FSCL Case Study

In 2012 Henry* bought his first house and asked an insurance broker to arrange house insurance. The broker corresponded with Henry using his work email address, but the email address on the insurance application form was different. The broker presented options to Henry, and Henry took cover under the broking firm’s branded insurance policy, underwritten by a large insurance company.

After the Christchurch earthquakes, most insurers changed the basis on which they calculated cover, moving to sum insured insurance. Sum insured insurance is an estimate of the total amount it would cost to rebuild your home. This was a big change from full replacement cover which allowed for the total repair, rebuilding or replacing the damaged portion of a home, without having to specify a sum insured.

The insurance broking firm wrote to Henry suggesting that he review his cover to make sure he was adequately insured. The broking firm advised that if Henry did not select a sum insured they would calculate one for him based on $2,000 for each square metre of the previously declared size of Henry’s home. Henry did not select a sum insured, so the broking firm used their default calculation.

Every year, on the policy’s anniversary, the broking firm wrote to Henry reminding him to check the sum insured, suggesting an online calculator that could help. Henry did not advise a sum insured so the broking firm continued to base the insurance on their calculation, adjusted for inflation.

In October 2020, Henry’s insurance broker sent an email to Henry’s personal email address, not his work address, saying the broking firm would be communicating with him by email from now on, rather than posting letters. Unfortunately, the insurance broker incorrectly entered Henry’s email address into their system. There was no record that the email ‘bounced back’ so the insurance broker assumed Henry had received it, when he had not.

In March 2022 Henry’s insurance broker transferred his fire and general insurance clients to another insurance broker. The new broker sent an email to the incorrect email address offering to review Henry’s cover to make sure it was adequate. Again, Henry did not receive the email.

In February 2023 Cyclone Gabrielle destroyed Henry’s home. Henry’s insurer accepted his claim, and paid out about $350,000, but this was only about half of what Henry estimated it would cost to rebuild his home. Henry accepted that the insurer had paid out the correct amount but complained about the advice given to him, saying his brokers and the broking firm had not done enough to make sure Henry knew what he needed to do to be properly insured.

When Henry was unable to resolve the complaints, he complained to FSCL.


Henry complained about:

•        The original insurance broker, saying he had not done enough to make sure Henry knew what he needed to do to be fully insured.

•        The new insurance broker, saying he should have contacted Henry personally, and not just relied on an email sent to the wrong address when taking over responsibility as Henry’s insurance adviser.

•        The insurance broking firm, for not doing more to make sure Henry was fully insured.

The broking firm did not accept they were liable for Henry’s loss, saying that they had written to Henry every year encouraging him to check the sum insured was correct. The broking firm said it was Henry’s responsibility to contact them if he felt the sum insured was too low.

Henry said he had disregarded the broking firm’s letters because he relied on the insurance brokers to tell him what he needed to know.

The original insurance broker, while sympathetic to Henry’s situation, also did not consider he was liable for Henry’s loss. The broker explained that, under the service agreement with the broking firm, it was not his role to discuss cover with Henry.

The new insurance broker was a member of a different dispute resolution service, so FSCL was unable to look into his actions.


FSCL first looked at the broking firm’s correspondence with Henry over the years and formed the view that if Henry had taken the time to read these letters, he would have understood what he needed to do to make sure he was properly insured. FSCL did not think the broking firm was at fault, and Henry agreed to discontinue this part of his complaint.

FSCL then looked at the original broker’s actions. It was FSCL’s view that the broker had not caused Henry’s loss because it was not their role to contact him directly. The broker was a sub-agent of the main broking firm and that firm had communicated clearly with Henry.

FSCL did not consider that it was reasonable for Henry to disregard the letters from the broking firm. The letters were addressed to him and written in plain language.

The original insurance broker made a mistake when entering Henry’s email address into their system. This error was then carried on to the new broker. Henry said that if he had received these emails, he would have updated his insurance cover.

It is natural for a person to look back on events, with the benefit of hindsight, and think about how an adverse situation might have been avoided. However, on balance, FSCL were not persuaded that, in the time before Cyclone Gabrielle, Henry would have acted any differently if he had received the emails from either his original insurance broker, or the broker that took over. 

Having disregarded the broking firm’s letters, FSCL considered it likely that Henry would have disregarded email contact from his insurance broker as well.


FSCL suggested that Henry discontinue his complaint. Henry did not respond, so FSCL assumed he did not wish to take his complaint any further and discontinued its investigation.

Insights for consumers

If you receive communication from your adviser, broker, or insurer and you don’t know what to do contact them and ask. The information is likely important and ignoring correspondence could result in a considerable loss.

The sum insured becomes the maximum amount that insurers will pay if your home is destroyed in a total loss such as a natural disaster, so it’s important it is as accurate as possible. FSCL encourages you to check not less than once a year that your sum insured will be enough to cover the cost of rebuilding your home.

March 2024

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