Upcoming Commencement of the Consumer Insurance Contracts Act 2019

Insurers entering into contracts of insurance with consumers in the Irish market will be impacted by changes to Irish law that will come into effect on 1 September 2020. These changes will impact contracts issued and varied from that date. 

While signed into law in December 2019, the Consumer Insurance Contracts Act 2019 (CICA) has not yet been commenced. On 16 July 2020, in response to a parliamentary question on commencement of the CICA, the Minister for Finance, Paschal Donohoe TD, outlined that many of CICA's provisions will commence on 1 September 2020 with Sections 8, 9, 12 and 14(1) - (5) being delayed until 1 September 2021.

The key sections that will come into effect on 1 September 2020 include:

  • the abolition of the insurable interest principle as a pre-requisite to a consumer making a valid claim (Section 7)
  • a 14 day cooling off period for consumers with no cancellation right under Solvency II or the EC (Distance Marketing of Consumer Financial Services) Regulations 2004 (Section 11)
  • claims handling duties and proportionate remedies (Sections 16 – 18)
  • the invalidation of clauses that convert a representation into a warranty (e.g. 'basis of contract' clauses) (Section 19)
  • modifications to subrogation and third-party rights (Sections 21 – 25)

Sections 8, 9, 12 and 14(1)-(5) of CICA will not be commenced until 1 September 2021. These are CICA's more onerous provisions and, for the most part, require systems and process changes by insurers. These sections include:

  • the introduction of a statutory duty to answer all questions posed by the insurer 'honestly and with reasonable care' in place of the contractual duty of 'utmost good faith' (Section 8)
  • proportionate remedies for misrepresentation by reference to whether it was innocent, negligent or fraudulent (Section 9)
  • increased duties for insurers at renewal stage (e.g. for non-life contracts, insurers must provide a schedule of all premiums and claims paid for the preceding 5 years) (Section 12)
  • changes to disclosure duties at renewal stage (Section 14 (1) – (5))

Section 5 of CICA provides that the Central Bank of Ireland (CBI) may issue a code of practice to provide practical guidance to insurers. While the CBI has not yet commented on the issuance of any such code, we anticipate an update soon on its planned response in light of the Minister's announcement on CICA's commencement.

While the Minister's clarification on CICA's commencement provides some comfort to insurers as regards CICA's more onerous provisions, insurers must nonetheless hasten their efforts to ensure compliance with the provisions due to come into force on 1 September 2020.

For more information please contact Laura Mulleady, partner, Scott McDonnell, solicitor or your usual A&L Goodbody Insurance & Reinsurance team contact . 

Date published: 24 July 2020