The Insurance Council of Australia (ICA) has come out strongly against proposals to extend unfair contract terms (UCT) provisions to include insurance contracts.

In its submission to the Australian Consumer Law Review ICA urges “careful consideration” before UCT provisions in Australian consumer law (ACL) and the Australian Securities and Investments Commission (ASIC) Act are extended to insurance contracts.

ICA argues that extending UCT provisions “should only be undertaken in light of clear and specific evidence that where an imbalance exists, or where consumers are currently experiencing disadvantage or loss as a result of unfair contract terms, this cannot be addressed through existing remedies”.  

It “firmly” submits that protections under the Insurance Contracts Act, together with the additional protections provided under the Corporations Act and through the Financial Ombudsman Service and the General Insurance Code of Practice, “provide a strong level of protection to consumers”.

“Extending UCT to insurance contracts is likely to unnecessarily create confusion, additional costs and complexities without enhancing consumer protections,” ICA says.

“Applying the UCT provisions under the ACL and ASIC Act to general insurance contracts would result in an unwarranted layering of regulatory requirements on insurers. This would lead to material operating inefficiencies, the cost of which ultimately would be passed to consumers.”

ICA believes the existing regulatory regime already provides a high level of protection to consumers.

It notes that the Insurance Contracts Act places an obligation on insurers and insureds to act with “utmost good faith towards each other, preventing either party from relying on a contract provision that would be contrary to this requirement”.