The Insurance Council of Australia (ICA) has shown support for the recent initiative by Assistant Treasurer and Minister for Financial Services Stephen Jones to engage in a consultative process aimed at standardising definitions related to natural disasters within insurance policies.
This initiative, as announced, also includes discussions on the potential revamp of the standard cover regime.
The goal is to achieve uniformity in the terminology used across the insurance sector, thereby making policy details more transparent and understandable to consumers.
This strategic move is part of an ongoing effort within the insurance industry to enhance customer service by making insurance terms more accessible and clearer. The initiative to establish standardised terms comes after the successful legislation of a uniform flood definition in 2012.
The Treasury's current focus includes looking into the standardisation of terms for other critical natural hazards such as fire, storms, and the effects of stormwater and rainwater runoff.
Concurrently, the ICA has begun exploratory discussions with insurance firms about standardising the language used to describe exclusions for maintenance and wear and tear in insurance contracts. This conversation is in its nascent stages, and any consensus reached on adopting uniform definitions would require subsequent regulatory approval.
Moreover, the Treasury plans to delve into the standard cover regime that has been operational since the enactment of the Insurance Contracts Act in 1984. Although established to facilitate the standardisation of policy terms and conditions to aid in policy comparison, its pertinence has been diminished over time due to legislative amendments and changes in policy structuring.
ICA CEO Andrew Hall has publicly welcomed the consultation process, emphasising the insurance industry's eagerness to collaborate with the Treasury on these proposed standardised terms.
“We welcome this consultation process announced by Assistant Treasurer Stephen Jones today and look forward to working with the Treasury on the standardised terms being considered,” he said. “We acknowledge there is more to be done to improve consumer understanding of policies, and standardised definitions for fire, storm, and stormwater and rainwater runoff may assist with this.”
The review of the industry's Code of Practice is currently in progress, with the ICA also looking into standardising clauses for exclusions related to maintenance and wear and tear in policies. This initiative is expected to further clarify policy details for the benefit of insurance customers.
The ICA is also in talks with the Treasury about the proposed Delivering Better Financial Outcomes reforms.
