Although some people may regard insurance cover as optional, and choose to self-insure for minor risks, insurance is nonetheless a cornerstone of modern commerce. Without insurance, banks would be reluctant to lend against the security of buildings and other property, and many business projects would never see the light of day. In Australia, the role of insurance companies is regarded as so important that they are regulated by APRA (the Australian Prudential Regulation Authority), which is the same government institution responsible for overseeing banks, credit unions, building societies and members of the superannuation industry.
Insurance law defines the establishment and registration of insurance companies, relevant capital and operational obligations, and many aspects of their interaction with policyholders. When you receive a policy document or product disclosure statement, from an insurer, you should be able to regard that as an honest statement of your rights and obligations, and to expect the insurer to have the ability to meet a valid claim. Without insurance law, we could not have confidence in the financial viability and behaviour of insurers, which would affect us all in one way or another.
However, this backdrop of legislation and government regulation does not entirely eliminate the scope for disputes between insurers and their clients. In relation to personal and property claims, insurance companies and policyholders are frequently at loggerheads regarding policy conditions (terms which must be satisfied before an insurance company is liable to meet claims), exceptions (an insurance company may be able to avoid paying a claim falling within the policy exceptions), and quantum (the amount of an insurance company's liability).
On the positive side, the relevant legislation in Australia, the Insurance Contracts Act (Cth), has some consumer-friendly provisions. For example, an insurance company may not be able to rely upon a condition not having been fulfilled, to decline a claim, unless that condition is relevant to the claim. However, other jurisdictions operate under different rules, and reference should be made to the specific legislation affecting insurance coverage in the country or state where the insurance is arranged.
In all cases, it is very important to truthfully answer questions asked by a prospective insurer, provide all material information about the risk, and read policy documents and disclosure statements carefully. It is also important to investigate an insurer's refusal to pay a claim, or an attempt to pay only part of a claim. In such cases, it is usually up to the insurer to show it has good grounds for its position, and legal advice may be necessary to interpret the policy terms, and to ensure they are correctly applied in accordance with insurance law.
Stephen Bourne is a lawyer in Australia (see profile ), and also contributes articles and case summaries to the Ekupu Law Library website. Stephen has law and business qualifications, and is a Fellow of the Australian and New Zealand Institute of Insurance and Finance.
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