In December 2020, Mike* asked his insurance adviser to arrange cover for a new car (“car A”) under his business insurance policy. The adviser replied asking Mike to confirm some details. Mike did not reply to the email, but said that he phoned the adviser the next day to answer the questions. The adviser had no recollection or evidence of this call. The adviser did not put any cover in place for car A.
Mike said that car A was run off the road by another driver in July 2021 and that he contacted his adviser about the accident. The adviser told him to repair the car and send the bill to the at-fault party. The adviser’s company said they had no record of receiving information about this incident. Mike said he ordered approximately $3,000 worth of parts, which became unusable when the car flooded while in his driveway. Mike said that the car flooded due to being left in the driveway and leaves accumulating in the drains.
Mike arranged insurance for a replacement car in October 2021 (“car B”). The adviser confirmed that the car had been added to the business’s insurance. In March 2022 car B and some personal items, including his phone and the only car key for car A, were stolen. Mike reported the theft to the adviser’s company.
In April 2022, the adviser told Mike that the premiums for car B had not been paid, and that they would need to be paid before the claim could be investigated. Upon reviewing the invoices and policy for car B, Mike realised that the car was insured for $18,000 instead of the $24,000 that he believed they had agreed to.
In May 2022, Mike purchased a replacement car (“car C”) and told the adviser. Soon after, Mike discovered that car A was in fact not insured. Mike told the insurer he was dissatisfied with the overall situation, particularly the delay in informing him that car A was not insured. Mike also asked the adviser to confirm that car C was insured. The adviser replied with attached invoices for insurance for both car A and car C, and asked Mike how he would like to pay. Mike told the adviser that he would need to consider whether car A was worth insuring but asked for car C to be added to the business plan.
The adviser’s company replied to Mike’s various complaints, including the delay in informing him car A was uninsured and car B being insured for less than he believed, in June 2022. Among other things, the adviser’s company confirmed that both cars A and C were now insured. Mike was unhappy with the adviser’s company’s response and complained to FSCL.
After the complaint, the adviser emailed Mike asking him to pay the monthly premiums payments for cars A and C. In August, the adviser told Mike that he would assume that he no longer required cover if he did not reply by the following day. Mike said that he replied in time, but the adviser’s company said that he replied one day late. The adviser attempted to resurrect the cancelled insurance, but the insurer declined due to a 12-month stand-down policy for any client whose insurance is cancelled due to non-payment. The adviser organised insurance through a different insurer.
Dispute
Car A
Mike said he asked the adviser to insure vehicle A, and the adviser was at fault for not insuring the vehicle. The adviser delayed in telling him that car A was not insured, causing further loss due to the unused car parts and the damage to the car while it was parked at his house.
The adviser’s company said that car A was not added to the insurance plan because Mike had not provided the requested information. Further, they said Mike should have noticed his car was not insured when he did not pay any premiums. The adviser’s company also said they had no information about car A being run of the road and had not advised Mike to purchase the car parts. Finally, they said that the damage that occurred in the driveway was unlikely to be covered by insurance because it was most likely gradual damage.
Car B
Mike wanted car B to be insured for $24,000, and he said that the adviser had made an error in insuring the vehicle for $18,000. Mike was also unhappy that the premiums for car B had not automatically been added to Mike’s business insurance arrangement, causing the premiums to not be paid.
The advising company did not agree with Mike’s recollection of the sum insured, saying Mike agreed to $18,000 being closer to market value. Further, they said that premiums for car B were not added to the business arrangement because the business did not activate a link included on the invoice.
Car C
Mike said that the insurance for vehicle C being cancelled from inception for non-payment was the adviser’s company’s fault because he had replied before the deadline. Mike said that the adviser cancelling the insurance resulted in him having a “bad debtor flag”, which would affect his future insurance.
The adviser’s company said that their records showed Mike responded after the deadline, and that they had given Mike adequate notice before cancelling his insurance. They also noted that they had organised insurance for Mike through a different insurer, so Mike had not suffered any loss. Finally, the company said that no “bad debtor flag” existed for Mike.
Review
Car A
There was insufficient evidence that Mike had replied to the adviser’s questions about car A. As Mike’s phone was stolen with car B, he could not prove the phone call. However, the adviser was subject to a statutory obligation to exercise the care, diligence, and skill that a reasonable financial adviser would exercise in the same circumstances. We considered the adviser should have followed-up with Mike when he did not reply to the email about car A.
There was insufficient evidence of any insurable loss arising from Mike being run off the road. It seemed inherently unlikely that Mike, who said he believed the car was insured, would have accepted a solution from his adviser that did not include an insurance claim. It was more likely that Mike did not phone the adviser. Further, Mike could not produce evidence of purchasing the car parts. FSCL did not have sufficient evidence of any loss that would have been covered by insurance.
The delay in telling Mike that car A was not insured did not cause any loss. If Mike was not clearing away the leaves, blockages (and flooding) was foreseeable. The damage to the car while in the driveway was unlikely
to be covered by insurance, due to the damage occurring over time.
Car B
FSCL found that the adviser’s company should have done more to draw Mike’s attention to the relevant link he needed to click to include car B’s premiums on the business arrangement. FSCL again found that the adviser should have followed-up with Mike. However, this did not cause Mike a financial loss, as the premium needed to be paid. Although it was stressful to discover that the premium needed to be paid urgently, this did not warrant a payment for non-financial loss.
The difference in the insured value was not crucial and no finding was required, as the claim had been settled and Mike did not advise of any shortfall.
Car C
There appeared to be an unexplained delay between Mike’s instructions to add car C to the insurance plan and the adviser’s reply email. However, this was not what caused cancellation of the cover. The cover appeared to be cancelled due to Mike not returning the completed proposal in time. If Mike wished to pursue this element of his complaint, he would need to explain the discrepancy in email timestamps provided by himself and the adviser.
Resolution
FSCL said that Mike should discontinue his complaint. Although the adviser could have followed up with Mike on various issues, he did not cause Mike financial or significant non-financial loss.
Mike did not reply to FSCL’s preliminary decision, so FSCL closed its case file.
* name changed
Insights for consumers and participants
This complaint illustrates communication failures by both the consumer, for not responding to their adviser’s questions, and the adviser, for not following up when he did not receive a reply from the client.
