The Australian Securities and Investments Commission (ASIC) has commenced Federal Court civil proceedings against HCF Life over alleged unfair contract terms (UCT) breaches in three types of policies offered to its members. 
 
ASIC says the case involves standard form contracts issued under HCF Life’s “Recover” range of insurance products. 
 
The regulator alleges that the “pre-existing condition” clause in the contracts is an unfair contract term and could “mislead” the public because it 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. 
 
ASIC says the term suggests that HCF Life can deny coverage even if the customer was not aware of the pre-existing condition. But section 47 of the Insurance Contracts 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. 
 
“The inclusion of allegedly unfair and misleading terms can deter customers from making a claim, which is not a good consumer outcome.” 
 
She says since the UCT regime was expanded in April 2021to include insurance contracts, the regulator’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,” she said. 
 
ASIC is seeking declarations that the “pre-existing condition” term is void in the HCF contracts. It is also seeking injunctions and corrective orders. 
 
“Further, ASIC is seeking a penalty regarding the allegation that HCF Life’s contracts are liable to mislead the public,” the regulator says. 
 
HCF has responded to the ASIC court proceedings, saying it will “contest this case to the fullest extent”. 
 
“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,” a spokesperson told insuranceNEWS.com.au. 
 
“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.” 
 
HCF Life says it has been notified by ASIC that four of its products will be tested in the courts following the introduction of new UCT 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,” the spokesperson said. 
 
“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.”