The Federal Court has determined that HCF Life Insurance misled consumers by failing to disclose a crucial statutory provision that limits its exclusions for pre-existing conditions. This action was found to violate consumer protection laws.
Background of the Case
HCF Life Insurance, a subsidiary of The Hospitals Contribution Fund of Australia Limited (HCF), provides various insurance products, including “Smart Term Insurance,” “Cash Back Cover,” and “Income Protect Insurance” through its Recover Cover line. Between 2019 and 2023, HCF Life changed the definition of “pre-existing condition” in its policy documents. Notably, these updates omitted references to Section 47 of the Insurance Contracts Act 1984 (ICA), which restricts insurers from denying coverage for pre-existing conditions if the insured was unaware or could not reasonably have been aware of the condition when the policy started.
Allegations from ASIC
The Australian Securities and Investments Commission (ASIC) alleged that HCF Life’s policies misled the public by not clarifying the implications of Section 47. ASIC claimed that by distributing product disclosure statements without this essential information, HCF Life violated Section 12DF of the Australian Securities and Investments Commission Act 2001. This section prohibits misleading conduct regarding the characteristics and suitability of financial services.
Court Findings
The Federal Court found that the language used in HCF Life’s policy documents misrepresented the circumstances under which benefits would not be payable. The policies defined “pre-existing conditions” based on whether a medical practitioner believed that symptoms existed prior to the policy’s start date. However, the documents did not inform consumers that under Section 47 of the ICA, the insurer could not use these exclusions if the insured was unaware of the condition at the time of obtaining the policy.
The court emphasized that there is a distinction between the statutory provision and HCF Life’s contractual terms. While HCF Life’s exclusions depend on a medical professional’s subjective opinion, Section 47 focuses on assessing the insured’s knowledge of their condition and what a reasonable person should have known.
Conclusion
Ultimately, the court concluded that HCF Life’s failure to reference Section 47 in its product disclosures misled consumers, violating Section 12DF of the ASIC Act. While the court did not classify the policy terms as “unfair” under Section 12BF, it acknowledged that the exclusions were misleading because they did not provide a complete picture of the coverage limits.
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