Big changes to insurance are in the works with a new law making its way through Parliament. The changes are aimed at increasing confidence in the insurance market by holding insurers to account and ensuring they operate fairly. The bill is comprehensive and replaces five existing laws, including one dating back to 1908, and changes a whole lot of others.
The onus will shift onto the insurer to ask the right questions to get the information it needs as opposed to you guessing what you should include.
Information Disclosure
The bill at present has different duties and remedies for consumers and non-consumers.
Consumer duty
As a consumer you will need to take reasonable care not to misrepresent relevant information to the insurer. Whether you have taken reasonable care will depend on a number of factors including:
- The type of insurance.
- The explanatory information provided.
- How clear and specific the questions asked were.
- How clearly the insurer communicated the importance of answering the questions and the consequences of failing to answer the questions.
- If a question was not answered then what steps the insurer took in response.
Non-consumer duty
As a non-consumer, eg a business owner, you will need to make a fair presentation of the risk. That disclosure needs to be reasonably clear, accessible and factually correct. The policyholder will need to disclose every material circumstance or give sufficient information to put the insurer on notice that it needs to make further inquiries. Non-consumers will not need to disclose anything the insurer already knows, ought to know, is presumed to know, or has waived.
Minimum insurance contract terms being updated
The bill includes other important changes to the way insurance contracts are drafted including:
- Insurers must pay out claims within a reasonable time. A reasonable time includes time to gather information, investigate and assess claims.
- Terms must not be unfair under the Fair Trading Act.
Watch and wait until the bill is passed
As with any parliamentary bill we need to wait for the final version to be passed just in case there are further changes. But we hope the complicated area of insurance contracts will be simplified by the updates this bill proposes.