A claimant has secured an additional benefit payment of $1.46 million under his total and permanent disability group cover despite not disclosing his diabetes on an application form.

The Australian Financial Complaints Authority says the insured should have answered “yes” to a question about medical conditions that needed treatment.

His answer was a misrepresentation, but insurer AIA has failed to prove he “deliberately misrepresented his health or was recklessly indifferent to the truth”.

The question asked: “Do you have, or have you ever had, any disease, illness or injury (other than colds, flu or mild asthma) which has required more than a total of two weeks off work during the last 12 months, or has recurred more than twice in the last two years, and/or is currently causing you symptoms or requiring treatment?”

The man said the question was “not clear” and he interpreted “requiring treatment” to mean active intervention for an acute or worsening illness.

He thought the term “treatment” did not include medications for stable conditions.

AFCA’s panel said: “In other words, the complainant explained he had been taking the medication for so long … that it was ‘part of his life’ and he did not see it as active ‘treatment’.”

The man filled out the AIA application form when consolidating his super accounts under the Hostplus fund in 2020.

AIA initially decided the claimant met its TPD requirements and paid him the default benefit of $119,000.

But it rejected his claim for the additional TPD benefit because he “failed to disclose all the heath conditions at the time of his application to transfer insurance and this failure was a fraudulent misrepresentation”.

AIA relied on an Insurance Contracts Act provision that allows an insurer to avoid a policy if failure to comply with the duty of disclosure was fraudulent or a misrepresentation was made fraudulently.

But AFCA accepts the man’s explanation around his understanding of the question, even if it was incorrect.

“Accordingly, on balance, the panel is satisfied that the complainant has given a reasonable and credible explanation for his misrepresentation.”

See the ruling here.