Does your broker have to go above and beyond for you?

Tahi had home, contents, and motor vehicle insurance with her insurer for a number of years. The insurer required Tahi to arrange the insurance through a broker, and Tahi’s insurance had to be paid by annual premiums.

In February 2020, Tahi’s broker reminded her that her insurance policies were coming up for annual renewal. However, the Covid-19 pandemic had affected Tahi’s business and income, and she found she was unable to pay the annual premiums in one lump sum like she usually did.

Over the course of the next 8 months, Tahi’s broker unsuccessfully tried to work out an acceptable payment solution for Tahi. Eventually, the insurer had to cancel Tahi’s insurance because the premiums remained unpaid.

Tahi complained to FSCL about her broker. Tahi thought her broker hadn’t properly represented her interests or taken into account the unprecedented circumstances of the Covid-19 pandemic when working out a solution for Tahi.

 

Dispute

Tahi wanted to pay monthly premiums and/or have a ‘premium holiday’, much like banks were offering to customers struggling with mortgage repayments due to the pandemic.

The broker said they couldn’t offer those solutions to Tahi because to do so would put them outside of their payment/credit terms with the insurer. The broker said they had done all they could to help Tahi in her situation but, ultimately, the premiums remained unpaid and the insurer had decided to cancel Tahi’s policies.

 

Review

After reviewing the broker’s file, we found that the broker had offered multiple solutions to Tahi, including: 

  • Increasing the voluntary excesses under the policies to generate lower premiums.
  • Exploring whether Tahi was eligible for a low kilometres discount under her motor vehicle insurance policy.
  • Double checking the sums insured were accurate under Tahi’s policies (which would affect the amount of the premiums).

The broker had also liaised with the insurer to come up with a monthly premium payment option, which Tahi rejected because the payment amount was still too high for her.

We found the broker had met their legal obligation to act with reasonable skill, care and diligence by proposing multiple solutions to Tahi and liaising with the insurer to offer the best payment solution possible.

We told Tahi that the broker wasn’t required to offer a premium holiday or lower monthly premiums in order to meet their obligations, even in the unprecedented circumstances of the Covid-19 pandemic. These solutions would have put the broker outside of their payment/credit terms with the insurer, requiring them to cover any shortfall to make it work.

 

Resolution

We issued a final decision recommending Tahi discontinue her complaint.

Tahi was disappointed with the outcome, but fortunately had found cheaper, comparable cover with another insurer who didn’t require her to use a broker as an intermediary.

 

Insights for consumers

It is helpful to be aware of the extent your broker’s obligations, which are essentially to help find appropriate cover and assist at claims time, acting as an intermediary with the insurer. Brokers cannot alter the payment required by an insurer to pay for the cover provided.

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