Insurance plays a fundamental role in maintaining the financial stability of both individuals and the Australian economy. The Government is committed to strengthening protections for consumers and small businesses who purchase standard form insurance contracts.
The Turnbull Government has today released a Proposals Paper on extending the unfair contract term (UCT) protections to insurance contracts.
Consumers and small businesses who enter into standard form insurance contracts should have confidence that the contract accurately reflects the cover agreed with the insurer. They should also have appropriate remedies when they suffer detriment as a result of terms in the contract which are unfair.
Under the Australian Securities and Investments Commission Act 2001 (ASIC Act), a term is unfair if it:
- would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
- is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
- would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
The Proposals Paper sets out a model for extending the UCT protections to insurance contracts. The model ensures that consumers and small businesses who purchase insurance are provided with the same protections that are already available for other financial products and services while ensuring the laws are appropriately tailored for the specific features of insurance contracts.
This proposed model involves:
- amending section 15 of the Insurance Contracts Act 1984 (IC Act) to allow the UCT laws in the ASIC Act to apply to insurance contracts regulated by the IC Act, which includes both general and life insurance contracts; and
- tailoring the UCT laws in the ASIC Act to accommodate specific features of insurance contracts.
Submissions to the Proposals Paper close on 27 July 2018. Stakeholders are invited to provide their feedback on the Treasury website.