AMP Ordered to Pay $450,000 after the client dies with no cover
AMP Financial Planning is ordered to pay $450,000 in compensation to the beneficiaries of a man who died without insurance coverage. The advisor’s recommendation to cancel the client’s life insurance resulted in financial consequences for his family. The Australian Financial Complaints Authority (AFCA) ruled in favor of the complainant, highlighting the advisor’s failure to adequately communicate the implications of the decision.
AMP Financial Planning must pay over $450,000 to the beneficiaries of a man who died in an accident after his life insurance lapsed.
An AMP advisor had recommended to the 38-year-old man, known as Mr P, to roll over his existing superannuation and replace his life and total and permanent disability (TPD) cover with a new fund in 2018. The insurer declined the new insurance application due to his existing medical conditions, leaving Mr P without insurance at the time of his accidental death in April 2019.
Mr P’s ex-wife, the mother of his two children, had sought the benefit of his cover, unaware that he had been advised to cancel his insurance policies. She argues the advisor should have recommended he keep his existing policies.
AMP states Mr P decided to proceed with rollover knowing his existing insurance would be cancelled, and that insurance was not a priority for him.
The Australian Financial Complaints Authority (AFCA) was in favour of the complainant stating the advisor should have made the implications of his decision clearer. The AFCA requires AMP to pay a total compensation of $457,749.12. This includes the benefit minus the cost of premiums to be paid into a trust established for the benefit of Mr P’s late two children for them to access when they turn 18.
The AFCA came to their decision stating, “There was a very real risk that the late Mr P may have had difficulty obtaining insurance in the future if he did, he may have faced significant premium loadings related to pre-existing conditions.”
“By allowing the existing insurance to lapse without warning of these risks and without undertaking further investigations into the late Mr P’s health to properly assess these risks, the advisor failed to warn the late Mr P of the significance of his insurance being allowed to lapse.
“The panel acknowledges that retaining the insurance was not the key priority for the late Mr P, but is satisfied this is only because he was not aware of the implications.”
Originally published by insurancenews.com.au
