Review of the Insurance Contracts Act , Australian Government, Department of the Treasury

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Final Report on second stage: provision other than section 54

Chapter 7: Remedies of insurer

7.1 Where there has been misrepresentation or non-disclosure by an insured, prior to a contract being entered into, the remedies available to an insurer are set out in Part IV of the IC Act. They are dependent upon whether the failure to disclose is fraudulent or not. The approach differs between general and life insurance. Part VII of the IC Act contains provisions restricting general insurers’ rights to cancel policies.

Breach of the duty of disclosure by the insured — life insurance

7.2 Division 3 of Part IV of the IC Act provides remedies to an insurer where an insured has failed to disclose a matter to it or where the insured has made a misrepresentation or incorrect statement.107 The key provisions are sections 28 and 29.

7.3 Section 28 of the IC Act provides the remedies to an insurer under a contract of general insurance where there has been non-disclosure or a misrepresentation by the insured. Where there has been fraud, the insurer is entitled to avoid the insurance contract. In the absence of fraud, subsection 28(3) of the IC Act allows the insurer to reduce its liability to the amount that would restore its position had no failure occurred.

7.4 Section 29 of the IC Act provides for the remedies available to an insurer under a contract of life insurance where there has been non-disclosure or misrepresentation by the insured. The term ‘contract of life insurance’ is defined in subsection 11(1) of the IC Act to mean ‘a contract that constitutes a life policy within the meaning of the Life Insurance Act 1995’. A ‘life policy’ includes, inter alia, a contract of insurance that provides for the payment of money on the death of a person; a contract that constitutes an investment account contract and one that constitutes an investment-linked contract.108

7.5 The remedies provided by section 29 are as follows.

  • Avoid the contract where there has been fraudulent non-disclosure or misrepresentation that does not relate to age.
  • Avoid the contract where there has been innocent non-disclosure or misrepresentation that does not relate to age and the insurer would not have entered into the contract of insurance with the insured on any terms. However this can only occur within three years after the contract was entered into. If the insurer discovers the misrepresentation or the non-disclosure after three years since the contract was entered into the insurer has no remedy.
  • Vary the contract on the basis of the formula set out in subsection 29(4) (which reflects the principle of proportionality) where the failure is innocent and does not relate to age. Again, this is dependent upon the insurer discovering the failure within three years.
  • Vary the amount of the sum insured where the insured has misrepresented his or her age (see section 30 of the IC Act).

7.6 Division 3 of Part IV of the IC Act also provides a remedy where there has been non-disclosure or a misrepresentation by a member of a scheme109 or by a retirement savings account (RSA) holder110 or where there has been a misstatement as to age.111

The law before the IC Act

7.7 At common law if an insured breached its duty of disclosure obligations or made a misrepresentation, the insurer could avoid the contract.112 This applied to both contracts of general and life insurance.

7.8 The position for life insurance was modified by the introduction of the Life Insurance Act 1945, with limitations being placed on the remedies available to an insurer where a misrepresentation had been made by an insured. These limitations being:

  • the inability to avoid the policy because of a misrepresentation by the insured of his or her age;113 and
  • the inability to avoid the policy because of an incorrect written statement, unless the statement:
    • was fraudulently untrue; or
    • was a statement that the insurer considered a material risk. However, in order to avoid the policy this statement must have been made within the period of three years immediately preceding the date on which the policy is sought to be avoided or the date of the death of the life insured, whichever is the earlier.114

7.9 In the second reading speech for the introduction of the Life Insurance Bill, the then Acting Prime Minister and Treasurer noted that it:

    ‘Sets out certain minimum rights that a policy-owner shall have in relation to his policy contract.

    ‘The provisions of the bill are not unduly harsh on the management of life insurance companies; indeed, I think it may be said that the better companies have already voluntarily given their policy-holders substantially all the rights conferred by the measure. However, the measure will introduce improvements into the practices of some other companies that have not been so liberal in the past.’115

The law under the IC Act

7.10 Section 29 of the IC Act provides the remedies available to an insurer under a contract of life insurance where an insured has failed to disclose a matter to it or where the insured has made a misrepresentation or incorrect statement.

7.11 The Explanatory Memorandum to the Insurance Contracts Bill 1984 explains the purpose of section 29.

    ‘As the law stands, the provisions of the Life Insurance Act 1945 (Cwlth) apply only to written misstatements and not to oral misstatements or to the failure to disclose. There is no reason why such a distinction should be drawn and, consequently, the proposed law will treat them in the same way. Section 84 of the Life Insurance Act 1945 (Cwlth) also leaves open the question of the appropriate method of assessing damages for an innocent misrepresentation or non-disclosure. The formula adopted is based on the principle of proportionality which is already used in the insurance industry in relation to misstatements of age (section 83 of the Life Insurance Act 1945 (Cwlth)). These reforms are consistent with those effected by clause 28 in relation to general insurance.’116

Changes to life insurance market

7.12 At the time of the ALRC’s 1977 Issues Paper on Insurance Contracts and the following 1978 Discussion Paper and 1982 Report,117 business that constituted life insurance comprised mainly whole of life insurance,118 endowment insurance,119 term life insurance120 and rider benefits to each of the insurances.121

7.13 The Investment & Financial Services Association Ltd (IFSA) has advised122 that although term life policies were common at the time of the ALRC review into insurance contracts, the major part of life companies’ business at that time was endowment and whole of life policies.

7.14 The proportion of new business in 1977 which was term life was less than 15 per cent. Now, the proportion of new long term life insurance business represented by term insurance including rider benefits, disability insurance and so on is 94 per cent.

7.15 In 1977 life insurance sales were dominated by sales of individual non-superannuation whole of life and endowment assurance products which equated to 80 per cent of the 458,000 policies sold in the year ending 30 June 1977.

7.16 The change in the type of product sold can be seen in the following table.123

Year ending 30 June
Whole of life and endowment
Term
Investment A/C and linked
Accident sickness and disability
Group life and credit life
Other
1972
95.3%
3.3%
_
1.4%
_
_
1974
92.6%
5.7%
_
0.2%
_
1.5%
1976
88.4%
9.0%
_
1.2%
_
1.4%
1977
80.0%
14.9%
_
3.7%
_
1.4%
1978
75.3%
19.0%
_
4.2%
_
1.5%
1982
40.7%
19.5%
23.2%
11.4%
4.2%
1.0%
 
 
 
 
 
 
 
Year
 
 
 
 
 
 
1992
16.7%
19.6%
34.5%
23.7%
3.8%
1.7%
1994
8.4%
34.4%
16.8%
33.4%
4.6%
2.4%
1996
6.1%
36.4%
12.6%
36.6%
5.8%
2.4%

Concerns raised about section 29 of the IC Act

7.17 Some stakeholders have expressed the view that section 29 is no longer appropriate because of the changed nature of life insurance.124

7.18 Given the wider range of risks now underwritten by life insurers (such as trauma and income protection) and the fact that they are often in the same policy (that is bundled contracts), the range of remedies provided by section 29 is now said to be limited and, in some cases, inappropriate. For example, in relation to bundled contracts section 29 does not allow avoidance or correction of one cover without there being an effect on all the other covers.

Comments received about subsection 29(3) of the IC Act

7.19 Subsection 29(3) of the IC Act provides ’if the insurer would not have been prepared to enter into a contract of life insurance with the insured on any terms if the duty of disclosure had been complied with or the misrepresentation had not been made, the insurer may, within 3 years after the contract was entered into, avoid the contract.’

7.20 The main concerns raised by stakeholders regarding subsection 29(3) of the IC Act centre around:

  • the distinction between ‘the contract’ and ‘a contract’; and
  • the retention of the three year time period from section 84 of the Life Insurance Act 1945 to subsection 29(3) of the IC Act.

7.21 In relation to the distinction between ‘the contract’ and ‘a contract’, IFSA state the problem as being that ‘a life insurer’s right to avoid the contract contained within section 29(3), is predicated on the fact that the insurer would not have been prepared to enter into “a contract” of life insurance with the insured on any terms.’ The Queensland Court of Appeal in Schaeffer v Royal & Sun Alliance Life Assurance Aust Ltd recently held that ‘for a right of avoidance under s29(3) to arise it must be shown that, on the insured’s offer on the assumption that it had stated the true facts, the insurer would not have been prepared to enter into a contract on any terms; in other words, the insurer would have declined the risk.’125

7.22 This being so, IFSA and MLC both believe that subsection 29(3) ‘effectively traps life insurers and “rewards” those insureds who fail to comply with their duty of disclosure or misstate material facts’.126 This is because insurers will usually offer a contract of life insurance to a potential insured but it may be on modified terms. Therefore, subsection 29(3) will have limited effect. The Consumers’ Federation of Australia have suggested that such a narrow interpretation of Schaeffer’s case may not be correct as it renders the phrase ‘on any terms’ redundant. It states that:

    ‘Whilst it is correct that section 29(3) uses the phrase “a contract” rather than “the contract” (as appears in section 29(2) and (4)), it also includes the phrase “on any terms”. When read together, it appears that the effect of section 29(3) is that an insurer has a remedy if it would not have offered the risk proposed on any terms and does not extend to any life insurance cover whatsoever. Unless the risk proposed for by the insured included an investment product or other life insurance products in a bundled contract, the insurer would not have to establish it would not have offered such other products to apply section 29(3) of the IC Act.’127

7.23 The second issue of concern raised by stakeholders about subsection 29(3) is the three year time period in which an insurer can avoid a contract. Life insurers say it is anachronistic and should be repealed. MLC state that:

    ‘… the rationale for the three-year rule is to protect consumers where the policy being avoided may have a surrender value. However, such policies are rare in today’s market. The vast majority of policies impacted by section 29 do not have a surrender value.’128

7.24 Australian Life Underwriting and Claims Association (ALUCA) also believes that the three year time period is out of keeping with current practice. It states:

    ‘This does not address current practice within the life insurance industry, or current medical knowledge. Not all illnesses result in death or disablement within 3 years, and in any case illnesses and medical conditions are not the only information relevant to the insurer’s decision. Income, assets and other aspects of financial status are relevant to decisions on disability income (income protection) insurance where a monthly income replacement benefit is payable. Such information is also relevant for setting the limits for death, TPD and trauma cover.’129

7.25 IFSA also support the removal of the three year time period in section 29 but only for morbidity risks. It believes that the time period could be retained for all mortality risks whether underwritten in traditional products (that is, whole of life and endowment policies) or not.130

7.26 However, the Consumers’ Federation of Australia believes that the three year time period provides a reasonable outcome and that ‘to simply repeal the three year time limit would upset the balance between the interests of insurers and insureds’.131

7.27 In relation to both these issues, the ALRC recommended that ‘where a misrepresentation or breach of the duty of disclosure is disclosed within three years of the contract being entered into, the insurer should be entitled to reduce the amount payable under the contract of insurance in accordance with the principle of proportionality. An exemption should be made where the insurer would not have entered into the contract at all. In those cases, the only appropriate remedy is avoidance.’132 Thus, the law as it currently stands is in keeping with the intention of the ALRC’s report.

Comments received about subsection 29(4) of the IC Act

7.28 Subsection 29(4) provides that where an insurer has not avoided a contract of life insurance, it can, in certain circumstances vary the contract for the sum insured according to the formula provided.

7.29 The formula is said to be an inflexible remedy. For example, where an insured has an old knee injury and does not disclose this, the policy cannot be substituted under subsection 29(4); all that can occur under this subsection is that the amount of the sum insured can be varied.

Bundled contracts of insurance

7.30 As mentioned above, some stakeholders have suggested that there is an inability to obtain an appropriate remedy under section 29 of the IC Act where an insured has made a misrepresentation or failed its duty of disclosure obligations. Section 29 does not allow avoidance or correction of one cover without there being an effect on all the other covers. ALUCA suggests that ‘it would be better for both insureds and insurers if specific provisions were made, in cases where the non-disclosure or misrepresentation affects one of the covers only and not just the others, to allow avoidance or correction of one cover, including adjustment of the premium if appropriate, without the other covers being affected’.133

Suggested possible solutions

7.31 Phillips Fox suggests that in relation to the three year period issue, ‘a fairer balance would be achieved by introducing the concept of proportionality and removing the entitlement of the insurer to avoid a policy where non-fraudulent misrepresentation or non-disclosure has occurred. Instead, it should be provided for the insurer to be put into the position had such non-disclosure or misrepresentation not occurred, effectively adopting the remedy provided for in contracts of general insurance as per section 28(3)’.134

7.32 MLC and IFSA suggest the possible solution to the concerns about subsection 29(3) as follows:

  • adopt a similar approach to section 28; or alternatively
  • amend section 29 so that:
    • the three year rule is limited to policies that acquire a surrender value; and
    • more flexible remedies are made available that allow, where appropriate, insurers to:
      • reduce the sum insured;
      • vary a policy to include an exclusion and/or loading;
      • sever parts of the contract (bundled contracts or multiple life insureds).

7.33 ALUCA submits that all issues concerning section 29 can be resolved if the remedies available to general insurers under section 28 were made available to life insurers. The exception to this would be the retention of the proportionality principle in subsection 29(4) (but not the three year time period) ‘where the appropriate remedy is the reduction of the sum insured or monthly benefit.’

Conclusion

7.34 While section 29 of the IC Act is, in general, in keeping with the outcome suggested by the ALRC, the Review Panel acknowledge that in some situations its application is no longer in alignment with current practices. This can be seen by the different products sold by life insurance companies and the fact that many policies provide different types of cover (for example, death cover, total and permanent disablement, trauma and income protection).

7.35 The Review Panel considers that for bundled contract of insurance, section 29 does not provide a fair outcome where an insured has either made a misrepresentation or breached its duty of disclosure obligations. The balancing of interests in this context is particularly difficult, but the Panel believes the concerns raised by stakeholders can be overcome by adopting the following approach.135

7.36 First, and as mentioned in Chapter 4 above, for the purposes of Part IV of the IC Act, life insurance contracts should be ‘unbundled’. Thus, each cover will be treated as a separate policy for the purposes of Part IV of the IC Act.

7.37 Second, for the reasons discussed in paragraphs 7.21 and 7.22 above, the words ‘a contract’ in subsection 29(3) should be replaced by the words ‘the contract’.

7.38 In relation to a ‘contract’ of life insurance, which includes parts of a contract of life insurance, that covers mortality or contains a surrender value, the law as it currently stands should continue to apply (subject to the proposal that subsection 29(3) be amended so that ‘a contract’ be replaced by the words ‘the contract’). Importantly, for those contracts, the three year time period in which an insurer can avoid a contract should remain.

7.39 However, a ‘contract’ of life insurance, which includes parts of a contract of life insurance, that does not cover mortality or does not contain a surrender value, should be subject to an equivalent of section 28 of the IC Act, subject to any necessary modifications.136 The result will be that for these contracts, insurers may avoid the contract at any time in the event of fraud. Absent fraud, insurers may not avoid the contract; instead, the parties are put into the same position they would have been if the failure of disclosure had not occurred or the misleading representation not been made.

Recommendations

7.1 For the purposes of Part IV of the IC Act life insurance contracts should be ‘unbundled’.

7.2 Subsection 29(3) should be amended so that the words ‘a contract’ are replaced by the words ‘the contract’.

7.3 All ‘contracts’ of life insurance (including parts of a contract of life insurance) excepting those that cover mortality or contain a surrender value, should be subject to section 28 of the IC Act, subject to any necessary modifications.

Misstatement of age

7.40 Section 30 of the IC Act provides for the variation of the sum insured when there has been a failure to disclose the date of birth of one or more of the life insureds or where there has been a misrepresentation of age. It provides a formula to work out the amount of the variation.

7.41 The formula provides for interest at a prescribed rate of 11 per cent payable on overpayment of premium. Some suggest the prescribed rate should be the same as the prescribed rate for the purposes of section 57.137

7.42 The Review Panel believes that the interest rate prescribed for the purposes of section 30 should be the Treasury 10 year bond rate.

Recommendation

7.4 The interest rate prescribed for the purposes of section 30 should be the Treasury 10 year bond rate.

7.43 IFSA believes that section 30 should be repealed. This is because ‘”new age products” do not necessarily allow the insurer the freedom to determine an outcome that is equitable to the insurer and insured … If it were to be retained, however, it should be limited to policies covering “mortality” risk as distinct from a morbidity risk’.

7.44 MLC have submitted that although section 30 is not deficient, it needs to be made relevant to today’s insurance market.

    ‘To accord with the intention of the section (that is, to place the parties in the position they would have been had the misstatement not occurred), MLC submits that section 30 be amended to allow insurers to change the expiration date of contracts where that date has been calculated with reference to the insured’s (incorrectly stated) date of birth’.

7.45 The Review Panel believes on balance that no sufficient case has been made for changes to section 30, other than the change recommended by MLC.

Recommendation

7.5 Section 30 of the IC Act should be amended to allow insurers to change the expiration date of contracts where that date has been calculated with reference to the insured’s (incorrectly stated) date of birth.

Cancellation of a contract of insurance

7.46 Part VII of the IC Act relates to expiration, renewal and cancellation of insurance contracts.

7.47 Section 63 provides that an insurer is not able to cancel a contract of general insurance except in accordance with the provisions of the IC Act.

Cancellation of contracts of general insurance

7.48 Section 60 of the IC Act provides the circumstances in which an insurer can cancel a contract of general insurance:

  • a breach of the duty of utmost good faith;
  • a breach of the duty of disclosure;
  • a misrepresentation;
  • a breach of a provision of the contract; or
  • a fraudulent claim under the contract, or under some other contract in effect at the same time.

7.49 The insurer can also cancel the contract by reason of an act or omission of the insured or some third party, if this is provided for in the contract, and the act or omission occurs after the contract has been entered into. The section refers to an act or omission of ‘the insured or some other person’.

7.50 There is no section 60 equivalent for contracts of life insurance. Therefore, there is no provision in the IC Act that allows a life insurer to cancel a policy for any reason. Many life insurers have proceeded on the basis that they are entitled, under some circumstances, to cancel a contract under the common law.

7.51 It has been suggested that consideration should be given to extending section 60 to cover contracts of life insurance.138 The Investment & Financial Services Association Ltd (IFSA) further suggested that:

    ‘Due to the evolution of products since the ICA was originally drafted … it is IFSA’s recommendation that the proposed amendments should only apply to morbidity benefits (that is, TPD, trauma and income protection) and not mortality benefits (that is, death cover) or bundled contracts (that is, whole of life or endowment policies)’.139

7.52 The question arises as to whether an amendment is warranted to give specific statutory rights of cancellation to life insurers, in line with those of general insurers.

7.53 There are two main concerns associated with extending the operation of section 60 of the IC Act, to all or even some life insurance products.

7.54 The Review Panel notes that section 210 of the Life Insurance Act 1995 does not allow a forfeiture of the policy, for premium non-payment, in certain circumstances. If section 60 of the IC Act were amended to apply to life insurance, the Review Panel would be concerned about possible conflicts between paragraph 60(1)(d) and section 210 of the Life Insurance Act 1995. IFSA suggested that this problem would not arise if the operation of section 60 was only extended in relation to morbidity benefits.140

7.55 However, it is also understood that life insurers can currently rely upon the common law and specific cancellation clauses in their policies to provide a similar outcome to that of section 60 of the IC Act. The Review Panel notes that the industry is concerned that these common law rights have yet to be tested by the High Court, however, the Review Panel questions the need to clarify in statute that which is already available to the life insurance industry.

7.56 On balance, the Review Panel is not convinced that section 60 of the IC Act requires amendment.

Cancellation procedure

7.57 Section 59 sets out the procedures to be followed by the insurer when exercising a right to cancel a contract of insurance. That is, the insurer must give notice in writing to the insured of the proposed cancellation. This does not apply where section 210 of the Life Insurance Act 1995 applies.

7.58 The question arose as to whether the period of notice for cancellation should be amended.

7.59 Submissions on this issue ranged from suggesting that the current time frames were appropriate, to suggesting that timeframes were either too long or not long enough. In light of such disagreement, the Review Panel is not minded to suggest an amendment to the timeframes that were proposed by the ALRC.


107 Section 33 of the IC Act.

108 Subsection 9(1) of the Life Insurance Act 1995.

109 Section 32 of the IC Act.

110 Section 32A of the IC Act. The term ‘RSA’ has the same meaning as in the Retirement Savings Accounts Act 1997.

111 Section 30 of the IC Act.

112 Sutton, K. 1999, Insurance Law in Australia, 3rd edn, LBC Information Services, Sydney, paragraph 3.5.

113 Section 83 of the Life Insurance Act 1945.

114 Section 84 of the Life Insurance Act 1945.

115 Australia, Parliament, 1945, Parliamentary Debates Session 1945, Third Session of the Seventeenth Parliament, Vol 182, at page 2147.

116 Australia, Parliament 1984, House of Representatives, Insurance Contracts Bill 1984 Explanatory Memorandum at page 47.

117 Australian Law Reform Commission 1982, Insurance Contracts, ALRC 20, AGPS, Canberra preceded by Australian Law Reform Commission 1977, Insurance Contracts, IP 2, Australian Law Reform Commission, Sydney and Australian Law Reform Commission 1978, Insurance Contracts, DP 7, Australian Law Reform Commission, Sydney.

118 ‘Under a whole of life policy, the sum insured is payable only on the death of the life insured … The insurer invests the investment component of the premium and the insured becomes entitled not only to the sum insured, but also (if, as is usually the case, the policy is one “participating in profits”) to a share in the net profits (declared in the form of “bonuses”) of the investment.’: see Kelly D. and Ball, St L. 2001, Kelly and Ball principles of insurance law 2nd edn (loose leaf), Butterworths, Sydney at paragraph 13.0030.

119 ‘Under an endowment policy, the sum insured is payable on the life insured reaching a specified age (normally) on that person’s death before reaching that age … The insurer invests the investment component of the premium and the insured becomes entitled not only to the sum insured, but also (if, as is usually the case, the policy is one “participating in profits”) to a share in the net profits (declared in the form of “bonuses”) of the investment.’: see Kelly, D and Ball, St L. 2001 at paragraph 13.0030.

120 ‘Term insurance is insurance under which the sum insured is payable only on the death of the life insured during the term of the contract, which is usually of short duration.’ See Sutton, K. 1999, Insurance Law in Australia, 3rd edn, LBC Information Services, Sydney, paragraph 1.4.

121 Although a variety of rider benefits are available, providing benefits on total and permanent disablement, total and temporary disablement and additional rights to future insurance as well as waiver of premium, most rider benefits of any substance constituted a pre-payment of the policy sum insured, consistent with the ‘bundled’ nature of the contracts.

122 See submission by Investment & Financial Services Association Ltd dated 27 February 2004.

123 Table reproduced from the submission to this review by Investment & Financial Services Association Ltd dated 27 February 2004, referencing Life Insurance Commissioner, 1982 Annual Report and Insurance and Superannuation Commission, Quarterly Statistical Bulletin, December 1997.

124 See, for example, submissions on the Issues Paper by MLC (undated supplementary submission); Australian Life Underwriting and Claims Association; Investment & Financial Services Association Limited dated 19 April 2004; and Phillips Fox dated 21 April 2004.

125 Schaeffer v Royal & Sun Alliance Life Assurance Aust Ltd [2003] QCA 182; (2003) 12 ANZ Ins Cas 90-116 at [43] per Davies J.A. with whom McPherson J.A. and Cullinane J. concurred.

126 See submissions on the Issues Paper by MLC (undated submission on issues of importance to the life insurance industry at page 12) and Investment & Financial Services Association Limited dated 19 April 2004.

127 See submission on the Proposals Paper by the Consumers’ Federation of Australia dated June 2004.

128 See submission on the Issues Paper by MLC (undated submission on issues of importance to the life insurance industry at page 12).

129 ALUCA noted in its submission on the Issues Paper the reasoning behind the three year rule: ‘appears to be that any relevant medical condition not disclosed is likely to result in death or disablement within three years, allowing the insurer to exercise its remedies. The three year limit may have been intended to prevent insurers from exercising remedies unfairly in respect of non-disclosure of old conditions that did not cause the death or sickness.’

130 See submission by Investment & Financial Services Association Limited dated 19 April 2004 at page 10.

131 See submission on the Issues Paper by Consumers’ Federation of Australia at page 27.

132 Australian Law Reform Commission 1982, Insurance Contracts, ALRC 20, AGPS, Canberra, paragraph 198.

133 See submission on the Issues Paper by Australian Life Underwriting and Claims Association at page 10.

134 See submission by Phillips Fox dated 21 April 2004.

135 Cf submission by the Consumers’ Federation of Australia (CFA). It submits that ‘the impetus for change to section 29(3) of the IC Act to unbundle life insurance contracts and to the wording of section 29(3) is based on the false premise that the remedies under section 29(3) are so narrow as to be ineffective.’ See CFA’s submission on the Proposals Paper, dated June 2004, at page 10.

136 MLC submits that this recommendation should be subject to the proportionality principle in subsection 29(4) being maintained within the reworked section 28 and the clarification of the phrase ‘necessary modifications’ (see MLC’s submission on the Proposals Paper). The Review Panel believes these issues can be resolved during any implementation process.

    The Consumers’ Federation of Australia submits that while the remedies for non-disclosure and misrepresentation of general insurance policies is relatively straight forward, the same cannot be said for life insurance. ‘As such, decisions as to non-disclosure or misrepresentation by consumers of life insurance products are much more likely to be marginal and include subjective issues as to the knowledge and honesty of a life insured. To remove morbidity life insurance policies from the scope of section 29 of the IC Act, will significantly erode consumers’ rights by removing the knowledge and honesty of an insured from the determination of an insurer’s remedies for non-disclosure and misrepresentation in respect of many life insurance policies.’ See submission by the Consumers’ Federation of Australia dated June 2004.

137 See submissions on the Issues Paper by Australian Life Underwriting and Claims Association; Brendan Pentony dated 13 April 2004; MLC (undated supplementary submission); Phillips Fox dated 21 April 2004; cf submission by Investment & Financial Services Association Limited dated 19 April 2004.

138 See submissions from the Investment & Financial Services Association Ltd dated 24 December 2003 at page 5 and dated 27 February 2004 at page 16; submission on the Issues Paper from Australian Life Underwriting and Claims Association (ALUCA) at page 12; and MLC dated 16 March 2004 and its supplementary submission on the Issues Paper at page 4.

139 Submission by the Investment & Financial Services Association Ltd dated 27 February 2004, at page 16.

140 See submission from the Investment & Financial Services Association Ltd dated 11 June 2004, at page 3.

 

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