When Australian home insurers deny claims on maintenance or wear and tear grounds, those decisions are reversed on internal review often enough that the industry’s own governance body has described the pattern as indicating possible systemic failure. A draft determination by the Australian Competition and Consumer Commission (ACCC), released on August 5, 2026, proposing to reject the Insurance Council of Australia’s (ICA) bid to standardise the definitions behind those exclusions, means the problem remains unresolved – for now. For brokers, the headline implication is direct: the patchwork of maintenance and wear and tear wording that varies across every policy on their panel stays in place, with no guarantee of consistent application at claims time.
The ICA’s own submission to the ACCC stated that denials attributable to maintenance and wear and tear exclusions rose from 9.2% of all claim denials in 2020 to 51% in 2023, while average monthly new claims stayed relatively steady. That trajectory intersects with a striking finding from the General Insurance Code Governance Committee (CGC). In its July 2023 report, Making Better Claims Decisions, the CGC found that, among a sample of six Code subscribers, more than half of denied home insurance claims examined for 2021-22 were declined on maintenance or wear and tear grounds. Nearly half of those decisions were later overturned through the insurers’ internal dispute resolution processes. The CGC said the findings may indicate underlying systemic issues in decision-making.
Home building insurance generated 7,359 complaints to the Australian Financial Complaints Authority (AFCA) in the 2025 calendar year, part of a record 111,373 total complaints – a 14% year-on-year increase. For brokers, a near-50% overturn rate on challenged denials means the first denial is not necessarily the final word. Clients who accept an initial refusal without escalating may be absorbing a loss that internal review would have reversed.
The ACCC identified several deficiencies in the ICA’s proposed wording. The regulator said new terms introduced by the definitions – including “good working order” and the distinction between “worn” and “deteriorating” – were themselves undefined and open to broad interpretation. It also warned that the wear and tear examples, including rust, rising damp, corrosion, rot, and deteriorating fencing, could deter valid claims, because those conditions can result from an insured event rather than gradual deterioration.
Because adoption was voluntary, the ACCC said the ICA had not substantiated its claim that participating insurers would represent more than 90% of the retail home insurance market. The regulator concluded the likely public benefit did not outweigh the likely detriment, which included a risk of lessening competition. The ICA had not issued a public statement in response to the draft determination at the time of publication. The ACCC has indicated what additional evidence would assist its assessment, leaving room for the ICA to strengthen its case before the final determination in September 2026.
Consumer organisations, including the Financial Rights Legal Centre, Consumer Action Law Centre, Financial Counselling Australia, and WestJustice, filed a joint submission opposing the application. Their core argument was that the proposed definitions failed to require insurers to establish a causal link between an alleged maintenance failure and the loss claimed, and that by leaving related terms such as “pre-existing damage” and “defect” undefined, the reform would simply shift insurer reliance to adjacent exclusions. The Australian Consumers Insurance Lobby (ACIL) went further on process. “We support standardising definitions in insurance. Inconsistent wording is a major driver of consumer confusion and disputes. But this cannot be led by the industry. These definitions go directly to whether claims are paid or denied,” said ACIL chair Tyrone Shandiman.
Drew MacRae, principal of policy development at the Financial Rights Legal Centre, called on the federal government to act directly: “The Insurance Council’s proposed definitions did little if anything to address these issues, and the ACCC has made that very clear in its proposal to not grant authorisation. Given this, the government needs to step in and include the definitions for ‘maintenance’ and ‘wear and tear’ in their previously announced work to standardise key natural hazard terms.”
That call has a concrete vehicle. The 2026-27 federal budget allocated $2.4 million for Treasury to legislate standard definitions for natural hazard terms used in property insurance contracts. Consumer groups are now publicly arguing that maintenance and wear and tear should be folded into that process. However, Treasury’s own consultation paper on standardising natural hazard definitions noted that stakeholders had identified “wear and tear” and related non-hazard terms as frequently causing consumer confusion, but that standardising such terms was “beyond the scope” of that process. Whether the government extends the legislative vehicle to cover exclusion terms – not just hazard definitions – is the question that will determine whether this impasse outlasts the ACCC's September 2026 final determination.
Brokers with panel recommendations built partly on coverage scope in the maintenance and wear and tear area should monitor the Treasury process closely. If the government does legislate in this space, the differentiation that currently exists between insurers on these terms will narrow – and the comparative advantage of understanding which policies apply them most broadly will diminish accordingly. Submissions on the ACCC draft determination close on August 20, 2026.
