Marine insurance should be exempt from unfair contract terms (UCT) protections, Assistant Treasurer and Minister for Small Business Kelly O’Dwyer has been told. 

In a letter to the minister, the Insurance Council of Australia (ICA) warns of “adverse economy-wide implications” including putting local marine insurers at a disadvantage to their foreign rivals if unfair contract terms protections are extended to the sector.

Marine insurance is regulated under the Marine Insurance Act 1909, which means small business contracts that fall under this category will be governed by the unfair contract terms legislation.

But the Insurance Contracts Act 1984 excludes insurance from the operation of Commonwealth, state or territory acts that provide relief in the form of judicial review of unfair contracts or claims of misrepresentation.

“ICA is concerned that if proposed unfair contract terms protections apply to Marine Insurance Act contracts, it will create contract uncertainty, leading to higher premiums or reinsurance charges for Australian insurers, or insurers becoming more selective,” CEO Rob Whelan says.

“Principally, this would make marine insurance in Australia less attractive and diminish the international competitiveness of Australian marine insurers.

“In that case, marine insurance contracts for Australian risks are likely to be increasingly issued by Australia’s global competitors.”

ICA members recorded about $500 million of marine insurance gross written premium last year.

The council wants the Marine Insurance Act included in plans to insert a provision into the Australian Securities and Investments Commission Act 2001 and Competition and Consumer Act 2010, providing the minister with a “regulation-making power” to rule unfair contract terms protections for small business do not apply to Commonwealth, state or territory law.

“This would ensure marine insurance contracts with small business are clearly exempt,” Mr Whelan says in the letter.

ICA backs the principles behind the protections, but is wary about the implications for Australia’s global reputation, citing an Australian Law Reform Commission report on the Marine Insurance Act.

“The [report] found the present codification of marine insurance law and practice is long established and well known, and that this has contributed to a business environment in which the meaning of contracts is well understood and is backed up by comprehensive case law,” Mr Whelan says.

“The [report] went further to warn that unilateral changes to Australian marine insurance law may impact adversely on and isolate the Australian market by severing the association between Australian and UK law and practice, a link shared with marine insurance regimes in other common law systems and also many other countries as well.”

The Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015 was passed by Parliament last Tuesday.