You web browser may not be properly supported. To use this site and all its features we recommend using the latest versions of Chrome, Safari or Firefox


Switching insurers can be risky business. Make sure you know what's involved before you change policies.

The federal government’s planned changes to financial advice laws (FOFA) has focussed attention on the big banks’ practice of promoting their own products – including insurance – to people who don’t need them or would be better off without them.

Adele Ferguson’s article in the Sydney Morning Herald tells the story of a man, Noel Stevens, who had life insurance, but was convinced by his bank’s financial planning arm to switch over to their insurer (all of the big banks have insurers). When Mr Stevens was diagnosed with terminal cancer, and made a claim, the insurer refused to pay. He took the case to Court, and won three days before he died.

Mr Steven’s sad story highlights the risks of switching insurers (such as life or disability to another).

There are two main types of risks when switching insurers

The first risk is that some insurance policies have exclusions for pre-existing conditions, or do not pay out until a waiting period has passed. What this means is, if you had a condition before you switched insurance policies, and that condition came back after you switched, you risk not being paid by your new insurer because the policy does not pay out for pre-existing conditions.

You might be able to fight the insurer in Court, but the reality is you would never have had this problem if you did not switch insurers.

The second risk of switching insurers is that the new insurer might try to cancel an insurance policy on the grounds that a person did not tell them something from their medical history. An insurer may allege ‘non-disclosure’ for example, if you had a history of mental illness but developed a condition that wasn’t related. The insurer might try to allege that because you didn’t tell them about your medical history, they don’t have to pay for the current condition.

In this case, you should get advice about whether you should fight the insurer in Court, but there would have been no problem in the first place if you had not switched insurers.

There are good reasons for switching insurers – like lower premiums, and higher benefits, but there can also be bad reasons for switching insurers – like commissions and kickbacks to salespeople and agents.

If you are considering switching from one insurer to another, you should get independent advice (and advice from a bank is not independent), read the fine print about exclusions and waiting periods, and make sure the insurer gets all the details about your medical history.

For more information, see rejected insurance claims.

The contents of this blog post are considered accurate as at the date of publication. However the applicable laws may be subject to change, thereby affecting the accuracy of the article. The information contained in this blog post is of a general nature only and is not specific to anyone’s personal circumstances. Please seek legal advice before acting on any of the information contained in this post.

Thank you for your feedback.

Related blog posts

Consumer and the Law
Banking Royal Commission legislation introduced

On 28 November 2019, the Government introduced legislation in line with the recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The legislation is designed to provide further protections for consumers and small businesses and is set to be passed in early 2020. Below is an overview of the proposed legislation. Click here for a recap of the Banking Royal Commission from our Head of Class Actions, Ben Hardwick. Under the proposed legislation, mortgage brokers will be required to act in the best interests of consumers when providing credit assistance. That means where there is a conflict of interest between the consumer’s...

Gavel and weights two people talking resized
Superannuation and Insurance
An end to for-profit Super funds?

A lot has been said and written about the Productivity Commission’s ground-breaking report into the efficiency and competitiveness (or lack thereof) of the superannuation industry since it was publically released a few weeks ago. Surprisingly however, one of the Commission’s 31 recommendations appears to have attracted no attention, despite the significant implications it would have for one prominent part of the industry: retail (or for-profit) super funds. The Commission recommended that all fees charged by APRA-regulated superannuation funds should be levied on a cost-recovery basis. The Commission reasoned that because super funds are legally obliged to act in members’ best...

Piggybank
Superannuation and Insurance
Under performance of retail Super funds confirmed

The Productivity Commissions’ final report into the superannuation system released today found the current system is “harming millions of members” with underperforming funds, multiple accounts and excessive fees. On 10 January 2019, the Productivity Commission released its final report into the superannuation system. Much like the Banking Royal Commission, the final report is particularly critical of the retail sector, both for underperformance and exorbitant fees. The final report found a significant number of super products were underperforming and that “most (but not all) affected members are in retail funds.” The report found that 77% of 5 million underperforming super...

Investment Statement Cropped

We're here to help

Start your online claim check now. Or, if you have a question, get in touch with our team.