Insurer makes change as policyholder battles to reinstate cancelled coverage

Insurer makes change as policyholder battles to reinstate cancelled coverage | Insurance Business Australia

Life & Health

Insurer makes change as policyholder battles to reinstate cancelled coverage

He was thought to owe nearly a year’s worth of premiums

Life & Health

By
Roxanne Libatique

An Australian business owner has caught headlines after claiming that his income protection policy was terminated without his knowledge by MLC Life Insurance (MLC Life) – prompting the insurer to take action.

9Now’s A Current Affair report revealed that Jamie de Graaff, who had been a client of MLC Life since 2007, encountered the issue when he attempted to make a claim after sustaining an injury, only to learn that his policy was no longer active.

Business owner loses income protection insurance

De Graaff’s enterprise, which involves the physical work of cleaning trucks, machinery, and aircraft, had led him to secure an income protection insurance policy to safeguard against potential loss of income due to injury. Previously, MLC Life had honoured two claims under the policy for health-related absences. However, a breakdown in administrative processes led to an unexpected challenge.

Following a period of inactivity due to surgery in 2019, and upon his return to work in mid-2021, it was discovered that MLC Life had not resumed the collection of premium payments. This oversight went unnoticed until the insurer attempted to retroactively collect nearly a year’s worth of premiums in a single invoice totalling around $45,000 in August 2022.

“I didn’t realise that they weren’t taking the full amount,” De Graaff told A Current Affair. “But I just realised they were still direct debiting my account so I just thought that was normal.”

This revelation came to de Graaff’s attention under unfortunate circumstances when he suffered another injury and sought to activate his insurance coverage, only to be informed of its cancellation. Despite his situation, MLC Life’s initial response was to demand payment of all overdue premiums for the reinstatement of the policy, later offering to absolve a portion of the accumulated debt.

Legal representation for de Graaff, Duke Myrteza, argued that the fault lies squarely with MLC Life for not maintaining the policy’s active status as per their agreement, stressing that the insurer’s administrative lapse should not financially penalise de Graaff, especially during a period of personal and financial vulnerability.

“If the insurance company had followed the contract to the letter of the law, the policy would have been intact at the time of the injury, and the claim would have been accepted,” he said. “Right now, he can’t earn any money, he can’t afford to make payments on his home, to live day by day.”

MLC Life responds to income protection insurance issue

In a recent development, MLC agreed to forgo the disputed premium payments and to reactivate de Graaff’s income protection policy, enabling him to file his pending claim.