NAB (National Australia Bank) is currently facing a lawsuit in Victoria, where the wife of a policyholder alleges that negligent advice from the bank led to the nullification of $400,000 in life insurance benefits.
Rachel Sneddon, the wife of the policyholder, claimed that the recommendations made by NAB to transfer her husband’s superannuation to its wealth management division, MLC, resulted in a lack of payout following his death in 2020.
According to the Australian Financial Review’s (AFR) report, court documents show that the bank overlooked Mr Sneddon’s severe blood clotting condition in its advice, failing to disclose the potential risks involved in moving their superannuation and insurance to a new provider. Specifically, the Sneddons were not informed about the possibility of claim denial or coverage exclusions by the new insurer.
The lawsuit echoed key issues highlighted during the Hayne Royal Commission regarding vertical integration within financial services, where banks have been criticised for promoting their products over potentially more suitable options for customers.
Previously, the Sneddons were insured under superannuation accounts with AMP and Hostplus, with combined coverage close to $400,000. In 2015, following advice from NAB, they terminated these policies to transfer their superannuation entitlements to an MLC fund. However, Mrs Sneddon contends that when her husband died in early 2020, MLC denied the cover, citing undisclosed health issues.
The legal proceedings shed light on the obligations of financial institutions to ensure clients are fully aware of the implications of health conditions on insurance agreements. As the case continues in the Victorian Supreme Court, neither NAB nor Maurice Blackburn, representing Mrs Sneddon, have issued comments regarding the matter.
In other news from the Australian life insurance sector, the Life Code Compliance Committee shed light on a rising trend in compliance breaches by life insurers, making the third year of increasing infractions.
