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Life cover sold to 72-year-old

In January 2010 Andrew, aged 72, contacted his insurance adviser explaining that he wanted a product that would provide a ‘nest egg’ for his family. Some years previously Andrew had had an annuity product arranged by a different financial adviser and, in his mind, this is what he was looking for.

The insurance adviser did not provide investment advice, and thought Andrew wanted an insurance product. The adviser completed a needs analysis. He could see that Andrew had extensive investments and recommended $15,000 of death and terminal illness cover, to cover funeral costs. The $15,000 in the needs analysis was later written over and replaced with $100,000. There were no notes from this time explaining why the change was made.

Andrew completed the application form disclosing no health concerns. The insurer accepted Andrew’s proposal and put life and terminal illness cover in place. Andrew started paying the monthly premiums of $378.

In 2015 Andrew contacted the adviser, concerned that the premium amount he was paying was increasing substantially. At this point Andrew discovered that he had not purchased an investment product but was paying for life insurance. The adviser explained that Andrew had three options. He could:

  • cancel the policy, and he would receive nothing back
  • keep the policy and, if he died, his estate would benefit by $100,000
  • reduce the cover to $15,000, which would also reduce the amount he was paying in premiums.

Andrew felt he had no option, but to continue with the cover.

In 2019 Andrew’s son, David, reviewed Andrew’s financial situation, and discovered his father was paying about $28,000 annually for an insurance policy that would pay only $100,000 if Andrew died. When David explained this to Andrew, Andrew was dismayed. On Andrew’s behalf, David complained to the insurer and asked for a new adviser.

The insurer investigated Andrew’s complaint and found no deficiencies in the adviser’s process but offered Andrew a refund of the premiums paid between the time Andrew asked for a new adviser and when they responded to the complaint, about $42,000. This was on the basis that, if a new adviser had been appointed at an earlier date, they would have advised Andrew to cancel the cover.

Andrew accepted the $42,000 to resolve his complaint about the insurer and cancelled the policy. However, Andrew did not accept that the adviser had not done anything wrong and complained to FSCL. Andrew wanted the adviser to compensate him for the cost of the premiums he had paid since 2010.


Andrew said the adviser did not do enough to explain to him that he was buying life insurance. Andrew said that he wanted, and thought he had received, an investment product and that the money he was paying was accumulating as a ‘nest egg’ that he would leave to his children when he died. Andrew was shocked to learn that, since taking out the policy, he had paid $164,000 in premiums for $100,000 of cover, and now that the policy had been cancelled, there would be no money for his children.

The adviser said that he had recommended that Andrew purchase $15,000 of death and terminal illness cover that he referred to as ‘funeral cover’. Andrew then made the educated decision to purchase $100,000 worth of cover, knowing that the premiums would increase over the coming years. The adviser considered the policy was fit for purpose because, although the premiums were increasing, so was the risk of a claim.

The adviser also said that all the information given to Andrew referred to insurance, and he did not understand how Andrew could have believed he had an investment product. In addition, the adviser did not accept that Andrew had not received a benefit from the insurance because, if he had died, his estate would have received $100,000.


We questioned whether the adviser had given Andrew suitable advice in recommending that Andrew, aged 72 and with substantial assets, take out life cover. It should have been obvious to the adviser that the premiums would quickly increase to the point where the benefit of having funds available to pay for a funeral would outweigh the cost of the policy.

We were concerned to see that the $15,000 cover the adviser had initially recommended was replaced by $100,000 without any record of why Andrew was acting against his advice. We do not think that the adviser had acted with reasonable care and skill by simply saying: “that is what the client wanted”. If the adviser had discussed why Andrew wanted to increase the amount of cover, it is possible the misunderstanding about the investment product/insurance product would have come to light. The adviser also had to turn his mind to whether the cover was suitable for Andrew.

However, the advice that Andrew was complaining about was given in early 2010. Under our rules, we cannot investigate a complaint where the event giving rise to the complaint occurred before 1 April 2010. The adviser did not want to waive the jurisdictional time limit. Unfortunately, this meant that the complaint fell outside our rules, and we had to decline to investigate the complaint. Had we been able to award compensation, we would likely have asked the adviser to pay compensation towards part of the premium costs Andrew had paid.

Although we declined to investigate the complaint, we asked the adviser whether he wanted to compensate Andrew for the shortcomings in his advice. We noted that under the Code of Professional Conduct for Financial Advice Services, since March 2021, advisers are required to treat clients fairly and act with integrity, including not doing anything that would, or would be likely to, bring the financial industry into disrepute.

The adviser declined to offer any compensation.


We declined to investigate the complaint on the grounds that the advice giving rise to the complaint occurred before 1 April 2010.

Insights for participants

As a dispute resolution service, we are always striving to achieve a fair resolution to a complaint that will allow both parties to move on. There will be occasions where a participant might not be obliged to pay compensation, but we encourage participants to engage in the process in the interests of bringing a matter to a final resolution.