A man who reduced his trauma cover but then wanted a higher claim payment has won a dispute before the financial services ombudsman, which says the insurer was partly responsible for a misunderstanding.

The man had $303,114 of cover with AIA when, in December 2024, he contacted the insurer to enquire about lodging a claim for rheumatoid arthritis. He was told a claim pack would be sent.

In January 2025, at renewal, he reduced his cover to $100,000.

That March, he made a claim for “severe rheumatoid arthritis” and AIA paid him $100,000.

He took his case to the Australian Financial Complaints Authority, arguing he should be paid $303,114 because he lodged his claim before he cut his cover.

He said he reduced his cover because he was misled by AIA’s website and the insurer should have warned him about the risk to his claim when he called in January.

The insurer argued he met the policy definition for severe rheumatoid arthritis only after he reduced the amount, and it did not mislead him and had given proper assistance.

The ombudsman says the man became entitled to a benefit in April 2025, but AIA should nevertheless pay the higher amount because it knew he had a claim when he contacted it to reduce his cover and should have warned him about the implications.

“The complainant misunderstood his cover and the insurer was partly responsible for that misunderstanding.”

The ombudsman says that when the man checked AIA’s website, he saw it paid out $25,000 for rheumatoid arthritis, and he did not understand he could claim the full amount for “severe rheumatoid arthritis”.

The man reduced his cover because he could not work due to illness, but when he called in January 2025, the insurer did not ask about financial hardship.

Read the ruling here.