ASIC files appeal over court decision on insurance contract terms

Insurance contract standards emphasised

ASIC files appeal over court decision on insurance contract terms

Insurance News

By Roxanne Libatique

The Australian Securities and Investments Commission (ASIC) has filed an appeal against a Federal Court decision that upheld a contentious contract term used by Auto & General Insurance Company Limited (Auto & General) in its home and contents insurance policies.

ASIC’s challenge pertains to a specific clause requiring policyholders to alert the insurer about any changes concerning their insured property. The clause also warns that failure to comply could lead to reduced claim payments or the outright denial of claims, as well as potential policy cancellation.

The corporate watchdog argued that this term places unclear obligations on policyholders and could mislead them about their actual rights under the agreement.

Auto & General’s alleged unfair contract term

The case originally presented by ASIC on April 4, 2023, was dismissed by the Federal Court on March 22, 2024, with the court not finding in favour of ASIC’s allegations of unfair contract terms under the ASIC Act.

Subsequent to the court’s decision, ASIC escalated the issue to the Full Federal Court, where the appeal is pending a scheduled date.

ASIC continues to express concerns that the term overly extends Auto & General’s ability to refuse or reduce claim payments beyond the standard provisions of the Insurance Contracts Act.

The controversial term was part of several product disclosure statements issued by Auto & General for different brands, including Budget Direct and Qantas Home and Contents Insurance. Since the legal proceedings began, Auto & General has stopped issuing new policies under some brands and updated their terms in May and again in September 2023 to mitigate the regulator’s concerns.

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