FSC resists unfair contracts extension
Extending the Unfair Contract Terms (UCT) legislation to the life insurance industry would encourage forum shopping and increased litigation costs as insurers found themselves defending baseless or unmeritorious claims, according to the Financial Services Council (FSC).
The FSC has mounted a vigorous defence to suggestions that the UCT legislation covering general insurance should be extended to the life/risk sector.
“We do not believe that a case has been made in relation to the incidence of unfair terms in contracts of life insurance,” the FSC has told a Parliamentary committee.
It said that “to extend the UCT legislation to these contracts will encourage forum shopping and increased litigation costs in defending baseless or unmeritorious claims”.
“These costs may need to be passed on to consumers without any material benefit,” the FSC said.
Referring to recent adverse publicity around life insurance claims-handling, the FSC maintained this still did not justify extending the Unfair Contract Terms.
“While we accept that some recently publicised claims highlight the need for life insurers to have processes to update medical definitions in their policies, these cases do not indicate that the relevant policies contained unfair terms at the time they were entered into,” it said.
“Extending the UCT regime to life insurance policies would not address the issue of out-dated medical definitions in life insurance policies. This issue is being addressed by the FSC Life Insurance Code of Practice, which obliges life insurers to have processes to review their medical definitions on a regular basis.”
Recommended for you
Government has introduced a bill to Parliament to legislate the first stream of the QAR reforms.
ASIC now has a 1:1 ratio when it comes to court success in the enforcement of crypto activities and more action is expected as Treasury seeks to introduce a regulatory framework.
A leading governance body has hit out at “specialist interest groups proposing ad hoc law reform” when it comes to reforms of financial services legislation and believes an independent body is needed.
The release of ALRC’s final report into financial services legislation has highlighted financial advice as a “significant” focus as it seeks to reduce costs and help advisers understand their obligations, alongside the Quality of Advice Review.
