Learn from big obesity error

Sometimes people make mistakes which might be laughable, if they weren’t so tragic.

One such mistake was made by a woman who took out a life insurance policy from her bank, which would pay $50,000 if she suffered a permanent disability, and $500,000 if she died.

The application form asked for her weight in kilograms, and she wrote ‘‘119’’, but added ’’lbs’’.

Five years later, she was diagnosed with cancer and made a claim.

When the bank investigated, it found she weighed 119 kilograms, not 119lbs (54kg).

54kg is in the ‘‘healthy’’ BMI range for someone of the woman’s height. 119kg is obese.

A slam dunk case of someone misleading an insurer, even if it was by accident, which surely it was.

In such cases, the insurer is entitled to ‘‘avoid’’ the claim, tear the policy up, and keep all the premiums.

And yet, the bank offered to

GOLDEN RULES

Always fight your corner Take great care with insurance forms

Go to pains to disclose everything refund $5000 in premiums to the woman ‘‘out of sympathy for her situation’’.

We know about this poor woman because she made a complaint to the Banking Ombudsman, which published a case note.

The ombudsman found the bank was entitled to decline the claim, and yet, the bank actually offered her compensation in addition to the refund. The woman accepted.

Banks don’t tend to hand out money when they don’t need to, so why did it offer more?

I suspect the insurance was sold face-to-face in a branch, and that someone in the bank saw they were dealing with an obese person, which is why the woman insisted to the ombudsman the bank should have known her real weight.

It’s not the first time the ombudsman’s had a case like this. In another from this year, a man took out life insurance with disability and redundancy benefits when he bought a house.

A banker visited his house and helped him apply. Five years later, he made a claim when he needed surgery caused by his diabetes, which he had when he took out the policy.

It was declined because the policy did not cover pre-existing

‘‘When they most needed their insurance, they found they'd been paying for nothing.’’

conditions, though as with the woman, it offered him a goodwill payment.

The bank had given the man information stating pre-existing conditions weren’t covered, but the bank’s internal information showed the policy was designed for healthy people who didn’t need cover for pre-existing conditions.

The ombudsman believed the bank knew the man had diabetes, though also found the policy was suitable for him because it provided cover for other illnesses, injuries and redundancy. There are lessons here. Ordinary people, who are not experts in insurance, have a duty to tell insurers what they need to know. People must read policies, and take care when filling in forms.

But, bank staff make mistakes too. Sales processes can be flawed. Red flags can be missed, or willfully ignored. People are sold policies they don’t understand.

These customers won partial victories, but when they most needed their insurance, they found they’d been paying for nothing.