Insurance Ombudsman Australia: How AFCA Handles Insurance Disputes

The insurance ombudsman in Australia is now called AFCA (the Australian Financial Complaints Authority). It replaced the Financial Ombudsman Service (FOS) in November 2018. AFCA handles complaints about general insurance, life insurance, superannuation, banking, and financial advice. The service is free for consumers. A determination in your favour becomes binding on the insurer once you accept it, and the insurer cannot then reject or appeal it. You are not bound, so if you disagree with the outcome you can reject it and take legal action instead.

Key takeaways

• AFCA replaced the Financial Ombudsman Service (FOS) in November 2018.
• It handles complaints about general insurance, life insurance, superannuation, banking, and financial advice.
• The service is free. A determination binds the insurer once you accept it, but never binds you.
• You can still take legal action if you disagree with the AFCA outcome.

If you are searching for the "insurance ombudsman" in Australia, you are looking for the Australian Financial Complaints Authority, known as AFCA. Since November 2018, AFCA has been the single external dispute resolution scheme for all financial services complaints in Australia, including insurance. The old Financial Ombudsman Service (FOS) and the Credit and Investments Ombudsman (CIO) were merged into AFCA, creating one body that handles everything from banking disputes to general insurance complaints.

What AFCA does

AFCA is a free, independent body that resolves disputes between consumers and financial services providers, including insurers. If your insurer has denied your claim, underpaid it, or taken too long to process it, and you have not been able to resolve the issue directly with them, AFCA can step in. A determination in your favour becomes binding on the insurer once you accept it, and the insurer must then implement it within 30 days. You are never bound by it. If you disagree with AFCA's decision, you can reject it and pursue the matter through the courts instead, though few people need to.

Who can complain to AFCA

Any individual who holds or is covered by an insurance policy with an Australian-regulated insurer can lodge a complaint with AFCA. You do not need to be the policyholder yourself. If you are a named insured, a beneficiary, or a third-party beneficiary under the policy, you may be eligible. You also do not need a lawyer or any professional representation. AFCA is designed to be accessible to ordinary people without legal training.

What types of insurance complaints AFCA handles

AFCA handles complaints about all types of general insurance, including home and contents, motor vehicle, travel, income protection, total and permanent disability (TPD), and life insurance. Common complaints include claim denials (the insurer refuses to pay), underpayment (the insurer pays less than you are entitled to), delays (the insurer takes an unreasonable amount of time to assess or pay your claim), and conduct issues (the insurer behaves unfairly during the claims process).

Before you go to AFCA, you need to go through IDR

AFCA requires that you first try to resolve your complaint directly with your insurer through their Internal Dispute Resolution (IDR) process. This means lodging a formal complaint with the insurer and giving them up to 30 days to provide a final response. If you have done this and are not satisfied with the outcome, or if 30 days have passed without a response, you can then lodge your complaint with AFCA.

If you have not yet sent a dispute letter to your insurer, that is the first step. Our guide to writing a dispute letter covers what to include and how to structure it.

How the AFCA process works

Once you lodge a complaint, AFCA follows a structured process. First, they assess whether your complaint falls within their jurisdiction. Most insurance complaints do. Next, they contact your insurer and ask for their response, including the claim file, policy documents, and any internal reports. AFCA then reviews both sides and attempts to resolve the matter. This can happen at several stages.

At the registration stage, AFCA may contact your insurer and prompt them to reconsider. Many complaints are resolved here without needing to go further. If that does not work, AFCA moves to a case management phase where a case manager works with both parties to find a resolution. If the case manager cannot broker an agreement, the complaint moves to a determination, where an AFCA decision maker issues a binding ruling.

How long does AFCA take?

The timeline varies depending on the complexity of your complaint and how cooperative the insurer is. Simple complaints can be resolved in a few weeks. More complex matters, particularly those involving large sums or disputed expert evidence, can take several months. Our detailed guide to AFCA timeframes breaks this down further.

What AFCA can award

AFCA can order an insurer to pay your claim, increase an inadequate payout, pay compensation for financial loss caused by the insurer's conduct, and in some cases, award compensation for non-financial loss (stress, inconvenience, and delay) up to $6,300 for complaints lodged from 1 January 2024. The monetary limit on AFCA's jurisdiction for general insurance disputes is $1,263,000 for claims lodged from 1 January 2024.

AFCA is not a court

One of the key advantages of AFCA over court proceedings is that it is informal and free. There are no court fees, no legal costs, and no risk of having to pay the insurer's costs if you lose. You present your case in writing, and AFCA makes its decision based on the documents and evidence provided. You do not need to attend a hearing (though telephone conferences are sometimes arranged). This makes AFCA accessible to anyone, regardless of their financial situation or legal knowledge.

What if AFCA rules against you?

If AFCA's decision goes against you, it is not binding on you. You can choose to reject the decision and pursue the matter through the courts if you wish. However, most people find that AFCA's process is thorough and fair, and the majority of complaints are resolved before reaching the determination stage.