Insurance companies, brokers and agents operate under the same broad scheme of regulation, as financial advisors and other financial product sellers. There are European-wide standards applying. The Central Bank, now the Central Bank is the insurance industry regulator. See the sections on financial services regulation.
Insurance companies must be authorised by the Central Bank and are subject to ongoing supervision by it. There are distinct regulations and requirements for life assurance and non-life assurance There are EU-wide standards in relation to capitalisation. companies. They must hold at least prescribed levels of minimum capital and reserves, in order to meet claims in the business. Insurance companies must meet minimum solvency requirements.
The Central Bank is the industry regulator and policeman. It has significant powers to investigate compliance and impose sanctions for breaches of obligations. They can undertake enquiries and impose sanctions. The powers extend beyond breaches of legal requirements, to cover of standards of fairness, reasonableness as provided by codes of conduct, in particular, the Consumer Protection Code.
The Central bank may can impose significant sanctions directly on insurance companies, intermediaries and their senior personnel. Sanctions can range from cautions, reprimands, to penalties, disqualifications, et cetera.
The Financial Services Ombudsman deals with complaints by consumers relating to financial services providers and intermediaries including insurance companies and insurance brokers. The provider or intermediary’s internal complaints mechanisms must be first exhausted
Eligible customers can make complaints to the Financial Services Ombudsman. This includes both consumers, and also businesses or company whose annual turnover is less than €3,000,000.
A complaint can be made to the Financial Services Ombudsman provided that the matter has not been the subject of legal proceedings and is related to a matter within the last [12[ years.
The Financial Services Ombudsman attempts to resolve the complaint by mediation. Generally, mediation is preferred. If this is not successful, the office of the FSO investigates and adjudicates upon the complaint.
It has powers to adjudicate and investigate disputes. This includes powers to compel the giving of the evidence and the production of documents It can compel persons to cooperate. It is an offence not to cooperate.
A complaint can be upheld on a number of bases. This includes the following;
- that it is contrary to law
- unreasonable, unjust, oppressive,
- improperly, discriminatory;
- based on improper motives or irrelevant considerations;
- based on a mistake of fact or law,
- that no explanation was given;
- that the conduct was improper.
The FSO may give directions to change the conduct or practice. It may award compensation up to €250,000. There is an appeal to the High Court.
Restricted Activity Intermediary
Multi-agency intermediaries hold appointments from a number of insurance companies. They must hold appointments from the relevant insurers and from other providers, such as Lloyd’s.
A restricted activity intermediary (usually a multi-agency intermediary) receives and transmits orders and provides advice in relation to insurance providers from whom it holds an appointment. There is a similar category of agents who receive and transmit orders to Lloyd’s brokers and other intermediaries
Authorised advisors may provide advice on the range of policies in the market. In contrast, restricted activity intermediaries may only provide advice in relation to products of insurers from whom they hold an appointment.
A restricted activity intermediary must comply with requirements in relation to their conduct and solvency. They must submit accounts and other information to the Central Bank. They are limited in the manner in which they handle client monies. There are requirements in relation to competence, qualifications, skills and ongoing professional development.
Where an intermediary has a single appointment, he is a single-agency intermediary. Where he is a tied agency he must describe himself as a tied agent.
A restricted activity intermediary may not generally handle client money. Monies are received as agent on behalf of the insured. There are very limited circumstances in which they can handle client funds.
The consumer protection code now applies to insurance intermediaries. Insurers must maintain a register of intermediaries, which to be available for inspection by the public.
Persons undertaking administration or certain activities in relation to insurance contracts, including claims, must be registered under the insurance mediation legislation.
There are certain exceptions for the requirement of authorisation for insurance intermediaries, such as where insurance is complementary, for example, to a contract for the supply of goods, travel insurance.
An insurance broker is an intermediary who holds appointments from at least five insurers of the same type, e.g., general insurance. An insurance agent is an intermediary with less than five appointments.
A single-agency intermediary holds one appointment. A tied agent is effectively an agent of the insurer and must refer all proposals to the insured. Each agent must disclose his status. The insurance company must take full and unconditional responsibility for the tied agent.
Intermediaries’ Obligations I
Intermediaries must have the requisite knowledge and competence. They must have certain organisational systems. Intermediaries who handle client money are subject to particular requirements. In many instances, payment to an insurance intermediary will be deemed to be payment to the insurance company, thereby removing the risk of fraud or default by the broker.
Insurance intermediaries must generally have professional indemnity insurance of €1 million per claim and aggregate limit of €1,500,000 for claims in any year.
Intermediaries must disclose certain information, including whether they are limited to providing products of a particular insurer, or provide analysis on the basis of a large number of products in the market. They must provide specific information to customers in advance of entering insurance policies. They must complete an assessment of the customer’s needs and advise and issue insurance in accordance with this assessment.
Insurance intermediaries must be members of a compensation fund.
Intermediaries Obligations II
The Consumer Protection Code places obligations on insurance intermediaries in respect of premium and money handling. Generally, the insurance intermediary is the agent of their client. In some circumstances the code deems him to be the agent of the insurance company so that it takes the loss concerned if funds are improperly applied.
An insurance agent is the agent of his client when he completes and helps the client to complete a proposal form. He is deemed to be the agent of the insurance company and the insurance company is responsible for errors in the proposal.
Insurance providers and intermediaries must have a complaint handling procedure. They must give their terms of business. They must act with due care and skill. They must perform to the standards of a person, with similar skill and profession.
The broker is generally the agent of the insured. He has a duty to the insurers as well as to his clients.
The terms and conditions of the appointment must be set out in a written agreement. Regulatory requirements require that the terms of business be provided. The broker has the following broad duties;
- to follow the client’s instructions;
- to advise the client in relation to his needs;
- to use due care to satisfy client’s needs;
- to be familiar with the general principles of insurance law.
An intermediary may assist the insured in completing the proposal form. He should inform the insured of the obligation to disclose all material facts.
The broker must pass on information to the insurance company. He must explain queries and questions raised. He should ensure that the policy wording is appropriate for the cover concerned. A broker can be liable in damages to his client where he breaches his expressed or implied duties.
Insurance undertakings must give certain information, before or at the point of sale. There are detailed provisions in relation to life assurance and investment type policies.
There are requirements relating to motor insurance. This included in particular requirement to get 15 days’ notice of the renewal and no claims bonus certificates specifying discount.
Insurance intermediaries must disclose certain information at the point of sale. They must disclose whether they act as agent or whether they offer advice on the basis of a fair analysis of the market. They are required to outline the needs and demands of the client on the basis of information furnished and give reasons why.
There are limits on the requirements to fact-find and give reasons in respect of certain larger commercial general insurance. Information must be given to the customer in a durable form.
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