IAG has been told to reinstate a disability pensioner’s vehicle policy after it sent a cancellation notice by post and not email. 

The man lodged a claim in September 2023 when he hit a parked car, but it was denied because his policy had been cancelled on July 18 after he stopped paying the monthly premium.  

IAG said it sent a letter on June 6 flagging the payment issue. A second letter was sent on June 18 saying the policy would be cancelled on July 18 if no payment was made.

Another letter dated July 19 stated the policy was cancelled.  

The policyholder said the payments failed because he changed debit card, and he argued the insurer’s action was unfair because it had not been communicated through his preferred method, email. He said he was often away from home and did not receive the mail on time.  

In a dispute before the Australian Financial Complaints Authority, IAG provided a record of a phone conversation in which the man was asked if he would “prefer to receive all your documents by email or are you comfortable to have it by mail?” He responded: “No mail’s fine.”

The insurer said this showed it was fair to send letters.  

However, AFCA says the call recording “leaves open the likely probability the complaint believed his preferred method of communication was by email”. It says earlier in the conversation, the man insisted the insurer correctly update his email address.

The authority acknowledges the man said he was “comfortable” with letters, but it says this response “would likely have been intended as an indication mail could be one choice of communication, but not the only choice.

“While the insurer might say the correct email address is required to identify the complainant during telephone calls, the time spent discussing and processing his new email address is consistent with the complainant’s belief his preferred method of communication with the insurer was, in fact, via email.” 

The policyholder, who suffers psychiatric illness and cognitive issues from a traumatic brain injury, said his disabilities “may have exacerbated any confusion he had about preferred methods of communication”.  

The authority says the insurer failed to show the man chose to receive communication via post, despite its reference to “records” demonstrating this.  

IAG has been told to reinstate the man’s policy upon payment of any outstanding premiums and accept the claim for the vehicle damage.  

“The exchanged material shows the complainant reasonably expected to receive communications from the insurer by email,” AFCA said. “The insurer did not notify the complainant in writing by email about its intention to cancel the policy. 

“This meant the complainant was not aware of the payment default. It follows the insurer was not entitled to cancel the policy.”  

Click here for the ruling.