29Life insurance

#### 29 Life insurance Scope (1) This section applies if a relevant failure occurs in relation to a contract of life insurance, but does not apply if: (a) the insurer would have entered into the contract even if the failure had not occurred; or (b) the failure was in respect of the date of birth of one or more of the life insureds. > Note: If subsection 27A(1), (3) or (4) applies to the contract of life insurance, different remedies may be available to the insurer in respect of each separate contract of life insurance that is taken to exist by virtue of the relevant subsection. Insurer may avoid contract (2) If the relevant failure was fraudulent, the insurer may avoid the contract. (3) If: (a) the relevant failure was not fraudulent; and (b) the insurer would not have been prepared to enter into a contract of life insurance with the insured on any terms, if the relevant failure had not occurred; the insurer may, within 3 years after the contract was entered into, avoid the contract. Insurer may vary contract (4) If the insurer has not avoided the contract, whether under subsection (2) or (3) or otherwise, the insurer may, by notice in writing given to the insured, vary the contract by substituting for the sum insured (including any bonuses) a sum that is not less than the sum ascertained in accordance with the formula  where: > S is the number of dollars that is equal to the sum insured (including any bonuses). > P is the number of dollars that is equal to the premium that has, or to the sum of the premiums that have, become payable under the contract; and > Q is the number of dollars that is equal to the premium, or to the sum of the premiums, that the insurer would have been likely to have charged if the relevant failure had not occurred. > Note: This subsection applies differently in relation to a contract with a surrender value, or a contract that provides insurance cover in respect of the death of a life insured (see subsection (10)). (5) In the application of subsection (4) in relation to a contract that provides for periodic payments, the sum insured means each such payment (including any bonuses). (6) If the insurer has not avoided the contract or has not varied the contract under subsection (4), the insurer may, by notice in writing given to the insured, vary the contract in such a way as to place the insurer in the position (subject to subsection (7)) in which the insurer would have been if the relevant failure had not occurred. > Note: This subsection does not apply in relation to a contract with a surrender value, or a contract that provides insurance cover in respect of the death of a life insured (see subsection (10)). (7) The position of the insurer under a contract (the relevant contract) that is varied under subsection (6) must not be inconsistent with the position in which other reasonable and prudent insurers would have been if: (a) they had entered into similar contracts of life insurance to the relevant contract; and (b) there had been no relevant failure in relation to the similar contracts. (8) For the purposes of subsection (7), a contract of life insurance (the similar contract) is similar to another contract of life insurance (the relevant contract) if: (a) the similar contract provides insurance cover that is the same as, or similar to, the kind of insurance cover provided by the relevant contract; and (b) the similar contract was entered into at, or close to, the time the relevant contract was entered into. Date of effect of variation of contract (9) A variation of a contract under subsection (4) or (6) has effect from the time when the contract was entered into. Exception for contracts with a surrender value or that provide cover on death (10) If the contract is a contract with a surrender value, or a contract that provides insurance cover in respect of the death of a life insured: (a) the insurer may vary the contract under subsection (4) before the expiration of 3 years after the contract was entered into, but not after that period; and (b) subsections (6), (7) and (8) do not apply in relation to the contract.