Encourage full disclosure

14 January 2019 Jonathan Faurie
judge Ron McLaren, the Ombudsman for Long-term Insurance

judge Ron McLaren, the Ombudsman for Long-term Insurance

When one looks at the recent case between the Ganas family and Momentum, one cannot help but wonder where the adviser was in this whole process.

There is no doubt that there was non-disclosure involved in this case, but surely the adviser who sold the policy to the late Nathan Ganas should have advised him on the impact that non-disclosure would have on his policy at claims stage. 

FAnews spoke to Judge Ron McLaren, the Ombudsman for Long-term Insurance about the learnings that have come out of the Ganas case and the advice and conversations advisers should be having with their clients. 

Major learnings

Initially, Momentum refused to pay the claim on the basis that there was non-disclosure involved. However, they later decided to honour a claim through a new product that they introduced to the market. 

This does not detract from the fact that Momentum was right not to pay out the claim in the first place. Judge McLaren pointed out that non-disclosure has a significant impact on the industry. 

"An applicant for a life insurance policy must give full information on the application form.  This is a fundamental principle which is founded on an insurer’s legal right to be informed of all the material facts in order to enable it to properly assess the risk involved in an application. The applicant has a legal duty to disclose all material facts to the insurer,” said Judge McLaren. 

A matter of materiality

One of the major controversies that came out of the case is that Ganas’ non-disclosure (high blood sugar) was not material to the loss that was suffered (gunshot wounds). There is a test that can be undertaken to establish a link such as this. 

“The test for materiality is prescribed in section 59 of the Long-term Insurance Act of 1998.  Information is regarded as material if a reasonable, prudent person would consider that it should have been correctly disclosed to the insurer so that the insurer could form its own view as to the effect of such information on the assessment of the relevant risk," said Judge McLaren. 

The debate regarding this continues. However, according to law, a client needs to disclose all information to their insurer whether it would be material to a loss or not. Materiality would be established by the insurer. 


While a lot of people were sympathetic to the Ganas family, others had plenty to say about the non-disclosure and the fact that Nathan Ganas should have known that he needed to disclose his medical information to Momentum. 

The reality of this is that a financial adviser’s typical client would not necessarily know that this would need to be disclosed to the insurer at policy inception unless they were prompted to do so by an adviser. 

The Ganas case placed a heavy spotlight on the level of advice that clients are receiving. Judge McLaren said that advisers should prompt clients to give full information in the application form. He added that clients should rather disclose more than only the information that is required at policy inception. 

Not off the hook

However, the responsibility when it comes to disclosure does not solely rest on the shoulder of policyholders and advisers. 

"Our office will not allow BREAK an insurer to shut its eyes to the light or to adopt a gung-ho attitude towards information in an application form which should alert the insurer to make its own enquiries. Such inaction on the part of an insurer may be interpreted as a waiver by it of its entitlement to the information.  This is another example of how our equity/fairness jurisdiction works in practice," said Judge McLaren. 

Editor’s Thoughts:
It may seem like we are beating a dead horse and that we are regurgitating information that advisers are already instructing their clients to do disclose. However, the Ganas case has shown that advisers cannot take anything for granted. Even if it is common sense to give an insurer full disclosure, they still need to be prompted to do so. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].


Added by Nancy Bowring, 15 Jan 2019
The medical questions on an application form are very clear when it comes to health. The questionnaire specifically asks whether the client has a problem with diabetes or anyone in the immediate family as it is an hereditary disease. In my personal opinion, unless the client was unaware that he had diabetes he would have known to answer in the affirmative if he was willing to be transparent.
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Added by cynical simon, 14 Jan 2019
Should the qiuestion:"Had Momentum known , would they have declined the proposal or would they have underwritten it at a premium loading or cover restriction," not first be established before the question of relevance be considered?
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Added by Ayanda, 14 Jan 2019
Good to know that judge Mcclaren abides by the rule of law and is not inclined to the rule of the mob like the FSCA spokesman seemed to be.
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Added by Jacky, 14 Jan 2019
This whole debacle needs to stir up conversation within the industry as well as with each client engagement as to what should be avoided/provided in order to avoid similar situations.

Clients do not know/understand insurance law and their obligation regarding their policies - and that is where education is of vital importance.

7 Costly mistakes that can be avoided to avoid repudiated claims:

• Churning (Early claims)
• Non-disclosure
• 2 year suicide
• Rating factors not verified
• Incomplete applications/wrong information
• Incorrect Product comparisons
• Uneducated clients regarding needs and their financial plan

Each of the above points has further details and discussion points to expand on.
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