The Australian Financial Complaints Authority (AFCA) has issued two External Dispute Resolution (EDR) response guides outlining detailed expectations for financial firms responding to complaints involving sections 29(6) and 29(7) of the Insurance Contracts Act 1984 (ICA). The guidance applies to both superannuation and retail life insurance disputes, and formalises the evidentiary standard required when insurers rely on retrospective underwriting decisions following alleged non-disclosure or misrepresentation.
AFCA received 100,745 complaints in 2024-25, marking the second consecutive year above 100,000 cases, despite a 4% year-on-year decline. While positioned as procedural guidance, the documents effectively define how AFCA will assess insurer reliance on retrospective underwriting reconstruction under ICA section 29, particularly where cover has been varied after claim lodgement.
AFCA’s guidance reinforces that section 29(6) disputes typically turn on whether insurers were entitled to vary cover based on what underwriting outcome would have applied if full disclosure had been made at application. Section 29(7) introduces a second threshold, requiring insurers to demonstrate that any variation is consistent with the position of other reasonable and prudent insurers.
In practice, ICA 29 disputes are increasingly assessed through a reconstruction framework, requiring insurers to evidence:
The guidance consolidates expectations that these positions must be supported by structured, contemporaneous records rather than retrospective justification.
A central feature of the guidance is the level of documentation required in EDR responses. AFCA sets out expectations for structured evidence packs including:
For superannuation arrangements, trustees must also demonstrate independent consideration of insurer decisions, including whether they agreed with underwriting conclusions and what material informed their position. This effectively establishes a minimum viable EDR file architecture for ICA 29 disputes.
For insurance held within superannuation, AFCA’s guidance places trustees closer to underwriting governance than in previous dispute frameworks. Trustees are expected to evidence:
This reflects an ongoing shift in expectations around trustee oversight of group insurance arrangements, particularly where insurers apply retrospective underwriting adjustments after claim lodgement.
One of the most operationally significant elements of the guidance is the treatment of comparative underwriting under section 29(7). AFCA requires insurers to demonstrate that retrospective underwriting decisions are not inconsistent with those of other reasonable and prudent insurers. Supporting material may include external underwriting opinions, reinsurer input, or comparable policy approaches. However, firms must also explain how that material applies to the specific facts of the complaint. This increases the evidentiary burden on insurers, particularly where underwriting practices vary across product lines or risk segments, and where market comparators are not readily standardised.
The guidance has implications across multiple internal functions:
Insurers must ensure that historical underwriting decisions can be reconstructed with sufficient granularity, including rationale for acceptance terms, exclusions, and loadings.
EDR responses will increasingly require integrated evidence across underwriting, claims, and trustee records, rather than siloed functional inputs.
Trustees are required to evidence independent review of insurer decisions, increasing governance expectations in group life arrangements.
The ICA 29 guidance sits within a broader AFCA trend toward structured evidentiary expectations in insurance disputes. Across life and general insurance complaints, AFCA has increasingly emphasised:
This reflects a gradual convergence toward standardised dispute evidence frameworks across insurance-related complaints involving retrospective decision-making.
The practical impact of AFCA’s guidance is unlikely to be procedural alone. Instead, it reinforces a structural shift already underway: retrospective underwriting decisions must now be defensible through contemporaneous evidence capable of withstanding external comparative scrutiny. As ICA 29 disputes continue across both superannuation and retail life insurance portfolios, underwriting documentation quality and consistency are likely to become central determinants of dispute outcomes.
