Australia’s insurance industry and small business advocates are on opposite sides of a live regulatory debate over whether new unfair trading practices laws should be extended to business-to-business dealings – with direct implications for how insurers manage the supplier networks that underpin claims fulfilment.
The Competition and Consumer Amendment (Unfair Trading Practices) Bill 2026 passed both Houses of Parliament on July 1, 2026, and will take effect from July 1, 2027, introducing a general prohibition on unfair trading practices towards consumers, stronger disclosure obligations to combat drip pricing, and new subscription contract requirements.
The government has framed the legislation as part of a broader consumer protection agenda with more to come. In a ministerial statement on July 2, 2026, Assistant Minister for Competition Andrew Leigh said: “The government is advancing a comprehensive approach to addressing unfair trading practices, making clear that there should be no gaps in consumer law that allow unscrupulous businesses to exploit consumers.” Consultation was already underway at that point on extending protections to small businesses and franchisees, and the government confirmed it was also working with states, territories, and the Australian Securities and Investments Commission (ASIC) to explore further alignment of protections within the financial services sector.
On June 3, 2026, Treasury commenced consultation on extending UTP protections to small businesses and franchisees, with submissions due on July 10, 2026. The scale of the affected market is significant: there are over 2.6 million small businesses in Australia, making up more than 97% of all businesses, and past Treasury consultations found that when acquiring goods or services from larger businesses, small businesses face many of the vulnerabilities experienced by individual consumers – vulnerabilities that can be more pronounced for owners from linguistically or culturally diverse backgrounds.
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has advocated for extending the prohibition to B2B dealings, arguing in a prior Treasury submission that “unfair trading practices protections must extend to small businesses as a B2B protection, as well as consumers, because both groups experience harm from such practices, often in situations where there are power imbalances.” The ASBFEO has described a gap in the existing framework: there is “a lot of ‘too sharp by half’ conduct that falls between current unfair contract terms protections and unconscionable conduct that can bring a small business to its knees.”
The Insurance Council of Australia (ICA), in a submission to Treasury dated July 9, 2026, argued that procurement in general insurance is structurally different from most commercial arrangements. In 2025, Australia’s general insurers paid $58.9 billion in claims – up 18% on the prior year – across 90 million policies, equivalent to $226 million every working day. That volume depends on a network of engineers, builders, motor repairers, and other specialist providers, many of which are small businesses.
That network is also governed by obligations that do not apply in most industries. Under the Australian Prudential Regulation Authority’s (APRA) Prudential Standard CPS 230, which took effect on July 1, 2025, insurers must identify critical operations, manage risks related to external suppliers, and ensure contracts with service providers contain appropriate safeguards – with claims processing explicitly listed as a critical operation for insurers. A broadly worded UTP prohibition could allow underperforming suppliers to contest the performance-based procurement decisions that APRA requires insurers to make.
The ICA identified four categories of routine activity it said could be inadvertently captured: allocation of work based on performance metrics such as quality, capacity, and safety; requirements that suppliers meet standards on pricing, audits, and customer communication; withholding or disputing payment where invoice accuracy or work quality is in question; and changes to panel arrangements in response to claims volumes or cost pressures.
“An overly broad ‘unfairness’ standard may create opportunities for underperforming suppliers to challenge legitimate quality-based decisions, leading to unnecessary friction in procurement processes and decision-making. This would undermine critical quality assurance mechanisms, ultimately harming the policyholders whose claims depend on competent, timely service delivery,” the submission stated.
The ICA’s concern is framed as one of regulatory layering rather than resistance to conduct oversight. ICA chief executive Andrew Hall has previously stated the issue directly: “The issue was not with oversight itself but with duplication and pace,” with the ICA estimating that every 1% increase in regulatory costs adds approximately $100 million in annual expenses to the sector, ultimately passed on to policyholders through higher premiums.
The ICA pointed to the enhanced unfair contract terms (UCT) regime – in force since November 9, 2023 – as existing protection for small business suppliers. Under the UCT regime, unfair terms in standard form small business contracts are illegal and attract substantial penalties, with each unfair term constituting a separate contravention. ASIC identified the insurance sector as an initial enforcement focus when the reforms commenced. The ICA also cited the unconscionable conduct prohibition under section 21 of the Competition and Consumer Act, the Payment Times Reporting Act 2020, and obligations under the ASIC Act and the Insurance Contracts Act 1984. Law firm Corrs Chambers Westgarth has similarly flagged that a B2B UTP prohibition carries significant risk where existing regulatory regimes already apply, warning that competing frameworks create compliance issues and the potential for inconsistent outcomes.
The ICA also flagged an unresolved ambiguity: while Treasury’s paper indicates any extension of the UTP regime to financial services will be handled separately, it remains unclear whether insurer supplier relationships – which do not themselves constitute financial services – would fall within the expanded regime. Treasury is expected to develop a Decision Regulation Impact Statement following the consultation period’s close, with that document to inform government decision-making on the final shape of the reforms.
