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Issue 23 - October 2015

The FOS Approach to Cancellation of Instalment Contracts


FOS reviews disputes where a financial services provider (FSP) denies a claim because a general insurance contract was cancelled due to the consumer failing to pay a premium.

This paper discusses FOS’s approach to such disputes and will be useful for FSPs involved in the general insurance industry, their customers and representatives.

FOS considers the following matters in these types of disputes:

  1. when the right of cancellation occurred
  2. whether the FSP exercised its right of cancellation in a clear and unequivocal manner
  3. where the FSP provided notice of cancellation, whether:
    a. the notice was clear and unequivocal,
    b. the FSP complied with the requirements of sections 59 and 72A of the Insurance Contracts Act 1984 (ICA)
    c. the appropriate timeframe had lapsed.
  4. where the FSP did not provide notice of cancellation because it contained a policy provision that complied with section 62(2) of the ICA, whether:
    a. this provision “clearly informed” the consumer of its effect (i.e. that it would cancel the policy without notification)
    b. the appropriate minimum timeframe had lapsed (30 days)
    c. the insurer exercised its right consistent with the policy provision.

In numerous instances, FSPs send letters to consumers informing them of the outstanding premium (reminder letters). In those cases, FOS will determine whether the reminder letter:

  • has the effect of cancelling the policy (if the FSP is relying on such a letter in that regard) or
  • provides an extension of time – that is, the FSP purports to not exercise a right to cancel until the timeframe in the letter passes
  • gives rise to a representation that the due date under the policy was extended and the consumer relied on this.

Read more about the FOS Approach to Cancellation of Instalment Contracts.

Visit to see all the available FOS Approach documents.