The Insurance Council of Australia (ICA) has proposed a new approach to standard cover as part of an industry and government action plan to assist consumers, but rejects the Hayne royal commission stance on unfair contract terms.

Improving consumer outcomes requires increased understanding of risks faced and options available, ICA says in a submission to a Treasury consultation paper on disclosure.

“It would be counter-productive to add to the material provided to consumers if there is no demonstrable proof that they will read and benefit from it,” CEO Rob Whelan says.

“Other recommendations for change more clearly offer benefits and can be put in place with appropriate transition periods that allow for effective implementation.”

The action plan includes five proposals for industry and four recommendations for government.

ICA says the current standard cover regime doesn’t make comparison between policies easier or help people who don’t want to think too much about their insurance needs.

“For some types of policies, the Insurance Council considers that it is likely to be more productive to develop a core package of covers which would be common to all policies,” it says.

The proposal could see policies only offering those protections, or including more features, but on current thinking they wouldn’t be able to offer less.

ICA funded research into a core package of covers for home and contents insurance is well advanced and the action plan says it should be contributed to a standard cover review proposed by Treasury.

The action plan says the government should apply unfair contract term protections to insurance, but it is “very disappointed” with the royal commission’s suggestion that only terms defining the thing being insured should be exempt.

“It is difficult to see how the approach favoured by Commissioner Hayne can be made to work in practice,” ICA says. “The potential impact of a narrow definition of ‘main subject matter’ may include decisions not to cover some risks and higher premiums.”

ICA says it is working to quantify the impact on consumers of managing the uncertainty that would result from Commissioner Hayne’s approach.

The action plan says the industry should include year-on-year renewal premium comparisons for home and motor policies by July 1 next year, but says the case for component pricing isn’t clear.

Instead, ICA will encourage members to provide consumers with information on natural hazards at the property they want to insure.

The paper says ICA is willing to work on a common “actions of the sea” definition and is keen to hear from consumers and other groups about additional terms that may be problematic.

Product disclosure statements and key fact sheets should be published prominently online, it says, and the Government should review the usefulness of the key facts sheet concept.

Insurance brands should be published on the underwriter’s website and on the Australian Securities and Investments Commission’s site, it says.

Actions proposed for the Government also include amending the Corporations Act to make clear that general insurers are able to discuss appropriate sum insured levels with consumers, and amending legislation to facilitate electronic document disclosures.