Insurance Contracts Regulations 2017

Insurers. Any insurer offering a prescribed class of contract to a natural person must meet the standard cover minimum requirements. The Key Facts Sheet obligations (section 13) apply specifically to insurers, though they can also be provided by intermediaries in some cases.

Insurance brokers. Section 13(5)(c) creates a carve-out: if a consumer requests information through an insurance broker who is not acting as the insurer's agent, the insurer is not required to provide a Key Facts Sheet. This places responsibility on the broker rather than the insurer in that transaction.

Individual insurance consumers. The standard cover obligations protect natural persons who hold prescribed contracts. Many of the prescribed contract classes apply "where the insured or one of the insureds is a natural person" (sections 15, 18, 21, 23, 24, 30). Business insurance contracts entered into entirely on behalf of commercial entities generally fall outside the standard cover framework.

Small businesses. Section 35 of the Regulations defines "small business" and section 24's accident and health insurance standard cover applies in some contexts where the insured is a small business. Travel insurance under section 30 is limited to natural persons.

Standard cover. Insurers must not refuse to pay a claim for a prescribed event under a prescribed contract where the amount claimed is less than the minimum amount declared in the Regulations, even if the policy would otherwise exclude the event. This is the fundamental consumer protection operation of the Regulations.

Key Facts Sheet provision. Under section 13(2), insurers must provide a Key Facts Sheet for a home buildings or home contents insurance contract within 14 days of: (a) the consumer first requesting information about the contract; or (b) the consumer entering into the contract. The insurer must also keep the current Key Facts Sheet on its public website in a downloadable format (section 13(4)). A Key Facts Sheet must comply with the prescribed format (section 12).

Duty of disclosure forms. When giving a disclosure notice under section 22(4)(a) or (b) of the Act, the insurer must use the forms set out in the relevant Schedule, or may use the prescribed form of writing (sections 7 and 8).

Interest on claims. Section 38 prescribes the interest payable on claims under the Act where claims are delayed beyond the period specified in the Act. The section cross-references the Act's claims provisions.

Infringement notices. Section 39A identifies prescribed offences for which infringement notices may be issued under the Act, creating an alternative to prosecution for certain lower-level non-compliance.

The Regulations are largely technical and prescriptive rather than creating open-ended regulatory powers. The key discretionary elements are:

Insurer's choice on Key Facts Sheet delivery. Under section 13(3), an insurer may provide a Key Facts Sheet by electronic means at the consumer's request. This is a facilitative discretion.

Key Facts Sheet exemptions. Section 13(5) sets out the circumstances in which an insurer is not required to provide a Key Facts Sheet: if it has already been provided without material change; if the insurer reasonably believes someone else has provided it; if the consumer uses an independent broker; if the consumer does not provide an address; or if the consumer requests not to receive it.

Exclusions from standard cover. For each prescribed contract class, the Regulations contain an exclusions list in subsection (2) of the relevant prescribed events section (sections 16(2), 19(2), 22(2) and so on). These exclusions define the outer limits of the standard cover obligation. Within those limits, insurers may draft their own exclusions, but those exclusions do not apply to reduce claims below the minimum amount if the event is a prescribed event.

War and terrorism. Section 39 provides that the standard cover obligations do not apply in relation to risks directly or indirectly caused by or connected with war or terrorism as defined in that section. This is a broad exclusion across all prescribed contract classes that complements the specific war and warlike activity exclusions in each contract class's prescribed events sections.

The Regulations do not directly create penalty unit offences for breaches of standard cover obligations. The enforcement mechanism for the standard cover framework operates through the parent Act, which enables the affected insured to recover in court the amount the insurer was obliged to pay.

Infringement notices. Section 39A identifies specific offences as prescribed offences eligible for infringement notices under the Act. This creates an administrative pathway for enforcement of certain obligations without requiring criminal prosecution.

Interest rate on premium refunds. Section 10 prescribes 11% per annum as the rate of interest for the purposes of subparagraph 30(2)(b)(i) of the Act. Section 30(2)(b)(i) applies in the context of remedies for non-disclosure and misrepresentation, where the insurer refunds the premium and interest must be paid on the refund.

Interest on delayed claims. Section 38 directly implements the Act's interest on claims provisions, creating a financial consequence for insurers who delay paying valid claims.

Key Facts Sheet: 14 days. Section 13(2) sets a 14-day deadline from when the consumer first requests information about the contract, or from when the consumer enters the contract. The obligation is phrased as "as soon as reasonably practicable but not later than 14 days."

Key Facts Sheet: exemption from repeat provision. Once a Key Facts Sheet has been provided and has not materially changed (only the date may have changed), the insurer does not need to provide it again to the same consumer (section 13(5)(a)).

Interest on disability claims. Section 26(3) reduces the minimum amount for consumer credit and disability insurance claims by the amount payable in respect of the first 14 days of the period of disability. This reflects the standard 14-day waiting period common in income protection policies.

Transitional matters. Part 5 (sections 40 to 42) addresses transitional continuity. Section 40 provides that things done under the Insurance Contracts Regulations 1985 are treated as done under the 2017 Regulations. Section 41 provides that references to provisions of the 1985 Regulations are read as references to the corresponding provisions of the 2017 Regulations. Section 42 deals with the application of amendments made by the Financial Sector Reform (Hayne Royal Commission Response) (2021 Measures No. 1) Regulations 2021.

Insurance Contracts Act 1984. The Regulations are entirely subordinate to and dependent on the Act. Every operative provision in the Regulations is made for the purposes of a specific section of the Act. Section 3 states the authority explicitly. The relationship is intimate: without the Regulations, large parts of the Act's standard cover and disclosure framework would have no operative content.

Financial Sector Reform (Hayne Royal Commission Response) (2021 Measures No. 1) Regulations 2021. Section 42 applies the Hayne RC response amendments from a specified date. The Royal Commission's insurance law recommendations led to significant changes in the parent Act and in the Regulations, including for Key Facts Sheet requirements.

Privacy Act 1988. Not directly mentioned but relevant in the context of Key Facts Sheets: the electronic delivery option in section 13(3) intersects with obligations under the Privacy Act concerning handling of consumer contact details.

ASIC Act 2001 and product disclosure obligations. The Key Facts Sheet requirement complements (and may overlap with) product disclosure obligations under the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001. Insurance products regulated under the Corporations Act also require Product Disclosure Statements.

Standard cover is a floor, not a ceiling. The Regulations set minimum cover obligations. They do not prohibit more generous cover. An insurer's actual policy may cover more events and pay higher amounts. The standard cover provisions only matter when the insurer is trying to rely on a policy exclusion that would reduce the payment below the minimum.

The prescribed events exclusion lists are specific and important. Each class of prescribed events in the Regulations comes with its own exclusions (for example, motor vehicle standard cover does not apply when the insured is driving under the influence: section 16(2)(i)). If a claim falls within an exclusion, the minimum cover obligation does not apply, and the insurer can rely on its own policy exclusion.

War and terrorism is excluded across all classes. Section 39 provides a broad carve-out from standard cover for war and terrorism risks. This applies on top of any individual class exclusion for "war or warlike activities" in sections 16(2)(i)(ii), 19(2)(d)(ii), 22(2)(d)(ii) and similar.

Strata title contents insurance. Section 4(2) modifies the definition of "contents" to include fixtures and structural improvements in a strata-titled unit that are not covered by the body corporate's building insurance. This is important for strata unit owners: the standard cover for contents insurance may cover some building-related items that the body corporate policy does not.

Key Facts Sheet must be on the insurer's website. Section 13(4) requires the current Key Facts Sheet to be available for download on the insurer's public website. This is a separate obligation from the obligation to provide it to consumers on request.

Home buildings insurance for let properties. The definition of "home building" in section 4(1) excludes buildings let or rented as a business that are not the insured's principal residence (section 4(1)(l)). Landlords renting out an investment property as a business may find that the property does not qualify as a "home building" for standard cover purposes, removing the standard cover floor from their building insurance.

Example 1: Storm damage to home building. A consumer holds a home buildings insurance policy. The policy excludes damage caused by "gradual seepage." After a severe storm, water enters through the roof and causes significant damage. The insurer tries to deny the claim by characterising the water ingress as gradual seepage. Under section 19(1)(a)(xiv), "storm, tempest, flood" damage to a home building is a prescribed event. The insurer cannot deny the claim under the "gradual seepage" exclusion if the amount claimed is below the minimum amount under section 20(1), which is the amount sufficient to indemnify the insured.

Example 2: Travel insurance and trip cancellation. A consumer holds travel insurance. The policy excludes cancellation for "change of mind." The insured is diagnosed with a serious illness before departure and cannot travel. Under section 31(1)(a), financial loss arising from the inability to commence a specified journey "through unforeseen circumstances beyond the control of the insured person" is a prescribed event. The serious illness is an unforeseen circumstance beyond the insured's control. The insurer must pay at least the minimum amount (the loss of fares and accommodation, less any refund recovered) under section 32.

Example 3: Motor vehicle third-party property claim. A motor vehicle insured under a prescribed contract causes damage to multiple third parties in a single accident, and the total claims exceed $5,000,000. Under section 17(2), the minimum amount in respect of each third-party property claim is capped at $5,000,000 in aggregate. After the first claim is paid, subsequent claims are reduced by the amount already paid, with a combined floor of $5,000,000 for the event.

Example 4: Key Facts Sheet obligation. A consumer telephones an insurer to ask about home contents insurance options. The insurer must provide a Key Facts Sheet within 14 days of that initial enquiry (section 13(2)(a)). If the consumer then enters the contract without receiving the sheet, the insurer must provide it within 14 days of the consumer entering the contract (section 13(2)(b)). If the consumer uses an independent insurance broker who is not acting as the insurer's agent, the insurer is not required to provide the sheet (section 13(5)(c)).