Pearse Doherty (Donegal, Sinn Fein)
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39. To ask the Minister for Finance if insurance companies providing home insurance under the consumer protection code are required to inform customers if they are under insured and of the consequences of being underinsured; and if he will make a statement on the matter. [26360/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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As Minister for Finance, I have policy responsibility for the development of the legal framework governing financial services regulation, including for the insurance sector. I am aware of the issue of under-insurance, which occurs when the sum insured on a property is less than the amount it would cost to rebuild or reinstate the property. According to the Central Bank of Ireland (CBI), this can leave a policyholder at risk of not being fully covered for losses were they to make a claim.

The Consumer Protection Code 2012 (the “Code”) is a key component of the strong consumer protection framework in place for consumers of regulated financial service providers. The Code sets out the requirements that regulated entities (including insurers) must comply with when dealing with consumers in order to ensure a similar level of protection for consumers. In line with Provision 2.1 of the Code, a regulated entity must ensure that in all its dealings with customers, and within the context of its authorisation, it acts honestly, fairly and professionally in the best interests of its customers and the integrity of the market.

In 2022, the CBI conducted a Thematic Review of the risk posed to consumers of not having sufficient home insurance cover. The Review was undertaken as a result of the increase in rebuild costs which can affect the level of insurance cover that a consumer should have on their property. The Review identified evidence of increasing levels of under-insurance from an average of 6.5% of paid claims being under-insured in 2017, up to 16.5% in 2021.

Upon completion of the Review, insurance firms were required, by the CBI, to communicate to their home insurance policyholders, either directly or by working with their intermediated partners, to explain the risk of under-insurance and the implications of being under-insured. Firms were required to explain to their policyholders the reasons why under-insurance is currently a heightened risk and how policyholders can better estimate their adequate sums insured value. Furthermore, the CBI noted that key information such as the application of the Average Clause, a common condition in a home insurance policy that can proportionately reduce the amount of a claim being paid, should be presented in a clear and understandable way to policyholders.

The CBI has advised the Department of Finance that by the end of Q1 2023, all firms in scope of the Review had issued communications to their policyholders that highlighted the risks of under-insurance and explained the importance of reviewing their home insurance details regularly to ensure they were adequately insured. In addition, all firms in scope had reviewed their consumer policy documentation and online information to ensure that key information was being provided in a clear and understandable way.

Following this work, the CBI collected further data, on the levels of under-insurance, from the main insurance firms operating in the Irish home insurance market, in order to assess the impact of the actions that have been taken by firms. The data showed that reduced claims payments as a result of being under insured have fallen from 16.5% in 2021 to 10.7% in 2024. In conclusion, the Department of Finance will continue to work with the CBI and insurers to closely monitor developments in this area.