The Australian Securities and Investments Commission (ASIC) has carried out a “targeted review” of insurance contracts in advance of the application of unfair contract terms (UCT) legislation next month.

UCT protections will apply to consumer and small business insurance contracts entered into or renewed from April 5.

ASIC says it has undertaken “targeted supervisory work” by reviewing a range of insurance contracts, and has worked with insurers to "encourage them to remove or qualify potential unfair terms".

“Through ASIC’s work many insurers have made important changes to insurance policies sold to consumers to help make them fairer,” the regulator said.

ASIC says examples of changes that were made include:

• removing terms that gave insurers unilateral discretion to do something

• removing or qualifying terms to reduce barriers for an insured person to lodge a legitimate claim

• qualifying overly broad terms so that they only apply in specific situations

• extending certain timeframes that might be difficult for an insured person to meet

• removing or qualifying terms where compliance with preconditions was not feasible

• amending terms to provide greater collaboration between the insurer and the insured around decision-making processes

• amending insurance policies to provide greater transparency and clarity for consumers.

ASIC says it will continue to monitor the situation.

“From 5 April 2021 ASIC expects all insurers to ensure that consumer and small business standard form contracts have been reviewed for fairness and that they obtain their own legal advice in relation to potential unfair contract terms where needed.

“ASIC will continue to monitor insurance contracts for unfair terms and we will consider the range of our regulatory powers where we are concerned about non-compliance and consumer harm.”