The Federal Court has hit HCF Life with a $750,000 penalty over a misleading pre-existing condition term in some policies.

Justice Ian Jackman made the order last week after ruling in October on proceedings launched by the Australian Securities and Investments Commission.

He also told the insurer to make corrective disclosures on its website. 

But the judge dismissed another allegation that the pre-existing condition term was an unfair contract term under the Australian Securities and Investments Commission Act 2001.

The misleading term was used in four policies issued under HCF Life’s Recover range of products. The insurer sent corrective notices to affected consumers before the penalty hearing.

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.” 

HCF Life says it acknowledges the penalty decision and accepts the finding that the pre-existing condition exclusion in certain Recover Cover products was “liable to mislead the public and should have referred to or more clearly explained section 47 of the Insurance Contracts Act 1984. 

“We apologise for any confusion that this may have caused and are committed to supporting our policyholders.” 

The life insurer added: “In response to the proceeding, we updated our Recover Cover products in November 2023 to align with section 47 of the act more closely. We have issued corrective notices to all affected current and former policyholders, and published corrective information on the HCF Life website to ensure transparency and support informed decision-making.”