Following an announcement made on 20 December 2012, the Assistant Treasurer, the Hon David Bradbury MP, has now released proposed legislative amendments to the Insurance Contracts Act 1984. The amendments will extend the existing unfair contract terms regime to general insurance contracts.
The unfair contract terms regime will apply to general insurance products, such as car insurance, that are governed by the Insurance Contracts Act on an equivalent basis to the regime applying to other financial products or services in the Australian Securities and Investments Commission Act 2001. Insurers will be given a 12 month transition period to review their standard form contracts for unfair terms before the commencement of the new regime. After this time, insurers will be unable to rely on a term of a general insurance contract which is ‘unfair’ within the meaning of the Act.
The unfair contract terms regime will continue not to apply to contracts for life insurance.
The ACCC has recently been focussed on addressing unfair contract terms in the consumer space with the release of its Unfair Contract Terms – Industry Review Outcomes Report in March, and the commencement of proceedings against Bytecard in April alleging that a number of terms in their standard form contracts are unfair. It remains to be seen whether ASIC will take a similarly active approach when these amendments come into force.
The proposed amendments are open for public consultation with submissions due by Friday 31 May 2013.