In 2008, the Productivity Commission recommended a new national consumer law applying to all industry sectors, including protections against unfair contract terms (UCT). In 2009 the Australian Consumer Law and related reforms were implemented, including the application of UCT protections in relation to most financial products and financial services through the Australian Securities and Investments Commission Act 2001 (ASIC Act).
Those provisions now render void unfair terms in many consumer and (from 2016) small business standard form contracts, but do not apply to many insurance contracts as a result of section 15 of the Insurance Contracts Act 1984 (ICA). Its rationale is that that Act has its own protections for standard insurance contracts and they have special characteristics due to the nature of the risk involved which make them unsuitable for UCT protections. The Corporations Act 2001 (and some other specific regulation) also imposes a number of product Disclosure Statement and other relevant product disclosure requirements on insurers.
However, the position is not clear-cut, with some insurance contracts, for example, private health insurance contracts and state and Commonwealth government insurance contracts, being subject to the UCT laws. A number of other similar jurisdictions also subject insurance contracts to similar UCT laws, and prior reviews have raised concerns over a range of terms potentially disadvantaging consumers, particularly in home building, car, consumer credit and travel insurance.
The Commonwealth announced at the end of 2017 that it intended to extend the UCT regime generally to insurance contracts, and Treasury recently released details of a proposed model at https://static.treasury.gov.au/uploads/sites/1/2018/06/t284394_UCT_Insurance_Contracts_Proposals_Paper_Aug.pdf and invited submissions from industry and the public. Submissions must be emailed in Word or RTF format to [email protected] no later than 24 August 2018.
Submissions should address as appropriate the questions raised in Treasury‚Äôs Proposals Paper, having regard to its proposed model. The key elements of the model are: