Focus: Highlighting the Government's
proposals for a new disclosure document. Services: Insurance Industry Focus: Insurance
Many of your insurance contracts and disclosure documents are
'lengthy', 'daunting' and written in 'dense
legalese', according to the Minister for Financial Services and
Superannuation. Insureds have become 'confused' about the
scope of their cover. The Federal Government's solution?
Require insurers to provide consumers with another disclosure
document. It is called the Key Facts Sheet, and the Government has
asked for your input as to how many words should be squeezed into
In February 2011, the Federal Government announced that it had
reached agreement with insurers that they would develop and
implement a plain-English one page statement of the key features of
insurance policies issued to consumers.
The Government then consulted from April to May 2011 on the form
of the key facts statement. By that time, the 'one page'
summary had already expanded to two pages, with explanatory
information set out on the reverse side of the document.
At the end of February 2012, twelve months after the deal with
insurers was announced, the Government issued a further discussion
paper on what is now called the Key Facts Sheet (KFS) for Home
Building and Home Contents insurance policies. The Government
proposes that the KFS will set out:
a description of the policy (its name and the type of cover it
in table form, a list of what is covered and what is not
information about the cooling-off period
details of excesses and sub-limits, and
How is the discussion paper different from the
The Government rejected submissions that the KFS need not
provide information about other policy types. Instead, generic
information about each type of policy is proposed to be set out on
the reverse side
The KFS is not intended to satisfy insurers' obligation
under the Insurance Contracts Act 1984 to notify insureds
of any departures from the standard cover prescribed by the
Sub-limits and excesses are to be disclosed on the front of the
KFS unless they can be varied by the consumer, in which case
generic information about them must be included
The Government proposes that the KFS will display a variety of
a warning that the consumer should consider carefully what is
covered and what is not
a health warning that the consumer should consider the
financial impact of decisions they make about their insurance
a further warning that if an excluded matter causes a loss then
the policy provides no cover even if there was a concurrent covered
cause of the loss;
yet another warning that the KFS is not a substitute for the
Product Disclosure Statement (PDS).
The proposed warning to consumers that the KFS is not a
substitute for the PDS is particularly telling.
It appears to be an acknowledgment of the risk that some
consumers will disregard the PDS and policy wording, and rely
solely on the KFS when deciding which insurance product to
Increasing consumer awareness of the cover provided by insurance
products is a worthy goal. In fact, it was the same goal sought to
be achieved by the introduction of the PDS when transition to the
FSR regime commenced 10 years ago this week.
While it is true that many PDSs are longer than necessary and
that many consumers do not read them, it is naďve to think
that providing consumers with more paperwork will actually
encourage more of them to read their disclosure documents. Nor does
it encourage product issuers to improve the clarity of their
Perhaps a more focussed effort on simplifying PDSs would have
been more successful at promoting consumer awareness than
attempting to identify which terms of a financial product are
universally important and then condense them into an A4 sheet of
paper. On the other hand, perhaps the KFS is a missed opportunity
for replacing the PDS altogether.
For better or for worse, the Government is now committed to the
introduction of a KFS as a supplement to the PDS and policy
wording. If you want to have your say on how the KFS should work in
practice, time is running out.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Contractors and principals should ensure they have appropriate insurance coverage instead of relying on indemnity clauses.
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