AFCA rules on broker v broker communications dispute

The Australian Financial Complaints Authority (AFCA) has found in favour of a broker in a dispute over email addresses used to advise a client – who was also a broker – that an insurer had declined to renew his professional indemnity cover.

The complainant argued he wasn’t told the insurer wouldn’t renew, and that alternative arrangements could have been found before the expiration. The failings had led to the cancellation of his Australian Financial Services Licence, and not having PI cover cost him potentially as much as $1 million, he said.

But PSC Insurance Brokers says a non-renewal notice was sent to addresses on file, a non-delivery notice wasn’t received, and it was only advised of new contact details after the policy expired. It also says alternative PI cover wasn’t available.

The policy started on July 1 2019 and was renewed in 2020 and in 2021. But on May 9 last year the insurer advised the cover now fell outside the risks it could insure, it was not in a position to negotiate renewal on any terms, and cover would cease from 4pm on July 1 2022.

On May 13 the PSC broker sent the non-renewal letter to the two email addresses previously used by the client, and says it wasn’t advised of a different email until July 5.

The complainant asserts the PSC broker understood he had shut down two websites associated with the past email addresses, and had another email, and he also communicated from a private email account and had provided a phone number. He says he expected the policy to auto renew and the broker should have done more to contact him regarding the insurer’s decision.

AFCA says there’s no information to confirm the advising broker knew prior to July 1 that the client was no longer using the previous email addresses.

“It is relevant to take into account the complainant’s profession as an insurance broker. As such, he must have been aware of the importance of maintaining up to date contact details. Further, he must have been aware of the renewal date for his PI cover,” AFCA says.

“The complainant’s contention that he trusted his PI policy would auto-renew is difficult to accept given that it had not done so previously. Instead, he had been asked to complete a new proposal form for each policy period.”

The panel acknowledges that the PSC broker doesn’t appear to have sought to provide advice on alternative options following the insurer’s decision not to renew, and it’s “arguable that it should have done so”.

But AFCA says it must also be recognised that the complainant was himself a vastly experienced broker, and the alleged breach concerns non-communication.

“The broker reasonably used the emails it had on file when it forwarded the non-renewal notice. The insurer is not responsible for the complainant’s failure to keep his contact details up to date,” it says.

The complainant conceded the traditional market’s underwriting appetite was “not good” at the time of the renewal but suggested cover could have been available through “another Lloyd’s binder”.

The advising broker said it went back to the insurer, but it was unable to assist due to a change of security, and none of its “alternatives” were able to look at insurance brokers as an acceptable risk. The complainant had also failed to meet Australian Securities and Investments Commission requirements for continuing professional development points, it said.

AFCA says it’s not satisfied that the complainant has proved on the balance of probabilities that he would have been able to secure alternative PI cover.

“He has not provided any evidence in support of his submission that such cover was available,” the decision says. “Further, the available information suggests that the complainant had not met the professional requirements to be able to continue as an insurance broker.”

AFCA says the PSC broker sought to communicate with the complainant in accordance with their standard arrangement, it is not responsible for his failure to advise of a new email address and the complainant had not shown alternative cover would be available.

The decision is available here.