ASIC has commenced the first proceedings alleging unfair contract terms in an insurance contract. The case involves standard form home and contents insurance contracts issued by Auto & General Insurance Company Limited (Auto & General).
ASIC alleges that since 5 April 2021, a contract term requiring customers of Auto & General to notify it ‘if anything changes about your home or contents’ is unfair because the term:
imposes an obligation on customers to notify Auto & General if ‘anything’ changes about their home or contents, which customers cannot practically meet.
imposes an unclear obligation on the customer regarding what they need to disclose to Auto & General.
suggests that Auto & General has a broader right to refuse claims or reduce the amount payable under claims if the customer does not meet the notification obligation than is available under the Insurance Contracts Act.
could mislead or confuse the customer as to their true obligations and rights under the contract.
ASIC Deputy Chair Sarah Court said ‘ASIC is concerned that the broad notification obligation in these contracts is unfair because it is unclear what policy holders are required to do to comply with such a broad obligation, and it is also unclear what their rights are when making a claim.
‘Contract terms need to be proportionate, transparent and clear, so any obligations are easily understood and able to be realistically adhered to by customers. They must accurately describe the actual rights and responsibilities of the parties under the contract.’
ASIC further alleges the contract term is unfair within the meaning of s12BG of the ASIC Act as the term:
causes a significant imbalance in the parties’ rights and obligations under the contract,
is not reasonably necessary to protect Auto & General’s legitimate interests, and
would cause detriment to the policy holders if the term were relied on.
ASIC is seeking declarations that the term is void. ASIC will also seek injunctions and corrective orders.