In September 2015 Ken bought a house in Auckland. Ken arranged home and contents insurance through an insurance broker.
In March 2016, Ken made a claim for his lost mobile phone. When Ken claimed, he found that his insurance policy had lapsed due to non-payment. Ken asked for his insurance to be reinstated.
On 14 April 2016 the broker sent Ken his policy details and an updated policy schedule. The broker’s letter explained Ken was required to pay the premium to confirm his cover. Ken said he did not receive this notification. On 17 April Ken emailed his broker stating “I have not heard from you. Any news?” The broker confirmed by email that the cover was in place.
Months later in August 2016, the broker wrote to notify Ken that the policy had been cancelled for non-payment of premium. The broker asked for the premium to be paid in order for the policy to be reinstated. Ken confirmed that he received the letter and intended to pay, but had forgotten prior to going on holiday with his family.
Late in the evening on 12 September 2016, Ken and his family returned from their holiday and went straight inside their home. When Ken returned to unpack the car half an hour later, he realised their car had been burgled. More than $12,000 of his family’s belongings had been stolen.
A week later, Ken informed the broker of the theft and asked for assistance in submitting an insurance claim. The insurer declined to cover Ken’s loss because Ken’s policy had been cancelled for non-payment.
Ken acknowledged that he received the cancellation letter on 10 August but disputed receiving the letter on 14 April requesting payment. Ken reasoned that because the broker had not provided him with an invoice for the premium with the cancellation letter, ken’s loss was the broker’s fault.
Ken complained to FSCL.
Ken’s view
Ken complained that the broker had watched his policy lapse and not taken reasonable steps to make him aware of it. While there had been some mix-ups, Ken was certain that an email dated 18 April stated that the broker ‘has placed cover.’
Ken disputed ever receiving the invoice or schedule the broker claimed to have sent on 14 April. Ken alleged that the broker had sent the invoice and schedule to Ken’s previous address.
Ken said, although he received the letter dated 10 August, he did not receive an invoice for the premium. Ken was uninsured because of the broker’s failure to place insurance.
Broker’s view
The broker said Ken was uninsured at the time of the theft because Ken had not paid the premium for the policy. The broker believed that the letter dated 10 August to Ken told Ken what he had to do to ensure the cover remained in place.
Further, Ken had not paid the premiums for the house and contents policies arranged in September 2015 and March 2016. The broker believed that Ken must have expected to pay premiums, but had not, and Ken had reasonable notice that his polices had lapsed.
Review
It concerned us that the brokers had primarily used emails to contact Ken and confirm cover had been placed, but invoices, the reminder letter, and cancellation notices had been posted with no follow up via email or phone. The contrasting communication methods served no practical benefit to Ken and, given Ken had only ever responded to emails, he may have reasonably expected to be notified by email.
It was clear to us that there was contributory negligence by Ken for his loss. Ken was responsible for paying the premium and being aware of the time frames around renewal. Because it was clear Ken had received the cancellation notice and not acted upon it, the broker had not caused or contributed to Ken’s financial loss.
Even if Ken had not received the April letter which stated that insurance had not been placed, upon receiving the notice of cancellation (dated 10 August) Ken should have taken immediate steps to place insurance even without an invoice.
However, we believed that a prudent broker would have taken steps to ensure Ken had received meaningful notice of cancellation. As a result, we suggested the broker make an offer of $2,000 as compensation for stress and inconvenience. The broker agreed to offer compensation.
Outcome
Ken did not accept the settlement offer. Ken withdrew his complaint and said he would take the issue to the Disputes Tribunal.
Key insight for consumers
Brokers are helpful in suggesting appropriate insurance cover and insurance policies. However, the service does not relieve you from your duties to pay your premiums in a timely manner.
