What are the Insurance Laws in Australia, and Do You Need an Insurance Lawyer?
In Australia, the insurance industry is governed and regulated by a group of laws, which prominently include the Corporations Act 2001, the Insurance Contracts Act 1984, and the Insurance Act 1973. The government bodies that regulate the insurance industry include the Australian Securities (ASIC) and Investments Commission, and the Australian Prudential Regulation Authority (APRA).
The ASIC licenses insurance providers and regulates consumer protection in the industry. On the other hand, the APRA creates prudential standards for the insurance industry. For instance, APRA sets a minimum capital limit that needs to be held in reserve by an insurer for claims.
Duty of Good Faith
The Australian insurance providers are also bounded by the duty of good faith. It regulates all the aspects of an insurance contract. The duty of good faith determines the responsibilities of the insurer and the insured.
In order to keep the contract fair for all parties, the good faith principle was developed. According to this principle, if a party possesses any kind of knowledge related to the contract owes a duty to disclose it to the other party, so they can assess the contract accurately and make an informed judgment about what they are undertaking.
Today, the duty of good faith has the status of an implied, statutory term that is included in all general insurance contracts under the Insurance Contracts Act 1984, section 13. This section mandates both the insurance provider and policyholder to ensure that they act in utmost good faith towards each other.
Obligations of the Insurer in Australia
In Australia, insurers have to abide by several obligations under the state, Commonwealth, and territory laws. These laws incorporate the conduct of the insurance industry, its financial integrity, and its Code of Practice.
Here is a list of obligations that an insurer in Australia has towards its clients:
The insurance company can only ask you for personal information that is relevant to the insurance application.
The insurance company must ensure that clients’ information is kept safe and confidential.
It is against the law for the insurance company to use client information for anything unrelated to the application for the insurance policy.
The applicant can access and correct the information used by the insurance company in assessing the application.
Insurance companies must conduct sales processes in a transparent, honest, and fair manner.
Insurance providers must provide information about their products when asked for it.
In case the insurance company refuses to provide coverage, it is required to explain its reasons for doing so. The company is also required to refer the client o another insurer, the National Insurance Brokers Association, or the Insurance Council of Australia for information regarding alternative options.
The insurer must provide information about the procedure of making a formal complaint in the insurer’s internal dispute resolution department if a policyholder is unhappy about a decision or conduct.
Insurance agents and brokers are obliged to inform the clients about any fee or commission that they receive from the insurance company for selling a policy to the client.
Obligations of the Insurance Policy Holder in Australia
Since an insurance policy involves a legal contract, the obligations don’t just only fall on the insurance provider. There are also certain regulations for the policyholder. First of all, the insurance buyer must oblige by the duty of utmost good faith.
The insurance policy buyer also has the legal duty of disclosure, which means they must provide all the relevant information accurately. If a policyholder withholds relevant information or provides it inaccurately, the insurer has the right to reduce the payable amount, deny a claim, or cancel their policy.
The insurance policy buyer is expected to read and understand the policy carefully before signing the contract. They have the right to ask any questions from the insurance provider. The buyer must understand what the policy would cover and what it wouldn’t. The buyer can consult with insurance lawyers to make an informed decision.
The insurance laws in Australia protect the rights of both the policy provider and the buyer. If you are unsure about buying an insurance policy, consult with insurance lawyers by visiting our website here!