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Care needed when switching insurance providers says FSCL

Dispute resolution scheme Financial Service Complaints Limited is urging New Zealanders to take care when switching insurance providers as it releases its annual report for 2014/2015.

Chief Executive Officer Susan Taylor said FSCL investigated a number of complaints during the year arising from consumers being sold replacement insurance – usually life, health or income protection – by an insurance adviser.

“It is really important that consumers understand the potential costs and pitfalls of changing insurance provider – particularly where they have a pre-existing medical condition.”

Ms Taylor said that while insurers continued to attract the most complaints to FSCL, the number of cases it had investigated into insurance brokers had nearly doubled in the last year, with cases involving financial and insurance advisers also increasing.

In one case, a complainant had changed life and health insurance providers in order to save on premiums. While the changes were being processed, he experienced medical problems with his knee, which was disclosed by his doctor to the new provider. As a result, his new policy excluded cover for any knee-related claims, but by this stage he had already cancelled his old policy.

“Shortly afterwards, the complainant required knee surgery. He complained to FSCL that his adviser had failed to counsel him against cancelling his existing policy before ensuring the new policy provided adequate cover. As a result he claimed he was $25,000 out of pocket,” said Ms Taylor.

While there were grey areas to the complaint, FSCL was able to facilitate a settlement between the two parties, with no admission of liability from either side, and the adviser paying the complainant $13,250.

Ms Taylor said another area of contention was where a consumer decided to cancel a new insurance policy within the first two years of cover and was then asked by the adviser to pay a fee.

“In our view, it’s reasonable for an adviser to be paid for the time they’ve spent advising the consumer and for the work they’ve done. But we don’t think it’s reasonable for an adviser’s fee to automatically reflect the amount of the commission they lose when the policy is cancelled.

“The fee should also be clearly disclosed and explained to the consumer when the policy is being sold.”

FSCL’s Annual Report 2014/2015 is available on its website at

Media contact:

Susan Taylor, Chief Executive Officer FSCL

P: (04) 472 3725




FSCL is an independent not-for-profit external dispute resolution scheme approved by the Minister for Consumer Affairs under the Financial Service Providers (Registration and Dispute Resolution) Act 2008. It was the first scheme to be approved and has been designed for and in consultation with the financial services industry on the principles of efficiency and effectiveness. It is governed by an independent Board with equal consumer and industry representatives, and an independent Chair.

FSCL provides dispute resolution services to participating financial service providers and their clients. The FSCL process focuses on resolving complaints through conciliation and assisted negotiation and is also able to make formal determinations which are binding on financial service providers. The FSCL process is free to consumers. For more information on FSCL visit

The other dispute resolution schemes in the financial services industry are the Banking Ombudsman, the Insurance and Savings Ombudsman and Financial Disputes Resolution. For more information about the financial services disputes resolution regime visit