The insured’s responsibility to provide information at claim time

Khadija met with an insurance adviser to review her life insurance cover. Khadija already had a $1,000,000 life insurance policy with one insurer and a further $300,000 life policy with another insurer, but no trauma/critical illness cover or mortgage replacement cover.

The adviser’s fact-find document and application form recorded that Khadija was working part-time, 28 hours a week, as an accountant for her own company and studying part-time. The adviser recommended Khadija combine both life insurance policies with one of the existing insurers, cancel the $300,000 policy, and arrange some new cover, including trauma/critical illness cover, that would cover household expenses, and mortgage protection cover, in the event that Khadija was unable to work for a period of time.

Khadija 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 Khadija tripped and fell, injuring her back.

Khadija 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 Khadija’s income, she was unable to provide convincing information. The insurer then discovered that Khadija was a fulltime student. The insurer declined the claim and voided the new insurance policies but later reinstated the $1,000,000 life policy that Khadija had before the changes were made.

Khadija 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, Khadija referred her complaint to FSCL.



Khadija complained that the adviser had not told her, when advising her about mortgage protection insurance, that she would need to provide financial statements to support any future claim. As a result of this poor advice, Khadija complained she had lost the $300,000 cover she had with the other insurer.

The adviser stood behind the advice he had given Khadija, saying that he gave cursory advice about the claims process, and noted that Khadija is an accountant and he expected that she would know that audited financial statements would be needed to support a claim.



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. Although Khadija lost the $300,000 life cover with the second insurer, because the first insurer had voided the new policy from inception, this was due to her ‘material non-disclosure or misstatement’ in not being completely truthful regarding the income she earned and was not due to anything the adviser had done.

We were unable to determine what advice the adviser had given Khadija about the information she would need to provide to support a claim, but we explained to Khadija that this did not appear to be the cause of her loss. It seemed to us that Khadija’s loss was caused by her being unable to give the insurer the information it needed to substantiate the number of hours she was working each week.



We recommended that Khadija discontinue her complaint because the adviser had not caused her loss. Khadija was disappointed that we had not found in her favour but agreed to discontinue her complaint.


Insights for consumers

You are responsible for providing your insurer with all the information they need to assess your claim. It is also important to tell your adviser your true working arrangements when you arrange cover. We considered Khadija was fortunate the insurer was prepared to reinstate her earlier policy.


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