Sickness and disability insurance policies commonly contain an exclusion for claims resulting from a condition that the consumer had before the contract of insurance was entered into (a ‘pre-existing condition’).
Section 47 of the Insurance Contracts Act 1984 (the Act) limits the circumstances where an insurer can rely on such a provision.
An insurer cannot rely on such a provision where the insured was not aware of, and a reasonable person could not be expected to have been aware of, the pre-existing condition (the Act uses the terms ‘sickness’ or ‘disability’).
Section 47 benefits a consumer where:
- the consumer had a pre-existing condition, being a condition before the contract was entered into
- the pre-existing condition resulted in a claim, and
- the consumer was not aware of, and a reasonable person in their circumstances could not be expected to have been aware of, the pre-existing condition before the contract was entered into (the key issue).
The following circumstances illustrate how FOS applies section 47:
- If the consumer was aware of the pre-existing condition at any time before the contract was entered into, section 47 will not assist them. This is even if the consumer reasonably believed they no longer had the pre-existing condition.
- If the consumer was aware of symptoms associated with the pre-existing condition, but not the actual condition itself, FOS will consider whether the consumer should reasonably have been aware that they were suffering from a condition. This will depend on various considerations, such as the degree of symptoms and/or extent of medical investigation/consultation undertaken.
- If the consumer was not aware of the symptoms or the diagnosis when the contract was entered into, and a reasonable person in their circumstances could not have been expected to have been so aware, then section 47 will assist them.
Read more about the FOS Approach to Section 47.
Visit www.fos.org.au/approach to see all the available FOS Approach documents.