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Broker pays price for non-disclosure after client’s claims rejected

PSC Connect will compensate a business owner whose insurer denied three motor claims and cancelled his policy because his driving and bankruptcy histories had not been disclosed.

The Australian Financial Complaints Authority has ordered the broker to pay $3000 in non-financial loss compensation and contribute up to $5000 towards legal costs after it was unable to show it had asked the client about bankruptcy when incepting the transport package policy in February 2022. 

Claims were later denied because the man had several prior driving offences across two states and had been the subject of a bankruptcy, discharged at the end of 2021.

The dispute body says no financial loss was suffered because alternative cover would not have been available, but it found the broker breached its duty of care to the complainant.

“The broker should be able to demonstrate it made the necessary inquiries and maintained detailed, complete and comprehensive records of their interactions with their client in order to accurately confirm their instructions, advice and actions. In this case, the broker has failed to do so. The statement of answers is unsigned and is not supported by emails, phone calls or similar evidence,” AFCA’s ruling said. 

The absence of such records meant the dispute became “unnecessarily protracted, causing the complainant considerable stress and inconvenience”.

In late 2021, a broker who now works for PSC Connect amended an insurance policy for the complainant’s father’s business while employed by a different brokerage. In February 2022 the broker, by then at PSC Connect, was asked to cancel the original policy and take out the same cover for the complainant’s own business. 

The broker said driving and bankruptcy disclosure questions were repeated using the same certificate of insurance as a guide, but AFCA says there is no evidence of any bankruptcy question on that certificate and no reference in the broker’s typed notes from 2021.  

“The broker simply confirmed they asked exactly the same questions using the previous broker’s schedule. The panel is not satisfied the broker has shown they asked the complainant about his bankruptcy history when the previous policy was amended.”

A proposal form submitted to the underwriter answered “no” to questions about bankruptcy and driving offences. Email evidence indicated the business owner had no opportunity to correct those answers.

“The panel is not satisfied the broker has shown it had actually put that question to the complainant when the new policy was being arranged in February 2022,” AFCA said. "There is no context as to how the answers were gathered or whether the complainant had the opportunity to check and confirm them.”

Handwritten notes of phone calls “do not detail the questions (if any) actually asked” and PSC Connect “failed to provide any information which shows, on balance, that it actually asked the complainant about his driving and bankruptcy history before completing the insurance proposal form on the complainant’s behalf”. 

However, AFCA says PSC Connect’s breach of duty did not cause loss, because it is not satisfied the business owner could have secured comprehensive insurance if his full driving and bankruptcy history were disclosed, so he has not shown he was worse off than if the broker had not breached its duty.

“The panel does not consider the complainant has established he suffered a loss because of the broker’s actions. It would therefore not be fair to require the insurer to cover any such loss. However, it is fair in the circumstances that the broker pays compensation for the significant upset and inconvenience caused,” AFCA said.

See the full ruling here