An insurer conducted an inadequate investigation of a policyholder’s earnings before alleging he made misrepresentations when applying for income protection cover, the financial services ombudsman has found.

Clearview Life has been told to honour the policy and pay the insured the maximum $6300 compensation for non-financial loss.

When it refused a claim, the insurer said that if it had known the truth about the man’s income it would not have insured him.

The policy was issued in November 2023 and the insured claimed after being injured at work in 2024.

When he applied for the cover in July 2023, he said he had been self-employed for more than 12 months and had a pre-tax income of $44,000 in the previous financial year.

At that time, he had not completed his tax return for 2022-23. He told the ombudsman he did not anticipate the substantial deductions for expenses his accountant later obtained for his tax return.

He said he had given his best estimate on the insurance application form and taken reasonable steps to tell the insurer his business was new, because he had been overseas between 2021 and January 2023.

The ombudsman says Clearview denied the claim on the basis the tax return was the only evidence of his income in 2022-23, but the man was overseas for nearly half that period.

Clearview could have asked for records of his income while he was overseas, but had not done so.

“There was no valid basis for the insurer to conclude that the complainant’s only income in the 2023 financial year was shown in the 2023 tax return. That is the insurer’s problem, not the complainant’s.”

Read the ruling here.