The Full Federal Court has rejected an appeal by the Australian Securities and Investments Commission (ASIC) concerning an allegedly unfair clause in home and contents insurance policies issued by Auto & General Insurance Company Limited.
The case centred on a policy provision that required customers to notify the insurer if “anything” changed in their home and contents.
ASIC contended the term was ambiguous, placing an unclear obligation on customers and potentially overstating the insurer’s ability to deny or reduce claims under the Insurance Contracts Act.
The clause was present across several Auto & General-issued policies, including those branded under Budget Direct, ING, Virgin Insurance, and others.
ASIC commenced proceedings in April 2023, asserting the wording might confuse customers about their disclosure responsibilities and the implications for claim outcomes.
Although the term was replaced in updated supplementary disclosure documents in May and new product disclosure statements in September 2023, ASIC appealed the original Federal Court’s March 2024 dismissal of its case.
The appeal was heard in August 2024 and ultimately dismissed this month, confirming that the clause did not meet the legal threshold for an unfair contract term.
ASIC has acknowledged the decision and is reviewing its next steps.
In a separate development, ASIC has released findings from a follow-up assessment of general insurers’ claims handling practices, identifying ongoing shortcomings related to the oversight of independent experts and consumer communication on cash settlements.
The follow-up review focused on how insurers responded to issues highlighted in Report 768, released in August 2023, following significant consumer complaints in the aftermath of the 2022 floods.
ASIC Commissioner Alan Kirkland noted that while oversight of builders and repairers had improved, the same could not be said for independent expert assessments.
“Oversight of builders and repairers has improved since our last report, but there are still gaps in oversight of independent experts – the external advisers who provide the expert reports insurers rely on to make claim decisions,” he said.
Additionally, ASIC flagged concerns over how insurers communicate cash settlement options. Although regulations require insurers to provide a fact sheet outlining these options, the review found most documents offered limited information about review rights or deadlines.
Persistent issues were also identified in areas such as workforce capacity, identifying vulnerable customers, and internal auditing of claims processes.
ASIC has called on insurers to evaluate their claims management frameworks against the latest review findings and proactively address areas of concern before the next natural disaster puts them to the test.
