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Contract terms reforms put onus on insurers

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Insurers will need to give close consideration to the policy terms they include in standard form contracts when unfair contract terms (UCT) laws are extended to the sector, law firm Clyde & Co says.

Excess payments, exclusions and defined terms that have uncommon meanings are particular areas of risk that insurers must pay extra attention to.

There is likely to be an increased requirement to justify such provisions through actuarial data, the law firm says in a report outlining the regulatory changes facing the Australian corporate sector.

Additionally, terms that focus on liability limits and premium payment terms may not be exempt from the UCT regime.

Treasury consultation over draft legislation to apply UCT laws to insurance contracts closed in August.

The looming UCT reforms and other regulatory changes that Canberra has committed to take up, a number of which were proposed by the Hayne royal commission, have upped the pressure on companies.

“The fast pace of regulatory change in Australia continues [this year],” the report says.

“It is clear from the recent regulatory developments in corporations law that the central theme for the year … is ensuring good corporate culture across Australian companies.

“Corporate culture will continue to be a focus by regulators and it will be increasingly important for businesses to have data and analytics to support and demonstrate the effective implementation of policies and processes.

“Compliance frameworks must be adapted to reflect this shift and executives must lead culture revision from the top.”