CICA in more detail

The Consumer Insurance Contracts Act 2019 (CICA)

Following a 2015 report by the Law Reform Commission on consumer insurance contracts, The Consumer Insurance Contracts Act 2019 (CICA) was signed into law in December 2019.  

Signing the Commencement Order to bring the majority of the provisions into operation from 1st September 2020, Finance Minister Pascal Donoghue said that the Act “will address many of the long-standing challenges that people and small businesses in Ireland have faced with their experience of insurance policies and insurance claims.”

The Act is aimed to provide increased protection and strengthen consumer rights by addressing some of the perceived imbalances between insurers and policyholders.  It requires the insurer to increase transparency and take on additional responsibilities in respect of its consumer interactions at all key stages of the customer journey - quotation, onboarding, policy assessment and completion, premiums handling, claims handling, complaints and renewals. Importantly, it stipulates that the interpretation of pre-contractual questions and contract terms most favourable to the consumer will prevail.

The legislation pertains to life and non-life insurance contracts and applies to individuals and businesses with a turnover of less than €3 million.
In recognition of the significant impact that some aspects of the Act have on insurers’ operations, the decision was made to implement the Act on a phased basis; some aspects being effective from 1st September 2020 while the more onerous requirements will come into force on 1st September 2021.

Requirements from 1st September 2020

Section 7: The requirement for insurable interest has been removed and the insurer is prevented from rejecting a claim on the basis that a consumer does not have an ‘insurable interest’ in the subject matter of the policy.
Section 10: The consumer must be provided with a copy of their completed application form within a reasonable time of the contract concluding. The interpretation of the terms of the contract most favourable to the consumer will prevail.
Sections 11, 13: A 14 “working day” cooling-off period has been introduced, as well as the requirement to repay the balance of any unexpired term on a cancelled contract. The reasons for cancellation must be provided to the consumer.
Section 14(6): The insurer must notify the consumer, no later than 20 days before renewal, of any changes to the terms and conditions of the policy.
Section 15: The principle of utmost good faith has been replaced, at the post-contractual stage, with the introduction of responsibilities for insurers and consumers. These include a duty on the consumer to pay the premium within a reasonable time and limitations to the circumstances in which an alternation of risk clause can apply.
Sections 16, 17, 18: Specific, increased duties regarding claims handling have been outlined. Insurers may no longer refuse liability under a claim solely on the grounds that the claim was not made in the specified notification period. Limitations have been placed on the deferment of a claims payment and remedies outlined for false, misleading and fraudulent claims.
Section 19: A representation made by the consumer in relation to the insurance contract cannot be treated as a warranty.
Sections 21, 22: Third parties may make a claim under an insurance contract where the consumer: has died; cannot be found; is insolvent; or for any other reason the court deems equitable to do so.
Sections 23, 24, 25: Limitations have been set out on the right of subrogation for family members, cohabitants and employment relationships. The Act has provided specific guidance on the distribution of funds where the right of subrogation applies.

Requirements from 1st September 2021

Sections 8, 14: The principle of utmost good faith has been replaced with a requirement to provide answers to specific questions posed by the insurer both at pre-contractual stage and at contract renewal. The consumer shall not be under any duty to volunteer information additional to that requested but must respond honestly and with reasonable care. The insurer may not use general questions. At the pre-contractual stage, the interpretation of the question most favourable to the consumer will prevail. The onus is on the insurer to investigate absent/incomplete answers (this does not apply in the case of fraudulent, intentional or reckless concealment on the part of the consumer).
Section 9: provides for proportionate remedies for misrepresentation by a consumer. The applicable remedy will depend on whether the misrepresentation was innocent (insurer is required to pay the claim), fraudulent (insurer may avoid the contract) or negligent (the insurer must do what it would have done had it been aware of the full facts).
Section 12: requirements introduced for non-life insurance at renewal for the insurer to provide the consumer with a schedule detailing premiums and claims paid in the preceding five years.

What does this mean for the broker?

While the legislation has placed a duty on consumers to respond to questions honestly and with reasonable care, it  stipulates that in determining whether the consumer has acted with reasonable care, one of the factors that will be considered, is whether or not the consumer was represented by an agent and the circumstances of that representation. Therefore, broker firms will need to assess the risk of future misrepresentation claims and introduce mitigating controls into their processes and procedures. Any changes should be formally documented and reviewed during the firm’s annual risk assessment. 

Training staff on the importance of asking all questions, seeking complete and honest answers and advising consumers of their duties will be paramount. Intermediaries may consider amending their Terms of Business documents to include advice to clients of their duties under the Act.  Advising the client of their obligations is equally important at all stages of the contract – application, mid-term adjustments, renewals and claims. It is advisable that intermediaries evidence that they have asked all the relevant questions and have advised the consumer of their duties pre and post contract of insurance.