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Insurance Contracts Amendment Bill 2012

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2010-2011-2012

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

Insurance COntracts Amendment Bill 2011

 

 

 

 

SUPPLEMENTARY EXPLANATORY MEMORANDUM

 

 

Amendments to be moved on behalf of the Government

 

(Circulated by the authority of the

Minister for Financial Services and Superannuation, the Hon Bill Shorten MP)



T able of contents

General outline and financial impact............................................................ 1

Chapter 1               Amendments to the Insurance Contracts Amendment Bill 2011   3

Chapter 2               Statement of Compatibility with Human Rights.............. 9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Amendments to the Insurance Contracts Amendment Bill 2011

These amendments seek to amend the Insurance Contracts Amendment Bill 2011 to:

•                 Ensure that after an insurer has provided information to the insured regarding the flood cover provided in their contract, to satisfy the ‘clearly inform’ requirement (section 37C), the insurer will not be required to provide that information for a subsequent renewal, extension or reinstatement of that contract.  In respect of a variation of a contract, the insurer will only be required to provide information regarding the variation, if the variation relates to the flood cover provisions. 

•                 Clarify that the circumstances in which prescribed contracts are taken to provide insurance cover in respect of flood (section 37D) do not affect the terms and conditions of a prescribed contract that would otherwise be applicable to flood cover.

•                 Ensure that insurers will not be required to provide information to the insured about whether an interim contract provides flood cover. 

Date of effect The amendments to the Insurance Contracts Amendment Bill 2011 will take effect from the date of Royal Assent. 

Proposal announced The amendments to the Insurance Contracts Amendment Bill 2011 have not preciously been announced.

Financial impact The amendments to the Insurance Contracts Amendment Bill 2011 have no financial impact on Commonwealth expenditure or revenue.

Human rights implications :  The amendments to the Insurance Contracts Amendment Bill 2011 do not raise any human rights issue.  See Statement of Compatibility with Human Rights — Chapter 2, paragraphs 2.1 to 2.4.

Compliance cost impact Low.  



Amendment 1

1.1                   This amendment ensures that insurers are not required to provide information to the insured of their flood cover, to satisfy the ‘clearly inform’ requirement (section 37C), before a renewal, extension or reinstatement of a prescribed contract that occurs after the transition time (as defined in proposed subsection 37A(4)) if the insurer has already provided that information in relation to the contract after that time. 

1.2                   However, an insurer must provide information to insureds of their flood cover to comply with the clearly inform requirement under section 37C :

•                 before originally entering into a prescribed contract after the transition time; and

•                 for a prescribed contract that was originally entered into before the transition time—before the first renewal, extension or reinstatement of the contract that occurs after the transition time.

1.3                   When varying a prescribed contract an insurer will only have to comply with proposed requirement for an insurer to ‘clearly inform’ an insured whether a prescribed contract provides insurance cover in respect of flood (section 37C) after the transition time, if the variation relates to provisions providing for, or in relation to, cover for flood.

Amendments 2, 3, 4 and 5

1.4                   These amendments clarify that the circumstances in which a prescribed contract is taken to provide insurance cover in respect of flood (section 37D) is not intended to limit the operation of provisions (other than flood provisions) in a prescribed contract. 

1.5                   The amendments to subsections 37D(2) and (4),  limit the effect of the subsections to the flood provisions (see subsections 37D(1) and (4)) of a prescribed contract and not to the prescribed contract as a whole. 

1.6                   Subsection 37D (5A) is inserted to ensure that the operation of provisions of a prescribed contract (other than the flood provisions as defined in subsections 37D(1) and (4)) are not affected by the operation of section 37D. 

1.7                   The intention of these amendments is to overcome concerns that insurers will be restricted from using other common limitations and/or exclusions that are currently used in prescribed contracts, such as:

•                 an exclusion for flood damage which occurs within the first 72 hours of a policy being issued;

•                 exclusions for specific items of high risk property such as sea walls, jetties and pontoons; and

•                 general exclusions that apply to all types of loss under the property such as where the home does not comply with the building laws and regulations or a flood that was the result of malicious or deliberate damage to a dam. 

Amendment 6

1.8                   This amendment provides that insurers will not be required to ‘clearly inform’ insureds whether prescribed contracts provide insurance cover in respect of flood for interim insurance contracts. 

1.9                   This amendment has been made to align the clearly inform requirement in respect to whether the prescribed contract provides insurance cover for flood  (section 37C) with similar sections of the Insurance Contracts Act 1984 including sections 35, 37, 40, 44 and subsection 68(1).

 

Do not remove section break.



Chapter 2          

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Insurance Contracts Amendment Bill 2011

2.1                   The amendments to the Insurance Contracts Amendment Bill 2011 are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

2.2                   The amendments to the Insurance Contracts Amendment Bill 2011:

•                 Ensure that after an insurer has provided information to the insured regarding the flood cover provided in their contract, to satisfy the ‘clearly inform’ requirement (section 37C), the insurer will not be required to provide that information for a subsequent renewal, extension or reinstatement of that contract.  In respect of a variation of a contract, the insurer will only be required to provide information regarding the variation, if the variation relates to the flood cover provisions. 

•                 Clarify that the circumstances in which prescribed contracts are taken to provide insurance cover in respect of flood (section 37D) do not affect the terms and conditions of a prescribed contract that would otherwise be applicable to flood cover.

•                 Ensure that insurers will not be required to provide information to the insured about whether an interim contract provides flood cover. 

 

Human rights implications

2.3                   The amendments to the Insurance Contracts Amendment Bill 2011 do not engage any of the applicable rights or freedoms.

Conclusion

2.4                   The amendments to the Insurance Contracts Amendment Bill 2011 are compatible with human rights as they do not raise any human rights issues.

The Hon Bill Shorten MP, Minister for Financial Services and Superannuation