Callum had insurance cover under his employer’s insurance scheme for life, total and permanent disability (TPD), and income protection insurance. When Callum left his employment in 2016, he had the option of keeping his insurance but having it rollover into his own name, with him paying the premiums. Callum understood he could only rollover his cover within 45 days after his employment ended.
Callum contacts the broker
Callum contacted the broker who oversaw his employer’s insurance scheme, to arrange the roll-over. He discussed with the broker that the income protection cover he had was expensive because of heart issues in his family history. The broker made enquiries about whether Callum could reduce the costs of the income protection cover. In the meantime, Callum said he told the broker (within 45 days of him ending his employment) that he definitely wanted to rollover the life and TPD cover, and to sort the income protection cover later.
Callum’s complaint
It transpired Callum’s cover was not rolled over within the required time period, and Callum was left without insurance. The broker contacted the insurer to try to have Callum’s cover rolled over, but this was unsuccessful. Callum was concerned he would be unable to secure new cover as good as the cover he would have rolled over. For example, Callum thought he might now have exclusions on his policy, and/or his premiums may be more expensive. Callum complained to the broker and, after it was unable to resolve the complaint through its internal complaints process, Callum complained to FSCL.
Our review
Communication about rolling over cover
Callum’s last day of employment was 1 October, meaning the 45th day after his employment ended was 15 November. The broker emailed Callum on 25 August attaching a form he needed to complete to roll over the cover. The broker said that there was a 45-day window to carry over the cover. However, on 28 October, the broker emailed Callum saying he had 60 days from the end of his employment to rollover the cover. On 14 November (the 44th day), Callum emailed the broker and said he wanted to rollover his life and TPD cover.
On 22 November the broker told Callum the window to rollover cover had expired (i.e. the 45-day period), but that the insurer would simply assess his life and TPD cover along with the income protection cover. Critically, the broker said in her email that Callum had interim cover while the insurer assessed everything. Callum replied on 22 November saying he thought he had 60 days to roll over the cover (because of the advice in the broker’s 28 October email).
The broker sent Callum a form to complete to carry over the life and TPD cover on 28 November and followed up with him on the 60th day after his employment ended (30 November). The broker did not warn Callum in the 28 and 30 November emails that he must send the form back by 30 November.
Did the broker cause Callum’s cover not to rollover?
Our overall impression from our review was that both parties thought Callum’s cover had continued because they mistakenly thought he could rollover the cover within 60 days after the end of employment. Also, both parties thought there was temporary cover in place. It transpired there had been a change in the underlying insurer of the employer’s scheme just before Callum’s employment had ended. The old insurer had a 60-day window to roll over the cover, and the new insurer only had a 45-day window. This had caused the confusion.
We said the broker should have been aware that the correct time period for Callum to rollover the cover was 45 days (as she had stated in her original 25 August email). Callum had advised the broker on the 44th day after his employment ended that he wanted the life and TPD cover to carry over, and we considered the broker should have immediately had Callum fill out the form to rollover the cover after receiving his 14 November email.
Callum seeks new cover
While we were investigating the complaint, Callum took steps to secure new cover. This took some time as he had to undergo tests in relation to his family’s heart condition history. Fortunately, the new cover Callum secured did not have any exclusions in relation to his heart. However, there was a new exclusion placed on Callum’s TPD and income protection insurance because of a leg injury he had suffered in early 2017 while he was trying to sort out his complaint. The exclusion meant Callum continued to carry the risk of not having $150,000 in TPD cover paid, and $55,000 of income protection cover paid, if he had a claim in relation to his leg.
The broker said it would not pay any compensation in relation to the leg exclusion because it considered Callum had delayed in putting new insurance in place, and it was during this delay that he suffered the leg injury. However, in early 2017, the broker was still trying to have the insurer accept Callum as a rollover client (being after he suffered the leg injury). We were of the view the broker gave Callum the strong impression he would not need to be re-underwritten elsewhere, and it was reasonable for him not to have sought new insurance.
How could the complaint be resolved?
We asked the broker for statistics on the number of TPD and income protection claims paid by the insurer in relation to leg issues. There were very few. Only 2% of all the insurer’s TPD claims and 3% of income protection claims were paid were in relation to leg issues. We thought that fair compensation would be for the broker to pay 2% of the potential TPD compensation – $3,000, and 3% of the potential income protection compensation – $1,650.
We also calculated the difference in Callum’s premiums between his new policies and what he would have paid had he rolled over the cover was $566.55. We also said the broker should compensate Callum for the medical bills he incurred in undergoing the tests to be re-underwritten ($1,085). Lastly, we thought the broker caused Callum inconvenience by making the mistake about rolling over his cover. We suggested the broker pay compensation of $2,000 for inconvenience.
Adding the above amounts, we suggested the broker should pay Callum $8,301.55. The broker agreed it was a fair way to resolve the complaint. Callum accepted the payment of $8,301.55 in full and final settlement of his complaint.
Key insight
This complaint is a clear example of miscommunication because of an error about the rollover of cover within the correct time period. This was a simple error but it caused a big problem for Callum. Although mistakes happen from time to time, this case is a reminder about the importance of making sure accurate advice is provided to clients
