Australian Securities and Investments Commission v HCF Life Insurance Company Pty Limited (Penalty)

This Federal Court decision is the penalty stage of ASIC’s case against HCF Life Insurance Company Pty Limited. The Court had already decided liability in an earlier judgment delivered on 28 October 2024. In that earlier decision, Jackman J found that HCF Life contravened section 12DF of the ASIC Act by engaging in conduct liable to mislead the public as to the nature, characteristics and suitability of financial services.

The conduct concerned the way HCF Life described pre-existing condition exclusions in product disclosure statements for its Recover Cover insurance products. The penalty judgment says those exclusions, called the Pre-Existing Condition Terms, were misrepresented in the Recover Cover PDSs. The Court also recorded that insurers are now on notice that contractual terms may mislead consumers if their operation is modified by, or inconsistent with, the Insurance Contracts Act 1984 (Cth).

That point is commercially important. The problem was not that the products were oversold. The catchwords say the insurance products were presented as less desirable than they actually were. In other words, a business can mislead not only by exaggerating benefits, but also by describing an exclusion or limitation too broadly when the law narrows how it can operate.

The products were sold under several PDS versions between April 2021 and April 2023. The judgment identifies Smart Term Insurance, Cash Back Cover, Income Assist Insurance and Income Protect Insurance as the relevant Recover Cover products. From 5 April 2021 to 27 April 2023, HCF Life entered into 12,265 Recover Cover contracts with members of the public, and 7,022 remained in force as at 10 December 2024.

The group structure also mattered. More than 90% of Recover Cover customers were HCF Ltd private health insurance members. HCF Life outsourced front-line operations and some support functions to HCF Ltd, including sales, marketing, advertising, member services, product design, risk, legal and compliance support. HCF Ltd also acted as HCF Life’s agent to promote and sell products. For businesses using related entities, white-label arrangements or shared services teams, this is a reminder that responsibility for customer-facing wording does not disappear because multiple entities are involved.

By the time of this judgment, liability had already been established. The Court was not deciding again whether HCF Life had contravened the law. The question was what pecuniary penalty and other orders were appropriate after the contraventions had been found.

The judgment sets out the usual civil penalty principles. The purpose of a civil penalty regime is primarily the promotion of compliance through deterrence, both specific deterrence of the contravener and general deterrence of others. The Court repeated that a penalty must not be so low that it becomes an acceptable cost of doing business, but it must also not be oppressive or greater than necessary to achieve deterrence.

The penalty issues in this case were commercially realistic ones that many businesses would ask about. The Court had to consider the significance of the fact that there was no intention to engage in misleading conduct, no evidence of consumer loss or damage, and only a theoretical risk of harm. It also had to consider that HCF Life derived no financial benefit from the contraventions. Another issue was the role of legal advice, because HCF Life had obtained external review of the relevant PDSs and those lawyers had not identified the problem. The Court also considered post-liability conduct, including that the relevant PDSs remained available on the website and corrective notices were delayed after the liability judgment.

The judgment makes clear that these factors can reduce or shape the penalty analysis, but they do not remove the Court’s focus on deterrence. That is a useful point for directors and founders. In a civil penalty case, the absence of bad faith or proven loss may help, but it does not end the matter if the Court considers a meaningful compliance message is still needed.

One of the most useful parts of the judgment for business readers is its treatment of legal advice. The Court recorded that external lawyers reviewed the relevant Recover Cover PDSs issued in 2019, 2021 and 2023 before they were issued. Those lawyers did not advise that the draft PDSs were potentially misleading and did not raise the possibility that the clauses may mislead because they failed to refer to, or explain, the existence or effect of section 47 of the Insurance Contracts Act.

That did not end the case. The catchwords say the weight to be given to obtaining legal advice depends on all the circumstances, including the nature of the contravention, the nature of the advice obtained and the degree of certainty or qualification with which it was expressed. For businesses, that means legal sign-off is relevant but not automatic protection. A review can miss the real issue if the brief is too narrow, if the advice is qualified, or if the risk sits at the intersection of contract wording and another statute.

The judgment also highlights the importance of legacy documents and online material. The relevant Income Protect Insurance and Cash Back Cover PDSs that were the subject of the proceeding still appeared on HCF Life’s website. The Court noted that, despite the liability judgment having been delivered on 28 October 2024, the website did not contain any reference to the existence or effect of that judgment, the existence or effect of section 47 of the Insurance Contracts Act, or the fact that the PDSs were and are liable to mislead the public.

That is a practical compliance lesson. Businesses often focus on fixing the current version of a document, but old PDFs, archived webpages and product pages can continue to shape customer understanding. If those materials remain accessible, they can remain relevant. The Court’s corrective notice orders, discussed below, show how seriously the Court treated visible and ongoing correction.

The group structure is also worth noting. HCF Life outsourced front-line operations and some support functions to HCF Ltd under a master services agreement, and HCF Ltd acted as HCF Life’s agent to promote and sell products. In FY24, each director of HCF Life was also a director of HCF Ltd. For businesses operating through a corporate group, this is a reminder to allocate ownership of customer wording clearly. Shared services can support compliance, but they can also blur accountability if no one is specifically responsible for checking whether the customer-facing explanation matches the legal effect of the product.

On 8 May 2025, the Federal Court ordered HCF Life to pay a pecuniary penalty of $750,000 under section 12GBB of the ASIC Act. The Court also made corrective notice orders under section 12GNB of the ASIC Act and or section 23 of the Federal Court of Australia Act.

Those corrective orders were detailed and practical. Within 14 days, HCF Life had to publish, or cause to be published, a corrective notice on the website www.hcf.com.au/insurance/life-recover-cover. The notice had to be accessible through a click-through banner prominently located in the top third of the webpage and visible without scrolling. The banner had to contain the wording “Notice ordered by the Federal Court of Australia - Life Insurance policies” with a “Learn More” button in white and in the same font centred on a red background. The banner had to remain on the website for at least 180 days, operate as a one-click hyperlink to the notice, and the notice had to occupy the entire webpage accessed through that banner.

The Court also ordered publication of the corrective notice, or otherwise the click-through banner, on each webpage where the relevant product disclosure statements were published for so long as policyholders were able to make a claim under the policy referable to those PDSs. The website also had to be maintained during the period the notice was required, and no mechanism could be used to stop search engines indexing the pages or scanning them for links to follow.

On costs, HCF Life was ordered to pay 50% of ASIC’s costs incurred up to 28 October 2024 and ASIC’s costs incurred after that date.

The catchwords also record the Court’s view that specific deterrence had largely been achieved by the declarations of contravention, and general deterrence had largely been achieved by insurers now being on notice that contractual terms may mislead consumers if their operation is modified by or inconsistent with the Insurance Contracts Act. Even so, the Court considered a substantial pecuniary penalty of $750,000 appropriate.

This case sits in insurance and financial services, but the practical reading is broader. Many businesses explain exclusions, limitations, waiting periods, eligibility rules, cancellation rights or claim conditions in customer documents and website copy. The risk is not only that those explanations overstate what the customer gets. The risk is also that they understate the customer’s legal position by failing to reflect legislation that changes how the term actually works.

The judgment is especially relevant where your business uses standard form documents at scale. A wording issue repeated across many contracts can become a systemic disclosure problem. It is also relevant where your business keeps old versions of documents online, because those materials may continue to influence customers and remain visible to regulators and courts.

Another practical lesson is that remediation speed matters. The Court noted that the relevant PDSs remained available on the website and that corrective notices were delayed after the liability judgment. Once a regulator raises a concern, and especially once a court has made findings, businesses should move quickly to review live and archived materials, decide what corrective messaging is needed, and document the steps taken.

For directors and managers, the governance point is straightforward. Someone should own the question of whether customer-facing wording matches the legal effect of the product or service. That review should cover not just the formal contract or PDS, but also website summaries, FAQs, sales scripts, onboarding material and any downloadable PDFs. If another law modifies the operation of a term, the customer explanation should be checked with that law in mind.

The penalty judgment was delivered by Jackman J on 8 May 2025 in the Federal Court of Australia. It followed the earlier liability judgment delivered on 28 October 2024. The orders required corrective publication within 14 days of 8 May 2025 and required the main website banner to remain in place for at least 180 days from publication. The orders also required corrective publication on each webpage where the relevant PDSs were published for so long as policyholders were able to make a claim under the relevant policies.

This page explains the penalty decision and the practical compliance lessons that can be drawn from it. It does not reproduce the full wording of the earlier liability reasons, and the published penalty material used here is truncated after the discussion of ASIC’s 23 March 2023 letter. Readers who need a full technical analysis of liability reasoning should read both judgments together.