'Not like for like': AFCA rejects complaint that broker caused client to overpay

An Aon client who insisted the broker failed to source a cheaper public liability (PL) policy, thereby causing it to pay more in premiums during the insured period, has been told the cover was not “like for like”.

The Australian Financial Complaints Authority (AFCA) says the client, a company that took up the Aon-arranged policy in March 2018 for a plot of farmland it had purchased with the aim of developing it in future, has not shown that cheaper policies offering the same scope of coverage would have been available at that time.

AFCA dismissed the complainant’s argument that Aon should refund it $19,000 – the amount representing the difference between the premiums paid in the two years to March 2020 and what it says it would have paid if the broker had found them the cheaper policy.

The ombudsman also dismissed the complainant’s bid for non-financial loss compensation.

AFCA says while the available evidence does not show what specific steps the broker took to obtain alternative cheaper quotes for suitable policies in 2018 and 2019, the complainant did not query the premiums or any other aspects of the policies proposed.

The ruling says the new policy taken up by the complainant in March 2020 with a new broker, who had arranged it with another insurer, may cost less but its protections differ from the one that Aon had procured.

For instance, the new insurer declined to accept the complainant’s request to have the description of the land changed so that it was the same as what was in the Aon-arranged policy in 2018 and 2019.

The new policy identified the relevant business as “property owner only of commercial property excluding tenant liability” while in the Aon policy the description reads as “principally property owner & developer of vacant property”.

The new policy also contained a “toxic mould’ exclusion, AFCA says, which on balance would have been a relevant consideration for the complainant given the location of the property and its occupation and use – including of outbuildings/sheds – at the time.

“I consider that indicates a fundamental difference between the previous policies and the new one, in terms of the risk being accepted,” the AFCA ruling said.

“It is therefore reasonable to expect that the terms, conditions and premiums of the different policies would also be different – and I am satisfied, on the available evidence, that is the case.

“In other words, the new policy is not like-for-like with the 2018 and 2019 policies.”

AFCA notes also that that the new policy was based on different property information in relation to its use and occupancy.

The ruling says Aon explained it approached five insurers for alternative quotes at the request of the complainant when the 2020 renewal was due.

All five declined to quote because the property had been purchased for redevelopment and there was only a limited insurance market for that, the broker said.

Aon also provided details of its more recent extensive enquiries as to the availability and cost of cover based on two scenarios: the original 2018 and 2019 property use/occupancy information, and the updated 2020 information.

The outcomes of those enquiries with ten insurers show that only the original insurer would have provided cover, and that was based on the 2018/2019 information only.

The available evidence indicates that none of the other insurers was prepared or able to quote on either scenario.

Click here for more from the ruling.