Australia’s corporate watchdog is challenging a Federal Court ruling that declined to classify a life insurance contract term as unfair, despite acknowledging it could mislead consumers.
The Australian Securities and Investments Commission (ASIC) has filed an appeal over the court’s October 2024 decision, which dismissed part of its case against HCF Life Insurance Company Pty Ltd. The case centres on a “pre-existing condition” clause used in several of HCF Life’s products, which ASIC alleges had the potential to both mislead customers and breach unfair contract term laws.
The disputed term, which was used in product disclosure statements for policies under HCF Life’s “Recover” insurance range, allowed the insurer to deny coverage if a medical practitioner later determined signs or symptoms of a pre-existing condition had been present before the customer entered into the contract – even in cases where the condition had not been diagnosed or the customer was unaware of it.
ASIC argues that this language implies HCF Life could refuse claims even when consumers had no reasonable way of knowing they had a pre-existing condition. According to ASIC, this is inconsistent with section 47 of the Insurance Contracts Act, which protects policyholders in situations where they were unaware of a condition and could not reasonably have been expected to know about it.
The Federal Court found the clause was misleading but did not rule it unfair under the Australian Securities and Investments Commission Act. ASIC is now challenging that conclusion, saying the court relied too heavily on section 47 to justify the clause’s fairness even though most consumers wouldn’t be aware of that legal protection.
“This effectively allows potentially unfair contractual terms to be cured by legislation that the ordinary and reasonable consumer would be ignorant of, and terms that are found liable to mislead the public can also be found not to be unfair,” ASIC said.
The appeal also raises a broader concern: that a term found to mislead the public can nonetheless be deemed fair, a position ASIC argues undermines the intent of the unfair contract term protections.
The pre-existing condition term was removed from HCF Life’s insurance offerings in November 2023. ASIC has since confirmed that the revised version is neither misleading nor unfair. In April 2025, following the court’s initial findings, HCF Life issued notices to affected current and former customers and posted a corrective statement on its website, which remains accessible.
ASIC first launched proceedings against HCF Life in May 2023. In a separate outcome handed down in May 2025, the insurer was fined $750,000 for using the misleading term and directed to maintain its corrective disclosures online.
