Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
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)
Table 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 .............. 5
General outline and financial impact
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.
1
Chapter 1
Amendments to the Insurance Contracts
Amendment Bill 2011
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.
3
Insurance Contracts Amendment Bill 2011
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).
4
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.
5
Insurance Contracts Amendment Bill 2011
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
6
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