Raisa’s elderly mother, Nazreen, had been paying for funeral insurance for twelve years through her credit union. Nazreen did not speak English as her first language.
One day, she noticed that no insurance payments had been deducted from her bank account.
Unbeknown to Nazreen, her funeral insurance policy had a cut off age limit. As Nazreen was over the age of 76, she no longer had cover.
Nazreen was very upset. She had paid $3,500 over 12 years for nothing. She did not have the benefit of any funeral cover should she pass away. She was also unhappy to discover that the credit union had been deducting koha (donations) from her account without her consent when fellow members passed away.
Nazreen cancelled her membership with the credit union. Raisa complained to FSCL on Nazreen’s behalf.
Raisa believed it was unfair for the credit union to have charged her mother premiums for twelve years, and not provide her with cover upon her death. She wanted a refund of the insurance premiums, or be paid out the funeral cover benefits.
The credit union explained that as per any insurance policy, Nazreen’s funeral plan offered cover in the event of death only. The application form Nazreen signed clearly stated that her cover would stop at age 76. Nazreen could switch to another funeral policy at a higher premium that offered longer cover. However, as Nazreen had cancelled her credit union membership, she was unable to switch to a new policy with it.
The credit union explained Nazreen had automatically opted into their koha scheme when she joined the credit union.
We agreed with the credit union. Although we thought that the credit union could have offered better customer service by notifying Nazreen when her cover lapsed, we did not think that it failed to make proper disclosures, or breached the fair insurance code.
We also noted that Nazreen had also suffered no financial loss. She had had the benefit of funeral insurance cover while she had paid for her premiums.
We explained to Raisa that the insurance policy forms the contractual basis between parties. As the contractual terms of her policy stated she will only have cover until age 76, Nazreen was not entitled to any further cover, or a refund of her premiums.
As a goodwill gesture, the credit union offered to refund Nazreen the koha payments she had made ($400). Raisa accepted this and noted they were grateful to have their understanding about the funeral insurance policy clarified.
Insights for the complainant
The purpose of insurance is to offer cover for an unforeseen event.
To prevent misunderstandings, consumers must read and familiarise themselves with their insurance policy. The policy forms the basis of the contract between the parties and explains the risk the insurer is prepared to cover.
In this case, while there is no legal obligation to do so, and as good customer service, the credit union should have notified Nazreen before her cover lapsed.