2011 National Conference Life Insurance Case Study Katy Adams – Ombudsman, Investments, Life Insurance &Superannuation Nicole Mackay – Senior Panel Case Manager, Investments, Life Insurance & Superannuation

A.1A person is totally disabled if, due to injury or sickness: o they are unable to do one or more of the important duties of their occupation; and o they are not working for payment or profit. A.2A person is partially disabled if they have been totally disabled and, due to injury or sickness: o they are unable fully to perform the duties of their occupation; o they have returned to work in their own or another occupation; o their monthly income is less than their pre-disability income. Scenario A – Policy Definitions

1.Did Chris have a duty to disclose the complaints about alleged unlawful activities if; a.it is established that Chris was aware of the complaints prior to applying for the policies? b.the application form did not specifically ask about these types of matters? 2.If the insurer is not entitled to avoid the policies, is it entitled to deny Chris' claim for benefits for : a.periods when he attended Tribunal hearings; and/or b.for the period he was deregistered from practice? Scenario A – Questions for Discussions

B.1Sickness means illness or disease which manifests itself after the policy is in force and which results in total disability or partial disability. B.2Manifests means that symptoms exist which would cause an ordinarily prudent person to seek diagnosis, care or treatment, or that medical advice or treatment has been recommended by or received from a medical practitioner. Scenario B – Policy Definitions

1.Did Chris have a duty to disclose the elbow problem? One of the questions on the application form was: “Have you ever had, or been told you have, or received any advice, investigation or treatment for any of the following: rheumatism or any other disorder of joints, bones or muscles; arthritis, RSI, tenosynovitis or myalgia?” 2.Having regard to the definitions of "sickness" and "manifests", is Chris entitled to benefits under the policies? Scenario B – Questions for Discussions

C.1 You must pay the premium to keep the policy in force…If the premium has not been paid in full for each life insured, we do not have to pay any benefits under the policy for any lives insured and we will cancel the policy for all lives insured. C.2This policy will end on the earlier of: the date we receive notification from you to cancel the policy the date we cancel the policy in accordance with our legal rights the date we cancel the policy because you have not paid the premium when due the ending of all covers for all lives insured under the policy. The circumstances in which each cover will end are set out in each cover section in these Policy Terms the date of the death of the last life insured under the policy. C.3Annual premiums for the policy must be paid by the policy anniversary date or the relevant premium instalment amount (if agreed by us) must be paid by the relevant instalment date. If a premium is not paid when due, we will cancel the policy 30 days after we give you notice of cancellation in writing Premiums may be paid by instalments if agreed by us and by an approved payment method and will be subject to a payment frequency loading as determined by us from time to time. The frequency of payment of premiums will be shown in the Policy Schedule. We may increase or vary frequency loadings on instalment premiums at any time by prior written notice to you. Scenario C – Policy Definitions

1.In these circumstances, which cancellation procedure applies? That is, section 59 of the Act or section 210 of the Life Insurance Act 1995 (“the Life Act"). 2.What constitutes a cancellation notice under section 59 of the Act? 3.What constitutes a cancellation notice under section 210 of the Life Act? 4.Would it make any difference if the notice was sent to Chris' former adviser, who failed to forward the notices to Chris? Scenario C – Questions for Discussions