In 2009, a Senate Committee reported that consumers are not
provided with adequate protection in general insurance contracts
under existing law.
In 2010, the Federal Government released a paper setting out
some proposed options for dealing with harsh or unfair terms in
insurance contracts, a move which was welcomed by consumer groups
but opposed by the insurance industry.
Last month, the Federal Government released an exposure draft of
the Insurance Contracts Amendment Bill 2010. This draft
legislation, long-awaited by the insurance industry, has been
updated in some respects but is silent on the issue of unfair
The insurance industry could have been forgiven for thinking
that unfair contract terms were off the Christmas list for time
being. Until now.
What has happened?
Today, the Federal Government has delivered a Christmas present
that will be seen as gift by consumer groups but as a lump of coal
by the insurance industry.
The Assistant Treasurer has confirmed that the Government will
amend the Insurance Contracts Act 1984 (Cth) to impose an
unfair contract term regime that applies to general insurance
contracts issued to consumers.
Key features are that:
it will apply to standard form contracts;
it will form part of the duty of utmost good faith, so that if
a term is found to be unfair then the insurer will be in breach of
that duty and will be unable to rely on that term;
courts will be empowered to award additional remedies;
unfair terms will be open to challenge not only by consumers
but also by the Australian Securities and Investments Commission;
insurers will have the onus of proving that a term is
reasonably necessary to protect their legitimate interests.
Details of the regime are not yet available but already it is
clear that the insurance industry will need to pay careful
attention to issues such as:
what contracts will be deemed to be 'standard
how 'consumer contract' will be defined in the
since the regime will not apply to 'the main subject matter
of the contract', how insurers can protect themselves
adequately – the question of whether some contract terms are
really exclusion clauses or insuring clauses has already proven
itself fertile ground for dispute.
The insurance industry will not be enthused by some of the
statements already being made by the Government. In a media release
today, the Assistant Treasurer referred to consumers having to
'...fight insurance claims with one hand tied behind their
back...' and asserted that consumers are not having claims paid
because of unfair terms contained in the 'fine print' of
Finally, although life insurers have been left alone for the
time being, they should monitor these developments with interest
because the Government has stated it will turn its attention to
life insurance contracts in the future.
What happens next?
We will not see the draft legislation until an unspecified date
In the meantime, the Assistant Treasurer's media release is
We will keep you updated with any developments.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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