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Stand-down period sparks complaint

An insurance client who was unable to claim for cardomyopathy because of a stand-down period has complained his adviser should have warned him that was a possibility.  

Wednesday, June 14th 2017, 7:32PM 6 Comments

The man took his case to Financial Services Complaints Ltd.

As he was about to turn 50, the man, whom FSCL identified as Daniel, wanted to reduce his life and trauma cover premiums. He contacted his adviser to discuss his options.

FSCL said the adviser reviewed the policies and found another that could give similar benefits, with lower premiums.

It was recommended that Daniel take out the policy with the new insurer.

"Daniel had no pre-existing conditions and made full disclosure of his medical history to his new insurer. Daniel took out the new insurance policy and his old insurance policy was cancelled. The new insurer agreed to cover Daniel, but a stand-down period was included in Daniel’s policy which excluded any claims that related to symptoms that may arise in the first 90 days of Daniel’s new policy," FSCL said in its complaint case note.

But 60 days later, Daniel was admitted to hospital and diagnosed with cardiomyopathy.

It was covered under his new policy, to a maximum $55,000 payout, but his claim was denied. He would also not be able to claim for anything in future relating to cardiomyopathy, which became a pre-existing condition.

"A few years later, Daniel contacted a new insurance adviser," FSCL said.

"He explained what happened with his old insurance adviser and was told that his old insurance adviser should have explained the 90 day stand-down period, and perhaps asked the insurer to waive it because Daniel had similar existing insurance and had not made a claim."

Daniel made the complaint to FSCL, saying his former adviser had not acted in his best interests.

FSCL reviewed the complaint. His former adviser was no longer working but the business he worked for addressed it.

FSCL addressed the severity of Daniel's cardiomyopathy against the policy wording of his new and old policies and found neither would respond to the condition at it current low severity.

But the new policy would have been triggered if it had worsened. Because he now could not claim for that, FSCL said that was a financial loss.

Daniel and the company reached a full and final settlement. One of the terms was that, if there was an otherwise valid claim declined due to being related to signs or symptoms that arose during the stand-down period, the adviser business would pay out a capped sum.

Tags: Life insurance Trauma

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Comments from our readers

On 15 June 2017 at 5:51 pm Aurora said:
There are some key details missing in this article specifically around the replacement business form and whether or not one was even completed?
On 16 June 2017 at 9:51 am LNF said:
It was a churn and the only beneficiary of the churn was the adviser. Should have reduced the existing cover for no financial benefit. No sympathy
On 16 June 2017 at 11:00 am Dirty Harry said:
Love to know more about this case.
Specifically the fact that replacement rules were not in place with the 2nd insurer covering the stand down. And second the call re replacement bus form.
On 16 June 2017 at 11:11 am Majella said:
It's unusual that the stand-down was applied. Usually, when switching supplier (for good reason or whatever), if the existing benefit has been in place for at least 3 years, the stand-down period is waived.
On 19 June 2017 at 9:23 am Dirty Harry said:
This is the sort of behaviour I'd expect from a large institution with an employee "adviser" (just typing that makes my mouth taste bad - these guys are no such thing).

It's the selling a policy that's probably "cheaper", perhaps with no replacement form in sight, and the moral compass set low enough to rely heavily on despicable exclusions even when the mainstream, Adviser based, insurers would deliberately have placed themselves on risk by waiving the stand down. It's also the hand-in-pocket just deep enough to ensure confidentiality agreements and closure.

BTW, if this was not a large institution employee, but an Adviser, then it's even worse.
On 16 June 2020 at 3:10 pm Majella said:
Dollars to doughnuts, this 'adviser' worked for a bank. Poor mug went into a branch to get a bag of $2 coins for his till and got asked the inevitable question by the teller. Poor guy hadn't thought about it recently but was shuffled over to the in-house 'adviser'. Good on you, Big-End-Of-Town!

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