The Consumer Insurance Contracts Act (the Act) which comes into force from 1 September introduces changes into Irish law applicable to insurance contracts. In this communication we’ve provided a background to the Act, the Act’s scope and details on the areas that Zurich made changes in relation to the Act. The changes we’ve made are primarily to the relevant pre-sale documentation such as Customer Guides – find more detail below.

Background to the Act

The Act, which was signed into law in December 2019, and the majority of the Act was commenced by the Minister for Finance from 1 September 2020. The Act introduces some significant changes into Irish law applicable to consumer insurance contracts (CIC’s).

The Act will be commenced in two parts, with certain sections of the Act commencing next year, from 1^st September 2021.

Scope of the Act

The main sections relevant to Life business that will come into effect from 1 September include the following:

• Insurable Interest: The Act abolishes the principle of insurable interest as a pre-requisite to a consumer making a valid claim (Section 7). This means that a claim cannot be rejected solely on the basis of the consumer not having a valid interest in the insured life. At underwriting stage, insurers can still take account of whether or not the consumer has an economic interest in the insured life.
  
  
• Cooling-off Period: For consumers with no cancellation right under Solvency II or the EC (Distance Marketing of Consumer Financial Services) Regulations 2004, a cooling-off period has been introduced (Section 11). This impacts Employer owned pension policies – executive pension plans and Group pension and Group Risk plans.
  
  
• Provision of Information: The Act introduces an obligation on an insurer to provide a copy to the consumer of their completed application form (where it is relevant to the particular contract) within a reasonable time after concluding a contract of insurance.

• Post-contractual Duties: The Act removes the duty on consumers to act with “utmost good faith” (Section 15). This section is mostly relevant to general insurance but it does place an obligation on insurers who intend to exclude matters from coverage to do so explicitly in writing prior to the commencement of the contract.
  
  
• Claims Handling: There are updates to how claims are handled and consumers’ duties relating to claims (Sections 16 – 18). This means that insurers must update their procedures for handling claims and amongst other things, requires insurers to engage with the consumer to allow them an opportunity to submit relevant evidence relating to a claim. It also specifies an insurer is entitled to refuse to pay a claim or terminate the contract where a consumer submits information which is false or misleading in any material respect as part of a claim but that a prior valid claim under the same policy is not affected.
  
  
• Basis of Contract Clauses: The Act invalidates clauses that are designed to convert a representation into a warranty (e.g. 'basis of contract' clauses) (Section 19). These clauses allowed insurers to invalidate a policy solely on the basis that all statements made by the consumer are warranties, irrespective of whether such statements were made innocently or recklessly. However, insurers have generally not relied on these clauses as remedies for misrepresentation in recent years as they were considered unfair by the courts and the impact of this section is unlikely to be significant.

Changes that we’ve made

To cater for the introduction of the changes above, we have made the following updates to our documentation.

Protection Products

• We’ve updated our application form on Guaranteed Term Protection & Guaranteed Mortgage Protection products, removing references to Insurable Interest, which are now replaced by an Economic Loss section.
  
  
• Update to our customer guides on all our protection products, to now include more information on exclusions that apply.

Non-Risk Products

• We’ve updated our policy documents to include cooling-off wording on policies that did not’ previously have a cooling-off period such as executive pensions and group pension plans.

Group Risk Products

• We’ve updated our policy documents

We will also be making some changes to our processes, including sending copies of the completed application form for our offline Protection products and updates to how we communicate with customers on claims.

From 1 September we’ve updated the relevant documents on ZurichBroker.ie and we’ve updated OnlineApply for the GTP/GMP protection journey. These changes are minor and will not impact on your submission of business. We will continue to accept any old documentation for a period of two months until the 31^st October 2020.

If you have any queries, please don’t hesitate to get in touch.