A dispute over a life insurance policy that was sold in 2006 has set out how the Australian Financial Complaints Authority (AFCA) applies its six-year time limit rules. 

The complainant bought a life and disability insurance product in that year from National Australia Bank (NAB), only to find out in 2010 that the policy was not compulsory. She had acquired the policy on the advice of a bank employee, who told her she had to buy it or her home loan would not be approved. 

She cancelled her policy in 2010 and lodged a complaint last year with AFCA, seeking a refund of premiums and compensation for her losses. 

NAB says the case fell outside the ombudsman’s time limit rules – which specify complaints must be brought within six years – but AFCA rejected the bank’s line of defence. 

AFCA says the key thing is when a complainant became aware of a loss and in this dispute the woman only knew about it last year after talking with her representative, who lodged the complaint last year on her behalf. 

“The time limits in AFCA’s rules turn on when the complainant was aware of her loss,” AFCA says in its ruling of the dispute, which went in the complainant’s favour. 

AFCA says the complainant’s loss, in this case, was the financial loss associated with having an insurance policy she did not have to have, and would not have had if she had known it was voluntary. 

“I am satisfied that the complainant knew the policy was voluntary from 2010 (and she cancelled it straight away),” the ombudsman says. 

“I am not satisfied she knew in 2010 that it was voluntary before 2010. It follows that she was not aware of her loss in 2010.” 

NAB also countered unsuccessfully that the complainant has not shown she would not have bought the life policy anyway. 

“The fact that the complainant cancelled the policy in 2010 as soon as she learned it was voluntary supports that conclusion,” AFCA says. 

“There is nothing to suggest that the complainant was looking for an insurance policy. She was looking for a home loan.” 

AFCA also ruled the bank did not give “appropriate” advice and that the employee who told the complainant she had to buy the life policy was “unqualified” to provide personal financial advice. 

NAB refunded a portion of the premiums when the policy was cancelled in 2010 and AFCA ruled the bank must refund the remaining amount as well as reimburse the complainant all finance interest she has incurred on the premiums. 

Click here for the ruling.