The Act aims to address a number of perceived issues with the Consumer Contracts Act 2019 (the 2019 Act) and also addresses issues set out in the Action Plan for Insurance Reform (published by the Department of Finance).
The Act was implemented into Irish law, largely with effect from 08 July 2022, though some provisions (including amended disclosure obligations) take effect from 01 October 2022 and others from 01 January 2023
2. Key changes to claims handling procedures in respect of motor insurance claims
From a claims handling point of view, the key changes under the Act are:-
(i) From 01 October 2022, the Act amends the mutual duty of disclosure during the claims handling process;
(ii) From 01 January 2023, insurers will be required to formally notify claimants of what deductions are made from settlement payments (excluding payments under the Recoverable Benefits and Assistance Scheme).
3. Amended disclosure obligations
Section 16 of the 2019 Act imposed a positive obligation on both insurers and "the consumer" to disclose certain information. Those obligations have been amended by S7 & 8 the Act.
The key impact of the new provisions on motor insurance claim handling procedures is that where an Insurer becomes aware of information or obtains a report that would support or prejudice the validity of a claim made by a consumer the insurer shall disclose this to the consumer within 60 days. This duty is reciprocal on the consumer.
The definition of "consumer" is key to understanding the extent of the obligation. That term is governed by the S.2(1) of the Financial Services and Pensions Ombudsman Act 2017 where a Consumer is defined as:
(a) (i) a natural person, not acting in the course of business,
(ii) a sole trader, partnership, trust club or charity (not being a body corporate), with an annual turnover in its previous financial year (within the meaning of section 288 of the Act of 2014) of €3 million or less, or
(iii) an incorporated body that—
(I) had an annual turnover in its previous financial year (within the meaning of section 288 of the Act of 2014) of €3 million or less, and
(II) is not a body corporate that is a member of a group of companies (within the meaning of section 8 of the Act of 2014) with a combined annual turnover (in the previous financial year (within the meaning of section 288 of the Act of 2014) of the group of companies), of greater than €3 million,
(A) is a customer of a Insurer,
(B) is a person or body to whom an Insurer provider has offered to provide a consumer insurance contract, or
(C) has sought the provision of a consumer insurance contract.
- The obligation on the Insurer to disclose the report if obtained by the Insurer is to disclose the report regardless of whether or not the Insurer wishes to claim that the document is protected by legal privilege.
- Legal privilege will continue to apply to reports prepared by a lawyer or communications between a lawyer and another person. Interestingly, no distinction is drawn under the Act to the difference between litigation privilege and legal advice privilege.
4. Implications for motor insurers
Based on that definition of "consumer", the Act will have limited impact on how motor insurers handle the vast majority of RTA claims unless the claimant is also the consumer. On that basis, we anticipate the Act impacting on motor insurers in the following scenarios:-
- Where policy cover itself is at issue in respect of a first party of third party claim and/or
- Where the claimant is a passenger is their own vehicle and is making a claim on their own policy of insurance.
In these scenarios, we consider it prudent for motor insurers to exercise caution in respect of the contents of any reports that it obtains from third parties (for example investigators). We consider the well-informed policyholder may use these obligations to their advantage should policy cover not be provided. Motor insurers may wish to protect themselves by using lawyers to obtain these reports so that they can then rely on legal privilege.
Since the obligations under the Act are reciprocal, we recommend that motor insurers put those consumer on formal notice that they themselves are also obliged to provide any information that may validate or prejudice the claim.
From 01 January 2023, Insurers will be required under S.16(B) of the Act to notify a claimant of any deduction, as well as the reason for the reduction, from a final claim settlement. This requirement excludes amounts paid to the State under the Recovery of Benefits and Assistance (RBA) scheme.
If you are a motor insurer or MGA and you wish to discuss how to ensure that your claim handling protocols are in compliance with this new legislation, please contact Killian O'Reilly or Neil Cahill in our Disputes Team.
Written by: Killian O'Reilly and Neil Cahill
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