Treasury has released for comment exposure draft legislation and explanatory material to give consumers protection against unfair contract terms in general insurance contracts.
The key elements of the draft legislation are:
- the new unfair contract terms regime will 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;
- consumers and the Australian Securities and Investments Commission (ASIC) will be able to take action for unfair terms in a standard form consumer contract of general insurance, such as seeking a court declaration that a term is unfair. A court will have access to a range of remedies in such circumstances;
- an insurer found by a court to have an unfair term will be in breach of the duty of utmost good faith and will not be able to rely on the term;
- ASIC will be given powers to enforce unfair contract terms for general insurance contracts by reference to the enforcement and investigation powers it has in the Australian Securities and Investments Commission Act 2001;
- the amendments will apply to standard form consumer contracts of general insurance entered into, or renewed, on or after the commencement day, and to terms varied on or after the commencement day. The commencement day will be 12 months after the day the Act receives Royal Assent, giving general insurers a transition period to review their standard form consumer contracts for unfair terms.
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 changes.
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Posted 13th May 2013 by admin in Consumer Law, Financial Services, Insurance