The Hon Josh Frydenberg MP
30 July 2019
Taking action on the Banking, Superannuation & Financial Services Industry Royal Commission –Recommendation 4.7: Extending unfair contracts terms to insurance contracts
The Coalition Government has today released exposure draft legislation that extends the unfair contract term (UCT) regime to insurance contracts.
Recommendation 4.7 of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry recommended extending the application of the unfair contract terms regime to insurance contracts. In the Government’s response to the Royal Commission it agreed to implement this recommendation.
Consumer law currently protects consumers against unfair contract terms that:
- would cause a significant imbalance in their rights and obligations under a contract
- are not reasonably necessary to protect the business, and
- would cause detriment (financial or otherwise) to a consumer.
In his Final Report, Commissioner Hayne observed the considerations that render a UCT regime appropriate for other contracts of financial products and services apply equally to insurance contracts, and there was no reason for the current exemption for insurance contracts to continue.
Removing the exemption for insurance contracts from the UCT regime will ensure consumers and small businesses have the same protections regardless of which financial service or product they are purchasing.
The Government is taking action on all 76 recommendations contained in the Final Report of the Royal Commission and will continue to take the necessary steps to restore trust in Australia’s financial system.