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Case - 50836

2016 - 2017

Insurance

Life insurance

Ms U took out life insurance through her bank. The policy would pay $50,000 if she suffered a permanent disability and $500,000 when she died. She completed a form seeking personal and medical information. The form asked for height in centimeters and weight in kilograms, but Ms U wrote “1.6” and “119”, above which she wrote “m” and “lbs”. The bank approved her request for insurance based on this information.

Five years later, Ms U was diagnosed with cancer and claimed the disability benefit on her policy. The bank sought information about the cancer and discovered Ms U was much heavier than it previously thought. She had said she was 119 pounds (54 kilograms) when she was in fact 119kgs. The bank declined her claim and cancelled her policy, saying it would not have offered her insurance if it had known her correct weight. However, it offered to refund her premiums – totalling about $5,000 – out of sympathy for her situation.

Ms U declined the offer and complained to us that the bank should have known her correct weight and should accept her claim. We didn’t agree that the bank should have known the weight stated on the form was incorrect because it was her responsibility to ensure she supplied correct information, and the bank was entitled to rely on the information she gave. We then considered whether the bank had the right to refuse to honour the policy. We concluded it did because:

  • Her stated weight was incorrect by a substantial margin – 54kg was normal, 119kg was obese.
  • Her weight was material to the decision about whether to provide insurance cover – knowing her true weight, the bank would not have offered her disability cover and would have required a higher premium for the life cover.
  • Ms U either knew 119lbs was incorrect or was reckless about whether this was correct when she filled in the form.

The bank then offered a further payment of compensation in addition to refunding the premiums. Ms U accepted the offer.