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Insurance - life/mortgage protection insurance - non-existence of insurance discovered after death of one partner - large loan to service - no duty on bank to ensure a customer has life/mortgage protection insurance
Ms P’s partner (Mr T) aged 31, died suddenly in April 2007. Ms P had just found out that she was expecting their first child. Ms P and the late Mr T had recently bought a new house with a large loan of $480,000. Mr T had handled most of the arrangements.
Ms P contacted the bank, confident that Mr T had arranged life or mortgage protection insurance with the bank when they took out the loan. To her dismay, the bank said that Mr T did not have any insurance cover.
Ms P later complained to the bank. She asked why the bank had not discussed life or mortgage protection insurance with Mr T, or suggested that he take out insurance when taking on responsibility for such a large loan. Mr T was a cautious person and she was certain that he would have accepted life or mortgage protection insurance if was offered to him.
The bank said that it was satisfied that Mr T had been made aware that life insurance and mortgage protection insurance cover was offered by the bank, but he had not requested any cover.
Following the birth of her baby, Ms P referred her complaint to me.
I accepted Ms P’s advice that Mr T would have taken up the offer of insurance cover had it been raised with him and that it would have been preferable and probably good practice for the bank officer to have discussed insurance needs with him. However, in the absence of any legal duty on the bank to have such a discussion, I had no basis on which to make a finding against the bank. Therefore Ms P agreed to withdraw her complaint.
However, the bank agreed to see what it could do to assist Ms P over the next six months or so until she was able to return to work. The possibilities included a loan holiday, an interest only loan for a period of time and/or the exercise of hardship options under the Credit Contracts and Consumer Finance Act 2003.
As a result of this complaint the bank changed its policy so that its customers now need to sign a declaration stating that they have agreed or declined to complete an insurance needs analysis, at the time of obtaining a new loan from the bank.