The Australian Financial Complaints Authority (AFCA) has ruled a financial planning firm “incorrectly” informed a client who was diagnosed with cancer that he had life insurance through his superannuation fund, causing him to miss out on critical cover.

AMP Financial Planning disputes that it ever told the client that the superannuation fund set up by his employer provided life insurance but AFCA says the statement of advice (SOA) “clearly states” the client held $143,920 in life and total and permanent disability (TPD) via his super account.

The client had approached the adviser formally for advice to increase his cover and was given the SOA in July 2018, which stated his scope of insurance coverage at that time.

“The misrepresentation was significant because non-underwritten life insurance was critical in the complainant’s circumstances,” AFCA says in its ruling of the dispute.

“He had been diagnosed with cancer in 2014 and had informed the adviser of this in 2017. It was extremely important in such circumstances that the adviser represent his insurance correctly, even if the advice were limited.”

AFCA ruled the financial firm must pay $110,400 less premiums paid, plus interest, to the client for the loss he suffered as a result of the misrepresentation.

The dispute arose after the client made a terminal illness claim in February 2020 with his superannuation fund, the one his employer opened when he started a new job.

The fund declined his claim, explaining to him he did not have any such cover in place as the life insurance cover in the fund was contingent on employer superannuation guarantee (SG) contributions being made.

In his complaint to AFCA, the client says that he did not understand that the cover was contingent on SG contributions and was led to believe that he had cover by his adviser.

He says if his adviser had informed him that he did not have cover, he would have made SG contributions to obtain the cover.

When he approached the adviser in June 2017, he told the adviser he wanted the super fund created by his employer to be wound-up and the proceeds rolled into another fund, where his SG contributions have been made to.

He was told he could close the fund on his own and that if he did want the adviser’s help, he would need to complete paperwork for the adviser to investigate the new policy to determine if he was better off with it or not.

The client subsequently authorised the adviser to find out information about the policy, before further action was taken.

The adviser proceeded to make calls to the employer’s super fund, where he was told there was no insurance cover provided.

The fund also told the adviser that to activate the default insurance cover, the client would need to start making SG contributions to the fund, and the existing salary sacrifice contributions he had made did not meet its eligibility requirements to obtain insurance.

“The adviser had a duty to explain what he had found out about the [employer’s super fund] insurance, and the panel is satisfied that it was an implicit part of the scope of advice having regard to the overall circumstances,” AFCA says.

“The panel is satisfied that if the adviser had correctly informed the complainant that he did not have insurance and that he needed to make SG contributions to obtain the insurance, he would have done so.

“Therefore, ‘but for’ the breach the complainant would have had life cover insurance. It is also clear he would have been able to claim under the cover as it was automatic, non-underwritten cover.”

Click here for the ruling.