Welcome to HFW’s Insurance Bulletin, which is a summary of the key insurance and reinsurance regulatory announcements, market developments, court cases and legislative developments of the week. 1. Regulation and legislation
On 17 March 2014, the French Parliament passed a new consumer law ( the “Loi Hamon”) the principal provision of which was the introduction of class actions. The law came into force on 1 October 2014.
The new section of the Consumer Code restricts the new type of “class action” to “nationally representative consumer defence associations”, recognised by the Consumer Code. The statutes of consumer associations define the type of dispute or issue for which the association can represent its members. The dispute which is proposed to be the subject of the class action must fall within the scope of these statutes.
Class actions are also restricted to claims for compensation of quantifiable losses resulting from material loss suffered by consumers. There needs to be a common cause, being a breach by one or more professionals of their legal or contractual obligations in the context of (inter alia) sale of goods or supply of services. Claims for losses resulting from physical injury, as well as “moral” (i.e. immaterial) damages, are excluded from this type of action.
In the standard type of class action, the courts define, after a preliminary ruling on admissibility and liability, which type of consumer may opt into the group.
It is too early to determine what impact the advent of class actions will have on insurers. Clearly there will be increased litigation for certain types of consumer claims, which may impact liability insurers.
The first class action was launched on 1 October by a consumer association, relating to the illegitimate invoicing of approximately 318, 000 tenants by a property management company. Shortly after that class action was launched, a French insurance company and another association were targeted by class actions relating to the unilateral decrease of interest rates in life-insurance contracts. These claims have been estimated at between 300 and 500 million euros.
This is clearly just the beginning of a raft of class actions under the new law.
Australian Insurance Contract Act – introduction of new duty on home building and contents insurers
On 9 November 2014, s 33B of the Insurance Contract Act 1984 came into force. It imposes a duty on home building and home contents insurers to provide consumers with a one page key fact sheet (KFS). The purpose of the KFS is to provide consumers with easily accessible information about key features of the contract. It is also designed to assist them to compare competing polices. The structure of the KFS consists of the following:
Part 1 – contains details about the name of the policy and the details of the insurer including their AFSL number.
Part 2 – the insurer is required to set out the main risks covered and not covered under the policy as well as an indication of any main conditions or exclusions contained in the policy.
Part 3 – requires the insurer to set out the policy limit, the excess, the cooling off period and the amount of legal liability cover provided in the policy
Part 4 – requires the insurer to provide their contact details and to inform the consumer that they need to consider which cover is best for them.
The amendment is a response to the severe weather events experienced in Queensland, Victoria and New South Wales in 2011. The insurance industry was heavily criticised by the public and the government for the complexity of its policy information and the inability of consumers to access information about cover. The consequence was that many consumers found themselves with no cover or were significantly underinsured.
The introduction of the KFS ultimately aims to increase the simplicity and consistency in the description of what the product offers.
Hong Kong authorised insurers’ staff may soon be required to become licenced
HFW have previously published a briefing on Hong Kong’s Insurance Companies (Amendment) Bill 2014 (“the Bill”).
There has been an unexpected development: On 20 October 2014, at the Bills Committee’s first meeting after the summer, it transpired that the Administration intends to regulate the paid staff of insurance companies who have direct interaction with customers or policyholders on sales or advisory matters relating to insurance policies (e.g. customer service, telemarketing, sales & distribution, marketing, underwriting and claims staff). As employees of authorised insurers (of which there are thousands) currently are not licenced (relying on S.78(1) of the Insurance Companies Ordinance (ICO)) this would be a major change.
Under the Bill (which amends the ICO), persons must be licenced to carry on “regulated activities” in the course of their business or employment or for reward. The term is defined to cover activities in relation to giving advice on insurance and sale and after-sale administration of insurance policies (e.g. policy renewal or insurance claims). There are exemptions for lawyers and accountants, loss assessors and clerical or administrative staff of an insurance company. The Bill does not expressly exempt employees of authorised insurers. Conversely, the Bill does not create a new category of licences, so unless the Bill is amended, employees of authorised insurers would need to be issued with licences for individual insurance agents.
The Hong Kong Federation of Insurers surveyed its members about what the consequences might be and subsequently met with the Administration. We understand that the concerns raised are being considered.
Until now, US life insurers have not asked about space tourism and life insurance policies have not excluded space tourism from coverage. As a result, insurers would most likely be liable to pay a claim in the event that a policyholder died on a space trip.
The insurance loophole for space tourism could be set to change in the wake of the Virgin Galactic SpaceShipTwo crash on 31 October 2014. Insurance companies are said to be considering how to deal with space tourism, and may well include questions about space travel on the proposal. Some insurers may choose to exclude cover for space travel. Certainly as things currently stand there is little safety data to allow insurers to assess the risk of space travel. Premium charges from those insurers who choose to offer cover for space travel are likely to be significant.
The Minister for the Cabinet Office with responsibility for the UK Cyber Security Strategy, Francis Maude, co-hosted a summit of CEO’s from the UK’s insurance sector in conjunction with Marsh on 5 November 2014. The purpose of the meeting was to discuss how the insurance sector can help ensure that the UK is one of the safest places to do business in cyberspace.
UK companies face significant cyber risks, and a growing percentage of businesses have suffered a breach in the last year. By asking questions of businesses in relation to their cyber breach and operational risk policies, the insurance sector can help to promote good practice and improvements in cyber risk security management.
The summit was the first event of its kind, and marks the beginning of a closer collaboration between government and industry to help promote the cyber insurance market with a view to improving cyber risk management.
3. Court cases and arbitration
Judicial review finds that a company director was not an eligible complainant for the purposes of the Financial Ombudsman Service
Bluefin sought judicial review of a decision by the FOS that a company director was eligible to bring a complaint against it to the FOS. Bluefin had acted for the company director and his company in obtaining a D&O insurance policy. The policy provided cover in respect of any insured person, which included a company director. The company director alleged that he had notified Bluefin of a potential legal claim to be made against him personally for dishonest misrepresentations and breach of personal covenants. He claimed that his liability should have been covered under the policy, but that the insurer had rejected cover because Bluefin had failed to notify the insurer of the potential legal claim. The director complained to the FOS about Bluefin’s failure to act properly in its capacity as a broker. The FOS determined that it had jurisdiction to investigate his complaint.
It was held that the FOS had no jurisdiction to entertain a company director’s complaint relating to an insurance broker who had obtained a D&O policy on behalf of the company. The director was not an eligible complainant within the meaning of the Financial Services and Markets Act 2000: the fact that his complaint related to his personal loss did not cause him to fall within the relevant definition of a “consumer” because he had incurred the liability in the course of his trade, business or profession.
Whilst every care has been taken to ensure the accuracy of this information at the time of publication, the information is intended as guidance only. It should not be considered as legal advice.
Holman Fenwick Willan LLP is the Data Controller for any data that it holds about you. To correct your personal details or change your mailing preferences please use the links provided or contact Craig Martin on +44 (0)20 7264 8109 or at firstname.lastname@example.org.
Please consider your environmental responsibility before printing this email.