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Case Review: Insurance
Summary of some of the decisions made by the Mediators on some of the complaints received by FMB.
This summary is for information only and should not be used for other purpose.
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FMB/GI 0424 - Repudiation of Liability Based on Direct Sales Act 1993
The insured was a member of a managed care organization (MCO). The MCO acted on behalf of their members in the purchase of medical insurance plans and assisted them in their insurance claims. The insured completed the membership application/enrolment form on 23.3.2000. The application form stipulates as follows:-
"This application form is subject to a cooling-off period of 10 working days as required by the Direct Sales Act 1993"
The form also contained 'Insurer's Supplementary Questions' which the applicants must complete for the purpose of purchasing the medical insurance plans.
The insured's insurance policy commenced on 24.3.2000. On the date of commencement of the policy (24.3.2000) the insured was involved in an accident. He submitted a claim for hospital and surgical benefit which was declined by the insurers on the ground that the accident occurred within the cooling-off period. The insurers' decision was based on the provision of section 25(1) of the Direct Sales Act 1993 which states that 'no goods shall be delivered and no services shall be performed under the contract in respect of a direct sale until the cooling-off period has lapsed'.
Section 1(3)(b) of the Direct Sales Act 1993 provides as follows:-
"(3) This Act shall not apply
(b) to any contract of insurance and reinsurance issued by an insurer registered under the Insurance Act 1996"
Since Direct Sales Act 1993 is not applicable to contract of insurance the insurers are not entitled to rely on section 25 of the Act to decline the claim. The cooling-off period in the application form was inserted by the MCO as they were involved in direct selling and were bound by the Direct Sales Act 1993.
The rights and liabilities of the parties to the contract of insurance are governed by the terms and conditions stipulated in the policy. In this connection the policy stipulates that the insurers will pay the benefits "in respect of injury occurring after the commencement of this insurance". Since the insured sustained injury after the commencement of the insurance the insurers were liable to pay the benefits.
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