The final form Regulation Impact Statement was released in November 2012, addressing the question of whether unfair contract terms (UCT) regimes which presently exist in legislation including the Competition and Consumer Act and the ASIC Act should be extended to insurance contracts, and if so, in what manner.
Since that time, the Commonwealth Treasury has determined that UCT laws should apply to insurance contracts. The Government has decided that it will introduce legislation amending the Insurance Contracts Act, effectively adopting the regime applying under the ASIC Act, with some adjustment.
In summary, the proposed regime:
- will apply to standard form insurance contracts
- will not apply to life insurance contracts
- will apply such that if a term is found to be unfair, the insurer will be in breach of the duty of utmost good faith
- will be able to be agitated by a consumer as well as ASIC
- will provide ASIC with the same range of enforcement powers available to it currently in relation to UCT under the ASIC Act.
Of note, the proposed regime will not apply to a term to the extent that it defines the subject matter of the contract or sets the upfront price payable under the contract.
We will report further on this development once draft legislation is tabled.