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Customer discovers house not insured

Insights for participants and consumers

It is important for insurance advisers to confirm to their clients in writing the instructions the clients have given to them. This avoids misunderstandings and provides the client with the chance to correct any errors. It also provides a record for insurance advisers in case there is a dispute about the instructions in the future.

Consumers should review their bank statements from time to time to ensure that all payments, including insurance payments, are being made.

What happened?

In October 2022, Michelle’s insurance adviser told her that he was leaving the industry, and his business would be handed over to another insurance adviser. He provided her with an appointment form if she wished to become a client of the other insurance adviser. Michelle signed the appointment form and became the client of the new adviser.

In early January 2023, the insurance company who provided Michelle’s house and contents cover posted the renewal details for her cover. This letter did not reach Michelle.

At about the same time, the new adviser contacted the insurance company and asked for renewal terms. The insurer replied that due to the way the policy had been set up in the past, it could not be transferred to the new adviser, and that a proposal would need to be completed for new business.

The new adviser told Michelle they would arrange quotes for house and contents cover. They provided two quotes, one from her current insurer and one from another company. Both quoted premiums were much higher than Michelle’s current premium. The adviser explained that her previous premium had been based on outdated council records, and on incorrect square footage for the house and garage. They said that as Michelle’s house was now valued at just over $1 million, the new quotes were more realistic if she needed to re-build in the current market.

Michelle decided not to go ahead with the new quotes. She assumed the current cover would just roll over as it had in previous years. However, as the insurer did not receive a new insurance proposal, Michelle’s house and contents policy was not renewed.

About 15 months later, Michelle discovered she had no house and contents cover. She was very concerned about what would have happened had her house been damaged or destroyed during that period. She asked FSCL to look into the situation. 

What was FSCL’s view?

We looked at the communications between Michelle and the adviser. Michelle had not been told that her insurer required a new insurance proposal in order to proceed with further cover. The policy was not going to renew automatically as it had in the past.

The adviser had understood from a telephone conversation with Michelle, that she had decided against pursuing insurance options with them because the premiums presented were too high, and that she would look elsewhere for cover. Given this, the adviser did not take the matter further.

On receiving the complaint, the adviser realised there had been a miscommunication. They accepted they should have confirmed their understanding of the conversation with Michelle in writing. The adviser upgraded their processes to provide written confirmation to clients of their instructions. This would avoid misunderstandings and give the client a chance to correct any errors. Further, all their advisers were reminded of the importance of properly documenting discussions with clients.

FSCL considered the adviser had acted responsibly in immediately updating their processes to avoid such issues happening again.

We considered what would be a fair resolution in Michelle’s case. It was clear she experienced anxiety when she discovered that her house and contents had not been insured for an extended period. We asked why she had not noticed that her premium payments had not been made from her bank account. Michelle explained that a family member was very unwell at the time, and she was focussed on providing care. It was not until the family member recovered that Michelle was able to focus on other matters.

We suggested to the adviser that a payment of compensation for the stress Michelle experienced was appropriate. The adviser made an offer of $500, which Michelle accepted. The case was closed on that basis.