Amy and Paul are a young couple with two small children and Amy was pregnant with their third child. Although they had health insurance, trauma insurance and life insurance, Paul was concerned that, as the main bread winner, he did not have income protection insurance. When a financial adviser asked if they would like their insurance reviewed, Paul agreed it would be a good idea.
The adviser came to Amy and Paul’s home one evening. Amy advises that during the meeting she was distracted caring for the children and very tired and, as a result she did not pay very much attention to the adviser and Paul’s discussion. Amy did not sign some of the initial documents and when she completed the insurance application form she forgot to disclose that for some years she had experienced heart palpitations and had been diagnosed with a minor heart condition. It was accepted by all concerned that this was an innocent non-disclosure.
After the meeting the adviser sent Amy and Paul an email with advice about the risks of non-disclosure, recommending that they give the insurer a copy of their medical records as part of the application process. Amy said that she did not notice this email, but Paul responded saying “all good”.
The adviser put forward an insurance proposal, doubling their life cover for the same cost, keeping the trauma cover the same, offering more extensive medical insurance and including their children at no extra cost, as well as providing income protection insurance for Paul.
Following the birth of their third child, Amy experienced complications relating to her heart condition. Amy claimed against the trauma policy, but the claim was declined when the insurer learned of her medical history. The insurer cancelled the trauma cover on the grounds that Amy had not disclosed her heart condition and increased the premium on her life cover.
The adviser was concerned for Amy but said that he had warned her about the risks of non-disclosure, both at the meeting and by email. Amy did not recall these warnings and referred her complaint to FSCL.
Amy felt that the adviser was so focused on Paul during the insurance advice process that he failed to adequately consider her situation. Amy said the adviser did not prompt her to disclose her medical history or explain the risk she was running in making the changes. Amy had disclosed her medical history to her previous insurer who had agreed to cover her at no extra cost. Amy felt railroaded to change her insurance and that the adviser was focused on increasing his income ahead of providing her with insurance best suited to her needs.
The adviser did not consider he was responsible for Amy’s failure to disclose her medical history and provided its records showing the insurance provided improved Amy and Paul’s position.
We considered the adviser’s process could have been better. The adviser acknowledged that Amy was absent from some of the discussions and we suggested that he could have checked with her individually. We were also concerned that Amy did not sign some of the initial documents. However, Amy did complete the application form and had access to the email with comprehensive information about the risks associated with changing insurance and recommending that she should give the insurer her medical records.
It seemed to us that while Amy may not have been fully engaged with the process, she was not railroaded into the changes. The new insurance did appear to benefit Amy with more extensive cover at no additional cost. The adviser did not have a legal obligation tell Amy to give her insurer her medical records
We were satisfied that Amy was not prejudiced by the flaws in the advice process and suggested that she discontinue her complaint. Amy agreed to do so.
Insights for consumers
It is wise for consumers to submit their medical records to a new insurer to avoid the risk of innocent non-disclosure. Even innocent non-disclosure can compromise your insurance cover. By providing your insurance records as part of your application process you can be sure that insurer has a full picture of your medical history and you will not find ourselves in Amy’s situation of having paid for something that is of no use to you.