REFORMING INSURANCE LAW: - Law Commission

in the revised version of s 22 set out in the Insurance Contracts Amendment Bill 2007. Proposed
new s 22(1) provides that the insurer must, before a contract of insurance is entered into, clearly
inform the assured in writing of the general nature and effect of the duty of disclosure and that
the duty of disclosure applies from the date the information is received by the assured until the
proposed contract is entered into. Where this duty has been complied with, then proposed new s
22(3) states that if the contract is made more than two months afterwards, “the insurers must give
to the insured, with the acceptance or counter-offer, a reminder notice stating that the duty of
disclosure applies until the proposed or other contract is entered into.” 90
4.17 There is much authority on what constitutes clear information, 91 although the form of
words for disclosure is now prescribed by Regulation. 92 It is uncertain whether s 22 requires the
assured to be informed of the nature and effect of the duty of disclosure or whether it is
necessary to go further and inform the assured of the consequences of any breach. There is
authority supporting the latter, wider view, 93 although the point has since been left open. 94 If it is
not reasonably practicable to give notice in writing, it suffices if the information is given orally,
eg, by telephone, 95 as long as the notice is confirmed in writing within 14 days of the contract
being entered into. 96 The burden of proving that notice was given rests on the insurers. 97 There is
no obligation, by s 71, for the insurers to give notice to the assured if the assured has used a
broker. 98
Special treatment of “eligible” policies
4.18 Review of the legislation led to the conclusion that warning the assured of the duty of
disclosure was not enough to enable him to appreciate its scope and significance. What was
required was a provision which placed the onus on insurers to ask specific questions rather than
to rely upon disclosure, failing which the duty was to be treated as having been waived. For this
reason s 21A was inserted into the 1984 Act with effect from 15 June 2000, replacing an earlier
version which came into effect on 1 September 1999. 99 The section draws a distinction between
consumer and commercial assureds, in that it applies only to an “eligible” contract of insurance.
90 Other amendments to s 22 relate to the proposed new s 31A, which for the first time imposes a duty of disclosure
on a person whose life is insured but who is not the policyholder: see infra.
91 Mann, para 22.40.
92 Insurance Contracts Regulations 1985, reg 3(1) and sched 1, which lay down different forms of wording for life
and non-life policies, and also for policies prescribed under s 21A (domestic policies – see infra). The Regulations
are to be modified to meet the extended duty of disclosure under s 22: see the draft Insurance Contracts Amendment
Regulations 2007,
93 Suncorp General Insurance Ltd v Cheihk (1999) 10 ANZ Insurance Cases 61-442.
94 GIO General Limited v Wallace [2001] NSWCA 299.
95 See Ghamrawi & Anor v GIO General Ltd [2005] NSWCA 467.
96 Insurance Contracts Act 1984, s 69. The Insurance Contracts Regulations 1985, reg 3(2) and sched 2 lay down a
form of words to be used when oral information is given in respect of a prescribed policy. Treasury Review II, 2004,
recommendation 4.6, recommends that this form of wording be extended to all policies whether or not prescribed:
this is to be implemented on the adoption of the draft Insurance Contracts Amendment Regulations 2007.
97 Suncorp General Insurance Ltd v Cheihk [1999] NSWCA 238
98 The assured would, however, presumably have a cause of action against the broker if he was not informed of his
duty. See supra on the issue of notice generally.
99 Sutton, paras 3.82 to 3.86.
22