Major changes to insurance renewal notices comes into force – 1 November 2019

From 1 November  2019 the Central Bank’s Non-Life Insurance (Provision of Information) Regulations, in force since 2007¹ (the “2007 Regulations”), are due to be updated with a series of amendments designed to better protect consumers when renewing insurance policies, other than life assurance policies, In Ireland, and help tackle rising costs. 

The 2007 Regulations, themselves a replacement of the 2002 motor insurance renewal regulations²,  represented a significant break with what had gone before, in that they extended the scope of renewal notice requirements from motor insurance to also encompass home, health, and various other classes of non-life insurance. The 2007 regulations also amended the scope of renewal notices subject to regulation - they provided for what information was to be provided when an insurer did not wish to invite renewal, what role an insurance broker or other intermediary played in the provision of information, etc. 

The 2007 Regulations are largely seen as having been successful, with little change suggested by industry, regulators, or other stakeholders for nearly 10 years after their having entered into effect. In late 2017, however, given concerns expressed as to the impact of rising insurance premiums; changes and market developments in other, comparable, jurisdictions, such as the Insurance (Information Disclosure for Renewals) Instrument 2016³ the UK; and in light of developments in the field of behavioural economics, the Central Bank published the first of two consultation papers concerning potential changes to the 2007 Regulations. Those consultation papers - CP 114 (of November 2017) and CP124 (of August 2018) - introduced the prospect of  requiring renewal notices be dispatched earlier than previously required; contain more detailed information, at least with respect to motor insurance renewals; contain details with respect to other coverage options; and various other developments.

Having considered submissions received as part of both consultation exercises, on December 19th 2018, the Central Bank made the  Non-Life Insurance (Provision of Information) (Renewal of Policy of Insurance) (Amendment) Regulations 2018⁴, which amend the 2007 Regulations to take into account each of these proposals. 

What are the changes? 

As outlined in the Central Bank’s 2017-2018 consultation process, the principal changes to the 2007 Regulations are:

• First, and most simple, rather than issuing a notice 15 days working days prior to the date of expiry, such notice must be issued by an insurer, to the subscriber, 20 working days in advance of the policy’s ceasing to be in effect;
  
• Second, for motor insurance policies, the insurer must not only detail the cost of renewing the coverage which is due to expire, but also the cost of alternative cover options offered by the insurer (e.g. third party fire and theft in the case of renewing comprehensive cover), and
  
• Third, for private motor insurance policies, in addition to other information to be provided, the premium paid in the previous policy year or, where applicable, the “annualised” premium figure, where a mid-term adjustment has taken place. 
  

Certain other amendments are also provided for, including a technical fix in terms of the types of non-life policy in scope (previously “a renewal of a policy of insurance that occurs on or after the commencement” of the regulations, becomes policies “entered into on or after” commencement, reflecting the fact that the regulations provide for, and regulate, the non-renewal of policies as well as renewal). 

Impact(s)

Whether or not the revisions due to the 2007 Regulations will have the impact sought remains to be seen, and evidence gathered in the United Kingdom over a year after some similar changes were effected there suggested that the percentage of home insurance customers who shopped around at renewal increased by 3%, whilst for motor cover, that figure was 1%⁵ - note that only private motor cover is subject to the relevant requirement in Ireland. What is certain is that insurers will need to have engaged in extensive system development and testing to be able to produce compliant renewal notices for 1 November 2019, taking into account potentially complex calculations on annualised premiums. Whether or not these revised regulations meet the objectives of policy makers remains to be seen, but it is unlikely that this will be the last measure designed to reduce insurance costs in Ireland, or close to it. 

For further information on the consultation process, or for advice on insurance or financial services more broadly, contact the ByrneWallace Financial Services team.

[1]  S.I. No. 74 of 2007

[2] The Motor Insurance (Provision of Information) (Renewal of Policy of Insurance) Regulations 2002 (S.I. No. 389 of 2002)

[3] Amending the FCA’s Insurance Conduct of Business Sourcebook, and in particular Rule 6.5

[4] S.I. No. 577 of 2018