RAC Insurance has been told to reinstate a claimant’s policy, despite his failure to pay monthly premiums, after the financial ombudsman found it did not provide adequate access to key documents.

The insured made a vehicle damage claim on February 26 last year but was denied a payout and told his policy had been cancelled three days earlier.

RAC Insurance said it had sent the man letters on January 23 and February 3 informing him of rejected payment attempts and asking him to check his direct debit details.  

The insurer said its policy terms allowed it to cancel cover without notice if a payment was overdue by more than a month.  

In its dispute decision, the Australian Financial Complaints Authority accepts the claimant had not paid for more than a month when the policy was cancelled.  

But it says that for RAC Insurance to be entitled to cancel the policy without notice, it would have to show it clearly informed the insured about these terms.  

The insurer said it provided a link to its product disclosure statement in an email sent after the policy was purchased, but no copy of this was provided to AFCA.  

RAC Insurance referred to a screenshot showing a dropdown list of documents, including one named PDS, which it said was provided to the complainant under the “new business” email in August 2023.

The authority says an example “new business” email provided by RAC Insurance had a PDS hyperlink that went to a blank page stating: “Service is unavailable.”

The insurer maintained the link had been working, but it could not provide a copy of the link it gave to the insured.  

The complainant said he was provided a “welcome” email, which differed from the “new business” email.  

The authority notes the “welcome” email invited policyholders to sign up to RAC’s online portal and, in smaller print at the bottom, included an invitation to view the PDS through a link.

The insured said he had not used this link.  

AFCA says the link “went to a page from which the complainant could select another link to view the documents applicable to his policy type, and then a further link to access the PDS”.

It is “not satisfied giving a pathway for the complainant to find the PDS through a series of hyperlinks commencing from a link in small print at the bottom of an email is consistent with good practice or satisfies the requirement under the [Insurance Contracts Act 1984] to clearly inform the complainant of the policy terms”.

The authority’s adjudicator added: “I am not satisfied the insurer has shown the complainant was clearly informed of the policy terms allowing the insurer to cancel the policy without notice or refuse to pay a claim when an instalment payment is overdue.

“Accordingly, the insurer is not entitled to rely on these terms.”

The company has been told to assess the man’s claim, subject to payment of all outstanding premiums.

Click here for the ruling.

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