ASIC has appealed the Federal Court’s decision dismissing part of ASIC’s proceedings against HCF Life Insurance Company Pty Ltd in respect of a ‘pre-existing condition’ term used in a range of products issued by HCF Life. On 28 October 2024, the Federal Court found that while the pre-existing condition term was liable to mislead the public, it was not unfair.
ASIC alleges that the term was liable to mislead the public and was an unfair contract term under the ASIC Act because it:
- purported to allow HCF Life to deny coverage if a consumer 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 consumer entering into the contract, even if a diagnosis had not been made, and
- suggested that HCF Life could deny coverage even if the consumer 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,
in circumstances where section 47 of the Insurance Contacts Act prevents insurers from excluding coverage for non-disclosure of a pre-existing condition where the consumer 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 is appealing the decision of the Federal Court because it remains concerned that:
- the Court took into account the ameliorating effect of s 47 of the Insurance Contracts Act in assessing whether the term was unfair and that this effectively allows potentially unfair contractual terms to be cured by legislation that the ordinary and reasonable consumer would be ignorant of, and
- terms that are found liable to mislead the public can also be found not to be unfair.
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Background
The term regarding pre-existing conditions appears in product disclosure statements (in substantially identical terms) for the following insurance products issued by HCF Life, which are all products offered under HCF Life’s ‘Recover’ range of insurance products:
- Cash Back
- Smart Term
- Income Assist (replaced by Income Protect from October 2021)
On 12 May 2023, ASIC commenced civil proceedings in the Federal Court alleging that three types of insurance policies issued by HCF Life contained unfair contract terms and could mislead the public (23-123MR).
HCF Life replaced the ‘pre-existing condition’ term in its life insurance products on 9 November 2023. ASIC does not consider that the replacement term is liable to mislead or is unfair. In April 2025, after the liability decision was handed down (24-237MR) and in consultation with ASIC, HCF Life wrote to affected current and former policyholders, and published a corrective notice on its website. Those documents notified consumers of the liability judgment and invited them to contact HCF Life if they thought they were affected. The corrective notice remains on HCF Life’s website.
On 5 April 2021, the unfair contract term protections in Subdivision BA of the ASIC Act were expanded to include insurance contracts with consumers and small businesses. This was a result of a recommendation by the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry (Recommendation 4.7 in the Final Report). Extending the unfair contract term protections to these kinds of insurance contracts was aimed at:
- ensuring that consumers and small businesses receive the same protections from unfair terms in insurance contracts as they do for other financial services, and
- encouraging insurers to improve the level of clarity and transparency in their contracts and remove potentially unfair terms.
On 9 November 2023, civil penalties for breaches of the unfair contract term prohibition came into effect following assent of the Treasury Laws Amendment (More Competition, Better Prices) Act 2022.
On 8 May 2025, the Federal Court fined HCF Life $750,000 for using a misleading contract term and make corrective disclosures on its website (25-070MR).