The most engaged report for Riskinfo readers this week featured an Ombudsman’s ruling on whether an adviser should be required to refund eight years’ premiums to a client…

An adviser who recommended a client hold insurance policies with two different firms providing the same cover has been backed by a dispute resolution firm following a complaint by the client.

Financial Services Complaints Limited (FSCL) was asked to intervene by Doug, who was told neither insurer would pay his income cover claim because he was insured twice for the same thing. When he cancelled one of the policies, the other paid out.

Doug complained he paid premiums for eight years for what he claimed was an unnecessary policy. Following a review, FSCL told Doug his adviser had given him suitable advice. Doug accepted FSCL’s decision.

The issue dates back to 2013 when Doug took out three insurance policies with Insurer 1:

  • Life cover ($80,000)
  • Trauma/critical illness and temporary disability ($75,500)
  • Business income protection ($1,250 per month)

Doug was later diagnosed with a health condition, for which he had some treatment. He needed medical follows ups every year, until he had two clear tests 12 months apart.

In mid-2016, Doug had a discussion with an insurance adviser as he had bought a house and wanted to ensure he had enough insurance.

His insurance adviser recommended the following cover for Doug with Insurer 2:

  • Life cover of $525,000
  • Mortgage repayment cover
  • Income cover, with an exclusion for Doug’s pre-existing condition

She recommended Doug retain the trauma/critical illness and temporary disability cover and the business income protection cover with Insurer 1 because of his existing medical condition. She suggested they review the situation in two years’ time.

Doug took out the recommended cover with Insurer 2. The life cover with Insurer 1 was cancelled, but the other two policies remained in place.

In 2022, Doug broke his arm and had to take time off work. With the help of his new insurance adviser, he made a claim for income cover with Insurer 2.

Doug understood both insurers were going to decline his claim because he had policies with both companies. He cancelled the policy with Insurer 1. Insurer 2 paid his claim.

Doug complained his original insurance adviser acted incorrectly and wanted the adviser to reimburse him for the premiums he had paid to Insurer 1. The original insurance adviser did not consider she had done anything wrong.

FSCL states it was not unreasonable for the adviser to recommend Doug retain Insurer 1’s policies for a period of time to ensure he had enough cover while his medical condition was under review.

Click here to read the full review.