National Australia Bank (NAB) is under legal scrutiny in Victoria as Rachel Sneddon, wife of a policyholder, alleges that the bank’s negligent advice led to the cancellation of $400,000 in life insurance benefits.
The lawsuit, filed in Victoria, asserts that advice from NAB prompted the transfer of her husband’s superannuation to its wealth management arm, MLC, ultimately resulting in a denial of insurance payout upon his death in 2020.
Alleged Negligence and its Consequences
Court documents, as reported by the Australian Financial Review (AFR), reveal that NAB failed to consider Mr. Sneddon’s severe blood clotting condition in its advice, neglecting to disclose potential risks associated with the transfer, including the possibility of claim denial or coverage exclusions by the new insurer.
This case underscores concerns raised during the Hayne Royal Commission regarding vertical integration in financial services, where institutions have been criticized for prioritizing their products over potentially more suitable options for clients.
Previously insured under superannuation accounts with AMP and Hostplus, the Sneddons had combined coverage nearing $400,000. Acting on advice from NAB in 2015, they terminated these policies to move their superannuation entitlements to an MLC fund. However, Mrs. Sneddon argues that MLC denied coverage upon her husband’s death, citing undisclosed health issues.
Implications for Financial Institutions and Clients
The legal proceedings highlight the responsibility of financial institutions to ensure clients fully understand how health conditions may impact insurance agreements. As the case unfolds in the Victorian Supreme Court, neither NAB nor Maurice Blackburn, representing Mrs. Sneddon, have provided comments on the matter.
In a separate development within Australia’s life insurance sector, the Life Code Compliance Committee has flagged a concerning trend in compliance breaches by life insurers, marking the third consecutive year of increasing infractions.
