Insurance regulations

In Australia, the Australian Prudential Regulatory Authority (APRA) regulates insurance under the Insurance Act 1973 (Cth).

Under the Act, insurance businesses need to:

  • comply with regulations set by APRA, such as having enough money to cover insurance claims
  • get APRA’s approval to carry on an insurance business
  • report regulatory breaches to APRA.
  • Insurance contracts are also subject to the Insurance Contracts Act 1984 (Cth).

Obligations of insurance businesses

Under the Insurance Contracts Act 1984 (Cth), insurers must:

  • act in good faith
  • give reasons in writing if the insurer doesn’t:
    • accept an offer to enter into an insurance contract
    • cancels an insurance contract
    • doesn’t intend to renew an insurance contract
    • intend to renew a contract on terms that are less advantageous to the policyholder
  • not deny policyholders compensation for a pre-existing imperfections or defects if the policyholder wasn’t aware of it before entering the contract
  • not vary insurance contracts to the detriment of the policyholder before the contract comes up for renegotiation
  • supply a document detailing all provisions of an insurance contract if a policyholder requests one in writing.

Under the Act insurance contracts also transfer to the buyer of an insurer goods when the buyer buys the good. For example, if your business bought a car off another business and the car had two of years insurance left on it, the insurer would have to continue to cover the car.

Obligations of insurance policyholders

Policyholders also have duties under the Under the Insurance Contacts Act 1984 (Cth), including to:

  • act in good faith
  • disclose every matter relevant to the risk being insured to the insurer, unless it’s common knowledge or decreases the risk
  • not make fraudulent insurance claims to an insurer.

Termination of insurance contracts

Under the Insurance Contracts Act 1984 (Cth), insurers can only terminate most insurance contracts if a policyholder:

  • doesn’t act in good faith
  • doesn’t disclose all relevant information
  • made a misrepresentation before entering into the contract
  • failed to comply with a provision of the contract, such as not paying you premium or not having smoke alarms
  • makes a fraudulent claim.

For life insurance contracts, however, insurers can also cancel them if the policyholder makes a misrepresentation under the contract with respect to either:

  • the life insurance contract
  • another insurance contract with the insurer.

More information

  • Visit APRA’s General insurance page to learn more about your insurance rights and obligations.

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