REFORMING INSURANCE LAW: - Law Commission

interests to do so. However, insurers may neglect to send out the relevant notice, or they may
take the view that they do not wish to renew, and in either case the policy could terminate
without the assured becoming aware of the fact. Accordingly the ALRC recommended that cover
should be automatically extended if the insurers failed to notify the assured of its expiry. Section
58 of the 1984 Act accordingly provides that if the policy provides cover for a particular period
and is not of a kind which it is usual to renew by negotiation, the insurers must no later than 14
days before expiry give the assured a notice in writing informing the assured of the due date of
expiry and whether or not the insurers are willing to negotiate a renewal. 532 If the insurers fail to
give due notice, and the assured has not before expiry insured elsewhere, the insurance is
deemed to continue. Once the assured has obtained cover elsewhere, the deemed insurance
comes to an end. The assured is not required to pay any premium for any period of cover,
although if there is a loss then the assured is required to pay something to the insurers: in the
event of a total loss the full premium which would have been payable had there been renewal is
payable, 533 and if there is a partial loss then the assured must pay a proportional part of the
premium based on the period until the claim as against the period of the original policy.
Necessarily the section does not apply if the insurers have validly cancelled the policy before the
14 day notice period, 534 and the ALRC specifically rejected the idea that insurers should be
deprived of the right to refuse to renew 535 although there is of course an obligation to provide
reasons for refusal to renew on the request of the assured. 536
8.43 As far as the UK is concerned, it is the practice of insurers to issue renewal notices warning
the assured of the duty to disclose material facts and maintaining premium payment
arrangements. They are not, however, obliged to do so, and in particular they are not obliged to
give any indication of an intention not to renew.
531 Life policies are continuous, so the renewal issue does not arise.
532 Sutton, paras 3.217 to 3.224, It would seem that the assured can utilise this provision indefinitely, although
Treasury Review II, 2004, para 8.16, felt that the notion of perpetual renewal was theoretical and that no change in
the law was required.
533 Treasury Review II, 2004, has recommended that the full premium should be payable even though there is only a
partial loss: recommendation 8.3. The draft Insurance Contracts Amendment Bill 2007 adopts this recommendation
by modifying s 58(4)(b) to provide that “if a claim is made under the contract, there is payable by the insured to the
insurer, as a premium in respect of the contract, an amount equal to the amount that, if the original contract had
been renewed for the same period and on the same terms and conditions, would have been payable by the insured in
respect of the renewal.”
Repeal subsections 58(5) and (6)
534 CIC Insurance Ltd v Bankstown Football Club Ltd (1995) 8 ANZ Ins Cas 61-232.
535 ALRC 20, para 265. One exception arises in relation to liability insurance, where insurers are required to
indemnify the assured for claims arising after the policy has expired as long as the policy provided cover for the
notification to the insurers during the currency of the policy of circumstances which might give rise to a claim: this
is now s 40(3) of the 1984 Act, discussed supra.
536 Insurance Contracts Act 1984, s 75, discussed supra.
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