In September 2019, an insurance adviser arranged various insurances, including life and health, with an insurer (insurer A) for Noah and his partner Dean. Years later, in September 2023, Noah asked a mortgage adviser for help to secure finance so he and Dean could purchase their first home. In addition to providing mortgage advice, the adviser helped Noah and Dean review their existing insurance policies and recommended that they cancel their insurance with insurer A and get insurance with insurer B. Noah and Dean agreed, and they switched their insurance policies to insurer B.
In March 2024, shortly after switching to insurer B, Noah and Dean cancelled with insurer B and, with the help of their previous adviser, were able to reinstate the policies they originally had with insurer A. Insurer B then ‘clawed back’ the commission they’d paid the adviser when Noah and Dean took out the policy with insurer B. The mortgage adviser sent Noah and Dean a $2,500 ‘clawback invoice’ to recover some of their losses he incurred after paying his commission back to the insurer.
Noah and Dean complained to FSCL.
Dispute
Noah and Dean complained that the adviser:
- Hadn’t followed a reasonable process when changing their insurance from insurer A to insurer B.
- Had placed undue pressure on them to keep their insurance with insurer B, by contacting them several times despite being asked not to.
- Had breached their privacy by reaching out to third parties in their community. Noah said that he received messages from his colleagues, who the adviser was also giving advice to, asking him to contact the adviser and settle the complaint. Noah explained that it was embarrassing and stressful for his colleagues to know these details about his personal situation.
The adviser didn’t deny contacting Noah and Dean or the third parties but said that he was doing his best to help them. The adviser apologised if his actions caused them any stress or inconvenience.
Review
We considered there were shortcomings by the adviser when he recommended that Noah and Dean change their policies from insurer A to insurer B. The adviser did not appear to have advised Noah and Dean about the risks of changing policies or set out why it was necessary for them to change providers. The adviser seemed to only focus on Noah and Dean reducing their premiums.
However, because the original adviser was able to reinstate Noah and Dean’s original policies with insurer A, they had not suffered any financial loss.
We found that the adviser had placed undue pressure on Noah and Dean to keep the insurance with insurer B, by contacting them despite being asked not to. Noah provided us with an email where he asked the adviser not to contact him anymore. The adviser’s continued contact after explicitly being told not to was unacceptable and did not meet the standard of good industry practice.
It was also unacceptable that the adviser contacted third parties at Noah’s workplace to try and get Noah to withdraw the complaint. This breached Noah and Dean’s privacy and caused Noah stress and embarrassment.
The adviser offered to withdraw the $2,500 invoice. We recommended that the adviser also pay $2,000 compensation, $1,000 for the stress and embarrassment caused by the breach of privacy, and $1,000 for the stress of the undue pressure.
Resolution
Noah and Dean, and the adviser, accepted our recommendation, and this resolved the complaint.
Insights for participants
Financial advisers must consider whether their advice is suitable for their clients, under the Financial Markets Conduct Act. Particularly where replacement cover is being suggested, this includes setting out both the benefits and the risks of changing the policy. This case is also a good reminder for advisers, and all financial service providers, to be vigilant in protecting clients’ privacy.
