The Full Federal Court has dismissed ASIC’s appeal against a previous finding of the Federal Court that a ‘pre-existing condition’ term used in a range of products issued by HCF Life was not an unfair contract term. The earlier finding that the term was liable to mislead the public is not disturbed by the Full Federal Court’s decision (24-237MR).
ASIC brought the appeal to seek to clarify how the unfair contract terms regime applies to contract terms in insurance contracts that may be affected by other statutory protections.
ASIC was also concerned that the same term that was found to be liable to mislead the public was also found not to be unfair.
ASIC is considering this decision.
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Background
The term regarding pre-existing conditions appeared 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 began civil proceedings alleging that three types of insurance policies issued by HCF Life contained the unfair contract term 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 directed them to contact HCF Life if they thought they were affected. The corrective notice remains on HCF Life’s website.
On 8 May 2025, the Federal Court penalised HCF Life $750,000 for including the pre-existing condition term in the above policies, which the court found was liable to mislead the public.
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.