Pearse Doherty (Donegal, Sinn Fein)
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138. To ask the Minister for Finance if insurance companies providing home insurance under the consumer protection code are required to inform customers of the consequences of being underinsured specifically in relation to the industry use of the average clause; and if he will make a statement on the matter. [28399/25]

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, this can leave a policyholder at risk of not being fully covered for losses were they to make a claim.

In the event of a claim, and where a policyholder is deemed to be under-insured, an insurance firm can reduce the sum it must pay against the claim in proportion to how much the policyholder is under-insured. In the insurance industry, this is known as the ‘Average Clause’.

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. 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 Central Bank of Ireland conducted a Thematic Review of the risk posed to consumers of not having sufficient home insurance cover. 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 Central Bank, to communicate to their home insurance policyholders, either directly or by working with their intermediated partners, 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.

In response to the specific question raised by the Deputy, the Central Bank also highlighted the requirement for all firms to ensure that they present key information, such as the application of the Average Clause, in a clear and understandable way to policyholders. 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, the Central Bank noted that 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.

On completion of the required work, the Central Bank 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 and this will be continue to be monitored in 2025.

In situations where a person is not satisfied with the service of an insurance provider, it is advisable that that person make a complaint to the firm's internal complaint resolution process. The Central Bank of Ireland’s Consumer Protection Code requires that if after 40 days the complaint has not been resolved to the customer’s satisfaction, the regulated entity must inform the consumer that they may refer their complaint to the Financial Services and Pensions Ombudsman (FSPO).

The FSPO is a statutory official who acts as an independent arbiter of disputes which consumers may have with their insurance company or other financial service provider. The FSPO can be contacted either by email at info@fspo.ie or by telephone at 01-567-7000. Investigations by the FSPO are free of charge to the complainant. In addition to this, II operates an Insurance Information Service for those who have queries, complaints or difficulties in relation to obtaining insurance, which can be accessed at: feedback@insuranceireland.eu.