The biggest change in the Insurance Contracts Act amendments is the broader application of the duty of utmost good faith, Clayton Utz partner Peter Mann told the AILA conference.

The amendments enable ASIC to take action against insurers for utmost good faith (UGF) breaches by making them a breach of the Act; extend UGF to third-party beneficiaries; and give ASIC powers to vary, suspend or cancel AFS licences for UGF breaches.

Mr Mann said there was very little case law on UGF since the Act was initially incepted, but that was likely to change with the new provisions. He also expected insureds and brokers to contact ASIC about potential breaches because of the regulator’s expanded powers.

Co-presenter Allianz general counsel Mathew Kaley said he was “not as bullish” on responses to the new UGF provisions as Mr Mann, but expected ASIC to investigate evidence of systemic issues. He said the Financial Ombudsman Service may also report any issues it identified to ASIC.

Mr Mann said it had taken 10 years from the announcement of the Nancy Milne-Alan Cameron review of the Act before the legislation was finally passed, making some amendments unnecessary because case law or insurers’ responses to it had resolved the problems. For example, excluding deeming clauses in professional indemnity policies had resolved issues raised by the application of s54 in the High Court’s FAI v Australian Hospital Care decision.

The revised Act has 102 inserts, amendments, substitutes or repeals, which are being progressively phased in over 30 months.

Mr Mann said insurers would welcome the ability to send notices electronically and Mr Kaley said insurers were “excited” by it.

Mr Kaley said changes to disclosure requirements meant they differed, depending on whether a policy was being incepted or renewed. “You can’t ask catch-all questions on inception. You can ask more specific questions, but that’s inconvenient for insureds.” He said insurers were likely to accept more risk and keep specific questions to a minimum.

It was “a challenge” to develop disclosure notices customers would understand and there was a lot of documentation insurers had to update, which would be costly. Insurers needed to check all policy documents to ensure they were consistent with the revised Act.

Mr Mann and Mr Kaly agreed the Act clarified the operation of subrogation provisions, which Mr Mann said were “impossible to understand” in the former Act.

• Back to top