Call us: 0800 347 257

No win no fee?

Insurance review

An insurance adviser, Jonathon, offered June a free insurance consultation and review. June accepted the offer, and Jonathon undertook a review of June’s insurances.

During his review, Jonathon encouraged June to make a trauma claim under her health insurance policy because she had treatment for skin cancer the year prior.

 

Claim declined

June submitted her claim, and the insurer agreed to pay 10% of the $30,000 benefit. The insurer said June wasn’t eligible for the full benefit, because her cancer was non-invasive (meaning it was treated at the early stages and had not spread beyond the initial site).

 

Jonathan offers to assist

June told Jonathon the outcome of her claim. Jonathon said he would be happy to assist June obtain the rest of the benefit from the insurer, and that he had a lawyer who helped him with these matters. Jonathon told June he and his lawyer would only charge a fee if the claim was successful.

June forwarded Jonathon all the documentation relating to her claim. Jonathon told June he would also follow up with his doctor for an opinion about whether the insurer had declined part of the claim correctly.  Jonathon also said, as he had mentioned previously, if the claim was successful, he would charge a fee of 25% of the claim paid. June confirmed she was happy with the fee.

 

Claim accepted

Jonathon told the insurer that June’s skin cancer had in fact, been invasive, referring to a letter from June’s oncologist that June had given him to read. The insurer quickly agreed to pay the balance of June’s claim, being $20,000.

Jonathon sent June an invoice for $5,000, being 25% of the claim paid.

On reflection, June thought this fee was unreasonable and told Jonathan she wanted to pay less. When Jonathon threatened to take debt recovery action against June, June complained to FSCL.

 

Dispute

June thought Jonathan’s fee was unreasonable because he had not used the services of a doctor or lawyer in getting her claim accepted, and she thought his fee would cover those costs. June also thought the fee was excessive on the back of a free consultation.

Jonathan said he and June had made an agreement. Jonathan said his fee was not conditional on him engaging a lawyer and doctor, and it was a reasonable fee for the service he had provided.

 

Review

We reviewed the correspondence around June’s acceptance of the 25% success fee. Based on what Jonathon had told June about using a lawyer and doctor, we thought it was reasonable for June to think the fee would include paying for their services.

We also considered the fact that June had an adviser who originally set up her policies. We thought that during Jonathn’s review, he should have asked June if she had an adviser and referred her back to her previous adviser to assist with the claim at no cost. 

We didn’t think the free consultation should have any bearing on the fee agreed between June and Jonathon. It was clear Jonathon was going to charge a fee for his services assisting with the claim, and that the free consultation had ended at that point.

 

Resolution

Given the misunderstanding about whether Jonathon’s fee would include the costs of a doctor and lawyer, and the fact that June missed the opportunity to consult her original adviser at no cost, we encouraged June and Jonathon to meet in the middle and agree to a 50% reduced fee of $2,500. We thought this fee still fairly upheld June and Jonathon’s agreement.

June and Jonathon agreed to settle on this basis.

 

Insights for consumers and participants

When an insurance broker or adviser sets up policies for consumers, consumers can usually go back to them for help with any claims at no cost.

All financial/insurance advisers should be careful to clearly disclose fees before commencing any work, and consumers should ask questions if there is anything they’re not sure about.

Finally, a fee should fairly reflect the level of work carried out for the client.