Adviser Pays Client Compensation

A financial adviser has paid a client $2,000 for putting a policy in place that didn’t meet their needs when making a health insurance claim for their child.

In concluding its investigation, following a complaint by the policyholder, the Financial Ombudsman’s Service Limited (FSCL) says a key insight for advisers is to ensure they are familiar with the policies they recommend, so they can identify exclusions that might be relevant to the client.

The case relates to policyholder Rosa who had surgery to correct an heriditory condition that developed when she was child. In 2016, as an adult, she told her insurance adviser about it.

More than two years later, Rosa asked the broker to arrange medical insurance for herself, her partner, and her children. She disclosed the surgery in her application form.

…most insurers – bar one – did not provide cover for this particular condition…

In 2023, one of Rosa’s children developed the same condition. However, the insurance company declined her claim for the child’s medical costs as there was a general exclusion clause for this condition.

“It turned out that most insurers – bar one – did not provide cover for this particular condition,” states FSCL

Rosa complained to FSCL saying the adviser should refund all the premiums she had paid.

FSCL said it was “unfortunate” the adviser had not understood the relevance of Rosa’s family history and didn’t point out the exclusion.

“We thought it was reasonable for Rosa to have relied on the adviser’s expertise and presumed knowledge of the policy,” states FSCL.

“We thought it was fair and reasonable for the adviser to compensate Rosa for stress, disappointment and lost opportunity, and we concluded the adviser should pay her $2,000.

“The adviser accepted our decision, but Rosa did not.”