Hannover Life Re does not have to pay a terminal illness benefit after it showed a policyholder did not answer questions correctly when applying for cover.

The insured made misrepresentations while buying the policy on September 24 last year, the Australian Financial Complaints Authority finds in a dispute ruling.

She was awaiting medical test results at the time, but denied this when asked. When she claimed a terminal illness benefit on November 22, the insurer investigated before denying the claim and refunding premiums paid. It has avoided the policy, meaning it is treated as if it never existed. 

An AFCA ombudsman listened to a recording of the woman buying cover over the phone. The insurer’s question about awaiting test results was asked clearly and there was no suggestion the woman did not understand. The insurer explained what could happen if the woman made any misrepresentations, and she acknowledged this.

Hannover later repeated these points in a welcome pack sent with a product disclosure statement.

The woman argued she had not been diagnosed when she applied for cover, but the ombudsman says she was asked about tests, not diagnosed conditions.

“The insurer has shown the complainant breached her duty when taking out the policy,” AFCA said. “She did not take reasonable care to not to make a misrepresentation about the medical tests.”

See the ruling here.