Insurers in Australia are being urged to carefully reassess the questions they pose to potential policyholders following amendments to the Insurance Contracts Act in 2021.
This advisory will be a central topic at the Australian Insurance Law Association’s (AILA) 2024 National Conference, “Sunny Side Up,” scheduled to take place on the Gold Coast, Queensland.
Barrister Ken Horsley and MinterEllison partner Katie Clark will delve into the implications of the revised duty of disclosure for consumer insurance contracts that took effect in October 2021.
Horsley stressed that the new legislation provides insureds with greater latitude in what information they disclose on proposal or renewal forms. This change necessitates that insurers be meticulous in their questioning.
Horsley and Clark indicated that smaller insurers, especially underwriting agencies, might not be thoroughly reviewing their questions, which could result in overturned declined claims.
The changes in the duty of disclosure came after the financial services royal commission found that the previous disclosure requirements failed to adequately protect consumers from having claims denied due to unintentional non-disclosures, arising from insurers not asking the right questions.
The updated law targets “consumer insurance contracts,” including home and contents, motor vehicle, and landlord policies. The previous stringent duty of disclosure has been replaced by a duty for consumers to take reasonable care not to misrepresent information to an insurer.
Clark said simplifying the disclosure regime aligns well with the unfair contract terms legislation, though there has been minimal litigation to provide the industry with judicial interpretation of these changes.
In an Australian Financial Complaints Authority (AFCA) case in February 2024, Allianz was unsuccessful in denying a landlord’s claim after a fire destroyed the property. AFCA determined that the insurer could not prove the property had been unoccupied for more than 60 days, noting that it failed to ask any occupancy-related questions in the renewal schedule.
Horsley and Clark pointed out that the act’s changes have not been a significant talking point in the insurance industry, suggesting that some insurers may not have adequately updated their proposal forms and renewal documents. This oversight could compel insurers to honour claims for coverage they did not intend to provide.
While there is no legislative limit on the number of questions insurers can ask, they must consider consumer satisfaction.
“If you’re asking 64 questions, the consumer may simply go to the next insurer,” Horsley said.
During the AILA conference, Clark and Horsley will examine various examples of insurer proposal questions.
The event, held at the Gold Coast Convention and Exhibition Centre in Broadbeach, will feature a range of speakers discussing future issues shaping the insurance market and industry responses.
Aside from Clark and Horsley, 2023 Actuary of the Year Sharanjit Paddam will speak at the conference. He will present insights from the third annual home insurance affordability report for 2024.
AILA national president Melanie Quixley noted that the conference theme, Sunny Side Up, will focus on how the insurance industry can positively impact the community, climate, and future living conditions.
