The federal court finds HCF Life’s term “pre-existing condition” misleading

The Federal Court ruled on Monday that a term for a “pre-existing condition” used by HCF Life Insurance Company Pty Ltd in its life insurance policies could mislead customers about their rights. This decision follows a case brought by the Australian Securities and Investments Commission (ASIC), which alleged that the terms and conditions under HCF Life’s “Recover” insurance product line did not comply with the consumer protections set out in the Insurance Contracts Act 1984 (ICA ).

Findings on the pre-existing condition term

A press release stated that the disputed ‘pre-existing condition’ clause allowed HCF Life to deny cover if it was later determined that symptoms of a condition existed before the contract date, even if the customer was not aware of or aware of the condition had not been determined. formally diagnosed.

Judge Jackman noted that the contract’s wording was likely to mislead an “ordinary and reasonable reader” because it does not clarify that section 47 of the ICA prohibits insurers from denying cover if a customer was unaware of a pre-existing condition when purchasing of a policy. Under Article 47, refusing coverage is only permitted if a reasonable person in the customer’s position should have been aware of the circumstance at the time the contract came into effect, the press release points out.

ASIC argued that the clause gave a misleading impression of HCF Life’s rights, effectively expanding the grounds for refusing cover beyond what the law allows. This alleged discrepancy, according to ASIC, could lead to policyholders refraining from making legitimate claims or misunderstanding their terms of cover.

ASIC deputy chair Sarah Court said customers often rely on policy information when making claims in challenging personal circumstances, highlighting the need for clear contract language.

Accusation of unfair contract duration dismissed

Although the court agreed that the pre-existing term was misleading, it rejected ASIC’s claim that the clause was an “unfair contract term” under the ASIC Act 2001. Judge Ian McNeil Jackman’s judgment in this area ASIC’s request to classify the clause not granted. term as unfair, but instead focuses on the misleading nature of the language used in HCF’s policies.

Next steps and broader implications

Following the decision, ASIC announced plans to seek sanctions against HCF Life for misleading conduct. A case management hearing is scheduled for November 8 to determine next actions.

In recent years, the federal government has expanded protections against unfair contract terms, a move that followed recommendations from the Royal Commission into misconduct in the banking, pensions and financial services industries. The adjustments in April 2021 brought insurance contracts under the unfair terms regime, bringing them into line with consumer protection in other areas of financial services. Civil penalties for violations of these rules will become enforceable from November 2023.

With the outcome of this case, ASIC aims to strengthen the standards expected in the insurance industry, ensuring that all consumers receive accurate information to make informed decisions about their cover.

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