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

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On 10 September 2003 the then Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, and the then Parliamentary Secretary to the Treasurer, Senator Ian Campbell, jointly announced that the Government would be undertaking a comprehensive review of the Insurance Contracts Act 1984 (the Act).

Mr Alan Cameron A.M. and Ms Nancy Milne were appointed to a Review Panel to conduct the review. Mr Cameron has extensive experience in the public and private sector, including 8 years as Chairman of the Australian Securities and Investments Commission and its predecessor. Ms Milne is a specialist insurance lawyer and a consultant with Clayton Utz.

The Review Panel was supported by a secretariat located within The Treasury.

The objective of the review was to make recommendations aimed at improving the overall operation of the Act through correcting deficiencies and clarifying ambiguities in its operation.

The review set out to:

  • identify the specific provisions that do not operate satisfactorily and reasons for such deficiencies;
  • identify and recommend measures to ameliorate ambiguities in drafting or resulting from judicial interpretation;
  • recommend amendments (including new or the repeal of existing provisions), that would improve the operation of the Act; and
  • identify areas of the Act that operate in a satisfactory manner (that is, the specific areas that should not be amended and, if appropriate, why).

The review was conducted in two stages. The first stage examined the operation of section 54. The second stage reviewed the remainder of the Act.

Review of section 54 of the Insurance Contracts Act 1984

  • The final report on section 54 was provided to the Government on 31 October 2003. The report was released publicly on 18 November 2003.
  • A draft of possible legislative amendments was released for public comment on 8 March 2004.
  • The Review Panel reported to the Government on the public consultation process by letter of 28 May 2004.

Review of the remainder of the Insurance Contracts Act

The second stage of the review examined the balance of the Act.

  • In November 2003, the Review Panel sought submissions at large on issues relating to the Act (other than section 54).
  • After considering submissions at large, the Review Panel released an issues paper for comment on 24 March 2004.
  • Following consideration of written submissions and meetings the Review Panel had with stakeholders, a proposals paper on the balance of the Act was released on 25 May 2004.
  • The Review Panel delivered its report to Ministers on the remainder of the Act on 30 June 2004, after taking into account comments made on the proposals paper.

A draft legislative package, including explanatory materials, to address the Review Panel’s key recommendations was released for public comment in February 2007.

After considering submissions made to the Review Panel, the Insurance Contracts Amendment Bill 2010 (the Bill) was prepared.  On 17 March 2010, the Bill and associated Explanatory Memorandum were introduced to the House of Representatives by The Minister for Financial Services, Superannuation and Corporate Law and Minister for Human Services, the Hon Chris Bowen MP.

The Bill gave effect to a number of the Review Panel’s recommendations.  In several areas the Review Panel’s recommended approach was modified to take into account subsequent consultations with stakeholders of the details of the proposed amendments.  In particular, the proposed amendments to section 54 were removed.

The Bill passed the House of Representatives but did not pass through the Senate before it lapsed as a result of the federal election in August 2010.

As a separate matter, in March 2010 Minister Bowen released an options paper entitled Unfair Terms in Insurance Contracts.  The paper noted a number of possible options to deal with the potential for unfair terms in insurance contracts, including extending the generic provisions, and making other reforms to the Insurance Contracts Act 1984.  13 submissions were received, which expressed widely divergent opinions on the merits of the various options.

Next Steps

Subsequent to the election, these matters fell within the responsibilities of the Parliamentary Secretary to the Treasurer, the Hon David Bradbury MP. The Parliamentary Secretary is currently engaging with key stakeholders in relation to the unfair contract terms issues.