In its preamble, The Insurance Contracts Act is, an Act to reform and modernise the law relating to certain contracts of insurance so that a fair balance is struck between the interests of insurers, insureds and other members of the public and so that the provisions included in such contracts, and the practices of insurers in relation to such contracts, operate fairly, and for related purposes
The Act provides the foundation of insurance: the Utmost Good Faith, and for consumer insurance contracts ‘the insureds duty to take reasonable care not to make a misrepresentation.’
The powers that ASIC has under the insurance Contracts Act add significant weight to ASIC’s enforcement tool-kit and their already far-reaching enforcement powers under the ASIC Act & Corporations Act.
ASIC responsible for general administration of Act
The Insurance Contracts Act (Act) is one of several financial service laws referenced in section 912A(1) Corporations Act.
AFS Licensees must:
- comply with the financial services laws (s912A(1)(c)); and
- take reasonable steps to ensure that its representatives comply with the financial services laws (s912A(1)(ca))
Powers of the ASIC (section 11B)
ASIC’s powers are set out in Part IA of the Act.
ASIC has the general administration of the Act (s11A)
ASIC has power to do all things that are necessary or convenient to be done in connection with the administration of the Act and, without limiting the generality of that power, has power:
(a) to promote the development of facilities for handling inquiries in relation to insurance matters;
(b) to monitor complaints in relation to insurance matters (note that this is in addition to Corporations Act and enforceable paragraphs of RG 271);
(c) to liaise generally with other persons or bodies having a responsibility to deal with inquiries, complaints and disputes concerning insurance matters (such as Code Governance Committee and AFCA);
(d) to review documents (including documents promoting particular kinds of insurance cover) issued by insurers (such as PDS, TMD, key fact sheets etc) and given to ASIC in compliance with section 11C;
(e) to review particulars, statistics and documents given to ASIC in compliance with section 11D; and
(f) to monitor legal judgments, industry trends and the development of community expectations that are, or are likely to be, of relevance to the efficient operation of the Act; and
(g) to promote the education of the insurance industry, the legal profession and consumers as to the objectives and requirements of the Act.
Supervisory powers—ASIC may obtain insurance documents (section 11C)
1) ASIC may, for any purpose connected with the general administration of the Act , require an insurer within 30 days (following ASICs written notice) provide:
(a) documents specified in the notice relating to insurance cover provided, or proposed to be provided, by the insurer; or
(b) documents relating to insurance cover of a kind specified in the notice provided, or proposed to be provided, by the insurer.
Non compliance without reasonable excuse is a strict liability offence.
Supervisory powers—ASIC may review administrative arrangements (section 11D)
ASIC may, require an insurer to give to ASIC, within 30 days of receipt of notice:
(a) written particulars of the organisational structure and administrative arrangements of the insurer either generally or in a particular area of insurance;
(b) statistics relating to the nature and volume of the insurance business of the insurer either generally or in a particular area of insurance; or
(c) copies of any training guides, work manuals or other materials of a similar nature used by an insurer in instructing its employees or any insurance intermediaries dealing with persons who have, or may be likely to seek, insurance cover from the insurer.
Non compliance without reasonable excuse is a strict liability offence.
Supervisory powers—liability of directors, employees and agents of insurers (section 11E)
A person commits an offence if:
(a) the person is:
(i) a director of a company that is an insurer; or
(ii) an employee or agent of an insurer; and
(b) the person permits or authorises the insurer to engage in conduct; and
(c) the conduct constitutes an offence against sections 11C or 11D