In June, the government released a proposals paper setting out a model for extending UCT protections to insurance contracts.
The proposed model involves amending section 15 of the Insurance Contracts Act 1984 (IC Act) to allow the UCT laws in the Australian Securities and Investments Commission Act 2001 (ASIC Act) to apply to insurance contracts regulated by the IC Act, which includes both general and life insurance contracts.
In its submission to Treasury, ASBFEO Kate Carnell said that, as recently highlighted in the Australian Competition and Consumer Commission (ACCC)’s Small Business in Focus report, unfair contracts remain a major issue, with many investigations underway and further actions on business-to-business contracts.
She argued that insurance policy contracts are ‘standard form’ and, therefore, should be subject to the UCT laws to ensure consistency and a level playing field.
“The UCT legislation provides protections to small businesses from the use of unfair terms in standard form contracts and it should apply equally to all sectors,” Ms Carnell said.
“This would ensure that small businesses purchasing insurance have the same level of protection from UCT as they do for contracts for financial services and products.”
Ms Carnell said the ASBFEO office has experienced firsthand the power of UCT provisions.
“Since the introduction of the UCT provisions, many contract disputes are resolved in the first conversation using the UCT provisions as a lever,” she said.
“By referencing the UCT provisions, we have been able to assist SMEs to negotiate, and have changed or removed, clauses that appear unfair such as unreasonable penalties for early exit.”
According to the ACCC’s Small Business in Focus report, that misleading or deceptive conduct remained the issue most commonly reported by small businesses with 1,072 reports between January and June 2018, up 7 per cent from the previous six months.
This was followed by issues relating to consumer guarantees with 488 reports, followed by wrongly accepting payment with 221 reports.
