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AFCA ruling ‘in best interests of client’, says ABN

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Australian Broker Network has responded to a dispute ruling that went against the business after one of its authorised representatives was found to have breached its duty of care to a client and must pay compensation.

“As members of AFCA we are bound by their decision and accept its findings to be in the best interests of the client, despite our submission to the complaint,” Director Tremayne West said.

As reported by insuranceNEWS.com.au, AFCA ruled the broker had not used proper care and skill when changes were made to the client’s policy when it was up for renewal in December 2018.

The client only found out the sum insured for the business truck was reduced by $30,000 to $20,000 after it made an unsuccessful claim to fully recover the truck’s repair cost of more than $26,000.

Mr West says the ruling has highlighted two aspects that serve as “a worthy reminder” to the industry.

He told insuranceNEWS.com.au that risk advisers need to have clients’ best interest at front of mind at all times.

“In this example it was beholden on Yes Insurance Group to properly understand and caution the client on their instruction, and not just follow it,” Mr West said. “To reduce the sum insured to the level requested should have highlighted concerns and a response to the client that the truck was worth considerably more.

“Then written instruction should have been sought from the client to confirm their [instruction] to reduce the sum insured.  The confusion in this case was the value of the truck, as opposed to the truck and body combined.”

AFCA says the broker not only failed the client when it misunderstood the instructions given before the policy was renewed, it also did not reasonably determine if the reduced coverage was suitable for the client’s needs and did not immediately inform the client after the policy was changed.

The client told AFCA it had asked whether the truck’s chassis and tray could be insured in separate amounts. They say they did not ask the broker to lower the sum insured.

AFCA says a competent and experienced broker would have realised reducing the sum insured by $30,000 was an “unusual request” and reached out to explain the changes may be a risky move.

Mr West says risk advisers all must take notes on telephone instructions, complete day books, make entries into policy administration systems and email client instruction for confirmation response.

“While the outcome of this example was payment of around $6000 payable by Yes Insurance to the client, the potential ramification for other instances could be multiple times of this amount,” he said.

Read here for the AFCA ruling.