A recent Victorian Supreme Court decision has significantly raised the bar on risk advisers and their duty to clients, according to risk specialist and principal of Integrity Resolutions, Col Fullagar.
Pointing to the findings in the case of Swannson versus Harrison handed down last month, Fullagar said the findings of Justice Macaulay had not only raised the bar on what was expected of risk advisers in their interactions with clients but, by implication, had opened to question whether they were being adequately compensated for those responsibilities.
The Victorian Supreme Court decision saw a risk adviser penalised when he moved a client from one long-standing insurance policy (which had been the subject of a significant premium increase) to another policy in circumstances where the client, while having consulted with a doctor, proved to have (at that point) undiagnosed pancreatic cancer.
If the client had remained covered by his existing policy he would have been eligible to receive a pay-out of nearly $1.5 million, but because the seriousness of his medical condition was undisclosed to the new insurance, the new policy was voided.
In the end, the court ordered that the client be paid nearly $739,000.
The judge found there was negligence on both parts, but found that beyond advising his client about his disclosure obligations and against immediately canceling the pre-existing insurance policy, the adviser should also have made further contact with the client to check his medical condition before ultimately writing the letter which cancelled the original policy.
Commenting on the implications of the case for the broader life/risk industry, Fullagar said that the court's findings suggested to him that the quality of risk advice could no longer be looked at in relative terms and that, in future, it would need to be looked at in absolute terms.
"And in absolute terms the advice in question, while sound in relative terms, did not get over the bar," he said.
Fullagar said there was no question that the court's decision had changed the underlying landscape with respect to how risk advisers should view their interactions with clients.
