ASIC sues HCF Life for misleading insurance policy

Oksana Patron

12 May 2023

The Australian Securities and Investments Commission (ASIC) has commenced civil proceedings against three types of insurance policies issued by HCF Life Insurance Company which, according to the regulator, contained “unfair contract terms and could mislead the public”.

ASIC alleges that the ‘pre-existing condition’ term in the contracts was an unfair contract term 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.

“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,” ASIC Deputy Chair Sarah Court said.

“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.”

The case involved standard form contracts issued under HCF Life’s ‘Recover’ range of insurance products.

ASIC will also seek injunctions and corrective orders. Further, ASIC said it would be seeking a penalty regarding the allegation that HCF Life’s contracts are liable to mislead the public.