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The insured’s responsibility to provide information at claim time

Khadija met with an insurance adviser to review her life insurance cover. Khadija already had a $1,000,000 life insurance policy with one insurer and a further $300,000 life policy with another insurer, but no trauma/critical illness cover or income protection cover.

The adviser’s fact-find document and application form recorded that Khadija was working part-time, 28 hours a week, as an accountant for her own company and studying part-time.

The adviser recommended Khadija combine both life insurance policies with one of the existing insurers, maintaining total life cover of $1,300,000, and cancel the $300,000 policy. The adviser also recommended that Khadija arrange some new cover, including trauma/critical illness cover, as well as a policy that would contribute to her household expenses and mortgage payments if Khadija was disabled and unable to work for a period of time.

Khadija accepted the adviser’s recommendations. She increased her life cover with one insurer to $1,300,000, cancelled the $300,000 policy with the other insurer, and arranged new trauma/critical illness cover, and disability cover. A month later Khadija tripped and fell, injuring her back.

Khadija submitted a claim under her disability policy, stating that she had been working as an accountant for 30 hours a week. She also stated on her ACC form that she had been working for 40 hours a week. When the insurer asked for documents to corroborate Khadija’s income, she was unable to provide convincing information. After making further enquiries, the insurer then discovered that Khadija was a fulltime student. The insurer declined the claim under the disability policy and voided all Khadija’s new insurance policies because it was concerned that Khadija had given it incorrect information about her employment status and income. However, the insurer later agreed to reinstate the $1,000,000 life policy that Khadija had with that insurer before the changes were made.

Khadija complained that the advice she had received from the adviser caused her to lose the $300,000 life insurance policy that she had cancelled on the adviser’s advice. When the complaint was not able to be resolved directly with the adviser, Khadija referred her complaint to FSCL.



Khadija complained that the adviser had not told her, when arranging the new insurance, that she would need to provide financial statements to support any future claim. As a result of this poor advice, Khadija complained she had lost the $300,000 cover she had with the other insurer because she would not have made any changes to her existing cover had she known about the financial statements requirement.

The adviser stood behind the advice he had given Khadija, saying that he gave cursory advice about the claims process. The adviser noted that Khadija was an accountant and he expected that she would know that audited financial statements would be needed to support a claim. The adviser helped Khadijah during the claims process but could do nothing about her inability to produce the evidence the insurer needed to assess the claim.



We were satisfied that the advice to increase life cover with one insurer, take out new trauma/critical illness and disability cover, and cancel the smaller policy was sound advice and had not caused any loss. Although the first insurer had voided the new policies from inception, this was due to Khadija’s ‘material non-disclosure or misstatement’ in not being completely truthful regarding the income she earned, rather than anything the adviser had done.

We were unable to determine exactly what advice the adviser had given Khadija about the information she would need to provide to support a claim, but we explained to Khadija that this did not appear to be the cause of her loss. It seemed to us that Khadija’s loss was caused by her being unable to give the insurer the information it needed to substantiate the number of hours she was working each week.



We recommended that Khadija discontinue her complaint because the adviser had not caused her loss. Khadija was disappointed that we had not found in her favour, but agreed to discontinue her complaint.


Insights for consumers

You are responsible for providing your insurer with all the information they need to assess your claim. It is also important to tell your adviser your true working arrangements, including income earned and hours worked, when you arrange cover that may provide you for loss of income. In this case, Khadija was fortunate the insurer was prepared to reinstate her earlier policy.