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My insurance claim has been refused – what are my options?

If the insurer has refused your claim this refusal must be in writing. If the insurer telephones you and tells you your claim has been refused, ask them to put it in writing.

Your options once your insurance claim has been refused are to:

  1. obtain competing independent evidence which supports your claim and/or undermines the understanding your insurer has relied upon to reject your claim; and then
    1. complain in writing to your insurer's Internal Dispute Resolution (IDR) department. If that does not resolve your claim then:
    2. complain to the AFCA (they will usually require you to complain to the insurer's IDR department first). If this does not resolve your claim then
    3. go to court
  2. accept the decision and do not challenge it.

If English is your second language you should use an interpreter to assist with completing any further response to your insurer.

Remember that the insurance policy is a contract and the refusal of the claim is a legal dispute.

If your claim is rejected we recommend that you ask your insurer to internally review the decision straight away.

Can I ask the insurer to review my claim?

If your claim is rejected, the insurer must give you access to an internal and an external dispute resolution process. You must try to resolve a complaint through the insurer's internal review process before approaching the external scheme - the AFCA. While the structure of the internal dispute resolution process varies with each insurer, it usually means the decision is reviewed by someone at a more senior level. This can be useful in two ways:

  1. You can find out why your claim was refused. Insurers are required by the General Insurance Code of Practice to give reasons why they have rejected your claim. The insurer's complaint and response letter can be used to find out the reasons why your claim has been refused. You need to address these reasons if you want to take your complaint to AFCA.
  2. More straightforward disputes may be resolved, or incorrect decisions may be overturned, when the matter is considered from a fresh perspective. You may also be given a more detailed explanation of the reasons behind the original decision, and understand the claim had been rejected correctly.

You can get contact details for each insurer's internal dispute scheme from AFCA. The insurer is allowed to take a maximum of 30 days for the internal review of any decision (or failure to make a decision) under the General Insurance Code of Practice, but if the matter is urgent, this time should be shortened.

What if my insurer still rejects my claim?

If your claim has still been denied after an internal review, the next step is to complain to the AFCA as soon as you can. AFCA can only hear complaints about insurers that are AFCA members.

The advantages of AFCA are:

  • The panel members who determine the claims are familiar with insurance law.
  • AFCA takes into account "good insurance practice" and what is "fair and reasonable in all the circumstances" (which may lead to a higher standard of conduct for the insurer than a court may impose).
  • There is no need for legal representation. AFCA procedures are generally simpler and faster than legal action. You can make a complaint in writing without having to appear in person.
  • The scheme is free and there is no risk of you being ordered to pay the insurer's legal costs if your complaint is unsuccessful.
  • The decisions of AFCA will be binding on your insurer if you accept the decision.
  • You still have the option of taking the dispute to court if you are not satisfied with the outcome.

The scheme's disadvantages are:

  • AFCA can only award limited amounts (generally less than $5400) for consequential financial and nonfinancial loss. It may award interest where it considers the insurer was unreasonable in rejecting your claim.

What matters can AFCA hear?

AFCA has terms of reference that state which cases it can hear. These can be altered from time to time. For a copy of the terms of reference, contact AFCA or visit:

AFCA can hear the following matters:

Where the claim is for $1,085,000 (or less), AFCA can make a final decision that is binding on the insurer about:

  • whether a claim should be paid
  • the calculated claim amount
  • whether interest should be paid due to unreasonably delaying payment.

AFCA cannot hear disputes:

  • involving a claim for more than $1,085,000 (but this cap is regularly reviewed)
  • where you cannot take legal action because the case is too old (usually six years from the event that gave rise to the claim)
  • about matters that do not relate to claim disputes (eg assessors' conduct)
  • where there is a factual dispute that can only be resolved by choosing between the version of events given by different individuals (although this rarely applies to floods)
  • if the insurer is not a member of AFCA.

AFCA may consider a dispute outside the terms of reference if the insurer agrees. You should approach the insurer about a claim outside the terms of reference to see if they will agree to the panel hearing it.

The maximum compensation AFCA can award is $542,500.

What happens when AFCA receives a complaint?

When AFCA receives a complaint, it will write to the insurer asking it to provide a written response. The insurer can insist its written submission is confidential. However, AFCA will encourage the insurer to provide you with copies of the reports from its hydrologist, if this has not been done.

AFCA will try to resolve the dispute by mutual agreement. If a dispute cannot be resolved by mutual agreement, AFCA conducts a detailed investigation and may offer an initial view on the merits of the dispute if it is likely to assist the parties to reach a resolution.

In most instances AFCA issues a recommendation. If a recommendation is not accepted by either party, a determination can be made.

Determinations are often made by a panel. The panel consists of three people:

  • an independent chairperson
  • a person with an insurance company background
  • a person with a consumer interest background.

Generally, the panel's decision is based on written submissions and reviewing documents, rather than interviews with the people involved. In flood cases, the panel may visit the storm scene, inspect the area and speak to the people involved.

Like all decision makers at AFCA, the panel must make its decision based on what is fair and reasonable in all the circumstances, and in line with good insurance practice, the policy terms and established legal principles. This is broader than the issues a court would consider.

The panel's decision is binding on the insurer. However, you can choose whether to accept the decision. If your claim is still refused by the panel, you can reject the panel's finding and take the insurer to court.

What should I include in my submission to AFCA?

Your written submission should include:

  1. The reasons why your claim should be paid. Your letter should address all reasons the insurer gave in refusing the claim.
  2. Detailed information about what documents you received, when you received them and how the policy is unclear (if you are relying on a standard cover contract).
  3. Any conflicting evidence between eyewitness accounts and the assumptions in a hydrologist's report. The panel is able to put weight on reliable first-hand evidence when it differs from reports provided by hydrologists. It has accepted that the modelling process adopted by hydrologists can only be a simplified reconstruction of events, and may not take into account variations from one street to another.

What time limits apply for making a complaint?

Your policy may also say you need to let your insurer know about the damage as soon as possible. It may be a basis for refusing your claim, so don't delay.

Applying for a review of your claim

If your property insurance claim resulted from a catastrophe or a disaster, you have 12 months from finalisation of your claim (if finalised within one month of the disaster) to ask for a review of your claim (clause 90 General Insurance Code of Practice).

If your insurer refuses to assess your claim because you cannot pay the excess, you should ask for an internal review and external review (if necessary). You may be able to argue that, under section 54 of the Insurance Contract Act, insurers cannot rightfully refuse your claim simply because you cannot afford to pay the excess in a lump sum.

Applying for Internal Dispute Resolution

If the review is refused or partially rejected then you can complain about this to the insurer's Internal Dispute Resolution department.

The General Insurance Code of Practice states insurers will respond to your request for internal review within 30 business days if they receive all necessary information and have completed any investigation required.

Each insurer designates senior officers to look at claims in an internal review and to make a final decision about the complaint.

If your insurer is not complying with their code obligations, you can contact the General Insurance Code Compliance Committee.

Time limits for submitting a complaint to AFCA

Your time limit for lodging a complaint with AFCA will expire on the earliest of:

  • two years from the date you receive a letter rejecting your claim from the insurer's Internal Dispute Resolution department or
  • six years from when you first became aware, or should have reasonably become aware, of your property damage loss (eg within six years from the date of the flood).

If AFCA receives a complaint that has not been through the internal review, they will ask you to go back to the insurer for internal review. The insurer will then make a final decision that can be taken back to AFCA within two years.

AFCA generally will not grant the right to lodge a dispute outside this time frame without the agreement of the insurer. When you lodge your complaint (AFCA calls this a "dispute"), you will be asked to fill in a form called a "notice of referral". You must complete and return this form by the date specified or you may lose your right to complain to AFCA. It is worth putting in a late complaint with reasons for the delay. Seeking legal advice about what to say is recommended.

Once AFCA has received a complaint (called "lodging a dispute"), a decision is likely to be made within three to six months but could take longer.

Time limit for taking complaint to court

If your matter is unsuccessful at AFCA, you can still take it to court. You must start your claim within six years from when the claim arose (which may be six years from the date of the 'insured event' - eg storm or flood - depending on what your policy says).

What power does AFCA have?

If AFCA's decision maker finds in your favour, it can make a decision ordering the insurer to pay:

  • the claim amount
  • interest in line with section 57 of the Insurance Contracts Act (if the panel considered refusal to pay was unreasonable).

AFCA's decision makers have the power to order the insurer to pay legal costs (in very limited circumstances) or expenses - such as hydrologist reports - where it is appropriate to do so.

AFCA has limited power to order the insurer to pay damages.

Is legal aid available for insurance disputes?

While AFCA is designed for people who do not have lawyers, some flood insurance cases are difficult and may need help from a lawyer.

Legal Aid Queensland can provide advice and some assistance for disputes with insurers. You can call Legal Aid Queensland on 1300 65 11 88.

Last updated 22 March 2022

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