Response from HCF Life spokesperson:
HCF Life has been notified today by the Australian Securities & Investments Commission (ASIC) that four of its products will be tested in the courts following the introduction of new unfair contract term laws in 2021.
Prior to this notification HCF Life has been participating in ASIC’s investigation into these products in good faith for over 12 months.
HCF Life believes these products comply with the new laws and strongly stands by them. It will contest this case to the fullest extent and believes this to be a test case for the wider industry.
The case relates to the pre-existing condition term which is commonplace across guaranteed acceptance insurance products to provide the seller some level of protection from people falsely claiming when they have a known medical issue.
With the growing underinsurance challenges in Australia HCF Life feels it is in the best interests of consumers to have direct access to affordable life insurance products such as those in question.
It is important to note this case relates to HCF Life Insurance only.
ASIC has commenced civil proceedings in the Federal Court alleging that three types of insurance policies issued by HCF Life Insurance Company Pty Limited (HCF Life) 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.
ASIC alleges that the 'pre-existing condition' term in the contracts is an unfair contract term and could mislead the public because:
- the term purports to deny coverage if a customer did not disclose a pre-existing condition before entering the contract, and a medical practitioner forms an opinion that symptoms of the condition existed prior to the customer entering into the contract, even if a diagnosis had not been made;
- the term suggests that HCF Life can deny coverage even if the customer was not aware of the pre-existing condition; and
- s47 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 Deputy Chair Sarah Court said 'Insurers need to ensure that all terms in their contracts, including important pre-existing condition terms, accurately communicate the rights of customers. The inclusion of allegedly unfair and misleading terms can deter customers from making a claim, which is not a good consumer outcome'.
Ms Court said one of ASIC's Enforcement Priorities is taking enforcement action with respect to unfair contract terms, including in insurance products.
'Given the expansion of the unfair contract terms regime in April 2021 to include insurance contracts, ASIC's current focus on enforcement action concerning unfair contract terms should not come as a surprise. Rather, it should serve as a reminder to providers of financial services, whose contracts are subject to the regime, that potentially unfair terms should be removed from their standard form consumer contracts,' concluded Ms Court.
ASIC is seeking declarations that the term is void. ASIC will also seek injunctions and corrective orders. Further, ASIC is seeking a penalty regarding the allegation that HCF Life's contracts are liable to mislead the public.
