ASIC has lodged an appeal against a Federal Court decision that rejected part of its case against HCF Life Insurance concerning a pre-existing condition clause in several of the firm’s policies.
In an October 2024 ruling, the court found the clause was likely to mislead consumers, but concluded it was not unfair under the ASIC Act. ASIC is appealing the decision.
The regulator alleges the term was liable to mislead the public and was an unfair contract term under the ASIC Act because it:
- Purported to allow HCF Life to deny coverage if a consumer 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 consumer entering into the contract, even if a diagnosis had not been made, and
- Suggested HCF Life could deny coverage even if the consumer 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, in circumstances where section 47 of the Insurance Contacts Act prevents insurers from excluding coverage for non-disclosure of a pre-existing condition where the consumer 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
See: HCF Life Contract Term Found Liable to Mislead Public
ASIC is concerned the court took into account the ameliorating effect of section 47 of the Insurance Contracts Act in assessing whether the term was unfair, and that this effectively allows potentially unfair terms in contracts to be cured by legislation.
The term regarding pre-existing conditions, states ASIC, appears in product disclosure statements (in substantially identical terms) in HCF Life’s Recover range of insurance products, namely cash back, smart term, and income assist (replaced by income protect in October 2021).
Click here to see previous our reports featuring HCF Life.
Thankfully, HCF doesn't have much market penetration in life insurance unlike the penetration achieved by the banks in their heydays. But I certainly, and I suspect most life risk specialists, have known about this sort BS in policies from small insurers for some time. Have a look at the reinstatement provisions in a St George life contract issued under the old Westpac Life.And some of those policies are now on the books of TAL
The issue for me is that ASIC should have been picking this stuff up years ago instead of waiting for it to be drawn to their attention by a Federal Court decision. Just goes to show that once again ASIC really has no idea about what goes on in the life insurance industry, and how draconian provisions like this HCF clause demonstrates the value of specialist life insurance advice.
This should be a warning to ASIC, but it won't be. Anyone that expects our life insurance "friends" to offer quality contracts to those people who contact the insurer direct under the new regime needs to have their head read. It's a disaster waiting to happen.
Been there, done that, got the T-shirt
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