The Law Handbook 2024

Chapter 10.4: Insurance 961 policy is automatically reinstated, for the same length of time as the original contract or until the policyholder obtains replacement insurance, whichever occurs first. Cancellation Section 60 of the ICAct contains a number of grounds upon which an insurer may cancel an insurance contract (which is not a life insurance contract). These grounds include: • the policyholder’s failure to comply with the duty of disclosure; • the policyholder’s misrepresentation before the contract was entered into; • failure to pay a premium; or • the making of a fraudulent claim. The section also permits insurers to cancel, at any time, a cover note and renewable contracts extended by operation of section 58 of the IC Act. If an insurer wishes to cancel an insurance contract it must comply with section 59 of the IC Act, which requires an insurer to provide the policyholder with a written notice of the proposed cancellation. The section also states when the cancellation becomes effective. Section 63 of the IC Act provides that a cancellation is void unless it is done in accordance with the IC Act. Under the 2013 reforms to the IC Act, the provisions under section 63 have been strengthened. Financial hardship The Insurance Code deals with three situations of policyholder hardship: 1 Policyholder is in urgent financial need; 2 Policyholder owes an insurer; 3 Policyholder is vulnerable Policyholder is in urgent financial need Where a policyholder has made a claim, is in ‘urgent financial need’, and can demonstrate the urgency of their situation, an insurer will fast-track the assessment and payment of the claim or make an advance payment or both (pt 8 Insurance Code). Policyholder owes an insurer Where a policyholder or other party is indebted to an insurer (but not in respect of the premium) – for example, a policyholder who is having difficulty paying an excess, or a third party from whom an insurer is seeking to recover money is suffering financial hardship – an insurer will consider providing assistance by modifying the terms of payment, or waiving or discharging the debt (pt 10 Insurance Code). Policyholder is vulnerable Insurers are committed to taking extra care of vulnerable policyholders. Part 9 of the Insurance Code sets out a range of factors that may give rise to vulnerability, including age, disability, language, family violence, and remote location. Insurers are required to have policies to support vulnerable policyholders. NOTE: INSURANCE CLAIMS AND COVID-19 As a result of the COVID-19 pandemic, there has been a significant increase in insurance claims for travel and business interruptions. Many policyholders have been disappointed by the rejection of their claims by insurers. The law in relation to such policies is uncertain. In November 2020, the New South Wales Court of Appeal held in favour of policyholders in the first COVID-19 test case (HDI Global SpecialitySE v Wonkana No. 3 Pty Ltd [2020] NSWCA 296). In June 2021, the High Court refused leave to the insurer to appeal this decision. The Insurance Council of Australia and the Australian Financial Complaints Authority have concluded a second series of test cases ( Star Entertainment Group v Chubb Insurance Ltd [2022] FCAFC 16). For more information, visit https://insurancecouncil.com.au/issues-in-focus/bi- test-cases/. Resolution of insurance disputes Litigation is one way of resolving insurance disputes, but it is often costly and time consuming. There are organisations that provide alternatives to litigation for policyholders; they deal with various kinds of insurance disputes so long as the complaint has not been referred to the courts. The Insurance Code