The Law Reform Commission has published a report on Consumer Insurance Contracts calling for a fairer system for consumers making insurance claims.
The report makes 105 recommendations to reform and rebalance the duties of insurers and consumers. It found that many of the rules have not changed from the time when insurance was between shipping traders and small insurers, wherein traders often had more information than insurers to judge the risk being insured. The report looks to reform laws in line with modern times and restore equal bargaining power to ordinary people and small businesses contracting with large multinational insurers.
The current law imposes an onerous duty on a consumer to disclose information that a “prudent insurer” might rely on in deciding whether to insure the consumer. The Report recommends that the law should be reformed so that the insurer would be required, by asking consumers specific questions, to identify what information it actually considers is relevant in its decision whether to insure the consumer and/or what premium to charge. A corresponding obligation should be imposed on consumers to answer, carefully and honestly, those specific questions.
The Commission also recommends the abolition of the concept of warranties in consumer insurance contracts and their replacement with statutory rules that will enable insurers to continue to include provisions in contracts that (a) precisely identify or define the risk insured and (b) protect consumers from the unfair and unjust effects of the current law.
As it stands, a third party to a insurance contract does not have enforceable legal rights under the contract even where the contract is intended to benefit him or her. This means that a seriously injured person cannot directly recover compensation from the insurer of an employer or other person who has paid for and holds a valid insurance policy expressly intended to benefit the injured person. This can happen where the policyholder is a corporate body in liquidation, receivership or examinership, or an individual who has died, is missing or whose decision-making capacity is in question. The Commission recommends in the Report that third parties should be allowed to bring claims directly against insurers where it is necessary and appropriate.
Click here for the full report.