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Unfair Claims Practices in Australia: 2025 Policyholder Guide

When you pay for insurance, you expect peace of mind. But what happens when your insurer doesn’t play fair? Unfair claims practices—ranging from delays to outright denials—can leave Australians stranded during their toughest moments. With new regulations rolling out in 2025, it’s crucial to know your rights and how to safeguard yourself from these dodgy tactics.

What Are Unfair Claims Practices?

Unfair claims practices refer to unethical or unlawful conduct by insurers during the claims process. This can include:

Unreasonable claim delays
Rejecting claims without valid reason
Offering settlements far below the claim’s value
Failing to properly investigate before making a decision
Withholding key policy information

In Australia, such practices are not just frustrating—they’re often illegal. The Australian Securities and Investments Commission (ASIC) and the Australian Financial Complaints Authority (AFCA) are cracking down, but problems persist, especially after widespread natural disasters and the COVID-19 pandemic put insurers under pressure.

2025 Regulatory Changes: Raising the Bar for Insurers

This year, several new measures are coming into force, aimed squarely at tackling unfair claims practices:

Stricter timeframes: Insurers must now meet tighter deadlines for assessing and paying claims, with penalties for unnecessary delays.
Enhanced transparency: From July 2025, insurers must provide clear, written reasons for any claim denial or reduction, referencing specific policy terms.
Expanded ‘Unfair Contract Terms’ rules: The Treasury Laws Amendment (Enhancing Consumer Protection) Act 2025 extends protections to more types of insurance policies, banning terms that are excessively one-sided or unclear.
Improved complaint pathways: AFCA has received additional funding to resolve disputes faster, with a new digital portal for tracking progress in real time.

These reforms reflect lessons from the 2018 Royal Commission and subsequent reviews, aiming to restore trust and protect everyday Australians from being let down when they need help most.

Spotting and Responding to Unfair Claims Practices

If you suspect you’re the victim of an unfair claims practice, here’s what to watch for—and how to respond:

Stonewalling or vague responses: If your insurer keeps asking for more documents or doesn’t provide clear answers, push for timelines in writing.
Lowball offers: Don’t accept the first offer if it seems off—request a breakdown of how the insurer calculated your payout.
Unjustified rejections: Ask for the exact clause or exclusion used to deny your claim. If they can’t explain, you may have grounds to dispute.

In 2025, you have more power than ever:

Submit a formal complaint to your insurer’s internal dispute resolution (IDR) process—they’re now legally required to respond within 30 days.
If unresolved, escalate to AFCA. The online portal makes it easier to upload evidence and track case progress.
Consider lodging a report with ASIC if you believe the insurer is breaching industry codes or the law.

Real-World Example: Flood Claims in Queensland

After the 2024 Queensland floods, hundreds of policyholders reported delayed or denied claims for water damage. One family in Rockhampton waited five months for an answer—well beyond the new 2025 60-day decision rule. With support from the updated AFCA system, their case was resolved within two weeks after escalation, resulting in a full payout and an apology from the insurer.

This example highlights the power of the new reforms and the importance of knowing your rights.

Protecting Yourself: Tips for 2025 and Beyond

Keep thorough records: Save all correspondence, photos, and documents related to your claim.
Know your policy: Insist on a plain-English summary from your insurer, as required by the new rules.
Act early: Don’t wait if you sense stonewalling—initiate complaints promptly to trigger legal timelines.
Use the digital tools: Register with the new AFCA portal for real-time updates and easier evidence submission.

Understanding the Role of Regulatory Bodies

In the complex landscape of insurance claims, several Australian regulatory bodies play pivotal roles in protecting consumer rights and ensuring fair practices. Understanding their functions can empower policyholders to seek redress effectively.

Australian Securities and Investments Commission (ASIC)

ASIC is a key regulator overseeing the insurance industry. It enforces laws to protect consumers from unfair practices and ensures that insurers adhere to their obligations. ASIC's role includes:

Monitoring compliance with the Corporations Act and other relevant legislation.
Investigating breaches of consumer protection laws.
Providing guidance and resources for consumers to understand their rights.

For more information, visit ASIC's official website.

Australian Financial Complaints Authority (AFCA)

AFCA provides a free, fair, and independent dispute resolution service for consumers and small businesses. It handles complaints related to financial services, including insurance. Key functions include:

Offering a platform for resolving disputes without the need for litigation.
Providing decisions that are binding on financial firms.
Offering resources and support for consumers navigating the complaint process.

More details can be found on AFCA's website.

Practical Examples and Case Scenarios

Understanding how unfair claims practices manifest in real-life situations can help policyholders identify and respond to them more effectively.

Case Scenario: Bushfire Damage in New South Wales

In early 2025, a homeowner in the Blue Mountains faced significant delays in processing their bushfire damage claim. Despite submitting all required documents promptly, the insurer requested additional information multiple times, prolonging the process beyond the regulatory timeframe. By lodging a complaint with AFCA, the homeowner received a resolution within three weeks, highlighting the importance of utilizing dispute resolution mechanisms.

Case Scenario: Health Insurance Denials

A Melbourne resident experienced a sudden denial of a health insurance claim for a pre-approved surgery. The insurer cited a vague policy exclusion. By requesting a detailed explanation and involving ASIC, the policyholder successfully challenged the denial, resulting in the insurer covering the procedure.

FAQ

What should I do if my claim is unfairly denied?

First, request a detailed explanation from your insurer, referencing specific policy terms. If unsatisfied, lodge a complaint through the insurer's internal dispute resolution process. If unresolved, escalate to AFCA.

How can I ensure my claim is processed efficiently?

Submit all required documents promptly and keep thorough records. If delays occur, request written timelines from your insurer and consider escalating the issue if necessary.

What are my rights under the 2025 regulatory changes?

You have the right to clear explanations for claim decisions, faster processing times, and access to improved complaint pathways. Insurers must adhere to these regulations, and breaches can be reported to ASIC.

Sources

For more insights on insurance and financial rights, explore other articles on Cockatoo, such as Understanding Your Insurance Policy and Navigating Financial Disputes.