Insurer Prevails in Dispute Over Misrepresentation of Mental Health

4

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

The dispute arose when the complainant made a claim on her total and permanent disability (TPD) policy for major depression. In response, MLC (the insurer) decided to amend the policy by adding an exclusion for mental illness, effectively denying the claim.

The insurer argued that it was within its right to add the exclusion because the complainant had misrepresented her mental health history when applying for the policy in March 2015.

Upon reviewing the application form, it was discovered that the complainant failed to disclose her use of anti-depressant medication and provided incorrect answers to questions regarding her mental health.

Misrepresentation of Mental Health

One of the questions on the application form asked whether the complainant had ever experienced or sought advice for anxiety, stress, or sleeplessness. The complainant answered "No," despite having a history of depression and taking medication for it.

The Australian Financial Complaints Authority (AFCA) determined that this answer was a misrepresentation.

The complainant also provided a false answer to another question regarding the use of medications in the last five years. Despite her two-year history of depression and recent medication use, she answered "No" to the question.

AFCA concluded that these misrepresentations were significant in the insurer's decision to add the exclusion for mental illness.

Ruling in Favor of the Insurer

The complainant argued that she was unaware of her depression diagnosis and believed her medication was intended to improve her mood, rather than treat depression.

However, AFCA rejected her explanation, noting that she had sought treatment for "anxiety-related condition" and had taken medication to improve her mood.

AFCA ruled in favor of MLC, stating that the insurer demonstrated the intent to add a mental illness exclusion even without the complainant's misrepresentations. The ombudsman also noted that other insurers would have made similar decisions.

Published:Tuesday, 5th Dec 2023
Source: Paige Estritori

Please Note: If this information affects you, seek advice from a licensed professional.

Share this news item:

Insurance News

Clear

Allianz Australia Penalised for Misleading Travel Insurance Information

30 Dec 2025: Paige Estritori

In a significant ruling, Allianz Australia Insurance and its subsidiary, AWP Australia, have been fined a total of $16.8 million for providing misleading information about their travel insurance products. The Supreme Court of New South Wales found that between 2016 and 2018, the companies misrepresented the extent of coverage available to consumers, leading to potential misunderstandings about policy benefits. - read more

Allianz Partners Highlights Risks of Travelling Uninsured

30 Dec 2025: Paige Estritori

Recent research conducted by the Insurance Council of Australia (ICA) and the Department of Foreign Affairs and Trade (DFAT) has unveiled a concerning trend: approximately 14% of Australian travellers embark on international journeys without any form of travel insurance. This statistic has prompted Allianz Partners to urge Australians to reconsider the importance of securing adequate coverage before travelling abroad. - read more

Surge in Medical Claims Among Australian Travellers Highlights Importance of Comprehensive Insurance

30 Dec 2025: Paige Estritori

In 2024, medical incidents emerged as the leading cause of travel insurance claims among Australian travellers, accounting for more than 40% of all claims handled by nib Travel. This trend underscores the critical importance of securing comprehensive travel insurance to mitigate the financial risks associated with medical emergencies abroad. - read more

Allianz Australia Penalised $16.8 Million for Misleading Conduct

30 Dec 2025: Paige Estritori

In a significant regulatory action, Allianz Australia and its subsidiary, AWP Australia, have been fined $16.8 million for making false and misleading statements. This penalty was imposed following an investigation by the Australian Securities and Investments Commission (ASIC), underscoring the critical need for transparency and honesty in the insurance sector. - read more

New Legislation Prohibits Use of Genetic Test Results in Life Insurance Underwriting

30 Dec 2025: Paige Estritori

The Australian government has announced plans to introduce legislation that will ban life insurers from using adverse genetic test results in their underwriting processes. This move aims to eliminate genetic discrimination and encourage individuals to undergo genetic testing without fear of insurance repercussions. - read more

Click for more Insurance News