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In mid-2020, an insurance advice company cold-called Peter at his home. Peter agreed to have one of their financial advisers visit him to review his insurances.

When the adviser visited, she advised Peter to switch his life and trauma cover to a different insurer, cancel mortgage protection cover, and to take out medical cover.

The adviser did not make any records about their meeting, except a brief needs analysis form. The adviser recalled that Peter:

  • was unhappy with the premiums he was paying
  • wanted to increase his trauma cover
  • was concerned he did not have medical cover.

The two new insurers (the new life and trauma insurer, and the medical insurer) accepted Peter’s applications for cover. Peter did not disclose any pre-existing medical conditions. Both insurers later found out that Peter had numerous pre-existing medical conditions, which he had not disclosed.

Shortly after the medical cover started, Peter sought pre-approval for medical tests. This prompted the medical insurer to obtain Peter’s medical records and the non-disclosures were identified. Peter eventually cancelled the medical cover, and the insurer refunded his premiums. 

Later in 2020, Peter contacted the adviser to increase his life cover because he was buying a home. Peter disclosed the results of a recent medical test in his application to increase cover. This prompted the life and trauma insurer to obtain Peter’s medical records, and the insurer identified that there had been non-disclosures with the original application. The insurer voided Peter’s life and trauma cover.

The adviser managed to get the insurer to offer to reinstate cover, with a 50% loading on the trauma policy. Peter did not accept the offer. He had lost faith in the adviser and went to a new adviser.

The new adviser arranged life, trauma, and medical cover with the original insurer. Peter’s trauma cover had a 50% loading (which meant his premiums were higher) and an exclusion for gallbladder conditions. The new adviser was not aware the offer from the other insurer to reinstate life and trauma cover had no exclusions.

Peter complained to the adviser that he was disadvantaged by the changes to his life and trauma cover. He now had less trauma cover (because of the exclusion) but he was paying more for the cover (because of the loading). The adviser believed she was not responsible for the non-disclosure of Peter’s pre-existing medical conditions.

Peter was not happy with the adviser’s response and, encouraged by his new adviser, he complained to FSCL.


Peter said the adviser told him to only disclose serious or life-threatening illnesses, such as diabetes and malignant cancers. Peter also said the adviser did not explain the importance of disclosing pre-existing medical conditions.

The adviser disagreed. She said she explained the importance of disclosure several times. She told Peter to disclose any health information other than normal colds and flu.


We concluded that the adviser had not exercised the level of care, diligence, and skill expected of a financial adviser when she advised Peter.

The adviser was unable to show that she had explained to Peter the duty of disclosure and the consequences of non-disclosure. She made no records about what was discussed (other than the brief needs analysis) and she did not give any written advice.

We preferred Peter’s version of events, that the adviser had led him to believe only serious illnesses needed to be disclosed. Their meeting was a unique event for Peter, so he probably had a better recollection of what was discussed. Further, records about Peter’s reaction when the medical insurer identified non-disclosures supported that he understood only far more serious health information needed to be disclosed.

We concluded that the adviser had caused Peter significant inconvenience. The events that had unfolded had been very stressful for Peter. He had also lost the opportunity to make informed decisions about changing his insurances because of the adviser’s poor advice process.

However, the adviser was not responsible for the loading on Peter’s trauma policy. He wanted to increase his cover. Regardless of whether Peter had increased cover with the original insurer or switched cover to the new insurer, he would have needed to disclose his pre-existing medical conditions. Both insurers would have applied a loading on cover.

The adviser was also not responsible for the exclusion on Peter’s trauma cover. While we appreciated Peter’s reluctance to deal with the adviser, he would have been better off if he had accepted the other insurer’s reinstatement offer because it had no exclusions. At law, a person must take reasonable steps to mitigate, or minimise, their loss.


We recommended that the adviser should pay Peter $2,000 compensation for inconvenience. This was the maximum amount we could recommend for inconvenience. Peter accepted this in final settlement of his complaint.

Insights for participants

When giving advice on life, trauma, or medical cover, it is important that financial advisers explain to their client:

  • the importance of disclosing pre-existing medical conditions, including the consequences of non-disclosure
  • that pre-existing medical conditions include signs, symptoms, and test results, as well as diagnosed conditions
  • the risks of moving cover from one insurer to another.

Financial advisers also need to make good written records. The events in this case pre-dated the law changes for financial advisers which came into effect in March 2021. It is now a standard condition of transitional licences for financial advice providers that they create and maintain adequate records for their financial advice services.