The Insurance & Financial Savings Ombudsman has rejected a complaint from a consumer over their insurance policy for life and trauma insurance.  The insured took out a new policy with the insurer and cancelled their existing insurances with another insurer. 

However, when they went to make a claim the insurer accessed the insured’s medical history and found several matters which had not been disclosed on the initial application for insurance.  This would enable the insurer to refuse cover under the policy, however, the insurer said that it would imposed a 50% loading.  It therefore was willing to impose a loading and pay out on a lower figure, after having taking the extra loadings into account.

The IFSO office checked this approach with two other senior insurers and both agreed that that was the practice they would have adopted.  The insured was therefore not entitled to the full pay out, but only the reduced pay out after the deducting the extra premiums he should have paid from the beginning.

Alan Knowsley

Insurance Lawyer Wellington