Family health cover and a request to leave out eczema
The Patel family - Anita, 41, Raj, 44, and children Aarav, 7, and Maya, 3 - live in Auckland. Raj earns $120,000; Anita works part-time at $35,000. They have no health insurance but want cover for specialists, surgery and diagnostics because Aarav has waited eight months for an ENT assessment. Aarav has asthma, treated with two inhalers, and eczema; Anita had gestational diabetes in 2022 and is now prediabetic. The family applies for a $2,000 excess plan with surgical and specialist cover. The insurer offers cover with a three-year exclusion for Aarav's asthma and eczema and a 25% premium loading for Anita, but no exclusion for Maya. The family is disappointed and asks the adviser to 'leave out' Aarav's eczema because it is 'only a skin thing' and to apply to another insurer without mentioning it.
1. Explain the disclosure obligations and the consequences of following the family's request.
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The request to leave out Aarav's eczema is a request to make a false declaration. The adviser must refuse. Health insurers underwrite on the information disclosed, and a failure to disclose a treated condition can lead to a claim being declined or the policy being avoided. Eczema may seem minor, but it is part of Aarav's medical history and may be linked to asthma; the insurer is entitled to assess it. Anita's gestational diabetes and prediabetes are also material and must be disclosed. The adviser should explain that the insurer's exclusion or loading is the price of cover, not a personal criticism.
The adviser should not submit a second application that conceals the condition. That would breach the Code of Professional Conduct, could expose the client to serious financial loss, and may be fraud. The proper options are to accept the terms offered, ask the insurer to review the exclusion after a symptom-free period, increase the excess to reduce premium, or approach another insurer with full disclosure. The adviser should document the disclosure discussion and the client's instructions. If the family refuses to disclose, the adviser should decline to arrange the policy.
2. Evaluate the insurer's offer and recommend whether the family should accept it, shop around, or restructure the cover.
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The offer is not unreasonable on its face. A three-year exclusion for asthma and eczema is common where the conditions are active, and a 25% loading for prediabetes reflects the risk of future diabetes and related complications. Maya is offered standard terms, which is good. The family's main need is specialist and surgical cover for Aarav's ENT wait; an exclusion for asthma and eczema may not affect that need if the ENT issue is separate. The adviser should check whether the exclusion is for all respiratory and skin conditions or only asthma and eczema, and whether it can be removed after review.
The $2,000 excess is a sensible cost-control measure. The adviser should compare the total premium with and without the loading, and consider whether a higher excess or a narrower plan would keep the family insured. Shopping around is legitimate only with full disclosure; another insurer may offer better terms, but a second application also creates a new underwriting process and possible delays. The adviser should recommend accepting the offer if it meets the family's budget and the exclusion does not undermine the main purpose, while documenting the alternatives and the right to complain or seek a review.