Insurance claims worst case: what to do when your claim is rejected or taking too long

If your home insurance claim has been delayed or denied, you can ask for support from the insurer, or lodge a complaint. As a last resort, you could consider taking your dispute to a tribunal, or even to court.

Making an insurance claim is not to be done lightly, and there is a chance that you could face financial stress without the insurer’s support. So, what can Australians who have lodged an insurance claim do if they’re waiting a long time to hear from the insurer, or if their claim is rejected full stop?

Why your insurance claim is taking so long

In a 2022 ABC News article, the Financial Rights Legal Centre revealed that the general insurance industry, which includes building, home contents and motor vehicle insurance, struggles with poor data handling. 

Senior policy officer Drew MacRae said: "Our research has found the data-handling practices of insurers and their central database is not up to scratch.”

"It's error-ridden, it's very difficult to access, inconvenient and unreliable. This can affect consumers' future claims and even disclosure requirements (which may mean insurers can later deny a claim),” Mr MacRae said.

This means that Australians considering making an insurance claim need to be certain that they are dotting their i’s and crossing their t’s. This not only includes when they sign up for a policy, but when they lodge their claim as well. The more accurate the information you can provide when signing up for a policy or making a claim, the easier it may be for the insurer to process it.

Also, some insurance policies have time limits for making a claim. Once an insured event occurs, it’s usually worth trying to lodge your claim swiftly.

What to do if your insurance claim is delayed

Unfortunately, your insurer may take several weeks, even months, to get back to you with a response to your insurance claim. In the interim, you may be left in the lurch with a damaged property, which could affect your quality of life.

If you feel your insurance claim is taking too long, you can consider the following options:

Ask for support

While you are awaiting a payout from your insurer, read through your policy to see if you're entitled to any emergency benefits, like temporary accommodation or car hire. This may help ease some of your burdens while you await the insurer’s response. You can also directly ask the insurer what emergency benefits you may be entitled to.

Internal Dispute Resolution

Pick up the phone, call the insurer, and request to lodge a dispute regarding the delayed response to your insurance claim. This may be enough to encourage the insurer to move things along, as the General Insurer Code of Practice states they have 15 business days to respond to your dispute.

If you do not reach an agreement regarding their decision, or if your complaint has not been resolved within 45 days from raising the dispute, you can consider lodging a higher complaint with the Australian Financial Complaints Authority (AFCA) - an External Dispute Resolution (EDR) provider.

AFCA and External Dispute Resolutions

According to the Financial Rights Legal Centre, AFCA deals with disputes with insurance companies as it relates to motor vehicle, home and contents, life insurance and travel insurance, as well as any policies in which you are a policyholder or a beneficiary. You could consider going to AFCA before you consider taking legal action, as:

• It is free for consumers,
• It is independent (despite being funded by industry), and
• A decision will (usually) be made by AFCA if the parties cannot negotiate a solution. The decision is binding on the insurer if you accept the decision. If you don’t accept the decision, you may still go to Court (subject to any time limits).

At this point, you should at least receive regular communication from the insurer, as the insurer’s internal disputes resolution team must update you at least every 10 business days.

There are some situations in which a delayed insurance claim response can occur, also referred to as exceptional circumstances, including:

• A claim relates to a catastrophe or disaster and must be declared so by the Board of the Insurance Council of Australia.
• Fraud is suspected, or involved, within the claim.
• You do not respond to requests for primary or supplementary documentation and information.

What to do if your insurance claim is rejected

Sometimes you lodge an insurance claim, and unfortunately it is refused. Fear not; according to the Financial Rights Legal Centre, there are still options you can consider at this point:

• Internal Dispute: Again, you can consider aising a dispute through the insurer’s Internal Dispute Resolution department.
• Make a formal complaint:Consider lodging a complaint to the General Insurance Division of the Australian Financial Complaints Authority (AFCA). Note that they will typically require you to lodge an official complaint with the insurer’s IDR department first.
• Take it to the tribunal:Apply to the appropriate tribunal for consumer claims for your state or territory.
• Go to court:If your claim is still being rejected and you want to contest the decision, you can consider taking legal action against the insurer.

What else can you do while you’re waiting on an insurer?

The AFCA may be able to assist Australians in more than just insurance delay resolutions and formal complaints. You may be able to apply for financial support as well, including:

Interest payments

If you did your due diligence when submitting your claim, and if you believe that your insurer has created an unreasonable delay, you can consider asking for interest to be paid for your time by the insurer. If your claim is successful, they may need to pay you interest from the date the insurer should have initially given you a response.

$5400 for non-financial loss

Another route to consider is that AFCA can award some eligible applicants up to $5400 in ‘non-financial loss’. According to AFCA, this includes ‘unusual’ amount of physical inconvenience, time taken to resolve a situation, or interference with the complainant’s expectation of enjoyment or peace of mind. 

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