HCF Life Insurance Company Pty Ltd has been ordered to pay a $750,000 fine and publish corrective information after the Federal Court ruled that a term in some of its life insurance products could mislead consumers about the scope of their coverage.
The decision follows proceedings brought by the Australian Securities and Investments Commission (ASIC), which alleged that the insurer’s product disclosure statements (PDSs) included a pre-existing condition clause inconsistent with protections under the Insurance Contracts Act 1984 (Cth).
The clause in question was included in four policies within HCF Life’s “Recover” product suite:
According to ASIC, the wording could cause consumers to believe that HCF Life had the right to reject claims based on a later medical opinion that symptoms of a condition were present before the policy was purchased, even if the policyholder had no prior knowledge or diagnosis of the condition.
The court supported ASIC’s position, finding that the clause could mislead policyholders into misunderstanding their rights and the circumstances under which coverage could be denied.
ASIC deputy chair Sarah Court said the regulator pursued the case to address potential consumer confusion around policy exclusions.
“The court’s findings and penalty handed down should serve as a message to insurers of their responsibility to ensure the information distributed to consumers is accurate and consistent with the law,” she said.
Justice Ian Jackman, who handed down the decision, noted that while HCF Life did not set out to deceive consumers, the impact of the clause was significant. He added that consumers should be able to rely on PDSs to accurately describe when benefits apply.
The judgment also emphasised that terms within insurance contracts can be misleading if they conflict with statutory protections, such as those provided under section 47 of the Insurance Contracts Act. That section limits an insurer’s ability to deny claims due to non-disclosure of a condition, provided the policyholder was unaware of it and could not reasonably have been expected to know.
Before the penalty was imposed, HCF Life issued notifications to affected customers and agreed to revise relevant disclosures on its website to address the court’s findings.
In the October 2024 hearing, the court also rejected a separate claim by ASIC that the clause was unfair under the Australian Securities and Investments Commission Act 2001, but upheld the claim related to misleading conduct under the Corporations Act
