A 'Damaging Loophole' 'Long Overdue' for Closing: Extending Consumer Protections Against Unfair Contract Terms to insurance

Abstract

As part of the Australian Consumer Law reforms of 2010, unfair contract terms protections were implemented nationwide across most sectors that use standard form contracts in their dealings with consumers, including financial services. However, until recently, these protections did not apply to general insurance contracts covered by the Insurance Contracts Act 1984 (Cth). Consumer groups, as well as a series of government and independent inquiries and reviews, have long called for reforms to bring insurance within the ambit of the unfair contract terms protections contained in the Australian Securities and Investments Commission Act 2001 (Cth). In February 2020, legislation was passed to remedy the situation. In this article, we examine the history that paved the way to these reforms, and evaluate their impacts for consumers and insurers. We argue that this legislation indicates a move away from the view of insurance contracts as having a ‘unique character’ that renders them ‘unsuited’ to the consumer protections that apply to other financial products and services. We suggest that the application of unfair contract terms protections to insurance contracts has potential to address consumer harm without resulting in prohibitive costs for the insurance industry.

Keywords: consumer protection; insurance; unfair contract terms