A Hamilton policyholder has had his health insurance cancelled following a cancer diagnosis – less than a week after MBIE published its options paper for an insurance contract law review, which urges a reform on current duty of disclosure.
An article by Stuff detailed the case of 44-year-old Dave Evans, who received a clean bill of health when immigrating to New Zealand in December of last year, but had his Partners Life policy cancelled following a diagnosis of terminal cancer. The insurer claimed it had not been made aware of a previous GP visit for stomach pains and acid reflux, something the Evans family say had been disclosed to their insurance broker.
Under current law, insurers have the right to terminate cover on the basis of innocent non-disclosure. According to Shine Lawyers associate Tim Gunn, an overhaul of duty of disclosure is well overdue as this situation is sadly “far too familiar.”
“The people I see on a regular basis genuinely don’t know that they have a certain type of illness, but questionnaires from the insurers are very opaque and difficult to interpret,” Gunn told Insurance Business.
“A lot of those questions will ask for ‘signs and symptoms’ and list three pages of ailments that the average person has no knowledge of. These symptoms can range from the extreme to the very mundane that the average person would simply not think to put down. The insurer asks you to make judgement calls when you’re filling out that questionnaire, and people don’t tend to think back to every single potential ailment that they’ve ever had. They think of the major diagnoses.”
According to the recently released insurance contract law reform options paper, insurers often don’t do enough at policy inception time to actually understand the risk that they are taking on. In this particular case, the insurer found something at claims time that they deemed important to know – however, Gunn says the insurer should be the one deciding whether a client is fit to take out cover from the very start.
“This particular client also believes they told their broker the information under question, and the broker didn’t pass that on,” he continued. “Again, this is something that happens all the time. The broker may have determined that that information was trivial and omitted it when applying for the policy – however, informing a broker means the insurer has deemed knowledge.
“The options paper suggests replacing current requirements with a duty to disclose ‘what a reasonable person would have known’ – but what average person knows every sign and symptom for the pages upon pages of obscure conditions that are put into these forms?” Gunn concluded.
“Duty of disclosure has to be completely overhauled as the customers are the one who need to be protected – not the billion dollar life insurance companies.”
The Evans family will be putting a complaint to the Ombudsman, and assert that they made no omissions in disclosure.
