Unfair contract terms for contracts of general insurance

This consultation process has now been completed. Submissions available
Consultation Type
Exposure Draft

Key Documents

The Assistant Treasurer, the Hon David Bradbury MP has exposed for public consultation draft legislation to give consumers protection against unfair contract terms in general insurance contracts.

This follows the Assistant Treasurer's announcement on 20 December 2012 that the existing protections from unfair contract terms available for consumer contracts of other financial products and services would be extended to general insurance contracts.

The key elements of the draft legislation are:

  • the new unfair contract terms regime will be inserted into the Insurance Contracts Act 1984 (IC Act) and apply to general insurance contracts on an equivalent basis to the regime applying to other financial products or services in the Australian Securities and Investments Commission Act 2001. The new regime is modified appropriately for contracts of general insurance;
  • if an insurer is found by a court to have an unfair term in a standard form consumer contract of general insurance, they will be in breach of the duty of utmost good faith in the IC Act and will not be able to rely on the term; and
  • consumers and the Australian Securities and Investments Commission will be able to take action for unfair contract terms, including seeking an injunction against the insurer to prevent them relying on the term.

The draft legislation will apply to:

  • standard form consumer contracts of general insurance which are entered into, or renewed on, or after, commencement; and
  • a term in a standard form consumer contract of general insurance that is varied on or after commencement.

Insurers will be given a 12 month transition period to review their standard form consumer contracts for unfair terms before the commencement of the new regime.

To assist with understanding the effect and intention of the draft legislation, the Government has also released draft explanatory material.