The insurer's decision to refuse benefit payment based on determinations that policy terms aren't satisfied, exclusions apply, non-disclosure occurred, or other valid policy reasons exist. Declined claims can be challenged through internal dispute resolution, AFCA, or legal proceedings, with many decisions overturned on appeal.
A claim decline is the insurer's decision to refuse a benefit payment. Common grounds include unmet policy terms, exclusions, non-disclosure, or other valid policy reasons. Decisions can be challenged through internal dispute resolution, AFCA, or the courts, and many are overturned on appeal.
A decline must include:
Section 54 of the Insurance Contracts Act 1984 gives a critical protection: insurers cannot decline claims or reduce benefits for non-disclosure or misrepresentation unless the specific undisclosed matter caused or contributed to the claim.
For example, failing to disclose high cholesterol cannot be grounds to decline a claim for accidental death.
The Internal Dispute Resolution (IDR) process is the first appeal:
The Australian Financial Complaints Authority (AFCA) provides free external dispute resolution. AFCA:
Legal proceedings are available but expensive and time-consuming, typically reserved for very large claims or novel legal issues.
Industry statistics show:
A TPD claim declined because insurer asserts claimant could retrain for sedentary work. After AFCA review considering age (58), education (Year 10), lifelong manual work, and realistic retraining prospects, decision overturned with $650,000 benefit directed to be paid.
An income protection claim declined for non-disclosure of previous back pain consultations. Insurer initially declines all benefits. After legal review, Section 54 applied: while non-disclosure occurred, current disability from new motor vehicle accident injury is unrelated to previous minor back complaints, requiring claim payment.
A death claim declined for alleged non-disclosure of diabetes on application three years prior. After IDR review revealing medical records show diabetes diagnosed after policy commencement, decline reversed with $800,000 benefit paid and apology issued.
Get indicative insurance quotes from 9+ leading Australian insurers.
Explore related insurance concepts