Thursday, 19 January 2017
Consumer Insurance Contracts Bill 2017: First Stage
That leave be granted to introduce a Bill entitled an Act to reform the law of consumer insurance contracts and to provide for related matters.
In recent years we have seen the insurance industry treat its customers with arrogance and, over the last couple of years, completely unjustified and unjustifiable increases in motor insurance premiums. An incredible level of defensive spin has emanated from this industry.
This Bill seeks to level the playing field so that the consumer is better equipped to stand up to the insurer and argue the toss. It represents a major modernisation of insurance contract law in Ireland and is based on a report by the Law Reform Commission from July 2015. I acknowledge the work and expertise of the commission in this area and in drafting this legislation.
Much of our insurance contract law is archaic and not fit for the modern world. It was drafted at a time when insurance was based largely on the needs and demands of the shipping industry. Much has changed, not least the relative power of the multinational insurance company and of the customer. In this day and age the insurance consumer is at a huge disadvantage when faced with the Iawyered up, technically savvy insurer. We know the results: the insurer holds all of the cards. Currently, if I insure my house and indicate in my contract that I have particular type of alarm fitted and my house then burns down the insurer can refuse to pay out. This is despite the fact that my alarm had nothing to do my with house burning down in the first instance. This provision is unacceptable and it needs to be updated. Likewise, the law on disclosure dates back to 1776, which is the year of the Declaration of Independence in the United States, such that the law on disclosures is as old as independent America. It gives huge discretion to insurers to decide what should have been disclosed after a claim is made. In its case studies the Financial Services Ombudsman has noted that: "Unfortunately, once non-disclosure takes place, for whatever reason, the legal effect of that can operate harshly." Innocent failure to disclose something an average consumer would not consider relevant should not be a get-out-of-jail clause for insurers.
The Bill also seeks to abolish the outdated concept of insurable interest. This means a son or daughter should be allowed to insure their parents' home and receive compensation if the home is damaged, as usual. The Bill also puts into law that insurers must provide consumers with plainly written documents containing the essential terms of the contract; to provide clear warnings of the consequences of non-compliance with the statutory duties proposed in the report; and to provide consumers with policy documents as soon as possible after the contract has been completed. This may all sound very basic but currently this is not the case.
The Bill is detailed and complex but at its core is a simple function: to empower consumers so that no longer will farmers, pub owners, residents and other consumers be denied what morally should be theirs because of outdated technicalities that can be exploited by insurers. Laws in force at the time of the American War of Independence - insurance laws based on the days of merchants trading across oceans rather than the modern needs of society - must be updated. The consumer alone loses when laws become archaic. The consumer, the victim, must get the benefit of the doubt when it comes to arguing the technicalities of insurance claims.
Earlier, in this Dáil, I had all-party support for a Bill abolishing the six-year rule for consumer complaints to the Financial Services Ombudsman. I believe this Bill is the next step in safeguarding consumers in financial matters and I hope it will also have widespread support.