“Adverse” consequences will follow if marine insurance contracts are governed by small business unfair contract terms (UCT) law, the Insurance Council of Australia (ICA) warns.

In a submission to Treasury, it says such a move would hurt Australian marine insurers’ global competitiveness and result in higher premiums or reinsurance charges.

An exemption should be made for marine contracts, it says.

“[ICA] is concerned that if the small business UCT law applies to [marine insurance] contracts… the adverse economy-wide implications resulting from this could be substantial,” the submission 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 would likely to be increasingly issued by Australia’s global competitors.

“This would have a material flow-on impact to associated domestic industries, including surveyors and other service providers appointed by insurers, as well as resulting in dispute resolution and litigation being managed in foreign jurisdictions.”

Marine insurance contracts are regulated by either the Marine Insurance Act 1909 or the Insurance Contracts Act 1984.

Section 15 of the Insurance Contracts Act excludes insurance contracts 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 says exempting marine contracts from UCT law will have a neutral effect on small business compliance costs, and their long-established rights and obligations under the Marine Insurance Act would remain unchanged.

“Conversely, extending the small business UCT law to… insurance contracts would impose on small businesses an unnecessary layer of regulatory complexity. This would require small businesses to allocate already scarce resources to try to comprehend a level of protection that is already provided for under the Marine Insurance Act.

“This would have a real negative effect on small business productivity and impede the sector’s ability to grow and contribute to the national economy.”