In June 2018, Sam*, who had been in hospital for 10 weeks, told his financial adviser, Tama*, he wanted to reduce his life insurance cover from $268,000 to $100,000, as the premiums were too high. Tama said Sam should wait for a diagnosis and discuss the matter with his wife, Jo.* Sam said to proceed. Tama asked both Sam and Jo to sign the request, even though Jo wasn’t a policyholder. Tama sent the request to the insurer, explaining Sam was in hospital. Jo co-signed the request to confirm she understood.
In July 2018, Sam told Tama he wanted to cancel the policy, because the premiums were too high. Tama recommended against it, and didn’t proceed.
In August 2018, Sam’s health deteriorated, and a claim was made for early payment of the life cover. Sam died in September and the insurer paid his Estate $100,000. The Estate complained, saying the adviser and the insurer breached their duties of care to safeguard Sam (who was vulnerable) and Jo from financial loss, because the Estate only received the reduced sum insured.
Insurers have a duty to ensure vulnerable customers are not financially disadvantaged to the insurer’s advantage. However, information about Sam’s deteriorating condition wasn’t provided to either Tama, or the insurer.
There was no evidence Tama failed to exercise reasonable care and skill (Consumer Guarantees Act). Sam had previously discussed reducing the cover with Tama and, by asking Jo to co-sign, Tama did what he could to alert Sam’s family without breaching his privacy. Insurers must act in good faith and with reasonable care and skill. The insurer said, because Jo had co-signed, it had no concerns. The insurer had not breached its obligations.
Complaint not upheld
*Names have been changed.