4.7 — Application of unfair contract terms provisions to insurance contracts

The unfair contract terms provisions now set out in the ASIC Act should apply to insurance contracts regulated by the Insurance Contracts Act. The provisions should be amended to provide a definition of the ‘main subject matter’ of an insurance contract as the terms of the contract that describe what is being insured.

The duty of utmost good faith contained in section 13 of the Insurance Contracts Act should operate independently of the unfair contract terms provisions.

Government Response

The Government agrees to extend the unfair contract terms provisions to insurance contracts, consistent with its response to the 2017 Senate Economics References Committee Inquiry into the General Insurance Industry.

Insurance contracts are excluded from the industrywide unfair contract provisions in the ASIC Act. Removing this exemption will ensure that standard form insurance contracts offered to consumers and small businesses on a take it or leave it basis cannot include terms that are considered unfair.

Consultation with industry on this policy occurred between June and August 2018.