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ONE
Cyber Insurance and
Claims TrendsMichelle Boland, AIG
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Cyber Insurance and Claims Trends
20th November 2019Brokers Ireland Annual General Insurance Conference
Michelle BolandPI and Cyber Underwriting Team Leader, AIG
What is Cyber / Data Protection Insurance?
Main Trigger - Loss or theft of Personal or Corporate Information
Event Management /Incident Response CostsLegal response, IT Forensics, Public Relations, Notification, Credit Monitoring, Data Restoration
Data Protection ObligationsData Protection Investigation/Lawfully insurable fines and or penalties
Third Party Liability ▪ Breach of confidentiality, Privacy or Data Protection Acts ▪ Failure to protect sensitive personal or corporate information▪ Breach of duty when processing third party data
Cyber (Non Physical) Business Interruption
End-to-End Risk Management Solution
Cyber Claims by Reported Incident
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Claims by Industry
7
Cyber Claims by Volume
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• AIG saw as almost twice as many claims notifications in 2018 as in 2017
• Ransomware replaced by business email compromise as leading cause of cyber incidents
• No industry is immune to a cyber-attack
• Human error continues to be a significant factor
• GDPR effect
Key Features
9
The scenarios described herein are offered only as examples. Coverage depends on the actual facts of each case and the terms, conditions and exclusions of each individual policy. Anyone interested in the above product(s) should request a copy of the policy form itself for a description of the scope and limitations of coverage.
10
Case StudiesCase Studies
•Attack on the IT systems took place through ransomware known as “Detractor”. Three servers encrypted and back-ups, on a different server, were deleted
•Attackers demanded a ransom in order to decrypt the system. The insured’s operation had ground to a halt as systems could not be restored
•Aim of the ransomware was not to steal information and there had not been a breach of personal information •On Event Day 10, the insured paid the ransom in BitCoin and was able to restore its operations
•AIG covered the cost of the ransom, incident response costs and the extensive network interruption, which included an increased cost of working and cancelled orders
Case Study
Manufacturer pays €25,000 ransom after suffering business interruption
11
•An SME professional services firm, was alerted to a cyber incident after receiving notifications from clients who had received a suspicious email from an employee of the firm. The email contained various links and a PDF invoice requesting payment from the recipients
•Upon initial investigation, it was determined that the employee’s email account had been compromised and a phishing email had been sent to 5,500 email addresses. The insured was proactive in taking corrective action and changing passwords
•AIG recommended the insured notified the Data Protection Regulator as a matter of caution, despite the fact the only identifiable information from the phishing emails were the recipients’ names and places of work. The recommendation to notify was driven by the nature of the firm’s business and reputational considerations.
Case Study
Email account compromised at Financial Services Intermediary
12
Whilst every effort has been taken to ensure the accuracy of the information in these pages, we make no representation and/or warranty express or implied that the financial information and/or information is correct, complete or upto date. The financial information and/or information is subject to change at any time without notice. You should not take (or refrain from taking) any action in reliance on the financial information and or information and we will notbe liable for any loss or damage of any kind (including, without limitation, damage for loss of business or loss of profits) arising directly or indirectly as a result of such action or any decision taken.
AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. Products and services are written or provided by subsidiaries or affiliates ofAmerican International Group, Inc. Not all products and services are available in every jurisdiction, and insurance coverage is governed by actual policy language. Certain products and services may be provided by independent thirdparties. Insurance products may be distributed through affiliated or unaffiliated entities. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in stateguaranty funds and insureds are therefore not protected by such funds.
AIG Europe S.A. is authorised by the Luxembourg Ministère des Finances and supervised by the Commissariat aux Assurances, and is regulated by the Central Bank of Ireland for conduct of business rules.
Morning Coffee Meet the Exhibitors
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Master of CeremoniesDavid Davin-Power
ONE
OE
09:30 – 09:40 Conference Opening – Cathie Shannon, Director of General
Insurance, Brokers Ireland
09:40 – 09:50 Welcome Address – Malcom Craig, Premium Credit
09:50 – 10:15 Insurance Progress Update – Minister Michael D’Arcy Minister
of State, with responsibility for Financial Services & Insurance
10:15 – 10:45 Using Behavioural Science to be Successful in Business –
Anthony Kelly, Carr Communications
10:45 – 11:15 The Broking View on Developing Technology – What Do
Buyers Want?– Andy Thornley, Head of Corporate Affairs, BIBA
CONFERENCE AGENDA
OE
11:15 – 11:30 COFFEE BREAK
11:30 – 12:00 Launch of Brokers Ireland ‘Insurance Broker’ brand - Rowan
McKevitt, Director, Climate Design Studio
12:00 – 12:30 Duty of Care & Risk Management – Best Practice and Useful
Tools for Brokers on Managing Risk, Avoiding Claims in the
Efficient Management of their Businesses - Andrew McGahey,
Senior Partner, Kennedys Law Firm
12:30 – 13:00 Guest Speaker - Philly McMahon, GAA Footballer
13:00 Conference Close – Duncan Duke, President, Brokers Ireland
13:10 LUNCH
Conference Opening Cathie Shannon
Director of General Insurance
Brokers Ireland
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Welcome AddressMalcolm Craig
General Manager, Premium Credit
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Insurance Progress UpdateMinister Michael D’Arcy
Minister of State with Responsibility
for Financial Services and Insurance
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Using Behavioural Science to
be Successful in BusinessAnthony Kelly, Head of Behavioural
Economics Services
Carr Communications
ONE
Using Behavioural Economics to be Successful in Business
Anthony Kelly
Power of Written Word
Imagine the scene, you’re walking down a New York street and you see a brown package.
You open it, and find a wallet, and a note.
You read the note and discover it was from someone who had found this very lost wallet.
They were returning the lost wallet to its owner, and in the process of returning it – they managed to lose it.
24
The Note Reads
25
Dear Mr. Erwin,
I found your wallet which I am returning. Everything is
here just as I found it.
I must say that taking responsibility for the wallet and
having to return it has been a great inconvenience. I was
quite annoyed at having to bother with the whole
problem of returning it. I hope you appreciate the
efforts that I have gone to.
How would you feel?
How would you behave?
Power of Written Word
This is where the experiment became really interesting
The notes inside the packet had variations in language and in tone
26
The Returned Wallets
Positive letter
Dear Mr. Erwin,
I found your wallet which I
am returning. Everything is
here just as I found it.
I must say that it has been a
pleasure to be able to help
somebody in the small things
that make life nicer. It’s
really been no problem at all
and I’m glad to be able to
help.
Neutral letter
Dear Mr. Erwin,
I found your wallet which I
am returning. Everything is
here just as I found it.
Negative letter
Dear Mr. Erwin,
I found your wallet which I
am returning. Everything is
here just as I found it.
I must say that taking
responsibility for the wallet
and having to return it has
been a great inconvenience. I
was quite annoyed at having
to bother with the whole
problem of returning it. I
hope you appreciate the
efforts that I have gone to.
27
51% 60%18%
The Returned Wallets
Scientists were able to manipulate the return rate by
changing people’s feelings about the task they were
considering undertaking
28
The Returned Wallets contd.
› ‘Hard to accept that people took the writer’s attitude as a model for what their attitude ought to be’ –but they did
› Feeling, not reason, dictated whether they sent the wallet back
Emotional contagion
• How you felt they felt
• If they were happy to do it, you’re happy to follow through
29
Feelings Influencing Behaviour
› It was feeling, not reason, that influenced behaviour
› Your language influences how customers feel about you, your products and your brand
› Those feelings will influence how they act – whether they buy or not
› How do you make people feel?
› Where are you causing these feelings in your customers?
30
Push and Pull
31
They’re all apparently small interventions
Your customers
Small things
you’re doing that
act as barriers to
customers
Small things you
can do to help
customers to
engage with you
Sir David Brailsford
32
‘The whole principle came from the idea that if you broke down everything you could think of that goes into riding a bike, and then improved it by 1%, you
will get a significant increase when you put them all together.’
Sir David BrailsfordBritish Cycling Coach
33
Source: Sir Dave Brailsford – the 1% Factor, London Business Forum, https://www.youtube.com/watch?v=NQxYlu12ji8
Marginal Gains
34
Antibacterial gels to reduce
infection
Liquid chalk on bike’s handlebars
rather than gloves
Painting inside of bike truck white
Travelling with own pillow
Avoiding shaking hands
Adapting bike seats
What is a Nudge?
Nudge is a small change in the choice environment
Helps people to make better decisions
Pensions – automatically in
‘The salad has to be put somewhere’
35
Dan Ariely at BX2019
› Beyond question that Behavioural Science is now having
profound impact
› Not just the small things and tweaks
› Significant changes in public policy and in approach to
widest range of issues
36
Waiting Days – Hospital Appointment Text Reminders
37
Scheduled appointmentSMS Reminder #1
5 days before
SMS Reminder #2
3 days before
Adapted from Dan Ariely’s
Keynote at BX2019
Appointment Attendance
› Hospital text
› My text message
• Exactly the same as the baseline – the poor one
› Some like me will always turn up anyway – irrespective of how it is framed
› But those who do are not the population – and we cannot base our assessment of what works on what the ‘compliant’ people do
› Any change at all – no matter which new formulation he chose - was an improvement on the baseline
38
21.1%
14.2%15.3%
18.6%17.7% 17.8% 18.2%
19.1% 19.2%
Standard AnotherPatient
SpecificCosts
FamilyReminder
Social Proof NationalEffort
HumanFactor
AlternativeStandard
ExpertReferral
Reducing the number of no-shows
39
Statistically significant improvement
32.7% 27.5%
Lower is better
n=161,587
Adapted from Dan Ariely’s Keynote at BX2019
Since changing the message 400,000 days have been saved
Appointment Attendance
Another patient Reciprocity, concern for one other person
Specific costs Value of the session, putting a value on your time
Family reminder Values, warmth, morals up front, priming
Social proof Herding behaviour, others like you
National effort Part of identity
40
What are the small things you can do in … ?
› Your website
› Your collateral / brochures
› Your subscription forms
› Your phone script
› Your customer service
41
Small changes,
influencing customer
behaviour
… that needs reviewed for the language to push or
to pull your customers in one direction
Language
matters
Story
(emotion)
matters
Appearance
matters
What matters in your customer interactions?
42
How you
curate your
choices
matters
People can’t
cope with too
much choice…
Defaults
(anchors)
matter
Sets
expectations
and removes
barriers
Attention - From Dripping Tap…
43
…to Fire Hose
44
No change in drinking capacity
45
Barry Schwartz
Psychologist
Dorwin Cartwright Professor of Social Theory and Social Action at Swarthmore College, Pennsylvania
Author of “The Paradox of Choice: Why More Is Less”
46
The Paradox of Choice
47
Source: The paradox of choice | Barry Schwartz, TED, https://youtu.be/VO6XEQIsCoM
Jams
48
30% purchase
3% purchase
Too much choice hinders us
We assume that more is better – more information and more
choices lead us to make better choices
‘While too little choice is stifling, having too many choices can be
paralyzing; our bounded brain is overwhelmed, and we end up
picking badly or giving up.’
Shlomo Benartzi, The Smarter Screen
49
Reducing the number of decisions
“You’ll see I wear only gray or blue
suits ... I’m trying to pare down
decisions. I don’t want to make
decisions about what I’m eating or
wearing. Because I have too many other
decisions to make.”
Barack Obama, in an interview with Vanity Fair
50
And others …
51
Attention and Memory
› Professor Nelson Cowan
› Curators Distinguished Professor of Psychology - Principal Investigator, Department of Psychological Sciences, University of Missouri-Columbia
› World leading expert on Attention and Working Memory
› How much can be held in working memory?
52
Magical mystery … 4
‘The true magical number is actually four (plus or minus one), with most
tests of working memory showing that we start to miss crucial information
whenever the number of bits (letters, words, numbers, colours, whatever)
exceeds that amount.’
Nelson Cowan, quoted by Shlomo Benartzi, The Smarter Screen
53
How much can be held in working memory?
Attention and Memory
‘This is a sobering finding because we are living in a world over-flowing with information, and because the mind can process only such a small amount of it, we are forced to constantly choose what to attend to.
‘It doesn’t matter how much data you throw up on to the screen – we can only notice about four bits of it.
‘The rest is noise. Wasted pixels.
‘The smallness of our magical number has a huge effect on how people make choices.’
Nelson Cowan, quoted by Shlomo Benartzi, The Smarter Screen
54
Language
matters
Story
(emotion)
matters
Appearance
matters
Choice Architecture Model
55
How you
curate your
choices
matters
People can’t
cope with too
much choice…
Defaults
(anchors)
matter
Sets
expectations
and removes
barriers
› Richard Thaler mantra
• Make it easy
› Often only looking for one recommendation
• Use default options
Anchors (Defaults) Matter
56
“Most of our customers like you find this product
suits their needs best”
Language
matters
Story
(emotion)
matters
Appearance
matters
What matters in your customer interactions?
57
How you
curate your
choices
matters
People can’t
cope with too
much choice…
Defaults
(anchors)
matter
Sets
expectations
and removes
barriers
Language Matters – Changes Debates
58
Global Warming Climate Change Gun Control Personal
Freedom
Change the language Change the debate
Framing – which of these is likely to sell more
59
Language You Use
› When presenting consumers with options for their retirement income
› Using the word annuity reduces the number of people that choose the product called ‘annuity’ compared with other labelled income streams
60
‘The use of the term ‘annuity’ reduces the number of consumers who choose the annuity, even though consumers appear to value the underlying characteristics of the annuity.’
FCA, 2014
https://www.fca.org.uk/publication/research/rims-framing-experiment.pdf
Language
matters
Story
(emotion)
matters
Appearance
matters
What matters in your customer interactions?
61
How you
curate your
choices
matters
People can’t
cope with too
much choice…
Defaults
(anchors)
matter
Sets
expectations
and removes
barriers
Message 1 - Rokia
62
Any money that you donate will go to Rokia.
Rokia, a 7-year-old girl from Mali, Africa, is desperately
poor and faces a threat of severe hunger or even
starvation.
Her life will be changed for the better as a result of
your financial gift.
With your support, and the support of other caring
sponsors, Save the Children will work with Rokia's family
and other members of the community to help feed her,
provide her with education, as well as basic medical
care and hygiene education.
Message 2 - Child Death in Africa
63
Food shortages in Malawi are affecting more than 3 million
children.
In Zambia, severe rainfall deficits have resulted in a 42% drop in
maize production from 2000. As a result, an estimated 3 million
Zambians face hunger.
Four million Angolans - one third of the population - have been
forced to flee their homes.
More than 11 million people in Ethiopia need immediate food
assistance.
Power of Stories
› Rokia alone generated more than the Child Deaths in Africa – the story of the millions – gave you 50% less
than Rokia on her own
› People donated more than twice as much to help Rokia than they did to help millions of children
› We can’t care about the millions, and we care less about two than we do about one
› Rokia’s story – when told in a particular way – doubles giving
› Changes to that story can reduce giving by up to 50%
64
Stories (Emotion) Matter
65© Carr Communications Ltd. 2019
Stories (Emotion) Matter
66
Case studies
Human stories
Others like you
Cautionary tales
Language
matters
Story
(emotion)
matters
Appearance
matters
What matters in your customer interactions?
67
How you
curate your
choices
matters
People can’t
cope with too
much choice…
Defaults
(anchors)
matter
Sets
expectations
and removes
barriers
Appearance Matters
68
Two groups given annual corporate reports – both contained the same information
Aesthetically pleasing
High quality images
Clear layout
No design aesthetic
No images, infographics, graphs
No colour
$327.01 per share $162.41 per share
What matters in your customer interactions?
69
Language
matters
Story
(emotion)
matters
Appearance
matters
How you
curate your
choices
matters
People can’t
cope with too
much choice…
Defaults
(anchors)
matter
Sets
expectations
and removes
barriers
What can you do today?
70
Language
matters
Story
(emotion)
matters
Appearance
matters
How you
curate your
choices
matters
People can’t
cope with too
much choice…
Defaults
(anchors)
matter
Sets
expectations
and removes
barriers
Small changes,
influencing customer
behaviour
What can you do today?
71
Language
matters
Story
(emotion)
matters
Appearance
matters
How you curate
your choices
matters
People can’t cope
with too much
choice…
Defaults
(anchors)
matter
Sets expectations
and removes
barriers
Small changes,
influencing customer
behaviour
PUSH AND PULL – WHAT SIMPLE INTERVENTIONS WILL YOU MAKE?
PROSPECTING – THREE NEW CONTACTS
LANGUAGE – BUILD SOME BEHAVIOURAL SCIENCE INTO YOUR ASK
Thank you
© Carr Communications Ltd 2019 – All rights reserved
5 Northumberland Road
Ballsbridge
Dublin 4
(01) 772 8900
www.carrcommunications.ie
The Broking View on
Developing Technology
What do Buyers Want?Andy Thornley,
Head of Corporate Affairs, BIBA
ONE
The broking view on developing technology:
What do the buyers really want?
Andy Thornley
Head of Corporate Affairs
British Insurance Brokers’ Association
What do the buyers really want?
• The growing shift to subscription
• Use vs ownership
• Enablers to development
• Barriers
• How long does tech take?
• Key take home messages
4G: 100,000 devices per KM2
5G: 1,000,000 devices per KM2
What brokers said:
• “Get the software houses to make models which fit the insurance industry specifically rather than having work arounds because it is something their system does not do normally. It always seems like the tail wagging the dog rather than the other way around.”
• “...More competition- the main 3 or 4 Software Houses control virtually all development.”
• “Software houses are too reliant on their past technology to leap forward and hence new entrants are needed to provide new software to brokers.”
• “Increase competition with additional EDI Software houses.”
• “Lean on software houses.”
• “Partner more closely with software houses. We recently proposed a CRM system from Microsoft however the email distribution element was not compatible with outlook in our software house environment”.
Ten years later
Are you selling the product the customer wants, or the product you have?
Change is happening. It’s both a threat and an opportunity.
Don’t project the world of today on the future of tomorrow
Thank you.
Questions?
COFFEE BREAK11:15 – 11:30
ONE
Launch of Insurance
Broker BrandRowan McKevitt, Creative
Director, Climate Design Studio
ONE
Next StepsCathie Shannon
Director of General Insurance
Brokers Ireland
ONE
Next Steps
• Register expression of interest today to receive Insurance
Broker brand guidelines and logo
• Work on developing brand will continue in first quarter of 2020
• Website development; brokerage profile; contact details;
products search; “Find a Broker” facility
Funding Insurance Broker
• Monthly fee €75 per month per Broker office from March 2020
• An ‘Early Broker’ offer of €825 (one month free) is available to
members who pay in one annual instalment
ONE
The Sky’s the Limit!
• Marketing of Insurance Broker is dependent on funding
received from Brokers
• Commitment from Brokers is essential for consumer
radio/press advertising; digital campaigns; sponsorship
opportunities; social media presence
• 2020 – a new decade and a fresh start to revitalise a vibrant
and professional brand for Insurance Brokers
o Your Brand
o Your Brokerage
o Your Business
www.insurancebroker.ie
ONE
Duty of Care & Risk
Management Andrew McGahey
Senior Partner
Kennedy’s Law Firm
ONE
BROKERS IRELAND GI CONFERENCEBROKERS’ DUTIES
Andrew McGahey, Partner, Kennedys
120
AgendaWhat is the role of an insurance broker? 3
What duties does an insurance broker owe to their client? 3
Key risk areas 4
➢ Placement 5
➢ Renewal 10
➢ Claims 11
Checklists 12
Consumer Protection Code (“CPC”) 2012 14
Addendum to the CPC 2012 15
European Union(Insurance Distribution) Regulations 2018 18
121
• Act as the agent of the insured for the
purpose of effecting insurance.
– Placement
– Renewal
• Give advice in connection with insurance
policies.
– Placement
– Renewal
– During policy period
• Assist the insured in making claims. Duties:
• Expected to act in the best interests of the
insured.
– Not put him/herself in a position of
conflict
– Must act honestly, faithfully and loyally
What is the role of an insurance broker?
122
• Placement
– Know Your client (assessing their needs)
– Duty of disclosure
– Misrepresentations
– Effect the policy
– Check the policy
• Renewal
• Claims
– notification
At all times, avoid conflicts
of interest and act in
insured’s best interests.
Key risk areas for insurance brokers
123
• Broker is obliged to assess the client’s needs
• Duty to:
• Identify and advise the client about the type and scope of
cover which the client needs;
• Match as precisely as possible the risk exposures identified
with the coverage available.
• Expected to:
• Have basic knowledge of insurance law;
• Question the client to elicit relevant information;
• Monitor client's requirements if he is aware they may
change.
Nature and scope of broker’s
obligations depends on:
• the circumstances;
• the client’s instructions;
• the sophistication of the
client.
Know Your Client - adequately assessing the client’s needs
Placement
124
• Need to advise the insured of the duty to disclose all
material circumstances and the consequences of not doing
so.
Consequences are severe – avoidance of policy!
• Mindful that a client may not appreciate what ought to be
disclosed as being material or arguably material.
• Part of broker’s expertise is to recognise matters which
ought to be disclosed and make sure they are – if in doubt,
the broker should advise that it is disclosed!
• Care should be taken where there is a change of personnel
at the insured.
• Broker is under a duty to make enquiries of the client.
s.18 Marine Insurance Act
1906 – insured’s duty of
disclosure.
s.19 Marine Insurance Act
1906 – broker’s personal duty
of disclosure
s.20 Marine Insurance Act
1906
- duty not to make
misrepresentations
Disclosure
Placement
125
• Broker should not make a representation to the insurer that he knows is false or should know
is false – if he does, and insurer avoids the policy, broker exposed to liability to insured.
• Be careful if requested to complete a proposal form.
• Check the proposal form.
• Get the insured to confirm in a declaration that he understands the duties he is under.
PlacementMisrepresentations
126
• Does the cover meet the client’s needs?
• Does it cover the risks to be insured?
• Are there any defects in the policy wording which may be
unsatisfactory to the client? (Governing law and jurisdiction)
• Is the cover at an adequate level?
• Need to explain underinsurance and the effects of average.
• Inform the client of onerous terms or restrictions and their
nature and effect.
• Inform the client urgently if he becomes uninsured.
A broker is not obliged to
determine complex sums
insured e.g. business
interruption cover.
They are not valuers.
But they must explain the
methodology and explain the
terminology, so that the client
understands what is required.
Checking the policy
Placement
127
• Broker must effect the insurance which meets client’s requirements.
(failure could only be justified where unobtainable)
• Even if unobtainable, duty to inform client promptly.
• If client defines the risks to be insured, broker must carry out those instructions (if possible
to do so).
• Broker is duty bound to consider the solvency of the insurer.
PlacementEffecting the insurance
128
Same duties apply as at the policy’s original inception.
Broker needs to check:
• Has client’s circumstances and requirements changed?
• Has there been a change of personnel – do they understand
their disclosure obligations?
• Is the client aware of any claims or circumstances that may
or are likely to give rise to claims?
Don’t assume everything is the same as last year!
Remember to notify
circumstances and claims to
expiring policy!
Renewal
129
Broker must:
• Notify the correct insurer(s) - primary and excess
• Comply with any time limits
• Comply with (or advise the insured to comply with) any
notification requirements.
• Assess the information provided to consider what
notification, if any, should be made – are they
circumstances that may (or are likely) to give rise to a
claim?
• Don’t bury bad news! Keep the client informed!
Particularly important where
requirements are condition
precedents!
Notification
Claims
130
Placement and renewal
Checklist
KYC - identify type and scope of cover client needs and advise accordingly.
Make a note of it!
Arrange the insurance the client has instructed broker to obtain, which is suitable and meets
client’s requirements.
When placing insurance, broker must advise client of duties of disclosure and representation and
consequences of breach.
General warning not sufficient!
If broker is unable to arrange the requested cover, then he should advise the client on scope of
cover available and what is not available.
Once cover has been placed, the broker should explain to the client the cover that has been
arranged and draw client’s attention to onerous terms and restrictions.
At renewal, broker should go through the same exercise carried out at original inception.
✓
✓
✓
✓
✓
✓
131
Claims
Checklist
Be aware of notification requirements – what information needs to be provided and by
when?
If you receive a purported notification:
➢ check the policy requirements;
➢ notify insurers quickly; and
➢ if you believe the insured has provided insufficient information, ask for further
information, quickly;
Advise the insured of the notification requirements – explain the bar (may or likely) to be
met.
✓
✓
✓
Discuss potential claims (circumstances) with the insured and advise if they need to be
notified – if in doubt, notify!✓
If at renewal, think about notifying into expiring policy.✓
Better to be cautious!
132
CPC applies to most regulated financial services firms, including insurance intermediaries.
When providing a quote an intermediary must:
➢ Set out:
• the monetary amount of the quotation (Section 4.30)
• when it expires (Section 4.30)
• full legal name of the underwriter (Section 4.30)
• all applicable warranties and endorsements (Section 4.31)
• costs of agreeing the quotation (Section 4.57)
and:
• fully appraise the consumer in relation to material non-disclosure (Section 4.35)
Consumer Protection Code (“CPC”) 2012Useful summary of broker’s obligations
133
➢ The Addendum will impact on remuneration arrangements in the insurance
sector from 31 March 2020.
➢ Objective - to reduce conflicts of interest and increase transparency
requirements in relation to commission payments for the benefit of
consumers.
➢ Amended CPC sections:
• Chapter 3 – Conflicts of Interest;
• Chapter 4 – Provision of Information.
Addendum to the CPC 2012 (September 2019)Addendum for Intermediary Inducements – Enhanced Consumer Protection Measures
134
The Addendum prohibits:
• Volume linked targets/remuneration (including override commission) and bonus payments linked to business
retention;
• Soft commission arrangements, i.e. agreements under which the regulated entity receives a fee, commission,
other reward or remuneration in the form of goods or services, in return for which it agrees to direct business
through or in the way of another person, e.g. hospitality such as tickets to sporting events.
The Addendum does not prohibit:
• Profit-related remuneration arrangements (if such arrangements do not interfere with an intermediary’s duty
to avoid conflicts of interest and consider the consumer’s best interests);
• Certain minor non-monetary benefits, e.g. attendance at a conference within Ireland, access to IT software or
platforms, or hospitality of a reasonable de minimis value such as food and drink during a business meeting or
conference.
Addendum to the CPC 2012 (September 2019)Addendum for Intermediary Inducements – Enhanced Consumer Protection Measures
135
➢ “Independent” and “Impartial”
• Intermediaries will be restricted from using the description “independent” and similar terms such
as “impartial”, where they receive any form of remuneration (other than a minor non-monetary
benefit) from a regulated entity for the provision of advice to consumers, even where such advice
is ultimately provided on the basis of a fair market analysis.
➢ What’s next for intermediaries?
In advance of 31 March 2020, intermediaries will need to:
• Review their remuneration arrangements with commercial partners to ensure they are designed in
a way which encourage best practice, avoid conflicts of interests and promote consumer
protection; and
• Consider whether the use of “independent” or any similar term in their trading name or terms of
business remains permissible.
Addendum to the CPC 2012 (September 2019)Addendum for Intermediary Inducements – Enhanced Consumer Protection Measures
136
➢ The Regulations apply from 1 October 2018
Section 20 – Competence Requirements
➢ Must possess appropriate knowledge and ability necessary to complete their
tasks and perform their duties adequately.
Section 21 - Indemnities, protections and policies
➢ Must hold ring-fenced professional indemnity insurance for not less than
€1,250,000 applying to each claim and €1,850,000 in aggregate per year.
EUROPEAN UNION (INSURANCE DISTRIBUTION) REGULATIONS 2018 (S.I. No. 229 of 2018)(The “Regulations”)
PART 5 - Organisational Requirements
137
Chapter 1 – Information
➢ Section 30 - Information requirements and conduct of business rules
• 30(1) – Must act honestly, fairly and professionally in accordance with the
best interests of their customers.
• 30(2) – All information must be fair, clear and not misleading and all
marketing communications shall be clearly identifiable as such.
• 30(3) – Remuneration must not conflict with the duty to act in accordance
with the best interests of their customers.
EUROPEAN UNION (INSURANCE DISTRIBUTION) REGULATIONS 2018 (S.I. No. 229 of 2018)(The “Regulations”)
PART 7 - Information requirements and conduct of business rules
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Chapter 1 – Information
➢ Section 31 - Information and transparency requirements for insurance intermediaries
• Certain mandatory information to be provided, including:
▪ Identity and address of the intermediary;
▪ Whether the intermediary provides advice;
▪ Complaints procedures (FSPO);
▪ The CBI register in which the intermediary has been included;
▪ Acting for customer or insurer;
▪ In relation to the contracts proposed:
- the advice is given on the basis of a fair and personal analysis
- the nature of the remuneration
EUROPEAN UNION (INSURANCE DISTRIBUTION) REGULATIONS 2018 (S.I. No. 229 of 2018)(The “Regulations”)
PART 7 - Information requirements and conduct of business rules
139
Chapter 1 – Information
➢ Section 31(1)(j)- Remuneration
• In relation to the contract, the intermediary works:
i. on the basis of a fee, that is the remuneration paid directly by the customer;
ii. on the basis of a commission of any kind, that is the remuneration included in the
insurance premium;
iii. on the basis of any other type of remuneration, including an economic benefit of any
kind offered or given in connection with the insurance contract, or
iv. on the basis of a combination of any type of remuneration set out in clauses (i), (ii) and
(iii).
EUROPEAN UNION (INSURANCE DISTRIBUTION) REGULATIONS 2018 (S.I. No. 229 of 2018)(The “Regulations”)
PART 7 - Information requirements and conduct of business rules
kennedyslaw.com
@KennedysLaw
linkedin.com/company/Kennedys
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Guest Speaker Philly McMahon
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Conference CloseDuncan Duke
President
Brokers Ireland
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Lunch
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