Insurance is there to protect our assets when things go wrong. However, unfortunately, there are a range of reasons why your insurance claim may be refused. If your claim is refused, you should understand your rights to have the decision internally and externally reviewed.
Most insurers have adopted the General Insurance Code of Practice, which provides a framework for insurers as to how they must conduct their services. If your insurer has adopted the Code, they must abide by the Code when assessing your claim and allow a decision to be reviewed if you disagree with it. For more information about the Code, please read our article NSW update on the General Insurance Code of Practice.
Common reasons for refusal
There are a range of reasons as to why your insurance claim could have been refused. We have found that the most common reasons are:
- Pre-existing damage or conditions
If your insurer can provide expert opinion establishing that your property was already damaged or defected prior to the event you are claiming over, then your claim may be reduced or refused.
Your policy will likely require you to disclose things such as all prior insurance claims, criminal offences, and existing damage or conditions. If you fail to disclose certain information required under your policy, your claim could be refused.
- Conditions and exclusion clauses
Your policy may outline a number of conditions and/or exclusions which may affect your claim. An example of this is the ‘business interruption’ exclusion clause related to businesses impacted by COVID-19. You should be aware that your insurer cannot use this exclusion clause as a reason to refuse your claim relating to COVID-19 business interruption. Read our article about the recent High Court decision here: https://chamberlains.com.au/insurers-unsuccessful-in-having-first-covid-19-business-interruption-test-case-appealed-to-the-high-court/
If your insurer suspects your claim is fraudulent, they may refuse your claim and/or void your policy. To establish fraud, they must prove that you intended to deceive the insurer or acted with reckless indifference as to whether or not your insurer was deceived.
- Policy cancellation
If you fail to pay the premiums for your policy, your policy may be cancelled, and you will be unable to make a claim. Your insurer must give you written notice at least 14 days prior to cancellation for non-payment.
The first step you should take once you find out your claim has been refused is to ask your insurer to provide you with their reasons for the decision. Carefully review the reasons and your insurance policy for any inconsistencies or interpretations you don’t understand or disagree with.
Once you know the reasons for the decision, you can ask your insurer to conduct an internal review of their decision. When doing so, outline your arguments for disputing the decision and provide as much evidence as you can to support your claim.
If your complaint has gone through the internal review process and you are still unsatisfied, you may seek assistance from the Australian Financial Complaints Authority (AFCA). AFCA is an independent dispute resolution authority which can assist you in resolving a dispute with your insurer. AFCA will attempt to resolve the dispute by agreement of both parties; however they may also conduct investigations, issue recommendations or make determinations.
Seek Legal Advice
Should you wish to refute the decision made under the external review process through AFCA, you may wish to commence legal proceedings against your insurer. If you are considering this step, contact us today to discuss how we can help.