A death claim, non-disclosure and a grieving beneficiary
Daniel, 44, died 18 months after taking out a $500,000 level-term life policy. His de facto partner, Lisa, is the nominated beneficiary. Daniel applied online without an adviser. He answered 'no' to a question asking whether he had ever been treated for depression, anxiety or a mental health condition, and 'no' to smoking in the past 12 months. His GP records show two episodes of moderate depression in 2020 and 2021, with fluoxetine prescribed, and a 2023 note that he had resumed smoking socially. The insurer has received the claim and is investigating. Lisa calls the adviser who had reviewed Daniel's mortgage two years earlier but did not arrange the life policy. She asks the adviser to help her 'get the claim paid' and says Daniel 'didn't think it mattered'.
1. Explain how the insurer is likely to assess the claim and what the adviser can and cannot do.
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The insurer will compare the application with the GP records. The depression treatment in 2020 and 2021 and the 2023 smoking note are material because they affect mortality and underwriting. If the insurer would have declined the policy, it may avoid the contract and refuse the claim. If it would have accepted with a higher premium or an exclusion, the Insurance Law Reform Act 1977 may allow an adjustment rather than a total decline. The adviser should not assume the claim will fail; the outcome depends on the insurer's underwriting guidelines and what it would have done.
Lisa should be told the truth: the adviser cannot help her conceal information or present a misleading claim. The adviser can help her request the insurer's decision in writing, gather GP records and the application, and explain the internal complaints process and the free dispute-resolution scheme if the decision is unfavourable. The adviser should check whether the policy had a suicide exclusion; after 18 months it is likely outside a standard 13-month exclusion, but the non-disclosure issue remains. The adviser should not act as Lisa's lawyer or promise an outcome. If the adviser did not arrange the policy, they should be clear about the limits of their role and refer her to a specialist claims advocate or legal advice.
2. Describe the client-service and ethical steps the adviser should take from the first call through to a possible decline.
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Start with empathy and clear process, not blame. Lisa is grieving and may be frightened. Explain that the adviser will not contact the insurer without her authority, and that all information will be handled under the Privacy Act 2020. Ask her to provide the application, the policy schedule and the GP's records, and check whether Daniel had a will or trust that affects who can receive the benefit. Do not coach her to say Daniel forgot or did not understand unless that is true.
The adviser should put the insurer's requests in writing, keep a file note of every contact, and avoid giving legal advice. If the insurer declines, explain the options: a formal complaint, the insurer's dispute-resolution scheme, and independent legal advice. If the adviser's firm has a conflict because it may have missed a disclosure issue during the mortgage review, escalate internally. The adviser should not accept a fee contingent on the claim being paid, and should not sign documents on Lisa's behalf. The ethical standard is to help her be truthful and informed, not to get the claim paid by any means.