There was strong reader interest this week in our report that the Federal Court has found that a ‘pre-existing condition’ term in a life company’s policies was liable to mislead the public…
The Federal Court has found that a ‘pre-existing condition’ term in certain HCF Life Insurance Company policies was liable to mislead the public.
A statement from ASIC says the term was used in three contracts issued under the direct insurer’s ‘Recover’ range of products. ASIC alleged that 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 that 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
ASIC notes Justice Jackman said that the “…ordinary and reasonable reader would be ignorant of the potential effect of s47 of the ICA, and nothing in the Recover Cover PDSs adverts to the possibility that it may preclude HCF Life from relying upon the Pre-Existing Condition Terms in particular circumstances.”
ASIC Deputy Chair Sarah Court says consumers “rightly expect” that insurers will provide accurate information to them about their rights.
“Consumers rely on this information to make insurance claims, often in trying personal circumstances. By including a term that was liable to mislead consumers and that purported to give HCF a broader right to deny coverage than was the case, HCF Life misled consumers about their rights.”
ASIC also alleged that the term was an unfair contract term under the Australian Securities and Investments Commission Act 2001, with Justice Jackman dismissing that part of its case.
ASIC says it will consider the Court’s decision and will seek penalties for misleading conduct. The matter will return to Court for case management on 8 November 2024.
As background ASIC notes the relevant ‘pre-existing condition’ term appeared in product disclosure statements (in substantially identical terms) for the following insurance products issued by HCF Life under HCF Life’s ‘Recover’ range of insurance products:
- Cash Back
- Smart Term
- Income Assist (replaced by Income Protect from October 2021)
It says HCF Life replaced that ‘pre-existing condition’ term in its life insurance products on 9 November 2023.
Click here to read the full judgement.
Be warned! This is what your clients will get if they ring their insurer, the one you recommended, to complain about ever increasing premiums. For all those who seem to think that life insurers can be trusted to always act in the best interests of their clients, even though it's general advice only, let this be a warning.
A bit of "rape and pillage" is in the DNA of every life insurer, as they are these days, driven by shareholder value
These policies are still out there in the back pocket of insurers, ready to be pulled out when the regulators are asleep at the wheel, and we all know when that is
You can just hear that backpacker in the call centre saying something along these lines "yes, Mr X, we have another comparable policy to your current lump-sum policy and you can save 25% in premium"
Mr Jones regime will not require the insurers to disclose the nasties in these policies
Those of you with longer memories will remember that the types of products that were flogged by the banks and in particular St George, Via Westpac life. They had a product full of PEC's and it was practically worthless, particularly if you inadvertently lapsed the policy and sought to reinstate the policy, whereupon a whole stack of new PEC's were introduced.
We all know that today credit cards are constantly being replaced for a numerous reasons and it's just a fact of life, but clients that lapse bcause they failed in inform the insurer of a new credit card number and then seek to reinstate.The circumstances will occur, clients will be disadvantaged at claim unless the insurers are compelled to do otherwise.
And, as is the case here, the regulator will arriveafter the event.
So your client gets dudded. And advisers will be dudded too ,if the original policy is still within clawback period. Happy birthday
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