Insurance mix-up

Sue and Jason had a loan and loan protection insurance with a credit union. The credit union’s insurer was changing so it wrote to all affected customers advising that if they wanted their insurance to continue they needed to confirm this intention by a certain date. Jason went online and confirmed that they wished to keep the insurance, but Sue forgot.

 

A couple of weeks later Sue and Jason got a letter from the credit union advising that the insurance had lapsed. Sue was horrified, she had wanted to keep the insurance. Sue immediately called the credit union and the credit union said someone would call her back the following week.

 

The credit union did not call back, and a couple of weeks later Sue followed up. The credit union was able to arrange new insurance for Sue and Jason.

 

Unfortunately, between Sue’s two conversations with the credit union, Jason was made redundant. Because Jason knew about the redundancy before the insurance was reinstated, the credit union said he would not be covered.

 

Sue was very upset. If the credit union had called her back immediately, the insurance would have been in place before Jason knew about the redundancy and he would have been covered. The credit union said there was nothing it could do because the decision was made by the insurer. Sue referred her complaint to FSCL.

 

Dispute

Sue said she did not mean to let the insurance lapse. Jason had confirmed that they wanted the insurance to continue and she had just forgotten to confirm this was her intention too. Sue felt the credit union should have done more before letting the insurance lapse because the change in the insurers was nothing to do with her. Sue was also annoyed that the credit union had not called her back promptly, depriving her of the opportunity to reinstate the insurance before Jason was made redundant.

 

The credit union said that it had communicated with all customers about the change. Once the confirmation cut-off date had passed the policy lapsed. The credit union was also not convinced that Jason did not know about the redundancy earlier than suggested by Sue.

 

Review

While Sue should have confirmed her intention to keep the insurance before the cut-off date, it seemed unfair that she and Jason should be penalised for the credit union’s failure to call Sue back. We asked Jason’s former employer about his knowledge of the redundancy, and the employer confirmed that Jason would have had no idea about the redundancy until he received a formal notification letter, which was after Sue’s first phone call to the credit union.

Resolution

We passed this information along to the credit union and asked if it would be prepared to reconsider its position. The credit union met with the insurer and explained what had happened. The insurer agreed to accept the reinstatement of Sue and Jason’s insurance as at the date Sue first contacted the credit union.

Sue and Jason completed the insurance claim forms which the credit union forwarded to the insurer for its usual assessment process. This action resolved the complaint.

 

Insights for consumers

If you receive any information about insurance or request from your insurer, it is very important to respond promptly.

 

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