ASIC has commenced civil proceedings in the Federal Court alleging three types of insurance policies issued by HCF Life Insurance Company contain unfair contract terms and could mislead the public.

The case involves standard form contracts issued under HCF Life’s ‘Recover’ range of insurance products (‘Cash Back’, ‘Smart Term’, and ‘Income Assist’).

ASIC alleges the ‘pre-existing condition’ term in the contracts is an unfair contract term and could mislead the public because:

  • A customer did not disclose a pre-existing condition before entering the contract, and a medical practitioner believes that symptoms of the condition existed before the customer entered the contract (even if a diagnosis had not been made);
  • The customer is unaware of the pre-existing condition; or
  • 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.

“Insurers need to ensure that all terms in their contracts, including important pre-existing condition terms, accurately communicate the rights of customers,” ASIC deputy chair Sarah Court said in a media release on Friday.

“The inclusion of allegedly unfair and misleading terms can deter customers from making a claim, which is not a good consumer outcome.”

ASIC is seeking declarations that the term is void. The regulator will also seek injunctions and corrective orders.

On 5 April 2021, the unfair contract term protections in the ASIC Act were expanded to include insurance contracts with consumers and small businesses. This was a result of a recommendation by the Hayne Royal Commission.