Defence Service Homes Insurance Scheme (Statement of Conditions) Variation 2015

EXPLANATORY STATEMENT

Defence Service Homes Act 1918

Defence Service Homes Insurance Scheme (Statement of Conditions) Variation 2015

EMPOWERING PROVISION

Subsection 38A(3) of the Defence Service Homes Act 1918 (the Act).

PURPOSE

The attached legislative instrument (2015 No. Min.3) varies the legislative instrument under the Act known as the Statement of Conditions (Principal Instrument).

The Australian Government provides domestic building insurance under the Act to eligible veterans and Australian Defence Force personnel - the Defence Service Homes Insurance Scheme (DSHIS). 

The Statement of Conditions sets out in detail the cover offered under the Scheme i.e. it is the insurance policy for the Scheme.

A number of variations have been made to the Statement of Conditions to ensure the product continues to be one of the most comprehensive building insurance policies available. 

The variations can be summarised as follows:

• simplifying provisions relating to non-payment of premium on time.

Previously if a premium was not paid on time any financial institution named on the certificate of insurance could be requested to pay the premium or, if the home had not been used as a basis for a loan, the insurance policy could be cancelled.

Now, if the premium is not paid on time the insurance policy will be deemed to not be in operation.

• introducing a more generous procedure where instalment of premium is unpaid. 

Previously the insurance policy would be cancelled after three consecutive unpaid instalments.

Now, if an instalment of premium remains unpaid for one month, the insurance policy may be cancelled (after notice is given to the policy-holder).

• giving examples of factors that affect the level of premium.

Previously the Statement of Conditions set out the factors that affected the level of premium e.g. “the construction of your home” but provided no explanation of the factors e.g. how the construction of a home would affect the level of premium.

Now, the factors contain examples explaining how a factor affects the level of premium.  In the factor given above, the example of how home construction can affect the level of premium is: “If your home is constructed of materials that will result in a greater risk of a fire, the premium will be higher.”.

Providing examples of the factors that affect the level of premium enables policy-holders to better understand how the premium is worked out.

• more strategic placing of vital information.

Previously the limit on additional expenses covered by the Statement of Conditions (20% of the sum insured, for example on shrubs and plants) was not shown in the part “Your sum insured” albeit it was shown in other parts of the Statement.

Now, the limit is also referred to in the “Your sum insured” part of the Statement of Conditions which is also an appropriate place to refer to the limit.

• re-wording of the parts of the Statement of Conditions called “If we agree to pay your claim”, “Disputes” and “Safeguarding policy holders personal information” to make the parts clearer and, in the case of the latter part, to give more information on privacy considerations applying to information provided by a policy-holder. 
• insertion of new part “Your excess” in substitution for the part “If the home is especially exposed to risk”.  Under the new part payments will not be made until the excess is paid. The amount of excess is stated in a policy-holder’s certificate of insurance.  The excess for accidental loss or damage is $100 and the excess for earthquake damage is $200.  More than one excess amount can apply to a claim.  For example, if a policy holder makes a claim for accidental loss of, say, two items, the excess will be $200.
• re-wording the part called “A. Repairing or rebuilding your home” to specifically refer to the policy under the DSHIS of “new for old replacement cover” i.e. under the Scheme a policy-holder is covered for the reasonable costs of repairing or rebuilding the home on a ‘new for old’ basis to a condition substantially the same as but not better than when new.

Previously the Statement of Conditions indirectly referred to the policy in the relevant part.  Now the policy is expressly referred to and in more “attention grabbing language”.

• removal of requirement for DSHIS prior agreement before a policy-holder can obtain a quote or inspection report if the DSHIS is to pay the cost of the quote or report.

Previously the Statement of Conditions provided in the part called “Part 4 Owner’s or Occupier’s Liability” that under the DSHIS the cost of a quote or inspection report would not be paid unless the DSHIS had first agreed to the quote or report being sought. 

This requirement to obtain DSHIS prior agreement has now been removed.

• amending of definitions .  The following definitions have been amended: “ certificate”, “excess”, “flood”.
• inserting examples of breakdown of claims payments.

This new part in the Statement of Conditions provides examples of the elements of claims payments.  For example, in the case of the total loss of a dwelling (value $360,000) due to fire, an example of the cost (as itemised) of re-building the home is given as follows:

Providing this type of information is one more initiative to explain to policy-holders how their insurance policy operates.

RIGHT TO PAYMENT

Subsection 38A(4) of the Act provides that the Minister (the Minister administering the Act) shall not vary the Statement of Conditions so as to remove the right of a person to receive a payment to which the person had become entitled before the variation. 

The attached instrument does not expressly remove any right to a pre-existing payment under an insurance policy i.e. it is not the intention of the instrument to remove such a right.  Further, the instrument specifically preserves any such right until the payment is made.

RETROSPECTIVITY

None.

CONSULTATION

Consultation in respect of the attached instrument was not considered necessary because the instrument is beneficial in nature and interested parties could be expected to support it.

DOCUMENTS INCORPORATED BY REFERENCE

No documents are incorporated by reference in the attached instrument.

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

The attached legislative instrument does not engage a human right.  It varies the “legislative template” for the standard terms and conditions that are to comprise a policy of insurance under the Defence Service Homes Insurance Scheme.

Accordingly as the attached instrument does not engage a human right it is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Conclusion

The attached legislative instrument does not engage a human right and is therefore compatible with human rights.

Michael Ronaldson

Minister for Veterans’ Affairs

Rule Maker

FURTHER EXPLANATION

Attachment A

Section 1

This section sets out the name of the instrument - the Defence Service Homes Insurance Scheme (Statement of Conditions) Variation 2015.

Section 2

This section provides that the instrument commences on the day after it is registered on the Federal Register of Legislative Instruments.

Section 3

This section is a saving provision and ensures that any right to a payment under the Principal Instrument is not diminished by any variation made to the Principal Instrument by the attached instrument.

Section 4

This section informs the reader that the attached instrument is made under the Defence Service Homes Act 1918.

Section 5

This section provides that an instrument mentioned in the Schedule i.e. the Principal Instrument, is changed as provided in the Schedule.

Schedule 1

Item 1

This item merely re-arranges the former provision and corrects a formatting error.

Item 2

This item omits the provision in question because it is no longer relevant because the non-payment of a premium will now mean the insurance policy will not be effective.  In other words, the provisions dealing with non-payment of premium have been simplified.

Item 3

As with item 2, item 3 is concerned with simplifying the provisions dealing with non-payment of premium.

Item 4

This item reduces the number of instalments of premium that may be outstanding before policy-cancellation-action may be taken, from 3 instalments to 1, but provides for cancellation to be discretionary rather than mandatory.

Item 5

This item explains the factors that influence the cost of the insurance policy.

Item 6

This item merely inserts information that is already in the Principal Instrument (limit on additional expenses of 20% of the sum insured) in another part of the Principal Instrument so as to make the information more accessible.

Item 7

This item re-states existing provisions in the Principal Instrument but includes a provision that explains the “excess” payable in respect of a claim.

Item 8

This item re-states existing provisions in the Principal Instrument to make them easier to understand.

Item 9

This item re-states existing provisions in the Principal Instrument to make them easier to understand.

Item 10

This item re-states existing provisions in the Principal Instrument to make them easier to understand.

Item 11

This item more succinctly states the “repair/re-build policy” of the DSHIS, namely:

“ new for old”.

Item 12

This item omits the requirement for a policy-holder to obtain DSHIS approval before seeking a quote or inspection report if DSHIS is to pay for the quote or report.

Item 13

As with item 12, this item omits the requirement for a policy-holder to obtain DSHIS approval before seeking a quote or inspection report if DSHIS is to pay for the quote or report.

Item 14

This item amends various definitions.

Item 15

This item sets out examples of how claim payments are calculated.  The examples provide a breakdown of the payment for particular types of claims.  Thus the cost of rebuilding a home includes the cost of “removal of debris” and “temporary accommodation” in addition to construction costs.