However, according to case notes published by Financial Services Complaints Ltd (FSCL), the result could have been different under the new financial adviser conduct regulations introduced on March 15 this year.

Kate (not her real name) decided she needed income protection insurance and went to an adviser who recommended she also get mortgage repayment, trauma and a small amount of life insurance for better protection.

Kate accepted the advice and proceeded with the insurance also disclosing some previous medical issues on the application.

A year later, Kate suffered a back injury and had to take months off work.

She contacted the adviser about making a claim and he reminded her they put a 13-week waiting period in the policy before she could make a claim and the waiting period had helped to reduce her premiums.

Kate was receiving ACC support, so she could manage her expenses during the wait period. However, when she submitted a claim, the insurer declined it due to the non-disclosure of several medical conditions, including rheumatoid arthritis, which can contribute to muscular injuries.

Kate complained to FSCL about the adviser alleging the insurance was not fit for purpose because:

- As a teacher, Kate received 100% of her income from ACC, rather than the usual 80%, reducing the need for income protection insurance.
- The adviser told her any ACC cover would only last six months, which wasn’t correct.
- Kate couldn’t afford the income protection policy, given the limited benefit it provided and that she had to wait 13 weeks to make a claim.
- The adviser didn’t adequately advise her on the risks of non-disclosure and should have recommended she provide medical records.

The adviser said the insurance was tailored to Kate’s needs and although the income protection benefit would be offset by ACC, it would still apply in the event of illness.

The adviser denied he told Kate any ACC cover would only last six months. Rather, he said he likely discussed his own back injury and experience with ACC, which he often does with clients.

He said Kate agreed to use the 13-week waiting period to bring the premiums within her strict fortnightly budget of $100 and said he advised her on the risks of non-disclosure, as is his usual practice.

According to the FSCL review, the adviser had not kept a written statement of advice or made notes at the meeting where Kate filled in her application form - FSCL had to work out what advice was given using their correspondence and the needs analysis notes he filled out when advising her.

The FSCL deemed Kate’s insurance was fit for purpose because it protected her in the event of either illness or injury while meeting her fortnightly budget.

Correspondence also showed he altered Kate’s proposed cover to bring premiums down and explained the effect of doing so.

The needs analysis notes showed Kate said she had sufficient annual and sick leave to cover the waiting period and showed the adviser told Kate that her income protection benefit would be offset by any ACC cover.

There was no evidence the adviser told Kate ACC cover would only last six months.

"Finally, we thought it was likely the adviser adequately advised Kate on the risks of non-disclosure," the case notes state, and when the insurer sent its offer of terms, the adviser noted exclusions for these had been applied ‘as expected’.

As a result, the FSCL closed its investigation but did offer some insights on record keeping.

"This complaint may have been decided differently under the new financial advice regime which came into effect on 15 March 2021 (and only applies to advice given after that date).

"Advisers now have a number of additional obligations, including making sure their clients understand their advice. Advisers also have to keep adequate records to show how they met their obligations in their dealings with the client.

"The record-keeping in this case was sub-standard."