ASIC has announced that it has commenced the first proceedings alleging unfair contract terms in an insurance contract. The case involves standard form home and contents insurance contracts issued by Auto & General Insurance Company Limited (Auto & General) through 7 different distributors.

On 5 April 2021, the unfair contract term protections in Subdivision BA of the ASIC Act were expanded to include standard form insurance contracts with consumers and small businesses.

ASIC alleges that since 5 April 2021, a contract term requiring customers of Auto & General to notify it ‘if anything changes about your home or contents’ is unfair under section 12BF of the ASIC Act because the term:

• imposes an obligation on customers to notify Auto & General if ‘anything’ changes about their home or contents, which customers cannot practically meet;
• imposes an unclear obligation on the customer regarding what they need to disclose to Auto & General;
• suggests that Auto & General has a broader right to refuse claims or reduce the amount payable under claims if the customer does not meet the notification obligation that is available under the Insurance Contracts Act;
• could mislead or confuse the customer as to their true obligations and rights under the contract.

ASIC further alleges the contract term is unfair within the meaning of section 12BG of the ASIC Act as the term:

• causes a significant imbalance in the parties’ rights and obligations under the contract,
• is not reasonably necessary to protect Auto & General’s legitimate interests, and
• would cause detriment to the policy holders if the term were relied on.

ASIC is seeking declarations that the term is void. ASIC will also seek injunctions and corrective orders.

On 9 November 2022, the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 was assented to. Among other things, this Act will introduce civil penalties under the ASIC Act for breaches of the unfair contract term prohibition from 10 November 2023.

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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.