Industry, Government and advocates have one of the best opportunities in years to make insurance fair, according to Consumer Action Law Centre.
A Senate committee has recommended a major shake up to the laws on home and car insurance with changes that would empower Australians to have a positive experience with insurers.
“Insurance has been too confusing for too long” says Susan Quinn, Senior Policy Officer at Consumer Action.
“This Senate Committee has hit the nail on the head in many ways. It’s great to see that they’ve recommended removing the absurd exception that insurance companies have from unfair contract terms laws. Why should insurers be allowed to have unfair contracts?”
The committee’s recommendations reiterate what Consumer Action and other advocates have been saying for a long time now—many insurance products have hidden and unfair exclusions, and a lack of competition means insurers can impose a ‘lazy tax’ at renewal time.
“This is the best opportunity for fair insurance in years” says Quinn.
“We’re keen to work with Government and industry to see these recommendations implemented. It’s vital that Government and the insurance industry rebuild trust in insurance and these recommendations would go a long way to doing so.
“Insurance is about helping people at some of the worst times in their lives—giving people security and support. This is a very positive opportunity for the insurance industry to win our trust back.”
Key recommendations supported by Consumer Action Law Centre:
- That insurers should be not be exempted from the general prohibition on unfair contract terms (recommendation 11)
- That the insurance ‘standard cover regime’, which was designed to improve the comparability of insurance products but has never worked, be independently reviewed (recommendation 5)
- That insurers be required to be upfront with premium rises, through a new obligation to disclose the previous year’s premium on insurance renewal notices (recommendation 3), and
- That insurers be required by law to comply with the ACCC’s good practice guidance for comparison website operators and suppliers (recommendation 10).
Key Committee quotes:
“1.9 Insurance touches many aspects of human activity. Adequate insurance cover is integral to protecting consumers’ most valuable assets and to maintaining and protecting the living standards of all Australians and the economy overall. As seen in the wake of a number of natural catastrophes, unsuitable financial products, including insurance, can have significant and devastating impacts on people’s lives. To that end, accessibility, transparency, affordability and competition are crucially important features of a well-functioning general insurance market.”
“3.73 Transparent disclosure that encourages understanding and promotes informed decision-making lies at the heart of robust consumer protection. To that end, the committee is deeply concerned by the apparent lack of transparency in the general insurance industry with regard to product disclosure, and the detrimental effect this has on consumers’ ability to effectively compare similar insurance policies.”
“5.13 General insurance plays an important role in maintaining the financial stability of consumers, and indeed, of the Australian economy. Given this, effective protections are essential during all stages of a consumer’s relationship with an insurer. The committee is of the view that the exemption of general insurers from the unfair contract terms provisions contained in the ASIC Act is unwarranted and creates a significant gap in consumer protections.”