knowledge | 6 December 2018 |
Gadget Insurance Products – Improvements Required
With Christmas shopping well underway, the Central Bank of Ireland’s latest “Dear CEO” letter, on the sale of gadget insurance, looks very timely. The letter sets out the findings of the Central Bank’s thematic inspection on the sale of gadget insurance products to consumers and is relevant to all insurers manufacturing and distributing non-life insurance products.
The Central Bank’s thematic inspection examined the manufacturing and distribution of gadget insurance products and assessed a number of areas including: product oversight and governance, timeliness and clarity of information provided to consumers, and a review of policy terms, conditions and exclusions and their impact on a policyholder’s ability to make a claim. The thematic inspection was supplemented by consumer research which examined consumers’ attitudes, behaviours and experiences when purchasing gadget insurance products.
The Central Bank is concerned that a consumer centric approach has not been adopted as regards certain aspects of gadget insurance product design, in making sure that the insurance product meets the needs of consumers and in how the cost of insurance is presented at the point of sale. The Central Bank’s main findings and related action points are as follows:
Inadequate information provided to consumers of gadget insurance policies
The Central Bank expects all insurers to issue an annual statement reminding consumers that the gadget insurance product remains in force, setting out the total cost of the insurance for the next 12 months, highlighting the key features and exclusions of the policy, details of how to make a claim, and providing consumers with relevant contact details should they wish to cancel or discuss any aspect of the policy.
Inadequate identification of target market and suitability assessment
Insurers should exclude from the target market for the gadget insurance product consumers who hold an existing insurance product that covers the gadget being purchased. This information should be sought at the point of sale when assessing the suitability of the gadget insurance product for the consumer.
Insurers must be fully aware of the reliance that consumers place on distributors. They must also ensure that regular reviews and appropriate updates are made to the product information/documentation provided to consumers at the point of sale.
Insurers must also satisfy themselves and be able to demonstrate that front-line staff distributing their gadget insurance products are provided with appropriate and relevant training and information in relation to the product so that the staff are in a position to clearly explain the product features to consumers and to properly assess suitability.
Inadequate provision of information about price
The Central Bank expects insurers to operate within the full spirit of General Principle 2.6 and Provision 4.30(a) of the Consumer Protection Code 2012 (the “Code”) and ensure that consumers have a full understanding of the true cost of the insurance product. Insurers must inform consumers of the cost of the insurance premium on both an annualised basis and based on the maximum possible duration of the insurance contract (ie, where the insurance contract continues to renew automatically until terminating after a pre-determined duration).
Non-Compliance with claims handling provisions of the Consumer Protection Code 2012
- ensure that the documentation issued to consumers at the point of sale and any further documentation thereafter is clear around how to make a claim;
- ensure that they comply with provision 7.7(f) of the Code, meaning that when additional documentation or clarification is required, the claimant is informed of this as soon as required and issued with a reminder where the relevant documentation or clarification has not been provided;
- ensure that all persons handling claims on their behalf allow consumers at least 10 days to accept or reject a settlement offer and that compliance with this requirement is monitored appropriately;
- review their claims handling policies and procedures to ensure that:
- where a claimant has waived its right to be allowed at least 10 business days to accept or reject a settlement offer, that the insurer keeps a record of the decision;
- it includes the requirement under provision 7.20 of the Code pursuant to which regulated entities must provide a claimant with written details of any internal appeals mechanisms available.
Risk that gadget insurance may not meet consumers’ expectations
Insurers must take the necessary steps to ensure that clear and understandable information is provided to consumers on the product being sold, including the cost of the product, at the point of sale so that consumers can make an informed decision.
Firms must consider the issues identified in the letter, not only for gadget insurance products but also for all non-life insurance products. They must also take remedial actions to ensure that they are acting in the best interests of consumers and in line with the Central Bank’s expectations. The Central Bank expects boards to discuss and consider its “Dear CEO” letter at its next meeting and that the minutes of the relevant board meeting will record this.
The Central Bank is engaging directly with firms where issues have been identified and supervisory requirements with specific timelines for remediation of issues have been imposed.
The “Dear CEO” letter is available here.
This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.