Ailepata Ailepata made news last month.

Ailepata was turned down for a $100,000 claim for gastric cancer because he had been switched to a new insurer, with less cover, and he had not disclosed his “impaired glucose tolerance” when the policy was issued.

Some were quick to decry the “churning” insurance industry and advisers looking to make money from vulnerable clients.

Adviser coach Tony Vidler described the actions of the NZ Home Loans adviser who shifted Ailepata from a Westpac policy to a Fidelity Life one, with half the amount of trauma cover, as a “shocker”.

“Hope that has an impact on their licence application …,” he wrote on LinkedIn.

But insurance adviser Katrina Church said there was not enough information available to condemn the advice process.

“Sadly guys this is all about the client understanding their obligation about their disclosure requirements If they had disclosed the high sugars he may not have been accepted and still be insured at Westpac,” she wrote in reply to Vidler’s post.

“It is also about protecting a client through the underwriting process to ensure they know their obligations with a view to reduce the risk of this happening. Is Fidelity a better product than that of Westpac surely is where trauma comes into play. No product is good however [if] it isn’t underwritten carefully.”

Vidler said he was surprised by that point of view, which he said sounded like she was blaming the client.

“Which part of this ‘advice’ (and I am being generous referring to it as such) do you think was appropriate? If you are publicly condoning replacement where the client ends up with less cover across the board and a higher premium and was only minimally involved in completing the application form all under the pretext of ‘better service’ and a ‘better’ deal then you are contributing to the problem the industry faces. It seems likely also that this is also a vulnerable consumer where extra care – not less – would be required and expected by professionals.”

While Church said “keyboard warriors” had taken the debate in an unhelpful direction, both Church and Vidler agreed that the issue of non-disclosure was a pressing one for the industry to deal with.

Vidler said: “Clients often, with the best of intentions, tell you everything they think you want to know then later say ‘I didn’t think that would matter. A doctor told me I needed to get my blood pressure under control 17 years ago but that doesn’t matter, does it?’”

Clients were in a poor position to judge what would be important to an insurer, he said, and it was the adviser’s job to step up.

“I always take the view that the adviser should be the frontline underwriter … if there’s any doubt or questions you’ve got to draw attention to it.”

If there was a concern about something from a client’s past, the adviser could suggest the insurer requested medical files, he said.

“The reality is the overwhelming majority of good risk advisers do that already.”

Church said there was not enough in the articles written about the case to condemn any adviser. “My experience is most clients don’t truly understand what their obligations regarding disclosure are. And as advisers I would ask do we do enough here to help out clients? Are we training this as well as we can in the industry?

“Advisers are the first underwriters and we should do all we can to derisk the situation for clients – this is something that online or applications made direct to providers can't. That’s our point of difference. 

“Advisers should be thinking, is this client really understanding what they have to do when they are filling out this form? That’s the first thing. The industry could do better, insurers could do better.”

She said it was the adviser’s obligation to underwrite all business and “derisk” the situation for clients in a way that online or direct-to-provider applications would not.

She said the level of non-disclosure picked up through her own business’s processes was “huge”. It was a concern that there was so much business being written on standard terms, she said.

“There are many ways an adviser can lower the level of non disclosure – ensuring the client reads their application post-submission and confirms this prior to issue, obtain medical notes from the outset, obtain ACC claims histories.

“This all gives you the tools to understand if a client knows and understands their medical history – this protects the client. Your own business picks up a huge amount of non-disclosure from highly intelligent people who just forget things.

“If I have a proposal with nothing disclosed – that’s a red flag.”

Many people did not understand what was in their medical notes, she said, and sometimes GPs had added information that clients did not even know was there.

She said, on the facts available, she might have suggested a shift from Westpac to another insurer, too. But it was important to help the client through the disclosure process, seeking medical notes if there was doubt – or flagging with the insurer that more investigation could be required.

Industry organisations could do more to train advisers, she said, as could insurers.

BDMs could be tasked with helping to teach advisers to help clients fill out forms properly. If there was a run of non-disclosure from a particular adviser, that could signal action required from the insurer, she said.

“Could we as an industry have a serious conversation about how to protect clients? Because quite frankly this wouldn’t have hit the news if a claim was paid. And isn’t that what we are all here for.”