New Zealand’s insurance industry has won a concession in the Consumer Law Reform Bill, but it does not go far enough, according to legal firm DLA Phillips Fox.

The bill will introduce a section to the Fair Trading Act 1986 that prohibits the use of unfair terms in standard form contracts.

While insurance contracts were not removed from the legislation as the industry had hoped, an amendment has been made proposing that a term will not be considered unfair if it reflects the underwriting risk accepted by the insurer.

The concession “goes some way” to dealing with insurers’ concerns but lacks clarity, leaving companies “waiting for decisions from the courts”, DLA Phillips Fox says.

Special Counsel Rebecca Sellers says a “broad-brush” approach to the insurance industry does not work.

“The concession is better than nothing, but it has not gone far enough and it adds ambiguity, which may result in increased costs,” she told insuranceNEWS.com.au.

“It would be better to deal with this as part of a wider review of insurance law.”

The bill is still to receive a third reading before Parliament.

The same issues will affect the industry in Australia as the Federal Government looks to add unfair contract terms to the Insurance Contracts Act.

Under the changes, customers or the Australian Securities and Investments Commission will be able to challenge a term in the courts.