New legislation to protect consumers from unfair insurance contract terms has been introduced into the Parliament, said Assistant Treasurer David Bradbury.
The Insurance Contracts Amendment (Unfair Terms) Bill 2013 will protect consumers from terms in general insurance contract that unfairly favour the insurer.
Australia's consumer protection laws currently provide protections against unfair terms in a range of other standard form consumer contracts, including for mobile phones, rental vehicles and financial services. This Bill will ensure that those protections are now extended to general insurance contracts.
"This legislation will make sure that there is a level playing field for consumers when they enter into insurance contracts," said Mr Bradbury.
"Too often we hear of people who are facing a traumatic event in their life who are then told their insurance claim won't be paid out because of small print that unfairly favours the insurer.
"This legislation will encourage insurers to remove these unfair terms from general insurance contracts. If insurers do not remove the terms, a court can declare that a term is unfair and stop the insurer from relying on that term to deny consumer claims."
The regime will also be backed up by the financial services watchdog, the Australian Securities and Investments Commission, with the potential of enforcement action for breaches of the law.
This Bill builds on the Gillard Government's commitment to improving the regulatory framework for consumers, which includes the Australian Consumer Law which is the most significant reform to consumer protection laws in a generation.