Niall Collins (Limerick County, Fianna Fail) | Oireachtas source

Insurance is an essential part of society that affects almost every walk of life. Insurance has a direct impact on the security and peace of mind of individuals and businesses, large and small throughout the country. It is essential for providing people with protection and security against the risks of everyday life. As we know, the insurance market in Ireland is dysfunctional in many respects. As far back as the collapse of PMPA, there have been serious issues with the insurance market. More recently there was the collapse of Setanta, where three years on, over 1,600 claims are still unsettled. Last year, Gibraltar-based Enterprise Insurance Company collapsed with 14,000 motorists left to find alternative insurance. The customer has faced exceptional increases in motor and health insurance premiums over the past number of years. We have long been calling for the Government to act on the rising cost of motor insurance. In 2014, motor insurance premiums increased at an annual rate of 11.6%, while in 2015 the rate rose by 30.8%. In the 12 months to August 2016, motor insurance increased by 28%. We have seen similar increases in the health insurance market.

With motor insurance, we have welcomed the recommendations from the Government's working group and we now eagerly wait for action on this issue. In addition, we have had issues regarding flood insurance, whereby insurance is been denied to people and businesses where flood protection has been installed. These are just some of the issues with the insurance market in Ireland. It is in this context that the Law Reform Commission began to look at the legal area surrounding the insurance contract. In July 2015, the commission published a detailed and comprehensive report on consumer insurance contracts. This Bill, brought forward by Sinn Féin, essentially mirrors the output from the Law Reform Commission. We commend Sinn Féin on bringing it forward and the Law Reform Commission on its work in this area. Fianna Fáil will support this Bill on Second Stage and will engage constructively thereafter, bringing forward amendments if appropriate.

The commission's report brings together a vast array of law ranging from legislation to court judgments, many of which date as far back as the 16th and 17th centuries. The commission produced recommendations that would consolidate existing law and update it for the 21st century. One of the key areas identified by the Law Reform Commission was to abolish what is known as insurable interest. This concept dates back to the 18th century and it stipulates that a consumer must have an identifiable interest in the property or risk being insured. This means that a consumer would not be able to obtain compensation if he or she did not own or had no interest in the property. Even in a case where loss has been established, compensation would not be payable because of the concept of insurable interest. The Law Reform Commission recommended the removal of insurable interest and replacing it with a law that requires a customer to prove actual loss, applying the principle of indemnity. This would make it a fairer system for the customers, whereby they are compensated for loss, and the insurers, whereby they are protected from the consumer making a profit on the claim.

In many cases compensation is not paid to a customer because of pre-contractual duties and obligations to disclose any information that may affect the risk of damage or loss. The Law Reform Commission in its report recommended the removal of this standard and replacing it with statutory pre-contractual requirements for both the consumer and the insurer. Under this proposal, as set out in section 6 of the Bill, the consumer will only be required to disclose information that is directly asked for by the insurer and the questions set out for the consumer cannot be general in nature. The consumer is still obliged to provide truthful and detailed information in response to the questions asked by the insurer. This has the potential for clearing up a grey area whereby a consumer can be punished for not providing an exhaustive amount of information at the pre-contractual stage.

The recommendations from the commission also extend to circumstances whereby the consumer unintentionally fails to disclose certain information. Under the current system, there is an all or nothing approach whereby if the consumer does not disclose certain information, he or she will not receive compensation, even if the omission was made in good faith or unintentionally. This is unfair to consumers as certain misrepresentations are innocent or negligent. Not all misrepresentations are done intentionally or fraudulently. However, it is important to note that the recommendations from the Law Reform Commission do not remove all the protections for the insurers. In the case of fraudulent misrepresentation, the insurer will not have to pay compensation.

Section 8 of the Bill deals with the form of the contract of insurance and the information to be provided by the insurer. The information to be provided by the insurer to the customer includes the subject matter of the insurance and the risks covered, the sum insured and any deductibles and the method of calculating the premium. In addition, the insurer would need to outline the right to revoke the application or terminate the contract. This will make the contract of insurance more accessible and clear for the consumer, which is to be welcomed. Sections 9, 10 and 11 deal with the right to withdraw from the contract of insurance, the renewal of the contract of insurance and the cancellation of the contract of insurance. These sections clear up many issues around the signing and renewal of insurance contracts. Section 9 in particular would require a cooling off period of 14 days for non-life insurance and 30 days for life insurance. This would allow the customer to carefully consider all the issues before signing the contract of insurance. Sections 12 and 13 cover the duties of both the insurer and the consumer at the renewal stage and in the post-contractual period.

This deals with any new information the insurer wishes to obtain at the point of renewal and the alteration of risk that occurs during the post-contractual period. At the moment it is unclear what information the consumer must declare at the point of renewal. This increases the risk for the consumer of mistakenly not disclosing certain information.

With section 12 any new information required by the insurer must be asked specifically from the customer. Sections 14 and 15 deal with claims handling and the duties of the consumer and the insurer. This would stipulate that a consumer must co-operate fully with the insurer in the investigation of the insured event. This is a strong tool for the insurer in cases where the consumer is un-co-operative. It would also compel the consumer to report an insurable event in a timely manner and would compel the insurer to process the premium promptly. This is essential as we have witnessed cases where insurers take a considerable time to pay compensation. Section 17 would protect the consumer from the insurer inserting unfair or onerous terms in the contract of insurance. This section has regard to the strength of the bargaining positions of the insurer and the consumer and whether the consumer had an inducement to agree to the term.

Subsection 4 outlines specific items that would be deemed unfair or onerous on the consumer. This section would be an essential tool to protect consumers from insurers placing terms in the contract that are overly unreasonable.

The remainder of the Bill deals with the right of third parties to claim against the insurer and the subrogation by insurance companies. In summary, the Bill brings together and updates the law that is currently disjointed and outdated. We will support the passage of this Bill through Second Stage and will engage constructively on Committee Stage and, if appropriate, we will bring forward amendments. We believe the work of the Law Reform Commission was extensive and detailed and the recommendations, if enacted, would be good for consumers and insurers alike.

Let us make no mistake. This Bill, if enacted, will not solve the problems individuals experience with the current insurance market. They are continuing to experience exceptionally large increases in their premiums, whether it be motor insurance or health insurance. Small businesses and households will continue to struggle to get flood insurance in areas where flood protections have been installed. We simply have not seen the urgency from Government in addressing the main issues involving insurance in this country. This Bill, if enacted, will not solve all the problems but it will help solve some issues in the market surrounding the insurance contract.

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