The corporate regulator has lost its appeal against a Federal Court ruling involving HCF Life Insurance’s pre-existing condition policy wording, in a decision that confirms the insurer’s clauses were not unfair contract terms, despite being found liable to mislead consumers.
The Full Federal Court dismissed ASIC’s appeal on Friday 19 June, upholding earlier findings that HCF Life’s policy wording breached misleading conduct provisions but did not contravene the unfair contract terms regime under the ASIC Act.
The case concerned HCF Life “Recover Cover” insurance products, including Cash Back, Smart Term and Income Assist (later replaced by Income Protect), which excluded cover for pre-existing conditions where a medical practitioner formed the opinion that signs or symptoms existed before policy inception.
…mismatch risked misleading consumers and creating unfair contractual imbalance…
ASIC argued the wording failed to reflect protections in section 47 of the Insurance Contracts Act 1984, which limits insurers’ ability to rely on pre-existing condition exclusions in certain circumstances. It said this mismatch risked misleading consumers and creating unfair contractual imbalance.
While the primary judge previously found the terms were liable to mislead and partially unenforceable under the Insurance Contracts Act, the court held they were not unfair under sections 12BF and 12BG of the ASIC Act. That finding was upheld on appeal.
…exclusions were reasonably necessary to protect HCF Life’s legitimate interests…
The court found ASIC had not established the wording caused a “practical, substantive disadvantage” to consumers beyond a theoretical possibility. It also accepted that, once section 47 was taken into account, the contractual terms did not create a significant imbalance in rights and obligations.
The court further found the exclusions were reasonably necessary to protect HCF Life’s legitimate interests, including its ability to offer guaranteed acceptance products and manage underwriting risk.
The ruling leaves intact earlier findings that the policy wording was misleading, but confirms it does not breach the unfair contract terms provisions for insurance contracts.
Click here for the full judgment.
