New law to make it more difficult for insurers not to pay out for valid claims
NEW legislation is set to turn the tables on insurers and massively benefit consumers.
The Consumer Insurance Contracts Bill has been described as the most radical shake-up of consumer legislation in centuries in this country.
The bill is expected to become law early in the new year.
The new legislation will make it more difficult for insurers to refuse to pay a valid claim.
It will also force them to own up when they plan to settle a claim, a bugbear with businesses especially when firms feel the claim should be defended.
Under the bill, the onus will be on insurers to ask the relevant questions when a consumer or a small firm is taking out a policy. This is a reversal of the current situation where the policyholder is expected to anticipate what has to be disclosed.
The bill will limit the controversial practice of insurers retaining part of a settlement when there is a successful claim.
The Alliance for Insurance Reform said the legislation was a game changer. It would alter the balance of power between insurers and policyholders, such as consumers, small firms and community groups.
Law firm Beale and Company said of the legislation: “It most certainly places more onerous obligations on insurers.”
It comes after a ground-breaking Law Reform Commission report in 2015 that recommended radical changes to insurance law, as it said insurance contracts were unfair to consumers.
Many elements of insurance law have not changed since the 18th century when they were designed to cover tea clippers sailing to India on hazardous trading missions, the commission said.
The new legislation follows recent comments by Financial Services Ombudsman Ger Deering, who accused the insurance industry of voiding policies in a way he said was “unreasonable and disproportionate”.
The bill was drawn up by
Sinn Féin finance spokesman Pearse Doherty, who hailed it as a shift in the balance of power in favour of consumers and small firms.
“This bill is far-reaching and brings transparency to the insurance industry, something the industry is fighting.
“It means, among other things, insurers will not be able to wriggle out of paying claims by relying on the small print,” he said.
Minister with responsibility for insurance reform Michael D’Arcy, who is piloting the bill through the Oireachtas, said it was a radical piece of legislation that should have happened years ago.
“It shifts the power to individuals rather than strong corporate entities,” he said.
Mr D’Arcy said when the bill is passed insurers will no longer be able to “rely on small print to avoid paying a claim”.
He said contracts were unfair at the moment, forcing thousands to complain to the ombudsman.
Insurance Ireland said it supports the objectives of the bill aimed at reforming and modernising our insurance contracts law. However, it warned that some of the provision of the bill will be difficult to implement and would require a long lead-in time.
It said a potential outcome is “a more costly or onerous system compared to international practices”.