With general insurance complaints at record levels, Australian Securities and Investments Commission’s (ASIC) enforcement focus trained on claims conduct, and the Insurance Council of Australia (ICA) pushing back on how the Australian Financial Complaints Authority (AFCA) will apply its new standards, three Approach papers published on August 10 carry implications well beyond a routine administrative update.
For insurance professionals, the most significant development in AFCA’s August 10 publication of three Approach papers is not the documents themselves – it is what their arrival confirms about the direction of regulatory pressure on claims handling in Australia. The AFCA published a new standalone paper on general insurance claims handling, an updated paper on non-financial loss, and a new paper on uninsured motorist complaints. AFCA described the documents as reflecting established processes rather than signalling a change in approach. The industry context suggests the stakes are higher than that framing implies.
In 2024-25, AFCA received 34,231 general insurance complaints, a 17% increase from 2023-24, with comprehensive motor vehicle insurance remaining the most complained-about product, accounting for a third of all cases. That pressure has since intensified: AFCA recorded 111,373 total complaints in calendar year 2025, a 14% increase on 2024 and the highest annual volume in its history, with general insurance complaints rising to around 36,000, up 20%. Delay in insurance claim handling ranked among the top three issues across all financial products in 2024-25, and AFCA chief ombudsman and CEO David Locke has been direct about the industry’s responsibility. “Proactive and clear communication with customers can often be the very thing that stops a complaint from being escalated in the first place,” Locke said.
The new claims handling Approach brings together AFCA’s position on common disputes, including claim delays, cash settlements, and claim denials involving expert evidence. Where AFCA finds a failure to handle a claim properly, it will consider what fair remedies, if any, should be awarded. Those remedies can include financial losses caused by poor claims handling, including some losses incurred beyond a policy limit, as well as compensation for non-financial loss. That position drew a substantive response from the ICA, whose August 2025 submission to AFCA’s consultation process raised several points of contention. The ICA – which represents approximately 85% of private sector general insurers and an industry that pays out $147 million in claims each working day – argued the Approach should more clearly reflect obligations on both sides of the insurance contract.
On claim delays specifically, the ICA said AFCA’s position that any delays caused by an insurer would typically constitute a breach of its claims handling obligations was too broad. The submission argued that “there will be circumstances where delays from an insurer could be for legitimate or uncontrollable reasons,” citing supply chain constraints as one example. The ICA also challenged AFCA’s approach to contingency margins in cash settlements, warning that broadly applied contingencies “can have material implications for premium pricing due to APRA’s prudential requirements and the affordability of insurance products more generally.”
On expert evidence, the ICA contended that where an insurer relies on credible expert opinion that later differs from AFCA’s preferred view, “a subsequent disagreement with that evidence should not be automatically treated as a breach of obligations.” These are not peripheral concerns. They go to the practical question of where AFCA draws the line between a defensible claims decision and a breach finding – a question that affects every insurer managing complex or disputed claims and every broker advising clients through them.
The updated non-financial loss Approach includes a severity-and-duration matrix that sets out how AFCA will calibrate compensation awards, ranging from very low impact – mild frustration or inconvenience – to high impact involving severe distress and hardship, across durations from hours to more than six months. Compensation for non-financial loss is capped at $6,300 per claim for complaints lodged on or after January 1, 2024.
In one case cited in AFCA’s 2024-25 annual review, even with the insurer making accommodation payments above policy limits, AFCA awarded the maximum non-financial loss amount due to the complainant’s stress and loss of enjoyment caused by the claim handling. The ICA, in its submission, welcomed the updated compensation matrix as a useful tool for guiding internal complaint resolution, but flagged that inconsistent application of non-financial loss awards at final decision stage risked being leveraged by third-party representatives in ways “not necessarily in the best interest of the customer.”
For brokers, the practical implications of both papers run in parallel. The claims handling paper provides a documented benchmark for identifying when an insurer’s conduct falls short of AFCA’s stated expectations – knowledge that directly informs how a broker advocates for a client whose claim is delayed or disputed. The non-financial loss matrix gives brokers and their clients clearer visibility of what compensation is available if conduct causes harm beyond direct financial loss. The regulatory backdrop reinforces urgency. ASIC named claims and complaint handling failures by insurers as an enforcement priority for 2026 and said it would target poor practices by insurers, which it expects to handle claims and complaints fairly as premiums rise. All three Approach papers and accompanying consultation feedback are available on AFCA’s website.
