After speaking with an adviser a woman proceeded to cancel her $300,000 policy and add a trauma/critical illness policy. After suffering a back injury a month after making the changes, the woman’s claims were denied.
“The woman met with an insurance adviser to review her cover – she already had a $1 million life insurance policy with one insurer and another $300,000 policy with another, but no trauma, critical illness or mortgage replacement cover.
The adviser recorded that she was working 28 hours a week as an accountant in her own company and studying part-time.
It was recommended she combine her life insurance policies with one of the existing insurers and cancel the $300,000 policy. The adviser also said she should include some trauma or critical illness cover and mortgage protection cover in case she could not work for a period of time.
The woman accepted the adviser’s recommendations. She cancelled the $300,000 policy and a new policy providing cover for trauma/critical illness commenced in October. In November she tripped and fell, injuring her back.”
When speaking with the adviser the woman noted that she worked 28 hours and studied part-time, when claiming she told her insurer that she worked 30 hours a week and informed ACC that she worked 40 hours a week. Her insurer discovered that she wasn’t working and instead was a full-time student. The woman proceeded to lodge a complaint against the adviser stating that she wasn’t informed that she would need to provide financial statements and a result of the advice she’s cancelled her $300,000 policy.
“She submitted a claim under her trauma/critical illness insurance, stating that she had been working as an accountant for 30 hours a week. She also stated on her ACC form that she had been working for 40 hours a week.
When the insurer asked for documents to corroborate her income, she was unable to provide convincing information. The insurer then discovered that she was a full-time student. The insurer declined the claim and voided the new insurance policies but later reinstated the $1 million life policy that she had before the changes were made.
The woman complained that the advice she had received from the adviser caused her to lose the $300,000 life insurance policy that she had cancelled on the adviser’s advice. When the complaint was not able to be resolved directly with the adviser, she went to FSCL.
She told the dispute scheme the adviser had not told her she would have to provide financial statements to support any claim.”
Although the FSCL concluded that the advice given was sound advice, the chain of events highlights the importance of risks of non-disclosure.
““We were satisfied that the advice to increase the cover with one insurer and cancel the smaller policy was sound advice and had not caused any loss,” FSCL said.” Click here to read more
Advisers reading the reports will notice inconsistencies and gaps. The story is plainly larger and more complex than is being shared. As such, there is no real basis for making form judgments. In more general observations we should probably note the increasing likelihood of client complaints and the difficulty of managing disclosures - making sure that clients are really clear about the importance of accurate disclosure and helping them to achieve that - for their benefit and ours. After all, complaints just cost us all money and reputation.
In other news:
Southern Cross: a Risk Partner – Sales and Marketing role is currently being advertised
Strategi: Strategi are offering remote AML/CFT audits