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Berkshire Hathaway Specialty Insurance
Berkshire Hathaway Specialty Insurance

ASIC targets UCT reform readiness

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The Australian Securities and Investments Commission (ASIC) is stepping up regulatory preparations for the start of laws extending consumer and small business unfair contract term protections to insurance.

The regulator says it has been undertaking targeted supervisory work with the industry in the lead up to the April 5 start date and has released updated information sheets outlining the protections.

“ASIC has been working with industry groups and insurers to gauge how insurers are tracking in the lead up to the new protections commencing and to help inform industry about these new obligations,” it said today.

“This includes discussions about potential contract terms which may raise concerns under the unfair contract terms protections.”

ASIC’s focus includes terms that allow cash settlements based on the cost of repair to the insurer; terms that are an unnecessary barrier to a claim being lodged; terms that reduce the cover offered where compliance with preconditions is unfeasible; and terms using an outdated, and therefore inaccurate or restrictive, medical definition.

The unfair contract term reforms are part of a raft of changes coming into effect following the Hayne royal commission, with implementation of the legislation on track despite the COVID-19 pandemic.

The National Insurance Brokers Association has this year stressed the importance of understanding the changes and the impacts they will have.

The ASIC information sheets outline the new regime for consumers and small businesses, highlighting when the law applies, what makes a term unfair and what options are available to pursue concerns.

The law applies to standard form contracts and not individually negotiated arrangements. Terms excluded from the law include the main subject matter, meaning what is being insured, along with terms that set the upfront price, such as the premium and a clearly highlighted excess.

Consumers and small business can take disputes over terms to the Australian Financial Complaints Authority, or potentially apply to a court for a declaration to void the term. A report of misconduct can also be lodged with ASIC.

Australian Consumer Law was extended to protect small businesses from unfair contract terms in November 2016, but insurance was not included.