FSCL complaint foreshadows implications of non-disclosure, and more daily news

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

RBNZ: Reserve Bank extending mortgage deferral scheme

RBNZ: Monetary Policy Statement Explained Q&A with RBNZ Chief Economist and External MPC Member

FMA: Sorted Money Week has begun


Industry participants react to gastric cancer claim denial, and more daily news

Ailepata Ailepata’s gastric cancer claim denial as a result of a New Zealand Home Loans broker suggesting Ailepata change insurers has caused division within the industry. While some have sided with Fidelity Life’s decision to deny the trauma claim, others have contested the decision. Tony Vidler described the incident as a shocker and hoped it would highlight the duties of advisers by stating that advisers need to act as front-line underwriters since they are better judges of insurer criteria than clients. 

“Vidler said: “Clients often, with the best of intentions, tell you everything they think you want to know then later say ‘I didn’t think that would matter. A doctor told me I needed to get my blood pressure under control 17 years ago but that doesn’t matter, does it?’

Clients were in a poor position to judge what would be important to an insurer, he said, and it was the adviser’s job to step up.

“I always take the view that the adviser should be the frontline underwriter … if there’s any doubt or questions you’ve got to draw attention to it.”

If there was a concern about something from a client’s past, the adviser could suggest the insurer requested medical files, he said.”

Katrina Church has stated that they isn’t enough information to condemn the advice provided to Ailepata Ailepata by the mortgage broker. Instead Katrina said that in her experience clients don’t usually understand their disclosure obligations. While advisers work to minimise risk of each application but she suggests that advisers consider the question do clients understand what they have to do when applying.

“Church said there was not enough in the articles written about the case to condemn any adviser. “My experience is most clients don’t truly understand what their obligations regarding disclosure are. And as advisers I would ask do we do enough here to help out clients? Are we training this as well as we can in the industry?

“Advisers are the first underwriters and we should do all we can to derisk the situation for clients – this is something that online or applications made direct to providers can't. That’s our point of difference. 

“Advisers should be thinking, is this client really understanding what they have to do when they are filling out this form? That’s the first thing. The industry could do better, insurers could do better.” Click here to read more 

In other news:

Financial Advice: Financial Advice formed a group called Corporate Associates

Financial Advice: consultation of the Trusted Adviser mark closed July 22 2020

Financial Advice: Applications invited to be a Corporate Associate

FMA: Kiwis confident financial markets will recover from COVID-19, plan to increase investments


Professional IQ: the first glimpse of a problem with the claim

Professional IQ are hosting a workshop titled 'Prima facie claim: the first glimpse of a problem with the claim' on the 8th of August. Details below:

Clients are often surprised when the insurer asks them to prove or quantify their loss. Using case studies of complaints to the IFSO Scheme, this webinar will look at:

  • What is the prima facie claim 
  • What insurers expect clients to prove
  • What clients expectations are
  • What the common issues are
  • How to avoid common issues

Click here to register.