As foreshadowed in late 2017, the Commonwealth Government is keen to progress plans to apply the unfair contract term (UCT) protections to insurance contracts. It has released a Proposals Paper for discussion, with a deadline of 24 August 2018 to provide responses.
The Proposal Paper outlines a model for applying UCT to standard form insurance contracts by amending section 15 of the Insurance Contracts Act 1984 (ICA) to:
- allow the UCT provisions of the Australian Securities and Investment Commission Act 2001 to apply to insurance contracts regulated by the ICA (which includes both general and life insurance contracts); and
- tailor the laws to accommodate specific features of insurance contracts, for example:
- defining what will be considered “standard form” to which the UCT provisions will apply
- providing some basis for considering underwriting risk to be taken into account when considering wither a term is unfair
- premium and excess payable will not be subject to review
The objectives of this proposed model are to:
- ensure that consumers and small businesses who purchase insurance have the same access to protection from unfair terms in insurance contracts as they do for other contracts for financial products and services;
- increase incentives for insurers to improve the clarity and transparency of contract terms, and remove potentially unfair terms from their contracts; and
- provide appropriate remedies for consumers and enforcement powers for the Australian Securities and Investments Commission (ASIC).
Two alternative models are also proposed for consideration. For those interested in reading more or making submissions, the Proposal Paper can be found here.
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