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Bad financial advice or a series of unfortunate events?

Sonny and Violet were an elderly couple with three separate insurance policies with three different providers. The policies contained no exclusions, and they had held the policies for some time.  

In 2015, the couple contacted a financial adviser. The adviser recommended that the couple change their cover to one comprehensive policy with Insurer A as it would be in their best interests and bring all their claims “under one roof”.

The couple were hesitant to make changes to their policies due to their age and the length of time they had held these, but decided to follow their adviser’s recommendation.

The adviser assisted the couple to complete their application for cover with Insurer A over the course of an evening, and the couple cancelled their existing policies.  

Sonny and Violet said they filled out the application forms accurately and had already posted all of their medical records to the adviser which they assumed he had.

The couple were subsequently underwritten by Insurer A and received a quote for a policy with no exclusions from Insurer A, which they accepted and began paying for.

In 2016, after a change in their circumstances, Sonny and Violet sought financial advice from another adviser, and decided to obtain quotes for new cover. They made applications to other companies during the course of which they supplied their medical records. To their surprise, the quotes received contained exclusion clauses. But no exclusion clauses had been applied in the past by Insurer A.

Due to the anomaly, Sonny and Violet decided to request a copy of their application forms from Insurer A. The couple were dismayed to discover that their application forms were near blank and did not contain their detailed medical information that they had filled out with the adviser. Further, Insurer A confirmed that it had not received any of their medical records.

It appeared that Insurer A had issued Sonny and Violet with cover without having full disclosure of their medical records. The couple subsequently provided full medical disclosure to Insurer A who asked Sonny to undertake some further tests. In the meantime, the couple accepted an insurance policy with another insurer, Insurer B, and they continued paying premiums to both insurers.

Sonny and Violet subsequently complained to FSCL about the financial advice service they received from their first adviser.


The complaint

Sonny and Violet alleged that the adviser failed to follow their instructions by not passing on their medical records to Insurer A. They also alleged that they completed the application forms accurately for Insurer A, however, the adviser manipulated the information that was ultimately sent to Insurer A.   

Sonny and Violet said this put them in a financially compromised position: they had essentially been granted cover without their full medical records being assessed. Sonny and Violet considered they were paying premiums for insurance that would not have covered them if they had a claim.

At first, Insurer A indicated that it would retrospectively apply a 50% loading on Sonny and Violet’s premium due to the further medical information disclosed. Sonny then had to undertake further medical tests before Insurer A agreed to provide him with continued cover without applying the increased premiums retrospectively. Sonny had to stay with Insurer A as he was unable to obtain cover from any other company without exclusions. Violet obtained cover from Insurer B with an exclusion clause for her medical condition.

Sonny and Violet said they suffered financial loss and inconvenience because of the adviser’s recommendations. They gave up their old policies that contained no exclusions and were placed in a compromised position with Insurer A and, potentially, with no cover. They had incurred costs and significant stress due to this.

In compensation, Sonny and Violet sought a refund of the premiums paid to Insurer A for two years, a refund for the premiums paid to Insurer B, and reimbursement of doctor’s fees for the further medical tests.


The financial adviser’s response

The adviser said he provided Sonny and Violet with reasonable financial advice and the terms of cover offered by Insurer A were superior to their earlier policy wordings.

When we contacted the adviser, he acknowledged that Sonny and Violet had made full disclosure of their medical history to him. He posted their medical records to Insurer A and had the application forms fully filled out Sonny and Violet as was standard practice. As a result, he had no reason to believe that Insurer A did not possess the medical records prior to the couple’s cover being issued.  

The adviser provided us with evidence to show that he had posted Sonny and Violet’s medical records to Insurer A. It appears that Insurer A did not receive the records.

In any event, the adviser argued that any disclosures made to him would be deemed to have been made to Insurer A as he was its agent. Sonny and Violet would not have had their claims voided on the basis of non-disclosure.

Further, Insurer A wrote to Sonny and Violet thanking them for their full disclosure and confirmed no retrospective change would be made to their terms, based on the new medical information received.



On the evidence available, we found that the adviser had provided Sonny and Violet with reasonable financial advice, and that the couple had not suffered financial loss as a result of the adviser’s actions.

The evidence received did not support the allegation that the adviser had manipulated the application forms sent to Insurer A. On the balance of probabilities, we found that it was more likely that Sonny and Violet had not made full disclosures when completing their application forms, instead relying on the supporting medical evidence provided.

We found there was no evidence to uphold the allegation that the adviser deliberately withheld Sonny and Violet’s medical records. There was evidence that the adviser had posted their medical records which, for reasons unknown, Insurer A did not receive. We did not agree that Sonny and Violet had been placed in a compromised position.

We noted it is at the insurer’s discretion whether or not to avoid a contract due to non-disclosure. Insurer A wrote to Sonny and Violet confirming their cover remained unaffected by the new disclosures; there was no change to the couple’s position. Further, we agreed with the adviser that Insurer A would be barred at law to avoid any claim due to non-disclosure, where disclosure had been made to him as their agent.

Sonny and Violet had suffered no loss during the period they remained covered nor was there any increase in premiums. A refund of premium was not considered appropriate because the couple would have been covered during the period they were paying their premiums.

Any decision to amend or seek new cover from Insurer B was an independent decision made by Sonny and Violet, especially as Insurer A had confirmed that no change would be made to their terms.

We did not consider the doctor’s fee to be unexpected or unusual; the fee would have likely been incurred had Sonny and Violet completed the application forms correctly and had the medical records been received in 2016.



We did not uphold the complaint and recommended that Sonny and Violet discontinue their complaint.


Key insight for consumers

Mistakes and miscommunications sometimes happen. When in doubt, it is best to attempt to resolve these by speaking with your financial adviser as there may be a simple explanation to resolve any misunderstandings. Check to make sure you have fully disclosed all pre-existing medical conditions to your insurer. If in doubt, ask your insurer to obtain copies of all your medical records.