How will you benefit

On 27 June 2018 the Commonwealth Treasury Department released a proposal to extend already existing unfair contract laws to insurance contracts. A media release from the Minister for Revenue and Financial Services, Kelly O’Dwyer has stated that, “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.”  In 2010 unfair contract laws were introduced which apply to all sectors of the economy who use standard form contracts in their dealings with consumers. This protection was extended to small businesses in 2016. The laws have not applied to insurance contracts which have been exempted by the Insurance Contracts Act 1984. The Government proposal now seeks to remove this exemption for those contracts which are governed by that Act.

Power to challenge terms

In practice this means that standard general and life insurance contracts can become subject to unfair contract laws. Consumers and small business will then have the power to challenge insurance terms where they are not clear and transparent in their meaning. The new laws would also provide remedies for those affected by unfair insurance terms. Unfair contract terms are generally considered to be those which cause a significant imbalance in the parties’ rights and obligations, are not reasonably necessary to protect the legitimate interests of the party advantaged by the term and would cause detriment to a party if  it were to be relied upon.

What this means for you

An example of how this may work in practice is where a pre existing exclusion clause is applied to deny a claim where the nature of the pre-existing condition is such that it has not affected the insured person in any substantial way previously. The application of that term may be unfair in those circumstances. This is a very positive move for consumers.

The proposal is open for consultation for submission until 24 August 2018.