Mistakes, claims, disputes and official sources
Car insurance claim refused or underpaid? Internal complaints and AFCA step by step
What to do when an Australian car insurer refuses, delays or underpays your claim: reasons in writing, the 30-day internal complaint, evidence and a free AFCA complaint.
If your car insurance claim is refused, delayed or settled for less than you think is fair, first ask the insurer for its decision and reasons in writing, then lodge a written complaint through its internal dispute resolution (IDR) process. Under ASIC's standard the insurer generally has 30 calendar days to give a final response. If it does not respond in time, or you disagree with the response, you can complain to the Australian Financial Complaints Authority (AFCA), an independent external dispute body that is free for consumers. AFCA can make decisions that bind the insurer if you accept them.
This guide is part of the car insurance mistakes and claims section.
Common reasons claims are refused or reduced
| Insurer's reason | What to check |
|---|---|
| Driver not listed or excluded | Was the driver a regular driver? What did the application ask? |
| Misrepresentation at purchase or renewal | Exactly what question was asked and what you answered |
| Use not covered (rideshare, business) | The PDS definition of the use and whether you were using the car that way |
| Unroadworthy vehicle | Whether the defect caused or contributed to the loss |
| Driving under the influence or unlicensed | The policy exclusion and the evidence |
| Late notification | Whether the delay actually harmed the insurer's position |
| Market value assessed too low | The insurer's method and comparable sales |
| Damage not caused by the insured event | Assessor's report and your evidence |
Section 54 of the Insurance Contracts Act can matter in disputes. In broad terms, where a claim would be refused because of something you did or did not do after the policy started, the insurer may only reduce the claim by the amount its interests were prejudiced, unless the act could reasonably be regarded as capable of causing or contributing to the loss. How it applies depends on the facts; get advice for large claims.
Step 1: get the decision in writing
Ask for:
- the decision and the policy terms relied on
- copies of assessor or investigator reports the decision relies on, where the insurer will provide them
- how a market value was calculated, if the dispute is about value
- information on how to complain
Insurers that subscribe to the General Insurance Code of Practice commit to giving reasons and information about complaints when they deny a claim.
Step 2: lodge an internal complaint
Write to the insurer's complaints team (not just your claims officer). Include:
- your policy and claim numbers
- what decision you dispute
- why you think it is wrong, quoting the PDS wording
- the evidence: photos, quotes, receipts, dashcam footage, witness details, police event numbers, comparable sale listings
- what outcome you want
Keep a copy. Note the date: the 30-day IDR period runs from when the insurer receives the complaint, with some exceptions for complex cases where it must tell you of the delay.
Worked example (illustrative)
Ravi's car is written off. The insurer offers market value of $17,200 less a $700 excess: $16,500. Ravi finds five comparable cars for sale in his state at $18,900, $19,400, $19,800, $18,600 and $20,300. Average asking price: ($18,900 + $19,400 + $19,800 + $18,600 + $20,300) / 5 = $97,000 / 5 = $19,400. Asking prices are often above selling prices, so he does not claim the full $19,400, but he asks the insurer to explain why its figure is $2,200 below the average and to reconsider. He attaches the listings, the car's service history and evidence of new tyres. The insurer must respond within the IDR time frame.
Step 3: go to AFCA
You can lodge with AFCA if:
- the insurer has not given a final response within the IDR time frame, or
- you are unhappy with the final response.
Lodge online or by phone. Generally you must complain within two years of the insurer's final IDR response, and other time limits apply depending on when you became aware of the loss; AFCA's rules set these out. AFCA will usually refer the complaint back to the insurer for a final attempt at resolution first, then try to resolve it by negotiation or conciliation, and if necessary make a determination.
| Stage | What happens |
|---|---|
| Registration and referral | AFCA registers the complaint and gives the insurer a chance to resolve it |
| Case management | Information exchange; AFCA may suggest a resolution |
| Preliminary assessment | AFCA gives its view on the likely outcome |
| Determination | An ombudsman or panel decides; if you accept, it binds the insurer |
If you do not accept the determination, you keep your right to go to court. AFCA has limits on the types and size of claims it can handle; check its website for current limits.
Claims by and against uninsured drivers
AFCA can also handle certain disputes where an uninsured driver's car was damaged by an insured driver and the insured driver's insurer refuses to pay, within limits set in AFCA's rules. See accidents with an uninsured driver.
CTP disputes go elsewhere
Disputes about CTP injury claims are not handled by AFCA in the same way; each state scheme has its own review and dispute processes, such as SIRA's dispute services in NSW. See CTP injury claims by state.
When to get advice
For large amounts, allegations of fraud or misrepresentation, or injury claims, get legal advice. Free help may be available from community legal centres, financial counsellors and specialist insurance law services. See the official sources directory.
Frequently asked questions
Does it cost anything to complain to AFCA?
No. AFCA is free for consumers. It is funded by its member financial firms.
Can I go to AFCA without complaining to the insurer first?
You can lodge with AFCA, but it will usually refer the complaint to the insurer's IDR process first.
Can AFCA help if the insurer is just slow?
Yes. Delays in handling claims and complaints can be the subject of a complaint.
What if my insurer says I misrepresented something?
Ask exactly what question was asked and what you said. The outcome depends on that wording and on what the insurer would have done if it had known. See misrepresentation and underinsurance.
Sources
- Australian Financial Complaints Authority — lodging a complaint and AFCA's rules
- ASIC — Regulatory Guide 271 on internal dispute resolution
- Insurance Council of Australia — General Insurance Code of Practice
- Moneysmart — complaining about financial firms
