Life insurers face exposure to third party beneficiaries
The Government’s moves to bring insurance under the Unfair Contract Terms (UCT) regime will open up life insurance companies to claims by third party beneficiaries.
The draft legislation accompanying the Government’s move has specifically exampled such claims being made by death benefit nominees.
The explanatory memorandum said that the new legislation would amend the Australian Securities and Investments Commission (ASIC) Act to allow third party beneficiaries of insurance contracts to bring actions against insurers.
“For example, death benefit nominees under a life insurance policy or individuals covered under certain group insurance policies (e.g. a policy purchased by small sporting associations on behalf of club members to cover personal injury incidents) are likely to be able to bring actions under the UCT regime in relation to contracts covered by the regime,” the explanatory memorandum said.
Importantly, the changes will not be retrospective, with the memorandum explaining that the regime would apply to new insurance contracts from the date the legislation is passed.
The changes are expected to have an impact on group insurance at a time when the industry is already seeking to deal with the Government’s insurance inside superannuation changes.
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