Compliance Update June 2020 Linda Doyle Items Covered AML - - - PowerPoint PPT Presentation
Brokers Ireland Compliance Update June 2020 Linda Doyle Items Covered AML - Non-face to face interaction with consumers Cyber Security and Data Protection COVID 19 Impact on Business Processes Professional Indemnity Changes
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Life/Pensions/Investments When interacting from a distance with clients, firms should continue to be mindful of the Criminal Justice (Money Laundering and Terrorist Financing) Act and the Central Bank Guidance for the Financial Sector issued September 2019. Life offices will have communicated to their broking partners what they will accept in respect
Due diligence exercises will still have to be conducted – Depending on the type of product or service being provided, the extent of the due diligence will vary.
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Where the business relationship is initiated, established, or conducted in non-face to face situations or an occasional transaction is done in non-face to face situations, firms should
gives rise to increased ML/TF risk and if so, adjust their CDD measures accordingly.
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Cybercrime can be described as a criminal activity carried out using computers and the
and includes financial fraud, theft of confidential data, ransomware and denial of services.
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Cyber-attacks on businesses are increasing in frequency, scale and impact, There is a heightened risk of IT systems failure and cyber ‘trigger events’ e.g. data theft or destruction. COVID-19 situation presented IT personnel, businesses and other users with cyber security challenges that - experienced on a significantly larger scale than ever before. Impersonation increasing for some time and has accelerated since the outbreak.
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GDPR and Data Security Brokers should not lose sight of their obligations under GDPR. Data security must remain high on the agenda. Avoid personal data breaches Processing employee health data See communications from Brokers Ireland 6 May, 14 May, 28 May 2020
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Cyber security and your practice Scam mitigation or preferably scam prevention Cyber criminals are targeting firms via remote users to intercept money transfers and other sensitive client information.
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Be mindful
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Best practice guidance and tips All business sectors are vulnerable to the reality of cyber crime, which is becoming increasingly sophisticated and exposes sensitive data and client monies to great risk. There are a number of steps that can be taken to guard against cyber-attack.
allows remote users to securely access office IT resources, such as email and the firm’s network. Contact your IT support service for more information.
full access is not through personal devices.
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Factor Authentication.
device with a license for the same anti-malware available in the office. In addition, consider limiting the ability to download and copy data to that device.
delete data from tablets and phones if they are lost or stolen.
password-only access.
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Internal Risk Management ▪ Business Continuity Processes ▪ Operational Procedures
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There has been a change to the Professional Indemnity Insurance (PII) levels of Indemnity. New PII requirements: €1,300,380 per claim and €1,924,560 in aggregate. Was: €1,250,000 per claim and €1,850,000 in aggregate; This increase was effective from 12 June 2020. Ring-fencing of cover Check your PII Schedule
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If a member firm is applying for authorisation with the Central Bank, whether as a result of setting up a new company, dividing its existing company into two or more entities, changing from being a Soletrader or Partnership to a limited company, or changing the structure or
To that end, Brokers Ireland suggest that you contact the Compliance Unit as we should be able to assist in this regard. Alternatively, we have a list of third party compliance consultants, from which members can choose that better suits their needs. Contact the Compliance Unit at compliance@brokersireland.ie
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New legislation was signed into law 26 December 2019 The provisions have yet to be implemented The Act will have a significant impact on all those who distribute insurance products, including brokers transacting both life and non-life business. The principle of utmost good faith and duty of disclosure by a consumer have been replaced. The Act imposes duties on both the consumer and insurer pre-contract and post contract stage, as well as in respect of claims handling.
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Summary of Changes Impacts: ➢ Insurer ➢ Consumer ➢ Broker Definition of Consumer
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Consumer Protection Code Financial Services and Pensions Ombudsman Act 2017
“consumer” means any of the following: (a) a person or group of persons, but not an incorporated body with an annual turnover in excess of €3 million in the previous financial year (for the avoidance of doubt a group
charities and trusts, not consisting entirely of bodies corporate); or (b) incorporated bodies having an annual turnover of €3 million or less in the previous financial year (provided that such body shall not be a member of a group of companies having a combined turnover greater than the said €3 million); and includes where appropriate, a potential ‘consumer’ (within the meaning above); “consumer”, in relation to a financial service, means— (a) (i) a natural person, not acting in the course of business, (ii) a sole trader, partnership, trust club or charity (not being a body corporate), with an annual turnover in its previous financial year (within the meaning of section 288 of the Act of 2014) of €3 million or less, or (iii) an incorporated body that— (I) had an annual turnover in its previous financial year (within the meaning of section 288 of the Act of 2014) of €3 million or less, and (II) is not a body corporate that is a member of a group of companies (within the meaning of section 8 of the Act of 2014) with a combined annual turnover (in the previous financial year (within the meaning of section 288 of the Act of 2014) of the group of companies), of greater than €3 million, that— (A) is a customer of a financial service provider, (B) is a person or body to whom a financial service provider has offered to provide a financial service, or (C) has sought the provision of a financial service, (b) a consumer who was, in relation to a credit agreement, a customer of the financial service provider in a case where a credit servicing firm undertakes credit servicing in respect of the credit agreement concerned, (c) an actual or potential beneficiary of a financial service, or (d) an employee or a former employee entitled to benefit from an income continuance plan; “consumer”, in relation to a pension product, means an actual or potential beneficiary of an
loss because of maladministration of the scheme, trust or PRSA, as the case may be;
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An insurer cannot reject a claim from a consumer just because the consumer does not have insurable interest in the subject-matter of the contract of insurance. An insurer is not relieved of liability because the person who may benefit under the contract is not specified.
▪ Consumer’s existing duty of uberrima fides (utmost good faith) will be abolished ▪ New pre-contractual duty of disclosure. Requires a consumer to answer all pre- contract questions posed by the insurer honestly and with reasonable care ▪ Customers must be informed of general nature and effect of the pre-contractual duty
▪ Questions must be specific, drafted in plain language, and asked using a durable medium ▪ Insureds are not obliged to volunteer any information over and above that sought in insurers’ questions ▪ Proposal Forms will need to be updated to make them “CICA-ready”
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▪ Provision of Information – more than what is currently contained within Renewal Regulations of 2018. ▪ Schedule outlining the previous five years premiums and a list of any claims (including third party claims) paid over the same period ▪ Health insurers not obliged to show claim amounts paid.
A consumer may cancel a contract of insurance, by giving notice in writing to the insurer, within 14 days after the date the consumer was informed that the contract is concluded. The insurer cannot impose any costs on the consumer other than the cost of the premium for the period of cover.
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▪ The consumer is not under any duty to disclose additional information on renewal unless the insurer has expressly required the consumer to do so. ▪ The Insurer must ask specific questions
▪ The principle of utmost good faith has been replaced. ▪ The consumer is under a duty to pay the premium within a reasonable time, or in accordance with the terms of the contract.
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▪ Insurers must ✓ Handle the claim promptly and fairly ✓ Notify the insured of a claim as soon as practicable, if the claim was not made by the insurer ✓ Engage with the insured – give them the opportunity to provide relevant information and evidence which could have an impact on their decision ✓ Inform insured of the amount for which a claim has been settled, or rejected and the reasons for same ✓ Pay any sums due to the insured within a reasonable time ✓ Not solely rely on late notification clause alone to deny indemnity unless prejudiced.
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Insureds must ▪ Cooperate with insurers ▪ Notify within a reasonable time of the event ▪ Both insurers and insureds must disclose
This provision within an insurance contract must be brought to the insured’s attention both prior to commencement of the contract and again at the time of making of the claim Only entitled to defer as follows: ▪ 5% of the claim settlement amount where a settlement is less than €40,000 ▪ 10% of the claim settlement amount where a settlement is greater than €40,000
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▪ The general power of insurers to rescind a contract in a case of misrepresentation is abolished ▪ The Act provides for proportionate remedies ▪ Where there has been a claim:
done had it been aware of the full facts and shall be based on a compensatory and proportionate test”
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▪ No Claim has occurred, but insurer becomes aware of a negligent misrepresentation: ▪ Terminate the contract (except in cases of life insurance), or, ▪ Notify the insured that it will adopt one of the following three courses:
the insurer may avoid the contract and refuse all claims, but must return the premiums paid
terms (excluding terms relating to the premium), the contract is to be treated as if it had been entered into on those different terms if the insurer so requires,
terms relating to matters other than the premium would have been the same or different), but would have charged a higher premium, the insurer may reduce proportionately the amount to be paid on a claim.
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Warranties automatically become Representations ▪ The existing law in relation to warranties is effectively repealed by the Act ▪ Any clause in a contract that converts a representation to a warranty is void Continuing Restrictive Conditions Now Suspensive Conditions ▪ Any term which imposes a continuing restrictive condition on the insured shall be treated as a suspensive condition ▪ If the breach is remedied by the time a loss has occurred, the insurer will not be entitled to deny the claim on this ground alone. ▪ Where a claim is made by an insured for a loss occurring during a period where the condition is breached, the liability of the insurer is only suspended where the breach
▪ Where a contract reduces/excludes certain risks from coverage, any breach by the consumer of the contract terms relating to same only suspends the insurer’s liability in terms of that loss.
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What Insurers need to do… ▪ Changes policy wordings ▪ Changes to proposal forms ▪ Changes to EDI quote systems questions sets ▪ Consider how insureds will be advised of their pre-contractual duties of disclosure, and other duties
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What brokers need to do…
Brokers Ireland Summary and Guidance document issued on 5 June 2020.
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From the implementation date of the Act, before a contract of insurance is entered into, consumers need to be advised of certain information :- a) Pre-contract stage b) On renewal c) Post-contract stage As you are the broker acting as advisor to the consumer you have a responsibility to advise consumers of their duties pre and post contract. Brokers Ireland’s Terms of Business Agreement Template will be updated and rolled out
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a) Pre-contract stage
Where an insurer asks a specific question, it must be presumed the matter to which it relates is material to the risk undertaken by the insurer or the calculation of the premium by that insurer, or both. The consumer is under a duty to answer all the questions posed by the insurer honestly and with reasonable care. The general nature and effect of the pre-contractual duty of disclosure (the Act specifies that the consumer must be informed on paper or other durable medium of this requirement). Where relevant, the insurer is not obliged to pay the full claim settlement amount until any repair, replacement or reinstatement work has been completed and specified documents for the work have been furnished to the insurer. This must be brought to the attention of the consumer (the Act specifies that the consumer must be informed on paper or
The claim settlement deferment amount cannot exceed 5% of the claim settlement amount where the claim settlement amount is less than €40,000, or 10% of the claim settlement amount where the claim settlement amount is more than €40,000. The consumer may cancel a contract of insurance, by giving notice in writing to the insurer, within 14 days after the date when the consumer has been informed that the contract is concluded. The insurer cannot impose any costs on the consumer other than the cost of the premium for the period of cover. This does not affect the notice periods provided under the Distance Marketing Regulations (30 days/14 days in respect of life/general policies respectively).
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b) On renewal
The consumer is under a duty to respond honestly and with reasonable care to requests by the insurer at renewal and if they do not provide any new information the previous information shall be taken not to have altered.
c) Post Contract Stage and Claims
The consumer is under a duty to pay their premium within a reasonable time, or in accordance with the terms of the contract of insurance. The insurer may refuse a claim where there is a change in the subject matter of the insurance, including an alteration of risk such that the risk is a new risk which the policy was not agreed to cover. The consumer must cooperate with the insurer in an investigation of insured events including responding to reasonable requests for information in an honest and reasonably careful manner and must notify the insurer of the occurrence of an insured event in a reasonable time. We suggest that you include an acknowledgement of this by the client, so they are aware of the potential impact on recovery of their answers and their actions.
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c) Post Contract Stage and Claims (continued)
If the consumer becomes aware after a claim is made of information that would either support or prejudice the claim, they are under a duty to disclose it. (The insurer is under the same duty). If the consumer makes a false or misleading claim in any material respect (and knows it to be false or misleading or consciously disregards whether it is) the insurer is entitled to refuse to pay and to terminate the contract and may refuse all liability in respect of any claim made after the fraudulent act and need not return premiums paid. The consumer whose claim is excluded as a result of a criminal or intentional act or omission must cooperate with the insurer in respect of an investigation of loss (claimed by a third party) by submitting statutory declaration or producing documentation as requested by the insurer. A court of competent jurisdiction can reduce the pay-out to the consumer where they are in breach of their duties under the Act, in proportion to the breach involved.
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▪ Consumers need to be advised of their duties under the Act. This will mostly be set
attention of your client and inform them they must read it. ▪ Procedures will change to reflect the new information gathering stage, including at renewal. ▪ Retain evidence.
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▪ Staff will need to be made aware of the changes resulting from the Act and trained accordingly.
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