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Lawyers turn spotlight on contract disclosure challenges

The Australian Insurance Law Association’s National Conference will examine the impact of consumer contract disclosure changes that were introduced in October 2021.

Barrister Ken Horsley and Minter Ellison partner Katie Clark will discuss challenges facing insurers complying with the Hayne inquiry-backed reform.

The Insurance Contracts Act was revised to introduce a consumer duty to take reasonable care not to make a misrepresentation to an insurer, discarding the previous obligation to disclose “every matter” a reasonable person would expect to be relevant.

According to Mr Horsley and Ms Clark, not every insurance provider has kept up with changes.

They say the disclosure regime means insurers need to ask potential insureds the right questions, but that is not always the case more than two years after the change took effect.

They warn some smaller insurers may be insufficiently focused on reviewing the questions they ask and therefore may see declined claims overturned. 

Mr Horsley says that because insureds have more “wriggle room” on what information they disclose on proposal or renewal forms, insurers must be “particular and precise” with their questions.

The disclosure reform applies only to consumer insurance contracts, defined as those obtained “wholly or predominately for personal, domestic or household purposes”.

Supporters have said the change makes it harder for insurers to deny claims because they now need to show reasonable care was not taken, while others have warned claims could still be voided if a misrepresentation is made.

The Australian Financial Complaints Authority recently announced it will consult on a new approaches document to provide greater clarity around disclosure disputes.

Click here for conference details.