Insurance Contracts Bill Passes Senate

The Insurance Contracts Amendment Bill 2013 has passed through the Senate (20 June 2013). The Bill re-introduces the measures previously contained in the Insurance Contracts Amendment Bill 2010 with "some minor refinements" giving effect to the recommendations of the Review Panel conducted by Mr Alan Cameron AM and Ms Nancy Milne into the operation of the Insurance Contracts Act 1984 (Cth) (the Act). 

The federal government says that the changes are largely technical in nature and respond to market developments and judicial decisions since its enactment of the Act. 

Major elements of the Bill

The Bill contains a large number of amendments affecting the Act. Broadly the following areas are affected in each of the Schedules to the Bill:

Schedule 1 - contains amendments that relate to the "scope and application of the Act", for example; one amendment deals with "failure to comply with the duty of utmost good faith is a breach of the Act".

Schedule 2 - contains amendments relating to "electronic communication" and proposes that the regulations under the Electronic Transactions Act 1999 (Cth) (ETA) be amended so that the Insurance Contracts Act 1984  will no longer be exempt from the ETA.

Schedule 3 - deals with amendments relating to the powers of the Australian Securities and Investments Commission (ASIC) and amends the Act to give the ASIC a statutory right to intervene in any proceeding relating to matters arising under the Act and under Part 3 of the Medical Indemnity (Prudential Supervision and Product Standards) Act 2003 (Cth).

Schedule 4 - deals with "disclosure and misrepresentations" and make various amendments in that respect, for example: the mixed objective/ subjective test in section 21 of the Act, which is used to determine if an insured has met their duty of disclosure, is sought to be clarified.

Schedule 5 - looks at the "remedies of insurers and life insurance contracts". Section 29 of the Act which contains provisions that prescribe remedies for life insurers that may be used where a person who became insured under a contract of insurance either misrepresented or did not disclose matters that should have been disclosed prior to entering into the contract is amended.

Schedule 6 — provides amendments with respect to "third parties" and amends the Act, for example, to provide that individuals who have rights under a contract of insurance ("third party beneficiaries") but who are not the insured, have access to particular rights and obligations currently held by insureds.

Schedule 7 — deals with subrogation and amends the Act so that, for example: section 67 of the Act, which deals with the allocation of moneys recovered when an insurer exercises a right of subrogation in relation to an insurance claim, is revised to reflect wording of a draft provision dealing with subrogation proposed by the Australian Law Reform Commission in its Review of the Marine Insurance Act 1909 (Cth).

Reaction to the legislation

The federal government says that the: "Bill will [amend the Act to] streamline requirements and address anomalies in the regulatory framework for the benefit of insurers and consumers".

In his second reading speech the minister said: "the measures have been subject to stakeholder consultation, and in some areas, the Review Panel’s recommendations have been modified to take account of issues raised in consultations".

Generally, the changes have been uncontroversial and well received in the industry.

Sources:

• Insurance Contracts Amendment Bill 2013 (as reported in TimeBase LawOne)

• Review of Insurance Contracts (Treasury Web Page)

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