In relation to the regulation of the Australian insurance industry, which of the following statements is correct?

The correct statement emphasizes the principle of utmost good faith, known as "uberrima fides," which is a fundamental concept under the Insurance Contracts Act 1984 in Australia. This principle mandates that both parties involved in an insurance contract—the insurer and the insured—must act honestly and disclose all material facts that could influence the other party's decision to enter into the contract. This means that the insurer must not misrepresent policy terms, and the insured must fully disclose relevant information regarding the risk being insured.

This requirement for good faith is critical in insurance transactions to maintain trust and ensure fair dealings, recognizing the asymmetric information often present in such agreements where one party typically has more knowledge about the risk involved than the other.

The other options do not accurately reflect the principles laid out in the Insurance Contracts Act and the general operational framework of the Australian insurance industry. For instance, insurance products are generally not exempt from the Act, and while many contracts may not need to be in writing, those that fall under certain regulations often do. Lastly, processing regulatory issues only after a complaint is made does not encompass the proactive oversight carried out by regulatory bodies to ensure compliance and protect consumers.