A product category largely restructured following the deferred sales model that took effect in 2021 has re-emerged as the single biggest driver of general insurance complaints in Australia, creating ongoing compliance and dispute management obligations for financial firms that still carry unresolved exposure.
The Australian Financial Complaints Authority (AFCA) received 34,231 general insurance complaints in FY2025 – a 17% increase from the prior year – with the surge driven primarily by add-on insurance. Excluding add-on insurance, general insurance complaint volumes remained broadly stable. The 7,880 add-on insurance complaints received that year represented 23% of all general insurance complaints lodged with the authority. That figure sits against a broader trend in the opposite direction: overall complaints across all product areas fell 4% in the same period.
Complaints about misleading product or service information in general insurance rose 365% in FY2025, to 7,515, driven by add-on insurance and related disputed issues. Common concerns included unfair sales practices, poor product design, inadequate disclosure, and misrepresentation. Nearly three-quarters of complaints were directed against nine AFCA members, mainly large banks.
Complaints lodged by paid representatives reached 9,429 in FY2025 – a 93% increase from the prior year and the highest volume ever recorded – accounting for 9% of AFCA’s total complaint volume. Consumer claims firm Claimo, which operates on a paid representative basis, accounts for a portion of that increase. The firm’s own internal modelling estimates that up to one million current and former frontline and public sector workers may have grounds to seek refunds, with total potential exposure calculated at approximately $3.4 billion and average individual refunds estimated at approximately $3,400. Those figures are Claimo’s own projections and have not been independently verified.
Under AFCA’s rules, unless a complainant can demonstrate special circumstances, a complaint about the sale of add-on insurance sold before July 2019 that was lodged after June 30, 2025, will likely fall outside AFCA’'s jurisdiction, assessed on a case-by-case basis. AFCA’s position is that the period following the release of the Royal Commission’s Final Report, and the media coverage that accompanied it, represents the point at which a complainant should reasonably have been aware to check for add-on insurance products purchased prior to 2019. AFCA’s full position on the awareness test is set out in its published add-on insurance fact sheet at afca.org.au.
According to Claimo, the June 30, 2025, deadline was a revision of an earlier February 4, 2025, cut-off, following concerns it raised with the Australian Securities & Investments Commission (ASIC) about whether AFCA’s approach met the legislative requirements of the AFCA scheme. Claimo says ASIC wrote to AFCA on December 23, 2024, seeking information on its handling of add-on insurance complaints, after which AFCA advised ASIC it would extend the lodgement deadline.
The deadline does not extinguish financial firms’ internal obligations. AFCA expects financial firms to engage with and resolve add-on insurance complaints regardless of its jurisdictional limits, consistent with their internal dispute resolution obligations. For compliance and disputes teams at firms still holding legacy exposure, that distinction is material: internal dispute resolution requirements remain operative even where AFCA’s external jurisdiction may not. In FY2025, AFCA identified possible systemic issues in add-on insurance, reporting concerns to regulators about misleading practices, breaches of advice obligations, poor complaint handling, and residual harm not addressed through earlier remediation programs.
Following ASIC’s 2019 review of consumer credit insurance, the regulator secured more than $160 million in remediation distributed to approximately 434,000 consumers, after finding widespread mis-selling across 11 major lenders, including the sale of policies to consumers ineligible to make a claim. Across car-yard add-on insurance and consumer credit insurance combined, insurers agreed to repay more than $290 million – a scale of remediation that demonstrated systemic product failures significant enough to prompt legislative intervention. For every dollar paid in premiums in car yards, consumers received just nine cents back in claims.
A deferred sales model recommended by the Royal Commission and implemented through the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 took effect from October 5, 2021, introducing a mandatory four-day pause between the sale of a principal product and the sale of add-on insurance. The design and distribution obligations regime, which commenced at the same time, has since moved from administrative stop orders to civil penalties. In January 2025, the Federal Court ordered Firstmac Limited to pay $8 million in penalties for failing to meet its design and distribution obligations – ASIC’s first civil penalty action against a distributor involving DDO breaches, with the court finding the conduct was “objectively reckless.” The Firstmac matter involved a managed investment scheme rather than add-on insurance, but it operates under the same legislative framework governing add-on product distribution.
Claimo director Nathan Mortlock has challenged AFCA to identify the specific evidence underpinning its awareness position, including the media coverage it says placed consumers on notice. Claimo says AFCA declined to provide those materials. “It is nonsense. If AFCA says consumers were reasonably aware, then AFCA should be able to identify the evidence it relies on. The onus should be on AFCA to explain why an ordinary consumer – not a financial services lawyer, expert, or banking executive – was reasonably aware that they had suffered loss and should have lodged a complaint earlier,” Mortlock said.
Mortlock also questioned whether the standard is realistic when applied beyond the financial services sector. “Are we really saying it was reasonable to expect our nurses, police officers, aged care workers, and other frontline workers – the backbone of our society – to have read the Royal Commission final report, understood the implications for old financial products, and lodged a complaint earlier?” he said.
AFCA chief ombudsman David Locke said in the FY2025 annual review that “persistently high volumes of complaints about general insurance demonstrates [sic] there is more to be done by the sector to prevent complaints reaching AFCA.” AFCA’s stated position is that each complaint is assessed individually and on its merits.
On the question of oversight, AFCA operates as a non-government ombudsman service with statutory independence, which limits the scope for direct ministerial intervention in its operational decisions. Claimo says ASIC has indicated it does not consider using its oversight powers – including a directions power – to be an appropriate response to the deadline issue, leaving the awareness test question unresolved through regulatory channels. AFCA was approached for comment on the awareness test specifically; its published position is available at afca.org.au/make-a-complaint/insurance/add-on-insurance.
Claimo has flagged the possibility of a legal challenge to AFCA’s approach. “AFCA is meant to be the accessible forum for consumers. If consumers then have to go to court to challenge whether AFCA is applying its own rules lawfully or fairly, that is a major issue,” Mortlock said.
AFCA resolved more than 4,500 add-on insurance complaints in FY2025, with 319 closed through formal determination. The volume of complaints still working through the system – and the IDR obligations that persist beyond the AFCA deadline – mean the category’s compliance exposure has not closed with the lodgement window.
