Colin* arranged life and trauma cover with the help of financial adviser Fred*. Fred and Felicity*, a mutual friend, completed the application on Colin’s behalf.
When Colin required a coronary angiogram, he made a claim to the insurer. The insurer avoided Colin’s cover because Colin had not disclosed his hypothyroidism, elevated cholesterol, elevated blood pressure, impaired glucose tolerance, abnormal liver function results, back strain, right thigh pain, heel tendinitis, asthma/bronchitis and vertigo.
Colin made a complaint about Fred, saying Fred should pay the value of his trauma cover ($80,000).
Colin said that, when the insurance was arranged, he showed Fred and Felicity his medication, and Felicity wrote down the names on the application. Fred asked Colin if he had high cholesterol, Colin said he was unsure, and referred him to his doctor. In response to a cholesterol question on the application, Felicity wrote “please refer GP (normal limits)”.
Colin believed the insurer had avoided his policy because the information about the medications hadn’t reached the insurer. However, the insurer avoided the policy because Colin hadn’t disclosed his numerous medical conditions. The information disclosed about cholesterol (“normal limits”) wasn’t correct.
If the insurer had asked Colin’s doctor for cholesterol information, it would not have enabled the insurer to obtain information about Colin’s other health conditions.
While Colin said Fred told him “medical history would be taken” before the insurer would accept the application, Fred said he’d only said that Colin’s insurer might obtain information from his doctor about his cholesterol. Fred didn’t have a file note of the meeting.
Colin was under the mistaken belief that the insurer would obtain all of his medical notes before accepting the application but, as a matter of course, insurers are not required to obtain an applicant’s medical notes.
Unfortunately, there were no documents available. There was insufficient evidence that Fred or Felicity caused Colin’s misunderstanding. There was no evidence that Fred or Felicity knew Colin suffered from other health conditions, which would have necessitated the insurer obtaining more of Colin’s medical notes. The insurer had avoided the policy because Colin did not disclose multiple health conditions. Colin’s complaint was not upheld.
Lessons for advisers
Keep Records
• Without any records of client conversations, there is no proof of what
occurred at application time.
• File notes and client correspondence enable you to respond to future
issues that might arise.
Take care with application forms
• Do not complete an application form on behalf of your client unless
absolutely necessary e.g. the client cannot physically complete it and
make a note about why you did it.
• Ensure your client completes the application form in full, answering
every question - even if he/she is an existing client.
• If you do complete an application for a client, note on the form that
you have completed it and why, and make a file note on client file.
• Ensure that your client reads the completed application, or you read
it to him/her.
• Remind your client to double check all information e.g. vehicle
modifications, convictions, claims history etc.
• Remind your client that he/she has a duty to disclose all material
information and that, if they do not, it could jeopardise a future claim.
Medical information
• Insurers do not, as a matter of course, get a client’s full medical history.
• Insurers will only ask for medical information if the application
triggers this.
*Not real names
