An insurer cancelled a death and funeral insurance policy lawfully and is not obliged to reinstate it or pay out the benefit, the financial services ombudsman has ruled.

The policy was held from December 2014 to March 2023, when Hannover Life Re cancelled it due to non-payment of premiums.

The policyholder died of cancer, aged 78, in December 2023 and her beneficiaries complained that the insurer had misrepresented the extent to which premiums would increase.

Hannover Life Re failed to appropriately consider the woman’s health status, financial hardship and vulnerability, they told the Australian Financial Complaints Authority, arguing the insurer should have contacted them about premiums not being paid, and it should pay the benefit.

But the ombudsman says the insurer gave the woman several opportunities to reinstate the policy and there was no indication she could not make her own financial decisions.

Premiums increased from $28.96 to $54.85 over the life of the policy, but the rises and policy terms were clearly explained. Premiums were often overdue and the insurer lawfully cancelled the policy.

In May 2023, the woman asked to reinstate the policy and was told she would have to make outstanding payments. That July, Hannover Life Re offered hardship assistance by reducing the amount payable.

In ruling against the beneficiaries, the ombudsman says Hannover Life Re gave the woman several chances to reinstate, although it was not obliged to do so.

By October 2023 the insurer was aware the woman had terminal cancer, was on a pension and financial hardship had affected her ability to pay premiums. It was not aware until December – after the policy had lapsed and the opportunity to reinstate had expired – of any mental health concerns or the woman’s gambling issues.

Hannover Life noted the $7698 in premiums paid did not exceed the benefit of $10,721.

Read the ruling here.