Insurance Updates

Section 13 of The Insurance Contracts Act 1984 (The Act) states that a contract of insurance is an agreement requiring each party to it to act towards the other party (in respect to any matter arising under or in relation to it) with the utmost good faith and failure to do so may result in civil penalties. 

Together with recent changes to the General Insurance Code of Practice, findings in the recent case of Australian Securities and Investments Commission v TAL Life Limited (No 2) [2021] FCA 193 (TAL case) raised awareness around insureds’ rights and serves as a guide for insurers on the extent of their obligations when assessing and investigating an insured’s claim. This piece outlines the recent findings in the TAL case and its implications for insureds’ rights and insurers’ obligations.



The application of the duty of utmost good faith was recently highlighted when the Federal Court found that life insurance provider TAL Life Limited breached its duty to act with utmost good faith under section 13 of the Act because it rejected cover under an income protection policy based on the insured’s failure to disclose her prior history of depression. A claim was made after the Insured was diagnosed with cervical cancer. Importantly, there was no real dispute that the prior history of depression was unrelated to the cervical cancer.  

The Court found that TAL failed to act with the utmost good faith, first by not notifying the insured about the investigation into her history of depression, and second, in failing to give her a proper opportunity to address TAL and any material it was relying on prior to its decision not to pay compensation. Third, the Court found TAL had failed to act with decency and fairness in reaching its decision without giving the insured a proper opportunity to supply material to TAL. 

This decision serves as a useful guide for insurers on the extent of their obligations when investigating and assessing an insured’s claim.



In a similar vein, based on a two-year review of feedback and input from member insurers, government, consumer advocates, and regulators, The Insurance Council of Australia implemented changes to the General Insurance Code of Practice (The Code) on 1 January 2021. The Code is designed to set industry standards above those required by law and may require further updates to reflect regulatory changes. Together with Section 13 of The Insurance Contracts Act 1984 (The Act), the Code is intended to maintain fairness and transparency for insureds, moving forward.



Clause 67 of the Code sets out the standard for assessing insurance claims, specifically: “When we are assessing your claim, we will only ask for and rely on information that is relevant to our decision. If we ask you for information, then we will tell you why we need it.” 

While insurers have the right to investigate claims and request related information, it is clear from its obligation under the Act and applicable Code that insurers must: 

  • act with decency and fairness in reaching their decision
  • give the insured notice of their investigation
  • allow the insured an opportunity to address the insurer’s concerns.



The outcome of the TAL case, together with the recent changes to the Code reinforces the obligations and standards insurers are required to uphold when investigating and assessing insureds’ claims. The changes are in line with the industry adapting to better support the rights of the insured.


Vanessa Yap

Senior Claims Executive



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