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Posted by:
Katrina Lee

The ethics of disclosure

You work in financial advice and have developed a friendly relationship with one of your clients who is now applying for an insurance product. They casually reveal to you that over a decade ago they engaged in regular recreational drug use.

Despite having been clean for a decade, the extent of the client’s drug use leads you to believe that, if disclosed, the client's insurance application will be blocked in an underwriting process and not be granted.

If it is disclosed, their application will not be accepted, and they will most likely be blacklisted from most products from the insurance company, which shares a database across its subsidiary financial product companies. Therefore, the disclosure might deny them the ability to secure many other financial products in the future.

What would you do? 

We challenge you to create a healthy discussion with your colleagues and post a comment below. You could even encourage them to consider taking The Banking and Finance Oath!

Please share your ethical dilemmas with us - we can post them anonymously. You can email your dilemmas to dilemma@thebfo.org

Photo by Pim Myten on Unsplash


Chris on Thursday, 17 Oct 2019
The customer may be exaggerating. If the high levels of drug use do not show up on a medical exam (or the product doesn't require a medical) how can it be serious enough to blacklist them? Can we talk a moment about the Orwellian data sharing that a casually revealed comment can be stored centrally and be the cause for denial of services? What protections exist for ensuring falsified gossip of previous drug use does not get introduced into such systems causing potentially innocent customers being denied service? Seems open to abuse.
Liam on Thursday, 17 Oct 2019
I would get a pre-assessment from any companies that will u/w previous recreational drug use and then have the discussion about the need for full disclosure as any claim will search Medicare history etc so non-disclosure for me is not an option.
Sonya on Thursday, 17 Oct 2019
As a side note, I think this hypothetical scenario has some fundamental misunderstandings about insurance companies, privacy and security of personal information, and the underwriting process. That said, I would encourage the client to be truthful in their application and advise that it is in their best interest in the long run to do so. If there is any possibility that the person would not be eligible for cover then it is best to know that up front, and plan for alternatives. There are many different insurers on the market with different criteria for acceptance and it's very likely they will get cover elsewhere, and as an adviser it is my duty to consider more than one insurer anyway. If they omit relevant information from their application they may be accepted, but would be in a much worse position if they claimed and the insurer avoided the contract because of non-disclosure. They would potentially not be able to rely on the insurance when they need it most, would have forfeited the premiums paid towards it, and would be unable to get new insurance if they were not working at the time.

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