Auto & General has prevailed in proceedings launched by the corporate watchdog over a contract term requiring home and contents policyholders to inform the insurer of any changes to insured properties. 

The Australian Securities and Investments Commission (ASIC) alleged the term was unfair but Justice Ian Jackman agreed with the insurer’s submission that the measure was “reasonably necessary” to protect its ability to decide the risks it wants to underwrite. 

“In my view, the [insurer’s] legitimate interests include its ability to choose which risks it will insure against, and the information-gathering process ensures that the defendant is not covering risks which it is not willing to insure against,” he said in his ruling handed down on Friday. 

“Accordingly, the [insurer] submits, and I accept, that it is reasonably necessary to protect the defendant’s legitimate interests for it to have powers under the contract to put itself in the position it would have been in had the insured disclosed information revealing the risk, and the [insurer] had declined to grant cover, or limited the cover which it agreed to provide, for that reason.” 

He says the obligation on policyholders to notify the insurer of any changes to any information previously disclosed is “therefore proportionate to [its] legitimate interests, and in my view reasonably necessary for the protection of those legitimate interests.” 

He dismissed the proceedings, lodged last April by ASIC, with costs. 

The proceedings concerned home or contents policies products sold between April 5 2021 and May 4 last year. Auto & General issued about 1.377 million insurance contracts during the period, including renewals. 

At the heart of the dispute is the insurer’s notification clauses in the policies’ product disclosure statements: “Tell us if anything changes while you’re insured with us” and "While you’re insured with us, you need to tell us if anything changes about your home or contents”.  

ASIC says it is considering the court decision. 

Auto & General has responded to the ruling. “We respect the importance of good regulation to protect consumers, and we will continue to work constructively with ASIC,” a spokesperson told insuranceNEWS.com.au.  

Click here for the ruling.