HCF Life fined $750k for misleading contract term

HCF Life Insurance has been fined $750,000 by the Federal Court for misleading the public about a pre-existing condition term under its Recover products.

Last October, the court ruled the term would deny coverage if a customer did not disclose a pre-existing condition before entering the contract, and a medical practitioner subsequently formed an opinion that signs or symptoms of the condition existed prior to the customer entering the contract, even if a diagnosis had not been made.

Judge Jackman also found that HCF Life could deny coverage even if the customer was not aware of the pre-existing condition when entering into the insurance contract and a reasonable person in the circumstances would not have been aware of the condition.

The four policies issued under Recover products were Cash Back, Cover Smart Term Insurance, Income Assist Insurance and Income Protect Insurance.

In the verdict handed down yesterday, Justice Jackman said whilst HCF Life had no intention to engage in misleading conduct, "the contravening conduct should be regarded as objectively serious."

He added that "insurers are now squarely on notice that contractual terms may mislead consumers if the operation of those terms is modified by, or inconsistent with, provisions of the [Insurance Contracts Act 1 984 (Cth)]".

ASIC first took action on HCF Life in May 2023, alleging it used unfair and misleading terms that can deter customers from making a claim.

In a win for ASIC, deputy chair Sarah Court said: "ASIC brought this case to ensure consumers were not misled about their rights and the extent of their cover by HCF Life's pre-existing condition term. 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."

ASIC sought to have HCF Life pay 50% of its costs of the liability hearing and for the costs of the penalty hearing. Judge Jackman agreed that HCF Life pay 50% of ASIC's costs up to 28 October 2024.