Claim Decline

Claim declines represent difficult but sometimes necessary outcomes in Australian insurance, governed by strict regulatory requirements ensuring declines are justified and properly communicated. Common legitimate decline reasons include: Non-disclosure or misrepresentation - material information withheld or incorrect on application that would have affected underwriting decision (within three-year contestability period). Policy exclusions - death or disability resulting from excluded causes (suicide within 13 months, self-inflicted injuries, war, criminal activity, dangerous sports if disclosed and excluded). Definition not met - claim circumstances don't satisfy policy definition (injury not meeting TPD permanency requirements, trauma diagnosis not satisfying specific condition definition, income loss not meeting minimum percentage). Pre-existing conditions - claim relates to condition existing before policy commencement that wasn't disclosed or was excluded. Fraud - deliberate provision of false information or evidence to support claim. Policy not in force - claim occurred during lapse period or after cancellation. Waiting period - claim event occurred before applicable waiting period expired. Insufficiency of evidence - inadequate medical or other evidence to substantiate claim under required standard of proof. The decline process must follow procedural fairness: thorough assessment of all available evidence, consideration of claimant's submissions and evidence, clear written decision letter explaining specific reasons for decline with reference to policy terms, quotation of relevant policy provisions, explanation of evidence relied upon, notification of dispute resolution rights including IDR and AFCA contact information, and reasonable timeframe for appeal (typically 45 days to lodge IDR complaint). Section 54 of the Insurance Contracts Act 1984 provides crucial consumer protection: insurers cannot decline claims or reduce benefits for non-disclosure or misrepresentation unless the specific undisclosed matter caused or contributed to the claim. This prevents insurers from avoiding all liability for minor non-disclosures unrelated to claim cause. For example, failing to disclose high cholesterol cannot be grounds to decline a claim for accidental death. Controversial decline categories include: TPD permanency assessments where insurers assert improvement potential exists while claimants consider disability permanent, mental health claims declined due to subjective assessment difficulties or improvement possibility allegations, partial disability claims where insurers dispute genuine work incapacity vs voluntary underemployment, and trauma claims for conditions not precisely meeting policy definitions (heart attack severity, cancer staging). The Internal Dispute Resolution (IDR) process provides initial appeal mechanism: claimant submits complaint to insurer, insurer conducts fresh review by different assessor, decision within 30 days (45 days for complex cases), written response explaining outcome with AFCA rights if still unsatisfied. The Australian Financial Complaints Authority (AFCA) provides free external dispute resolution: accessible to all consumers with claims up to $5-10 million, independent assessment of medical and other evidence, authority to direct insurers to pay claims or vary decisions, decisions binding on insurers but not complainants (who retain legal action rights). Legal proceedings through courts available but expensive and time-consuming, typically used only for very large claims or novel legal issues. Industry statistics show: approximately 8-12% of life insurance claims are declined, varying significantly by product (higher for disability claims than death claims), non-disclosure constitutes largest decline category, Royal Commission revealed some inappropriate decline practices leading to remediation programs, and improving decline rates through cultural change and better claims practices represents ongoing industry focus. Consumer strategies when facing declines include: carefully review decline letter and identify specific grounds, gather additional supporting evidence addressing decline reasons, obtain independent medical opinions if medical evidence disputed, submit comprehensive IDR complaint with new evidence, escalate to AFCA if IDR unsuccessful, consider specialist insurance law advice for large or complex claims, and understand that many declines are overturned on review when additional evidence or proper policy interpretation applied.