The New Zealand Government proposes adding unfair contracts in insurance to consumer law reforms currently before Parliament.

But a supplementary order paper to amend the bill has clarified how it applies to insurance contracts, after the industry raised concerns the terms were too vague.

Bell Gully partner David Friar told insuranceNEWS.com.au there were concerns well-established insurance principles – such as the insured’s duty to disclose – could be overturned by courts ruling they were unfair.

There is no date for when the law might be passed. It will apply to standard-form contracts only and will not be retrospective.

Mr Friar says the order paper features a list of insurance contract terms that favour insurers but will not be considered unfair because they are reasonably necessary to protect legitimate interests.

These include exclusions, payments and the duty of utmost good faith.

A new insurance contracts bill has been proposed for years, but Insurance Council of New Zealand CEO Tim Grafton says the Government plans to give it higher priority and bring the consumer reform provisions into a new act governing insurance contracts.

“Ideally, any issues relating to insurance contracts should be in insurance-specific law,” he told insuranceNEWS.com.au.

“However, the proposals the Government has put forward in its most recent supplementary order paper are ones that provide the best outcome, given the Government’s determination to include insurance contracts in the consumer law reforms.”