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Jumping to conclusions

Proposed surgery covered by policy

When Paula discovered she had breast cancer she contacted her insurance adviser. for details of her health insurance cover. The adviser explained to both Paula and her surgeon that Paula’s health insurance would cover the surgery to remove the cancer and an ex gratia payment towards the breast reconstruction. Paula’s surgeon estimated the surgery would cost about $24,000.


Additional surgery to be paid for by Paula

Paula decided that, at the same time as the surgery to remove the cancer, she would have a breast reduction surgery on the unaffected breast. Paula understood that she would need to pay for the breast reduction surgery herself. Paula paid a deposit of $2,400 for the breast reduction surgery on the morning of her admission to hospital.


Surgery successful, and claim lodged by email

In March, Paula’s husband, Nathan, contacted the adviser to advise the surgery had been successful and they would be sending the invoices through shortly. One invoice was $1,418 for the breast reduction surgery and the other invoice was $12,484.22 for the cancer removal surgery. The adviser asked Nathan to post the invoices to him. Paula did not appreciate the need to have original, posted invoices and emailed the invoices to the adviser.


Original invoices required

In May Paula emailed the adviser, referring to telephone messages and other emails enquiring about the progress of assessing the claim. The adviser said that he had received the emailed invoices, that those invoices were ‘unusual’, and asked Paula to post the original invoices, which Paula did.

Paula contacted the adviser again in late June, again asking about the progress of the claim. The adviser said he had received the invoices, but had not processed the claim, and undertook to do so by the end of the week.

The adviser then contacted the hospital, querying the deposit Paula had paid on her admission to hospital as this amount had been included in the claim. The hospital explained the invoice was a split account, and the $2,400 deposit paid by Paula was the deposit for a ‘self pay’ procedure. Unfortunately, the hospital confused the invoice numbers in its email.


The adviser concerned about insurance fraud

The adviser became concerned that Paula had undergone two procedures and may have had two insurance policies in place. The adviser believed that Paula was committing insurance fraud, and cancelled the policy she held with him. Paula was very upset that the adviser had cancelled her policy and could not understand why, she said:

I have done nothing illegal, unlawful nor have I ever missed a payment in the 16 years I have been with you. I have never questioned the increases in premiums and joined your company in good faith that I would be looked after.

Paula explained the $2,400 was a deposit she paid on admission, and could not understand why she could not claim it back. Paula confirmed that she only had one policy, the policy administered by the adviser. At this point Paula did not understand the $2,400 related to the deposit for the self-pay procedure and believed it was a deposit relating to the entire surgery.


The adviser asks for details about other insurance cover

The adviser then called Nathan and told him the claim had been accepted. However, the phone call was premature because, in August, the adviser was in touch again asking Paula and Nathan to complete a declaration which included the statement:

In the past 12 months how many medical covers providing medical cover in whole or in part for hospital treatment do you and/or Nathan have?

Paula and Nathan became concerned that the claim was not going to be accepted and contacted a lawyer. The lawyer wrote to the adviser confirming that Paula did not have any other insurance cover. The adviser replied that there were irregularities with Paula’s claim and until he received the declaration, he could not do anything further. Paula and Nathan completed the declaration in mid-September.

The adviser was aware that Nathan had health insurance with another insurer through his work. The adviser submitted a claim to this insurer but the claim was declined because Paula was not covered by Nathan’s work policy. Paula could not understand why the adviser submitted the claim to Nathan’s insurer, given her statement that she did not have any other insurance cover.


Hospital provides an explanation

The adviser then contacted both Paula and the hospital asking why the invoice was for much less than the original estimate. The hospital explained:

  • there had been a mistake with the invoice numbers
  • Paula had already paid the breast reduction invoice
  • the surgery had been less extensive than anticipated and the post-surgery accommodation period shorter
  • that the pre-surgery estimate was a quote.


Claim accepted

The adviser continued to correspond with the hospital during October and by November was satisfied that he had the correct information to submit the claim. The claim was submitted and paid in December.


Paula’s view

Paula was dissatisfied with the way the adviser had handled her claim. She was disappointed that the adviser had never discussed the claim with her. It appeared to Paula that the adviser had jumped to conclusions, without giving her the opportunity to explain or understand what was going on. Paula could not understand why the adviser had cancelled her insurance, taken so long to accept her claim, and spoken so rudely to her throughout the process.

Paula felt as though the adviser did not fully appreciate the stress she experienced during the claims process, or the consequences for her in cancelling her insurance.


 Paula complained to FSCL.


The adviser’s view

The adviser explained that when he became aware of a possible fraudulent claim he had to make further enquiries and these enquiries take time. When the adviser saw Paula claiming the $2,400 deposit, combined with the confusion caused by a mistake in the invoice numbers by the hospital, he became concerned that she may have had insurance elsewhere and was duplicating her claim.

The adviser said that on the evidence available to him at the time, it was reasonable for him to cancel Paula’s cover. The adviser also said that Paula could easily be included in Nathan’s work insurance policy and did not accept that her breast cancer would cause any complications in the application process.

The adviser did not accept he was responsible for the delayed claim, as he had submitted the claim as soon as he had all the available information.



We were concerned at the way the adviser had handled Paula’s claim. The tone of the adviser’s emails to Paula throughout the claims process were abrupt and accusatory. Although Paula had made a mistake, and it was reasonable for the adviser to query the inclusion of the deposit for the self-pay procedure, we could not understand why the adviser had immediately assumed the claim was fraudulent.

The adviser’s attitude had substantially delayed what should have been a relatively straightforward claim. We suggested to the adviser that he may wish to consider making a settlement offer to Paula.

The adviser offered to:

  • compensate Paula for the legal costs incurred
  • arrange alternative cover for her and
  • pay the first year’s premium.

We discussed the offer with Paula. Paula accepted the offer to cover the legal costs, but said that she did not want to have anything further to do with the adviser. Paula said she was so disappointed with the response of private medical insurance, and so pleasantly surprised by the follow-up treatment received in the public hospital, that she no longer wanted medical insurance at all. Instead she would prefer the adviser to compensate her for the inconvenience experienced during the claims process.

We spoke again to the adviser and he agreed to compensate Paula for her legal costs and pay her $1,000, in full and final resolution of her complaint.



Paula accepted the adviser’s offer and the complaint was resolved.


Key insights for the participant

If you have a query about some information given to you by your client, we suggest you pick up the phone and ask. Although a discrepancy with a claim may possibly indicate fraud, it is much more likely that your client has just made a mistake.