ASIC prosecutes HCF Life for misleading insurance contract terms

The Australian Securities and Investments Commission (ASIC) has commenced civil proceedings in the Federal Court against HCF Life Insurance, alleging that three types of its insurance policies contain unfair contract terms and could mislead the public.

Specifically, ASIC has targeted the “pre-existing condition” term in the contracts issued under the firm’s “Recover” range of insurance products, which it alleges is an “unfair contract term” and could mislead the public because:

• the term purports to deny coverage if a customer did not disclose a pre-existing condition before entering the contract, and a medical practitioner forms an opinion that symptoms of the condition existed prior to the customer entering into the contract, even if a diagnosis had not been made;
• the term suggests that HCF Life can deny coverage even if the customer was not aware of the pre-existing condition; and
• s47 of the Insurance Contacts Act prevents insurers from excluding coverage for non-disclosure of a pre-existing condition where the customer was unaware of the condition when taking out the insurance, and a reasonable person in the circumstances could not be expected to have been aware of the condition.

“Insurers need to ensure that all terms in their contracts, including important pre-existing condition terms, accurately communicate the rights of customers. The inclusion of allegedly unfair and misleading terms can deter customers from making a claim, which is not a good consumer outcome,” commented ASIC deputy chair Sarah Court.

Ms Court added that one of ASIC’s enforcement priorities is taking enforcement action with respect to unfair contract terms, including in insurance products.

“Given the expansion of the unfair contract terms regime in April 2021 to include insurance contracts, ASIC’s current focus on enforcement action concerning unfair contract terms should not come as a surprise.

“Rather, it should serve as a reminder to providers of financial services, whose contracts are subject to the regime, that potentially unfair terms should be removed from their standard form consumer contracts,” concluded Ms Court.

ASIC said that it is currently seeking declarations that the term is void, alongside injunctions and corrective orders.

Further, the regulator is also seeking a penalty regarding the allegation that HCF Life’s contracts are liable to mislead the public.