This blog continues my series of occasional blogs on the impact of the Insurance Contracts Amendment Bill 2013 on the provisions of the Insurance Contracts Act.
Today’s blog looks at the proposed amendments to Section 59 of the Act.
Section 59 outlines the procedure which an insurer must follow to cancel a contract of insurance. In broad terms it provides that where an insurer elects to cancel a contract of insurance, the insurer must notify the insured in writing of the proposed cancellation.
The Bill proposes to add Section 59A.
The proposed Section 59A concerns the cancellation of contracts of life insurance. It provides that if the insured has made a fraudulent claim under a contract of life insurance or any other contract of insurance held with the same insurer over the same period as the contract of life insurance, the insurer may cancel the contract of life insurance.
In any proceedings in relation to the claim, the Court may disregard the cancellation, order the insurer to pay such amount as the Court considers just and equitable in the circumstances and require the insurer to reinstate the contract, if it would be harsh and unjust for the Court not to do that.
If any proceedings in relation to the cancellation, the Court may require the insurer to reinstate the contract, if it would be harsh and unjust for the Court not to do that.
Whatever it decides to do, the Court must have regard to, amongst other things, the need to deter fraud.
The Bill also proposes to amend Section 63 of the Act to render any attempt to cancel a contract of insurance otherwise than in accordance with Section 59 (as amended ) or in the case of contracts of life insurance, Section 210 of the Life Insurance Act 2005, ineffective.
Upon the commencement of the Insurance Contracts Amendment Bill, an insurer’s decision to cancel a contract of life insurance in the face of fraud will come under greater scrutiny to the point that a Court may simply disregard it and require the insurer to meet the claim.