As a child, Rosa had had surgery to correct a condition she had developed. In 2016, as an adult, Rosa told her insurance adviser about it. She says she also told the adviser that one of her parents had had the condition too.
Over two years later, Rosa asked the broker to arrange medical insurance for herself, her partner, and her children. She disclosed the surgery in her application to the insurance company. The insurance company accepted her application, but they applied an exclusion for anything that related to the condition Rosa had had the surgery for.
In 2023, one of Rosa’s children developed the same condition. However, the insurance company declined the claim for that child’s medical costs, noting there was a general exclusion clause in the policy for this particular condition. It turned out that most insurers – bar one – did not provide cover for this particular condition.
Rosa was not happy. She complained to FSCL. Rosa wanted the adviser to pay the cost of all the premiums Rosa had paid to the insurer for a policy that Rosa now thought was worthless.
Dispute
Rosa had not realised that there was a general exclusion in the policy for the condition. She knew about, and accepted, the specific exclusion in relation to herself, but said that she was misled into thinking she was the only one in the family who did not have cover for the condition.
Rosa said she told the adviser back in 2016 that the condition was hereditary. She had given the adviser a copy of the children’s medical records, which included a note about the ‘FamHx’ (family history) of the condition. Rosa said the adviser should have told her about the general exclusion. She said she would not have taken out these policies for her children if she had known the condition was not covered.
The adviser said that, with this particular condition, it is not necessarily the case that a person will pass it on to their children. The adviser said Rosa did not tell him that she specifically wanted cover for this condition for her children. Insurance advisers are not qualified to interpret medical histories, and could not have been expected to join the dots from the information Rosa had given them. They said Rosa did not appear to have read the policy document containing the general exclusion.
Review
The adviser in this case had not kept notes of their discussions with Rosa. Since then, record-keeping standards have been introduced in the industry, but even at the time it was poor practice for the adviser not to have made notes. It also made FSCL’s investigation more difficult. Rather than having a clear record of what was discussed, FSCL had to weigh what Rosa said happened against what the adviser said would not have happened, and decide what was more likely.
We thought it was more likely that Rosa had told the adviser in 2016 about her childhood condition, and that one of her parents had had it too. It was the most significant health issue Rosa had had, and so personal to her, that it is inherently likely she told the adviser about it when they discussed health.
However, we thought it was unlikely that Rosa had told the adviser, either in 2016 or over two years later when she applied for medical insurance, that cover for the condition for her children was of primary importance. If she had, we thought it probably would have been mentioned in emails between Rosa and the adviser, especially when the adviser provided a comparison between the insurance company and another insurer that did provide cover for the condition.
Resolution
We could not find that the adviser had sold Rosa an inappropriate policy, and we were not sure that Rosa would have rejected that policy if she had known about the general exclusion. After all, at the time none of Rosa’s children had any signs of the condition.
But we thought it was unfortunate that the adviser had not understood the relevance of Rosa’s family history and had not pointed out the existence of the general exclusion. We thought it was reasonable for Rosa to have relied on the adviser’s expertise and presumed knowledge of the policy.
We thought it was fair and reasonable for the adviser to compensate Rosa for stress, disappointment and lost opportunity, and we concluded the adviser should pay her $2,000.
The adviser accepted our decision, but Rosa did not. We closed our file.
Insights for participants
This is another complaint where poor record-keeping hampered our investigation. However, the key insight for insurance advisers is to ensure you are familiar with the policies you are recommending, so you can identify exclusions that might be relevant to your client.
