Federal Court orders NRMA health insurance ads misleading

The Federal Court has made orders by consent against NRMA Health Pty Ltd for misleading advertising that appeared in various newspapers in September last year and against NRMA Insurance Limited for a misleading publication on its web site. The Australian Competition and Consumer Commission instituted proceedings against NRMA Health Pty Ltd, also trading as SGIC Health and SGIO Health, and NRMA Insurance Limited in November 2001.

The material published by NRMA Insurance Limited on its web site represented that it would not cost a pregnant woman anything to have a baby if she was insured with NRMA Health Pty Ltd whereas in fact a significant proportion of members were in fact required to pay either an excess or a co-payment.

The ACCC alleged that the print advertisements published by NRMA Health Pty Ltd, depicting a woman nursing a new born baby, made representations guaranteeing "free delivery … no matter how advanced your pregnancy is" in an endeavour to entice consumers to transfer or join NRMA health insurance. The advertisements contained two fine print disclaimers that stated members only received full health insurance coverage for obstetric services:

• following the payment of any excess or co-payment
• after the 12 month waiting period for obstetric related benefits had been served with NRMA Health Pty Ltd or an existing fund.

The ACCC alleged that the disclaimers were inadequate and unlikely to come to the attention of consumers and failed to detract from the overall impression conveyed by the advertisement that it would not cost a pregnant woman anything to have a baby if she was insured with NRMA Health Pty Ltd and that she would not be required to serve any waiting period.

"With the huge increase in ordinary Australians taking out private health insurance or switching health funds, I am concerned to ensure that consumers are given complete and accurate information", ACCC Commissioner with responsibility for health matters, Mr Sitesh Bhojani, said today. "Advertising plays an important role in informing and educating consumers, therefore, it is imperative that the information provided be readily understood, free from technical jargon and contain sufficient information to allow consumers to make an informed choice".

The Federal Court orders include:

• declarations that NRMA Health Pty Ltd and NRMA Limited contravened the relevant provisions of the Australian Securities and Investment Commission Act 1989* by publishing advertisements that were misleading
• a requirement that NRMA Health Pty Ltd write to consumers who took out Hospital Plus or Hospital Value health insurance products between 1 July and 30 August 2001, informing them that the advertisements were misleading
• a requirement that, for people who were mislead, NRMA Health Pty Ltd will waive the 12 month waiting period for pregnancy related services and refund excesses or co-payments
• an order that the NRMA Health Pty Ltd and NRMA Limited must not make representations in the future about health insurance benefits without clearly and prominently displaying the existence of excesses, co-payments and waiting periods
• an order requiring NRMA Health Pty Ltd and NRMA Limited to review and report on their Trade Practices compliance programs.

Saatchi & Saatchi Australia Pty Ltd, the advertising agency responsible for preparing the NRMA's campaign, were joined in this action. The ACCC's proceedings against Saatchi and Saatchi have been set down for hearing before the court on 18 September 2002.

BACKGROUND

*The proceedings have been instituted under sections 12DA, 12DB(1)(c), 12DB(1)(e),12DB(1)(g), 12DF of the Australian Securities and Investments Commission Act 1989 (ASIC Act) as opposed to the Trade Practices Act 1974. Health insurance, as it falls within the definition of a financial product, is regulated through the ASIC Act. However, the Australian Securities and Investments Commission has, since December 1998, formally delegated the regulation of all consumer protection aspects of health insurance to the ACCC through the use of nominated ACCC officers as delegates.