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Compensation for a lapsed policy

Róisín bought an electric bicycle in 2019 for a purchase price of $9,000. The bicycle was covered under Róisín’s existing contents insurance policy (“the policy”), which was arranged by her original insurance adviser.

Róisín contacted a new insurance advising company in 2020 and became their client. The new insurance adviser organised various policies for Róisín, but inadvertently failed to renew or arrange a contents insurance policy for Róisín. The omission, which was not in dispute, came to light in August 2022 when Róisín’s electric bicycle was stolen, and she contacted the adviser to make a claim.

The advising company offered to pay Róisín $7,000 for the loss her electric bicycle, based on the assumption that she would have had the policy in place if the adviser’s error had not occurred. The policy Róisín previously had in place indemnified the policyholder for the present value of the item that was stolen.

Róisín believed that she should be compensated for the full cost to buy a new electric bicycle, so she complained to FSCL.


Róisín said that she should have had a full replacement value policy in place but, due to the adviser’s error, she did not. She wanted compensation of $13,000, which was the cost of a new electric bicycle.

The advising company said they would have arranged the same cover Róisín had with the previous adviser, which would have compensated her for the present value (not replacement value) of the bicycle. They said that there are very few insurers in New Zealand that offer replacement cover for all contents, none of which the advising company had agreements with.


The electric bicycle was insured for its present value under the policy. The specified sum of $9,000 was the maximum amount that would be compensated in the event the bicycle was stolen, but not necessarily the present value. The previous policy defined the present value as the “estimated reasonable cost to replace an item with an item in New Zealand that is of equivalent age, quality, and capability, and is in the same general condition”. The advising company said their offer of $7,000 was higher than the price of similar bicycles of the same age and in the same condition on Trade Me. We had no reason to question this evidence.

Although Róisín wanted full replacement cover for her electric bicycle, she did not previously hold such cover, and the new advising company could not have arranged such cover. Evidence suggested that both Róisín and the advising company were under the impression that Róisín continued to have contents insured under the policy. Given this belief, it was appropriate and reasonable for the advising company to make a settlement offer based on the type of cover available under the original policy wording. It was not fair to expect the advising company to pay full replacement value for a new bicycle when that cover had never been in place.

We also noted that the advising company did not deduct from the present value compensation the amounts of the excess or premiums that Róisín would have paid had the policy been in place.


It was our view Róisín should accept the advising company’s offer. The offer of $7,000 was fair and reasonable in light of the policy cover that would have been in place.

Róisín rejected our preliminary decision and asked the advising company to pay her $10,000. The advising company counter-offered with a sum of $8,500, which Róisín accepted, resolving her complaint.

Insights for participants and consumers

Insurance advisers should take care to ensure that a client’s requested insurance policies are placed. If the adviser makes a mistake, and an event occurs for which there would have been cover under a previous policy, it may be fair and reasonable for the adviser to compensate their client for the cover they would have otherwise received under their original policy.