Unfair contract terms legislation could be a blessing in disguise, brokers say

Unfair contract terms legislation could be a blessing in disguise, brokers say | Insurance Business

Unfair contract terms legislation could be a blessing in disguise, brokers say

Brokers are hoping legislation that will protect consumers from unfair terms in insurance contracts will simplify policy terms and therefore make them easier to explain to clients.

Plans to extend unfair contract terms to insurance contracts yesterday prompted law firm Herbert Smith Freehills to warn that brokers could find themselves under greater pressure to ensure the policies they recommend do not contain unfair terms.

However some broking experts think it could be a blessing in disguise for intermediaries who are left with the arduous task of explaining vague and complex insurance terms.

“Anything that makes insurance simpler, fairer and easier for our clients has to be a good thing,” Cooper Professional Risk director, Robert Cooper, pictured, said. “If it gives insurers a clear incentive to draft their policy wordings and contracts more carefully, it has to be a benefit to all.

“We have had to interpret some complicated clauses to our clients in the past [because of confusing] wordings and documents.”

 While ambiguity generally favours the client in Australian insurance law, the client can find it stressful getting to that point when making a claim.

“We like to prevent these problems before a claim, not at claim time,” said Cooper. “Claims are annoying for our clients at the best of times without insurers interpreting their own clauses differently to what we thought we had agreed with the underwriter.”

Some brokers also believe the legislation will provide clarity for their clients as to whether to take action on a rejected claim.

“There have been isolated cases where this legislation would have greatly assisted the consumer,” said David Rogers, managing director of Westminster Broking House. “Individual consumers faced with huge legal bills to pursue insurance companies will generally think twice, and if a decision whether to run a legal case is made based on the cost rather than the likelihood of success then that is not a good outcome.

“I see the proposed legislation as clarifying the likelihood of success and thus allowing a more balanced decision about pursuing insurers where they feel unfair contract terms apply to their case,” he added.