The Federal Court has ordered HCF Life Insurance Company Pty Limited to pay a $750,000 penalty and update a term covering pre-existing conditions in four policies saying it was liable to mislead the public.
The term was found in its Recover range of products, namely:
- Cash Back Cover
- Smart Term Insurance
- Income Assist Insurance
- Income Protect Insurance
The company sent corrective notices to affected consumers prior to the penalty hearing.
The court accepted ASIC’s claim the term could mislead the public because:
- It purported to allow HCF Life to deny coverage if a customer did not disclose a pre-existing condition before entering the contract, and a medical practitioner subsequently formed an opinion that signs or symptoms of the condition existed prior to the customer entering into the contract, even if a diagnosis had not been made
- It suggested HCF Life could deny coverage even if the customer was not aware of the pre-existing condition when entering into the insurance contract and a reasonable person in the circumstances would not have been aware of the condition
- Section 47 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
The court’s findings and penalty handed down should serve as a message to insurers…
ASIC Deputy Chair Sarah Court said: “ASIC brought this case to ensure consumers were not misled about their rights and the extent of their cover by HCF Life’s pre-existing condition term.
“The court’s findings and penalty handed down should serve as a message to insurers of their responsibility to ensure the information distributed to consumers is accurate and consistent with the law.”
Justice Jackman found that while HCF Life had no intention to engage in misleading conduct, “the contravening conduct should be regarded as objectively serious”.
He said: “It is also common ground that the conduct involved misrepresentation of the operation of an important exclusion in life insurance policies, and that the misrepresentations were made in [product disclosure statements] which consumers were entitled to regard as reliable documents, containing accurate and sufficient information as to the circumstances in which benefits would be payable.
“Insurers are now squarely on notice that contractual terms may mislead consumers if the operation of those terms is modified by, or inconsistent with, provisions of the Insurance Contracts Act 1984.”
Click here to read the full judgment.
