Paul Scarr (Queensland, Liberal Party) Share this | Hansard source

At the outset, I'd just like to acknowledge the contributions of a number of senators who've spoken before me. First, to Senator Whish-Wilson: I acknowledge his involvement in many inquiries and his passion in relation to this issue over a number of years. As a relatively new senator, that's a pretty good example for me to follow. You did refer to my good friend George Brandis, who was a senator in this place and served with distinction over a number of years. I must say, as someone who was in a position as a secretary of a listed public company and advised directors of listed public companies over many years: if someone had asked me before the Hayne royal commission whether or not there was such a systemic cultural problem in some of our oldest and largest financial institutions, I would have found it hard to believe. I was deeply stunned by some of the evidence that came out of the Hayne royal commission, so I think George Brandis was not alone in terms of those views.

I'd also like to acknowledge, as my good friend Senator McDonald has, the contribution of former Senator—as he then was—Barry O'Sullivan to the debate in relation to the royal commission. I think Barry also, in that regard, performed an extraordinarily important role, as did the member for Wide Bay, Llew O'Brien, in terms of ensuring that the Hayne royal commission came into being. I'll also, finally, as an introductory comment, just place on the record how much I agree with Senator McDonald's comments in relation to people in my state of Queensland, especially in the regional areas, being able to access insurance on a reasonable basis. Senator McDonald outlined a few issues there, which I think a number of us representing the state of Queensland will be pursuing.

Prior to talking about the specifics of the legislation—and I will deal mainly with the part of the legislation dealing with insurance contracts—I want to refer to two case studies that are detailed in the Hayne report, because, to me, these case studies put into stark relief why this legislation is so necessary. The first case study involves an insured, a fellow Australian, who suffered a heart attack in January 2014. The gentleman had had his life insurance policy in place since 2000. He suffered his heart attack in January 2014. Like many Australians, he would have applied for insurance, entered into a life insurance policy, had the policy sitting there, been loyally paying his premiums over a number of years, had his heart attack in January 2014 and then sought to make a claim. What he found was the insurer—and I'll name them: CommInsure—had actually changed the definition of 'heart attack' under his insurance policy.

Now, most Australians would think a heart attack is a heart attack. You wouldn't necessarily be looking for the fine detail to ascertain the definition of 'heart attack'. I'll state the definition here: 'A heart attack requires an elevation in levels of troponin I above 2.0 mcg per litre.' I don't think any reasonable Australian would be searching through their insurance policy to ascertain what the definition of a heart attack was, nor—even if they did—would they have any understanding of what such a definition meant.

After the heart attack, the insured made a complaint to CommInsure in June 2014. CommInsure did not change its decision. We then saw the power of the media and the importance of a free press in this country, when the ABC's Four Corners program and Fairfax Media, as it then was, reported on concerns about CommInsure's life insurance business. As a result of those reports, CommInsure decided to amend the definition of 'heart attack' again—and that occurred in 2016—and to backdate that definition to 11 May 2014. But that didn't help the insured, because he had his heart attack in January 2014. So the insured was still in a position where he wasn't able to claim on that insurance. There was then engagement between CommInsure and the Financial Ombudsman Service, toing and froing, all the while the insured not having access to his policy, a policy which he first applied for in the year 2000 and for which he had been loyally paying his premiums. It wasn't until 2016 that, eventually, CBA/CommInsure came to the party and made an ex gratia payment, more than two years after the insured suffered the heart attack. From my perspective, that is an example of why this legislation is so necessary. If the insured hears this debate in the Senate, I hope he knows that at least now—and it's taken until 2020—we have legislation before the Senate which will be passed and which will hopefully address people in a similar position.

In terms of the principles governing this legislation, I'd like to make a few points. Firstly, this legislation does not impinge upon freedom of contract—the reasonable interests of both the insured and the insurer. I believe it will promote people entering into insurance contracts, it will assist in those insurance contracts being provided at a reasonable cost and it will protect the most vulnerable in our society. I think that's important. And, when I talk about the most vulnerable in society, that includes people like many of our people in the First Nations but also those who have undergone a tragic event in their own life and are at their most vulnerable at that point in time. All of us have those moments in our life, and it's important that at those times we have protection.

The mechanics of the legislation are such that, if an insurance contract is subject to the unfair contract terms regime, a term in that insurance contract may be declared unfair and therefore void. It's important to note in this context that the term could be unfair on its face—it doesn't matter what the individual case is—or the application of the term in an individual case could be unfair. That's an important principle. Whether or not the specific term is unfair depends upon whether or not one of three tests are met: whether it would cause a significant imbalance in the party's rights and obligations arising under the contract; whether or not it's not reasonably necessary in order to protect the legitimate interests of the party that would be advantaged by the term; and whether or not it would cause detriment to a party if it were to be applied or relied on. Examples of terms that are unfair in this context are provided in the explanatory statement, and they include:

• a term that allows the insurer to, instead of making a repair, elect to settle the claim with a cash payment calculated according to the cost of repair to the insurer, rather than how much it would cost the insured to make the repair;

• a term that is an unnecessary barrier to the insured lodging a legitimate claim (for example, requiring the payment of a large excess before the insurer considers a claim or requiring the insured to lodge the claim within an unreasonably short timeframe)—

and in this context we're talking about insured who have suffered tragic events—

• a term in a contract that contains unexpected payment arrangements (for example, that would enable the insurer to unilaterally start making direct debit deductions to an account of the consumer despite the consumer selecting a different payment method);

• a term in a disability insurance contract—

and this goes back to the initial case study I referred to—

that uses an outdated, and therefore inaccurate and restrictive, medical definition to determine whether the consumer meets the criteria to be eligible to have a claim paid; or

• a term in a contract that significantly reduces the cover offered where compliance with the preconditions for being covered is unfeasible (for example, a term in a travel insurance policy that only covers loss of luggage when it has been personally attended by the insured at all times)—

which we know is an impossible condition to meet.

The act does protect the legitimate interests of insurers and it gives examples of terms which would not fall foul of the unfair contract term regime. These include where an insurer has, in a bona fide way, referred to actuarial evidence in order to calibrate the pricing of an insurance contract. It also includes the insertion of standard terms in a contract which are required for the insurer to obtain reinsurance—both legitimate interests of the insurer.

The last point I'd like to make is in relation to an exclusion which deals with the main subject of an insurance contract. This was referred to by my good friend Senator Brockman. The unfair contracts regime will not respond to what is at the heart of the contract. The examples go to someone who purchases home insurance for a specific property with a specific definition and a specific amount—the fundamental terms of the contract which go to the heart of the deal and are clearly stated, being obvious to both the insured and the insurer when the contract is entered into. I don't think Australians are expecting the main subject of the contract to be regulated in this way. What they are most concerned with is the fine print, if I can put it that way, that undermines the efficacy of the contract.

I think the legislation satisfies all of the principles which should be adhered to in relation to such legislation. Hopefully it will promote confidence in the insurance industry. It will assist people when they obtain their insurance to get what they bargained for and get what they're contracted for and it will protect the most vulnerable in our society. I commend the legislation to the Senate.