Renewable policies automatically renew unless the insurer gives notice within time. An insurer may only cancel a contract in the manner set out in the legislation.
Under section 58 of the IC Act an insurer must provide a policyholder with a minimum 14 days notice of the impending expiration of a renewable insurance policy (insurance that is provided for a particular period of time and is of a kind that is usual to renew at the end of that period of time). If an insurer fails to give this notice in accordance with section 58, the policy is automatically reinstated, for the same length of time as the original contract or until the policyholder obtains replacement insurance, whichever occurs first.
Section 60 of the IC Act contains a number of grounds upon which an insurer may cancel an insurance contract (which is not a life insurance contract). These grounds include:
• the policyholder’s failure to comply with the duty of disclosure;
• the policyholder’s misrepresentation before the contract was entered into;
• failure to pay a premium; or
• the making of a fraudulent claim.
The section also permits insurers to cancel, at any time, a cover note and renewable contracts extended by operation of section 58 of the IC Act.
If an insurer wishes to cancel an insurance contract it must comply with section 59 of the IC Act, which requires an insurer to provide the policyholder with a written notice of the proposed cancellation. The section also states when the cancellation becomes effective.
Section 63 of the IC Act provides that failure to cancel an insurance contract in accordance with the terms of the IC Act is of no effect. Under the 2013 reforms to the IC Act, the provisions under section 63 have been strengthened.