Jenny bought a new house in 2018. She asked her insurance broker to arrange home and contents insurance for the property.
When Jenny filled out the application form, she omitted a few details about locks and the alarm system because she needed to be at the property to provide them. Jenny noted on the form she would provide these details once she had moved in. The broker told her everything in the form ‘looked fine’.
The broker couldn’t progress Jenny’s contents cover without the missing details, and forwarded Jenny the details of her home insurance policy which was called a ‘Maxi-cover’ policy. Jenny paid the premiums due.
A year later, a valuable bracelet worth about $4,000 was stolen from Jenny’s house. She asked her broker for a claim form. The broker told Jenny she didn’t have contents insurance in place so she couldn’t make a claim.
Jenny thought this was unfair because she had asked her broker to arrange contents insurance cover and didn’t know her application had been unsuccessful. Jenny complained to FSCL.
Dispute
Jenny assumed the Maxi-cover policy included both home and contents insurance, because the broker didn’t tell her she didn’t have contents insurance. Even though she missed details in the application form, she didn’t realise these were key to getting contents cover. In any case, the broker had assured her ‘everything looked fine’ in the application form.
The broker said they thought Jenny should have known the missing details were key to getting contents cover and should have followed them up to progress her application. The broker also thought that Jenny should have read the Maix-cover policy and queried the lack of contents cover with them if she had wanted to progress it.
Review
We reviewed all the correspondence between Jenny and the broker, along with the Maxi-cover policy.
Insurance brokers have an obligation to act with reasonable care, diligence and skill.
We agreed with Jenny it was misleading for the broker to advise ‘everything looked fine’ after she provided her application form. We didn’t agree Jenny should have known the missing details on the form were key to getting contents cover. Acting with reasonable skill, care and diligence, the insurance broker should have highlighted to Jenny that her contents cover application had been unsuccessful and told her the missing details were required to progress it further. We also thought the word ‘Maxi-cover’ could suggest there was more than one type of cover in place.
However, we also thought Jenny had contributed to her loss. Jenny could have followed up the missing details once she was able to. We also thought a reasonable person would have looked at their insurance policy to check they had the right cover in place. If Jenny had looked at the Maxi-cover policy, she could have queried the lack of contents cover.
Resolution
We recommended the insurance broker compensate Jenny for 2/3 of her claim, taking into account 1/3 of contributory fault on her part. The parties agreed this was a fair outcome and Jenny’s complaint was resolved.
Insights for consumers and participants.
Insurance brokers should make sure their clients understand what cover has been put in place, and clients should check with their broker if they’re not sure.
Any misunderstandings could lead to serious consequences for both insurance brokers and clients down the track if a big claim is made.
