Annual Review 2022–23

Between 1 July 2022 and 30 June 2023

1,898 complaints received
36% resolved at Registration and Referral stage

Life insurance complaints received

Percentage of life insurance complaints resolved at Registration and Referral stage

Top five life insurance complaints received by product 

Product

2018–19 ¹

2019–20

2020–21

2021–22

2022–23

Income protection

399

530

575

650

523

Funeral plans

103

162

169

880

441

Term life

183

331

290

359

347

Total and permanent disability

111

179

184

227

210

Trauma

95

144

115

120

93

 

Top five life insurance complaints received by issue 

Issue

2018–19 ¹

2019–20

2020–21

2021–22

2022–23

Misleading product/service information

78

116

109

437

358

Delay in claim handling

98

155

172

204

245

Incorrect premiums

137

181

213

286

209

Denial of claim

140

270

212

171

145

Service quality

46

98

141

205

141

1,468 complaints closed
Average time to close a complaint: 107 days

Life insurance complaints closed

Average time to close a life insurance complaint in days ²

Stage at which life insurance complaints closed 

Stage

2018–19 ¹

2019–20

2020–21

2021–22

2022–23

At Registration

230

497

513

603

529

At Case Management

188

621

473

505

534

At Rules Review

136

151

104

186

125

Preliminary Assessment

65

232

225

213

132

Decision

21

209

280

383

148

 

Time taken to close life insurance complaints 

Time

2018–19 ¹

2019–20

2020–21

2021–22

2022–23

Closed in 0–30 days

98

173

154

222

 197

Closed in 31–60 days

218

405

361

444

 405

Closed in 61–180 days

311

769

715

781

 589

Closed in 181–365 days

13

328

289

347

 223

Closed in in more than 365 days

0

35

76

96

 54

 

¹ AFCA commenced on 1 November 2018. The 2018–19 financial year covers an 8-month period (from 1 Nov 2018 to 30 Jun 2019). Year-on-year changes between 2018–19 and 2019–20 have been calculated pro rata using monthly averages.

² This excludes complaints that were inactive for an extended period, for example complaints that were paused because the financial firm was insolvent or due to court proceedings, and complaints that were previously closed and re-opened.

AFCA can consider complaints about life insurance products including the following:

  • consumer credit insurance
  • death cover
  • income protection
  • total and permanent disability policies
  • trauma policies
  • whole of life policies.

The types of issues and problems AFCA resolves include:

  • misrepresentation or incorrect application of insurance premiums or fees
  • product information that wasn’t disclosed, or was misleading or incorrect
  • decisions a financial firm has made such as claim denial  
  • complaints about an insurer’s decision to void or vary a policy on the basis of non-disclosure or misrepresentation
  • complainant’s instructions that weren’t followed
  • confidentiality breaches.

Key insights

  • The number of life insurance complaints received in 2022–23 was significantly lower than the previous year. This was largely due to a spike in complaints about funeral plans in the 2021–22 year.
  • We continue to receive a lot of complaints about premium increases and delays in claims handling.
  • Complaints about delay have more than doubled over the last four years.

Over the 2022–23 financial year, AFCA received 1,898 life insurance complaints, which made up 2% of total complaints to AFCA. The life insurance complaints number was 24% lower than in the previous year. This was, in part, due to a reduction in the number of complaints about four Aboriginal Community Benefit Fund (ACBF) companies (the Youpla group). When the effect of these is removed, the year-on-year reduction for insurance complaints was about 7%.

We closed a total of 1,468 life insurance complaints in 2022–23. The average resolution time was 107 days, down from our five-year average of 114 days, and a reduction on the previous financial year.

The leading sources of complaints were income protection policies (523 complaints, or 28% of the total), funeral plans (441 or 23%), term life policies (347 or 18%) and total and permanent disability policies (210 or 11%).

Claims of misleading product or service information remained the most common issues raised by complainants, accounting for 19% of the total. Complaints about delays in claim handling rose from the previous year, accounting for 13% of the total, while complaints about incorrect premiums decreased, making up 11% of the total. We urge insurers to review their claim handling practices and take steps to reduce the average time taken to make decisions about claims. Many people making a life insurance claim are in a vulnerable situation because of bereavement or illness, and need certainty of an insurance decision and the income stream if the claim is successful.

The number of complaints closed at the Registration and Referral stage was 529, or 36% of the total (up from 32% in the previous year). Closures in the Case Management stage increased from 505 to 534, or 36% of the total. Closures at the Rules Review stage dropped from 186 to 125, or 9% of the total.

We encourage insurers to continue pursuing fair outcomes for both parties in early resolution, which is ultimately more efficient and cost effective for firms and less stressful for complainants.

Misleading product/service information was the most complained about issue, followed by delays in claims handling. Complaints about service quality decreased by 31% from the previous year.

Case study – Delays in the assessment of income protection benefits

Background

The complainant became very unwell, stopped work, and made a claim for income protection benefits. The insurer quickly paid the first month of benefits. Despite receiving further information about the case over the next few months, it did not pay further benefits until after it was notified of the AFCA complaint – about nine months after the initial claim for benefits.

Findings and outcome

After carefully reviewing the case, AFCA found the insurer was responsible for long delays in the assessment of the claim. This included not contacting the complainant for nearly three months after promising an urgent update. It only provided the update after it was notified that the complainant had complained to AFCA.

AFCA also found that despite having received financial information relating to the claim, the insurer had wrongly denied having received that information for almost a year, resulting in long delays in the assessment and payment of the benefit.

The insurer eventually resumed paying benefits, and AFCA required the insurer to pay interest to the complainant. AFCA also directed the insurer to pay the complainant compensation for non-financial loss for the serious impact of its:

  • late payment of benefits
  • failure to communicate
  • repeated requests for information it had already received.

Case study – Fraudulent misrepresentations and total permanent disability claims

Background

The complainant successfully applied to an insurer for total and permanent disability (TPD) cover in 2016, and subsequently made a claim for benefits. The insurer investigated the claim, and then avoided (cancelled) the policy, saying the complainant had fraudulently failed to disclose and made misrepresentations about her medical history when applying for the policy. The complainant denied the insurer’s claims, and said that even if the insurer could prove fraud, it should be disregarded because of section 31 of the Insurance Contracts Act 1984 (Cth). The insurer said section 31 only applied where prejudice to the insurer was non-existent, minimal or insignificant. It said it was significantly prejudiced because it would not have been at risk if there was no fraud.

Findings and outcome

AFCA found that the complainant, when applying for the policy, had fraudulently failed to disclose and made misrepresentations about her medical history and intention to make a workers’ compensation claim. AFCA found the insurer would not have offered the complainant a policy in the absence of her fraudulent representations.

AFCA considered section 31 of the Insurance Contracts Act, which gives courts the power to disregard fraud in certain circumstances. AFCA found that it did not have powers under section 31, because it is not a court, but that the legal principles in section 31 should be considered when AFCA decided what was fair in all the circumstances. AFCA found section 31 only helps a claimant where the prejudice to the insurer is non-existent, minimal or insignificant. AFCA found the prejudice was not minimal or insignificant, and that it was fair in all the circumstances for the insurer to avoid the policy.

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