The final Bill (once enacted) will reform our insurance contract law and consolidate and modernise existing insurance legislation (Part 3 of the Law Reform Act 1936, the Insurance Law Reform Acts of 1977 and 1985, the Insurance Intermediaries Act 1994). The draft Bill also proposes amendments to various other pieces of legislation.
Submissions are open until 4 May 2022.
Why has the Bill been released?
The draft Bill has been expected since the Government agreed to a number of policy changes in November 2019. The key policy changes for consumers include:
- Reforming the policyholder’s duty of disclosure;
- Removing the existing exemption for insurance contracts from the unfair contract terms provisions in the Fair Trading Act 1986; and
- Imposing an obligation on an insurer to present policy wordings clearly.
The Government is seeking feedback on whether the proposed drafting achieves the policy intent and is workable in practice.
Notable features of the proposed reforms include:
- A new codification of disclosure duties for consumer and non-consumer policyholders, accompanied by a schedule setting out insurers’ remedies for qualifying misrepresentations or breaches;
- A codification of the duty of utmost good faith;
- A new regime to govern third party claims against insurers;
- Amendments to the Fair Trading Act 1986 to remove insurance specific exemptions from the unfair contract provisions in that Act and to clarify how the generic exemptions apply to insurance; and
- The insertion into the Financial Markets Conduct Act 2013 of duties to assist policyholders to understand insurance contracts.
While the Bill does not generally extend to marine insurance, it does propose repealing several of the disclosure and warranty provisions of the Marine Insurance Act 1908, and the new Act would prevail in any case where it conflicts with the 1908 Act.
Have your say
The draft Bill is available, together with a Consultation Paper and submission templates, on the MBIE website. We will be reviewing the draft Bill closely and will provide further general comments on our website in due course.
In the meantime, if you would like to know more about the Insurance Contracts Bill and its potential consequences for insurers and policyholders, or would like assistance with making a submission, please get in touch with our Insurance Team or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.