Personal or general advice? AFCA sets out what it means in dispute ruling

A Gallagher client who complained the broker breached its duty of care when arranging an income protection (IP) insurance policy, thereby causing him to have an inappropriate level of cover, has lost his dispute.

The dispute arose when the client made a successful claim in May last year, entitling him to a weekly benefit payment of $700. He says the weekly benefit is well below his actual pre-disability income and wants the broker to pay him the difference.

He says the broker should have advised him that he had inadequate cover but the Australian Financial Complaints Authority (AFCA) says no – ruling the broker provided general advice, not personal advice, when it set up the policy in 2016 at the request of the client.

AFCA says there is no doubt the broker provided the client with financial product advice but points out there are two types of advice under the Corporations Act: personal advice and general advice.

Personal advice as defined by the Act means a provider has considered one or more of the recipient’s objectives, financial circumstances or needs and general advice is financial product advice that is not personal advice.

AFCA says in this particular dispute Gallagher did not provide personal advice, noting the broker informed the client from the start that it operated on a general advice model and did not advise on suitability of the IP policies he was after.

The broker did not provide a recording of a phone call the client made on April 8 2016 requesting quotes for various covers, including IP, but it says during the exchange a general advice warning was given to the client who then nominated the levels of cover he wanted.

It provided a copy of an email it sent to the client later that same day which included the IP quote and the information the complainant had provided, as well as a covering letter.

The emailed quote recorded a proposed weekly illness benefit amount of $700 and the letter comes with a detailed general advice warning that states “should this insurance plan include personal accident & illness insurance, the advice has been prepared without taking into account your objectives, financial situation or needs”.

The advice warning went on to state “before acting on the advice, [one should] consider the appropriateness of the advice, having regard to your objectives, financial situation or needs”.

“The [client] accepted the income protection insurance quote, without requesting any changes,” AFCA said. “I am satisfied that the broker met that standard in its dealings with the complainant.

“The evidence supports a finding that it acted in a manner to be expected of a competent insurance broker operating under a general advice model.”

AFCA says the client did not ask for changes in subsequent renewal emails confirming a weekly $700 benefit cover if a claim was successful.

No information was provided that showed the client ever asked the broker for personal advice on the level of income protection cover he should take out or that the broker provided such advice, AFCA says.

While the client did ask the broker if the benefit amount could be increased and was informed it could but not for the purpose of the claim, it was not under the broker’s “duty of care” remit to advise that the amount should be raised.

“The fact that the benefit amount could be increased does not establish the broker should have advised the [client] to do so,” AFCA said.

“The broker operated under a general advice model and the complainant was told that was the case and what it meant.”

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