragraph (c), the insurer shall not invoke the provision in respect of a relevant claim unless, at the time of the making of the claim, the provision is brought to the consumer’s notice on paper or on another durable medium, and
(c) the provision shall be construed and shall operate as being subject to the following limitation, namely, the amount of the claim settlement amount, payment of which may be deferred to the time the conditions referred to in subsection (2) are satisfied, shall not exceed—
(i) 5 per cent of the claim settlement amount - in a case in which the claim settlement amount is less than €20,000,
(ii) 10 per cent of the claim settlement amount - in a case in which the claim settlement amount is €20,000 or more.”.
I move amendment No. 43:
In page 12, lines 8 to 12, to delete all words from and including “(1) Where” in line 8 down to and including line 12.
I move amendment No. 44:
In page 12, line 23, to delete “in writing” and substitute “on paper or on another durable medium”.
I move amendment No. 45:
In page 12, lines 31 to 33, to delete all words from and including “Notwithstanding” in line 31 down to and including “where” in line 33 and substitute “Where”.
I move amendment No. 46:
In page 13, line 12, to delete “consumer”.
I move amendment No. 47:
In page 13, line 13, to delete “coming into force” and substitute “commencement”.
I move amendment No. 48:
In page 13, line 21, to delete "coming into force" and substitute "commencement".
I move amendment No. 49:
In page 13, line 25, to delete “a consumer” and substitute “an”.
I move amendment No. 50:
In page 13, line 32, to delete “consumer”.
I move amendment No. 51:
In page 13, line 40, to delete “consumer” and substitute “insurer”.
This an important section because it deals with the issues of warranties. It is bizarre that this goes back to the 18th century and merchant shipping and so on. I want to be clear about the effect of the section on existing warranties. Section 16(3) states:
Any term in a consumer contract of insurance which purports to convert any statement referred to in subsection (2) into a warranty (as understood in the law concerning insurance warranties prior to the coming into force of this section), including by means of a declared “basis of contract” clause or by any comparable clause (including one described as a warranty, a future warranty, a promissory warranty or a continuing warranty), shall be invalid.
That will be for future warranties and contracts as opposed to existing contracts where a conversation between the consumer and the insurance company has been taken as a warranty.
Burglar alarms are an example. If one has a valid burglar alarm and renews it in a year's time and say it is valid, the warranty would flow.
Say I am running a business and have a chat with the person in the insurance company and I say I have good security for the business and all the rest.
That is a conversation but, when this section comes into effect, the insurance company is not allowed to convert that statement or conversation with me into a warranty on the basis of contract and, if they do, it would be invalid. It must be part of-----
-----the contract. Is it correct that that will only apply for future contracts?
Yes. It applies for contracts that get renewed now and in the future. If the Deputy has an existing contract and he has told the insurer that the warranty on his burglar alarm system is sufficient, it is, but when he then renews, he will have to indicate that warranty. It is not all in favour of the consumer. There is a requirement on consumers that, if they have a warranty, it has to be enforceable on behalf of the insurance company.
The section is important. It relates to what many people call the small print in insurance contracts. How we deal with that is archaic and outdated at the moment but this will bring it into a modern era in a serious way. It will not allow for claims to be invalidated where a warranty does not impact on the reason for the claim. The Minister of State referred to burglar alarms. There is a good example where one has a warranty that insists on a class A burglar alarm and, unknown to oneself, one has a class B alarm. One's house burns down because it was struck by lightning. In such a situation one's insurance claim would be invalid. That will no longer be the case because the burglar alarm had nothing to do with the fact that lightning hit the house and, therefore, the insurance company will pay out.
Even if one was in breach of the warranty for a period, it is only for that period that one's insurance contract is invalidated for and only for the portion to which the warranty refers.
We have asked legal counsel for a specific view about warranties because we want to bring clarity to it.
We are trying to rebalance the authorisation between the insurer and the insured. There are also some elements that move in the opposite direction.
Amendments Nos. 52, 55, 57 and 58 are related and will be discussed together.
I move amendment No. 52:
In page 15, lines 6 and 7, to delete “which the person may incur to a third party, and where” and substitute the following:
“that may be incurred by the person to a third party (and such a liability is incurred) then, where either of the following applies”.
A group of amendments relate to this section and aim to clarify the rights of third parties to claim against an insurer and amendment No. 58, a consequential amendment, inserts a new section 19, which relates to supplemental provisions of section 18.
Amendment No. 52 replaces "which the person may incur to a third party, and where" with "that may be incurred by the person to a third party (and such a liability is incurred) then, where either of the following applies".
Amendment No. 53 is technical.
If we use the term "court of competent jurisdiction", it would beg the question what court is competent in the context of this new statutory jurisdiction.
I move amendment No. 53:
In page 15, line 11, to delete “liabilities” and substitute “liability”.
I move amendment No. 54:
In page 15, lines 18 and 19, to delete “in writing” and substitute “on paper or on another durable medium”.
Amendments Nos. 55, 57 and 58 are related and will be discussed together.
I move amendment No. 55:
In page 15, between lines 32 and 33, to insert the following:
“(5) For the purposes of this section, a liability is established only if its existence and amount are established and, for that purpose, “establish” means establish—
(a) by virtue of a declaration under section 19,
(b) by judgment or decree,
(c) by an award in arbitral proceedings, or
(d) by an enforceable agreement.”.
Amendment No. 55 provides for a new subsection (5) which sets out what form an established liability should be noted by (a) by virtue of a declaration under section 19, (b) by judgment or decree, (c) by an award in arbitral proceedings, or (d) by an enforceable agreement.
Amendment No. 57 provides a new definition of insolvency which is more clear than the previous one.
Amendment No. 58 introduces a new section, section 19, entitled "Supplementary provisions in relation to section 18". The new section 19 is a technical, supplementary amendment which is required in order to outline how a third party can establish their claim through bringing proceedings in the appropriate court for either or both of (a) a declaration as to the insured's liability to the third party or (b) a declaration as to the insurer's potential liability to the third party. Section 19 goes on to elaborate on what "appropriate court" means as, if we were to simply use the term "court of competent jurisdiction", it would beg the question which court is competent in the context of this new statutory jurisdiction.
I move amendment No. 56:
In page 16, line 29, to delete “policy” and substitute “contract of insurance”.
I move amendment No. 57:
In page 16, to delete lines 36 to 41, and in page 17, to delete lines 1 to 5 and substitute the following:
“(a) in the case of an individual, the individual is adjudicated bankrupt or there is issued, or there comes into effect, in respect of him or her—
(i) a Debt Relief Notice,
(ii) a Debt Settlement Arrangement, or
(iii) a Personal Insolvency Arrangement,
(b) in the case of a corporate body, the winding up of the body commences or—
(i) an examiner is appointed to it under Part 10 of the Companies Act 2014, or
(ii) a receiver is appointed to property of the company,
(c) in the case of a partnership, the dissolution of the partnership commences.”.
I move amendment No. 58:
“Supplemental provisions in relation to section 18
19. (1) This section applies where a person claims that the person is a person (the “third party”) in whom the rights (against the insurer) of the other person referred to in subsection (1) of section 18 (the “insured”) have been vested under that subsection.
(2) Where this section applies and the third party has not yet established the insured’s liability which is insured under the contract of insurance concerned, the third party may bring proceedings in the appropriate court against the insurer for either or both of the following—
(a) a declaration as to the insured’s liability to the third party,
(b) a declaration as to the insurer’s potential liability to the third party.
(3) In such proceedings the third party is entitled, subject to any defence on which the insurer may rely, to a declaration under subsection (2)(a) or (b) on proof of the insured’s liability to the third party or (as the case may be) the insurer’s potential liability to the third party.
(4) Where proceedings are brought under subsection (2)(a) the insurer may rely on any defence on which the insured could rely if those proceedings were proceedings brought against the insured in respect of the insured’s liability to the third party.
(5) Where the court makes a declaration under this section, the effect of which is that the insurer is liable to the third party, the court may give the appropriate judgment against the insurer.
(6) When bringing proceedings under subsection (2)(a), the third party may also make the insured a defendant to those proceedings.
(7) If (but only if) the insured is a defendant to proceedings under this section (whether by virtue of subsection (6) or otherwise), a declaration under subsection (2) binds the insured as well as the insurer.
(8) In this section—
(a) “appropriate court”, without prejudice to subsection (9)(c), means—
(i) in a case in which the Circuit Court would have jurisdiction in the proceedings concerned were—
(I) the proceedings to be treated as an action founded on tort, and
(II) the monetary amount for which the liability, as referred to in subsection (2)(a) or (b), is sought to be established in the proceedings to be treated as an amount of damages sought to be recovered in such an action, the Circuit Court,
(ii) in a case in which the District Court would have jurisdiction in the matter if each of the matters referred to in clause (I) and clause (II) of subparagraph (i) were to be treated as described in that clause (I) and clause (II), respectively, the District Court,
(iii) in any case, the High Court, and subsection (9) supplements this paragraph;
(b) references to the insurer’s potential liability to the third party are references to the insurer’s liability in respect of the insured’s liability to the third party, if established.
(9) (a) References in subsection (8)(a), so far it applies to the Circuit Court, to an action founded on tort shall be construed as references to an action founded on tort that is not a personal injuries action within the meaning of the Civil Liability and Courts Act 2004 but that exclusion—
(i) is for the purpose of the application to subsection (8)(a) of any enactment that specifies different jurisdictional limits, in respect of the Circuit Court, in actions founded on tort depending on whether the actions are or are not personal injuries actions (within the foregoing meaning), and
(ii) does not limit the types of wrong (within the meaning of the Civil Liability Act 1961), liability in respect of which may be the subject of a declaration by the Circuit Court under subsection (2).
(b) Subsection (8)(a)(ii) operates to confer power on the District Court to make a declaration referred to in subsection (2)(a) or (b) notwithstanding that there is not vested in the District Court, by the Courts of Justice Acts 1924 to 2014 or any other enactment, any general power to grant declaratory relief.
(c) Any enactment that provides means whereby the parties to a cause or proceedings may consent to the Circuit Court or the District Court, as the case may be, having jurisdiction, without restriction as to the monetary amount of the claim, in the cause or proceedings shall apply for the purposes of subsections (2) and (8) as it applies otherwise and where those means are duly used by the parties subsection (8)(a)(i) or (ii), as the case may be, shall be construed and have effect accordingly.”.
Amendments Nos. 59 and 61 are related and may be discussed together.
I move amendment No. 59:
In page 17, to delete lines 27 and 28 and substitute the following:
“(i) the consumer and the other person being members of the same family or being cohabitants, or”.
This group of amendments relates to the amendments aimed at clarifying section 19 regarding subrogation. In particular, I propose to replace the reference to "personal relationship" to "cohabitant" as this is the more commonly used term which has been legislated for recently. The two amendments I propose to achieve this aim are, first, to replace "a family or other personal relationship between the consumer and the other" with "the consumer and the other person being members of the same family or being cohabitants"; and, second, to provide a definition of "cohabitant and family", which is aligned with other relevant legislation. Consistency is key in this regard. Specialist external legal counsel is reviewing the Bill's proposed changes to subrogation. Depending on the outcome of this review, I may table further amendments on Report Stage.
The amendments are straightforward.
I move amendment No. 60:
In page 18, line 8, to delete “should” and substitute “shall”.
I move amendment No. 61:
In page 18, between lines 11 and 12, to insert the following:
“(3) In this section—
(a) the reference to persons being members of the same family shall be construed in accordance with the Employment Equality Act 1998;
(b) “cohabitant” has the meaning given to it by the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010.”.
I move amendment No. 62:
In page 19, line 10, to delete “clearly informed the consumer in writing” and substitute the following:
“informed the consumer on paper or on another durable medium and in terms that are clear and unambiguous”.
Amendment No. 63 has been ruled out of order.
I move amendment No. 64:
In page 19, line 19, to delete “an insurance contract” and substitute “a contract of insurance”.
I move amendment No. 65:
In page 19, line 23, to delete “an insurance contract” and substitute “a contract of insurance”.
I move amendment No. 66:
In page 19, line 31, to delete “consumer”.
I move amendment No. 67:
In page 19, between lines 34 and 35, to insert the following:
“(4) The power under subsection (1)(b) shall not be exercised to an extent that such exercise would have the result that the total sum payable in respect of the claim concerned exceeds the monetary amount which, in the proceedings, the court would have jurisdiction to award.”.
I move amendment No. 68:
In page 19, to delete line 37 and substitute the following:
“(2) This Act shall come into operation on such day or days as the Minister for Finance may by order or orders appoint either generally or with reference to any particular purpose or provision and different days may be so appointed for different purposes or different provisions.”.
This amendment sets out in clear terms the Minister for Finance's power to appoint the date of commencement of the Act or appoint different days for different provisions or purposes.
It has been more than two years since I introduced this legislation. I welcome the Minister of State's support for it and the co-operation of his officials with me. It is important that as sponsors of the Bill we use our time to make sure this progresses in the autumn through the Houses bearing in mind that he has indicated that he is looking for advice on several sections. We will engage with him on that. When it does come into effect notwithstanding that the Oireachtas must give its final view in the Dáil and Seanad, it is important that it commence without delay. I urge the Minister of State to do that.
My expectation and hope is that we conclude this Bill by the end of the year and I do not anticipate any delay in enacting it.