The National Insurance Brokers Association (NIBA) has questioned the legal basis for the proposed changes to the unfair terms provisions in the Insurance Contracts Act.

In a submission on the draft regulation impact statement on the changes, NIBA CEO Dallas Booth has expressed concern about justifying the changes when the implementation costs are considered.

“NIBA is open to considering changes to the Insurance Contracts Act if it can be established that there is a significant gap in protection and the costs of making the changes to consumers, insurers and brokers do not outweigh the benefits,” he says in the association’s submission.

“At present, it is obvious to NIBA that this is the case.”

The association argues the protection provided to consumers in the Act is currently at a high standard and there are dispute mechanisms in place to deal with unfair terms.

It questions assertions in the impact statement that there is “overwhelming evidence of a problem”.

“There is nothing in the regulation impact statement that allows NIBA to form the view as to whether this is accurate,” Mr Booth says.

“Financial Ombudsman Service determinations on the relevant issues would be a valid source in identifying whether consumers alleging an insurer’s reliance on a provision would be in breach of its duty of utmost good faith term are unfairly disadvantaged or not.”

NIBA also argues that examples put forward by a consumer group of harsh contract terms do not support the argument for change either way.

“It is clear from the statement [that] consumer representative groups and insurers’ views are diametrically opposed,” Mr Booth says.

“To justify such a significant change, real evidence of a problem is necessary given the potential adverse impact on consumers and the industry.

“If there is real evidence of such a significant problem, NIBA would support any changes to better protect consumers.”