If in doubt – disclose, disclose, disclose!

Shane seeks some advice

Shane already had health and life insurance with insurance company, Behealthy Insurance Limited. On 17 December 2014, Shane met with an insurance adviser, Jason, to review his policies. Jason suggested Shane replace his insurance through another insurance company, Stayhealthy Insurance Limited.


Shane’s recollection of his discussion with Jason

Shane said he asked Jason whether he needed to disclose his pre-existing medical conditions, being high cholesterol and high blood sugar (the PEMCs), on the application form for cover with Stayhealthy Insurance. Shane said Jason asked him whether he was on any medications for his PEMCs which he was not. Because Shane did not have to take any medications, Jason said he did not need to disclose his PEMCs on the application form. Shane also said Jason told him that Stayhealthy Insurance would seek information from Shane’s GP, in any event.


Shane cancels his Behealthy Policy

At the end of December 2014 Shane cancelled his policies with Behealthy Insurance. After that, Stayhealthy Insurance contacted Shane with its approval of cover, but told Shane he needed to have disclosed his PEMCs to be covered for them under its policy. Shane complained to Jason that he gave the wrong advice about disclosure and about changing his insurer.

Shane then complained to FSCL. Shane wanted to cancel the Stayhealthy Insurance policy and for Jason to compensate him for the premiums he had already paid up to that point to Stayhealthy, being $1,017. We suggested to Shane not to cancel the Stayhealthy Insurance policy until he had been able to reinstate his cover with Behealthy Insurance again, or secure further cover with another insurer. Otherwise, he was going to have no cover whatsoever.


Jason’s version of events

Jason said that he wanted to get the complaint resolved as quickly as possible, and would pay $1,017 for the premium refunds to Shane. Jason said when he met with Shane in December 2014 he remembered Shane mentioning about the high cholesterol and sugar levels, but that he was really busy, and upon reflection he probably should have noted those down on Shane’s application form.

However, Jason said Shane gave the impression the issues were not serious and he had not had any health problems for several years. Jason had since discovered that Shane’s PEMCs were more serious than Shane had let on, and, in Jason’s view, Shane had contributed to the situation he found himself in. Jason was not prepared to accept full liability for the issue.

Jason also said that he no longer wanted to be Shane’s adviser, and could give him names of other advisers.


FSCL attempts to negotiate a resolution

We asked Shane to see if he would accept $1,017 from Jason, and agree to see another insurance adviser, in full and final settlement of his complaint. Shane said he had actually paid more than the $1,017 by the time Jason made this offer, he had paid $1,245. Shane also said he had filled out an application with Behealthy Insurance to reinstate / seek new cover and was waiting to hear back.

In the meantime, Jason also contacted Stayhealthy Insurance which was prepared to cover Shane’s PEMCs if his premium was loaded 150%.

We told Jason that we thought paying Shane the $1,245 appeared to be a reasonable way to resolve the complaint. If the matter had to go to a full decision there was the risk that Jason may need to make some payment towards the difference in the original Behealthy policy and the Stayhealthy policy. We also thought that Shane may need to make a payment for inconvenience.

Jason agreed to pay $1,245 to Shane. The written settlement included a confidentiality clause, and recorded that payment of the $1,245 was a gesture of goodwill and did not represent any admission of liability on Jason’s part.


Lesson to be learned

It is absolutely vital that advisers tell their customers not to cancel their existing policies until the offer of replacement cover is sent through from the new insurer, and the customer has had an opportunity to assess whether it is better for them to change their policy or stick with their existing policy.

It is also vital that a customer be told to fully disclose all PEMCs (no matter how minor those conditions may be) when applying for new insurance cover.