While the insurance industry can take some comfort in its exemption from new federal consumer legislation, it still has to provide a convincing argument that two sets of laws which would potentially overlap and contradict each other would act against the interests of consumers.

So far the industry has not made a convincing case that consumers are adequately protected in insurance contracts.

The Senate Economics Committee spells this out in recommendations following its inquiry into the insurance contract exemption in the Trades Practices Amendment (Australian Consumer Law) Bill.

And it’s clear that efforts to minimise costly changes to the Insurance Contracts Act will not go unopposed.

As the committee sees it, the onus is now on those who do not believe consumer protection provisions should be at least mirrored in the Insurance Contracts Act to prove their case.

There is a tacit acceptance by the committee that insurance is “different”, which is an encouraging sign of the progress made over the past 20 years in building understanding of the industry’s unique role.

But consumer groups say many other industries are subject to industry-specific regulation as well as general consumer laws – so what makes insurance different?

The Insurance Council of Australia says it is looking forward to seeing how the Insurance Contracts Act in updated form could work alongside the amended Trades Practices legislation.

Insurance lawyer Mark Radford from Colin Biggers & Paisley has analysed the Senate committee’s recommendations and warns that the devil will be in the detail when the Insurance Contracts Act comes under review.

He questions the merits of legislative change aimed at protecting insurance consumers, given the cost of new compliance procedures and statistical evidence from the Financial Ombudsman Service.

“There was a lot of misdirection to the Senate committee inquiry, a real lack of clarity on what the issues are,” Mr Radford told insuranceNEWS.com.au.

For example, consumer groups incorrectly argued that the Australian Securities and Investments Commission has no right to bring representative actions under the Insurance Contracts Act.

Committee member Doug Cameron did a great job of basically taking insurers to task, and it’s up to the insurers to come back and give more detail,” he said. “That’s what’s going to happen when we negotiate the Insurance Contracts Act amendments.”

While unsuccessful in removing the insurance exemption from trade practices legislation, consumer groups have the right to some kind of moral victory. They argued convincingly that insurance contracts are not that different from any other kind of contract.

So from here on, there is added importance for insurers to provide convincing details of how they see consumers being protected under the Insurance Contracts Act. As the Prime Minister might say, the industry isn’t out of the woods yet.