Nancy, her husband, and three children, took out sickness and disability insurance policies over a number of years with an insurer. Over a period of 14 years, the family had paid premiums towards the policies totalling around $122,000.
In mid-2015, Nancy called the insurer about cancelling the policies, but decided against cancelling.
Nancy’s communication with the insurer in 2016
Nancy called the insurer again in mid-2016, cancelled policies held in her name and received a pro-rata premium refund of $2,100. The insurer told Nancy that if her family members wanted to cancel their policies, they would need to provide their written confirmation directly to the insurer (which they did not do).
Nancy said the insurer told her it would negotiate a greater premium refund because she had not made claims she could have made under the policies. However, later the insurer said it was not prepared to refund any more premiums. Nancy complained to FSCL.
Nancy considered she had been oversold policies and said that she could not claim under the policies because the insurer’s sales representative had not been attending at her home for at least a year.
The insurer said that although Nancy and her family members had a number of policies, they did not exceed underwriting standards. Although some of the family members held a number of the same type of policies, the policy benefits had the effect of building on each other.
In addition, the insurer said the family would have been able to claim for those benefits in the event they suffered a claimable event. Nancy and her husband had also had some claims paid under the policies (amounting to $3,100).
The insurer’s offer
However, as a gesture of goodwill, the insurer offered to refund the premiums on Nancy’s policies from mid-2015 to mid-2016 ($4,750). This was because she had originally called the insurer about cancelling her policies in mid-2015.
Nancy did not accept the offer and wanted the insurer to refund the premiums back to mid-2015 for all of her family members.
We asked the insurer for a detailed analysis of why it considered the family had not exceeded underwriting standards. The insurer’s analysis revealed that one of Nancy’s sons had held a policy in excess of underwriting standards, and the insurer offered to refund the premium on this ($1,260). Other than this, we were satisfied that underwriting standards had not been exceeded.
We highlighted to Nancy she fundamentally misunderstood that she could have submitted claims at any stage directly to the insurer, and it did not require the salesperson coming to her home to claim. When we explored with Nancy whether she wanted to make a claim under the policy/ies (before accepting the insurer’s offer), she decided not to take that action.
We could understand Nancy was upset that she had paid a lot in premiums over the years. However, it needed to be remembered that the premiums had been paid over 14 years and for 5 people. Nancy and her family had had the benefit of that insurance had they ever needed to claim.
Also, Nancy could have chosen not to take out the policies at the time of policy placement if she considered they did not meet her family’s needs. The family had held the policies and paid premiums for a number of years and had plenty of opportunity to review and cancel the policies if they felt they were too expensive.
Nancy did not accept the insurer’s offer to pay her $6,010 in full and final settlement of the complaint, and we discontinued our investigation.
This complaint shows the importance of consumers regularly reviewing their insurance and, if they feel they are not getting good value for money, to investigate other insurance options and/or seek financial advice.