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This article is general information only and does not constitute legal advice. For your specific situation, consult a qualified solicitor or tenancy service.
In 2024-25, the Australian Financial Complaints Authority (AFCA) received 11,230 motor vehicle insurance complaints — an 18% jump from the previous year and more than double the 4,386 recorded in 2020-21. That number tells you something important: a denied claim is not a rare event, and it’s becoming more common. When your insurer says no, the question isn’t whether you have options — it’s whether you know how to use them. Here’s what you actually need to know.
Most people assume a denial is final. It isn’t. Australian law gives you a structured path to challenge it — from an internal review at your insurer all the way to a binding decision from AFCA, and if needed, the courts. The catch is that each step has strict time limits and specific procedures. Miss one, and your options shrink fast. I’ve watched people lose valid claims not because the policy was weak, but because they didn’t know the process existed. That’s what this guide is for.
If you’re dealing with a denial right now, the first thing to understand is how your policy was set up in the first place — because the reason for the denial often traces back to something in the application or the fine print.
What a Claim Denial Actually Means — and the Key Term You Need to Know
A claim denial isn’t a single event — it’s the start of a process. The Insurance Contracts Act 1984 is the central piece of law here. It requires insurers to act with “utmost good faith” (Section 13), which means they can’t hide behind technicalities or bury reasons in fine print. If they deny your claim, they have to tell you exactly why, in language you can understand.
What I tend to notice is that people confuse “denied” with “lost.” They’re not the same thing. A denial is a decision. A lost claim is one you didn’t challenge. The difference often comes down to whether you knew the rules of the game. If you’re unsure where to start, rethinking how you approach car insurance might help you avoid the same issues next time.
Why Claim Denials Are Rising — and What That Means for You
The numbers are hard to ignore. In 2025, AFCA received 111,373 complaints across all financial services — a 14% increase and the highest annual volume in its history. Motor vehicle insurance alone accounted for 11,230 of those, with denial-of-claim complaints hitting 6,362 — up 32% from the previous year. Meanwhile, consumers and small businesses secured a record $643 million in compensation through AFCA, a 120% year-on-year jump.
These figures point to a system under strain. Insurers are scrutinising claims more aggressively, and policy language is getting tighter. The distinction between “flood” and “storm surge,” for example, has tripped up many drivers who assumed their comprehensive policy covered all water damage. It doesn’t. Similarly, using your car for ride-share on a private policy, or failing to report an accident “as soon as reasonably practicable,” can void coverage entirely.
One scenario that comes up often: a driver hits a kangaroo in regional NSW, reports it three days later, and the insurer denies the claim for late notification. The policy says “as soon as reasonably practicable,” and the insurer argues three days isn’t reasonable. AFCA has overturned such denials before, but only when the driver can show they had a genuine reason for the delay — like being in hospital or having no phone reception. The point is, the reason matters as much as the timing.
If you live in a remote area, the risks are different. Driving in remote Australia comes with its own insurance considerations that many people don’t think about until it’s too late.
Where People Go Wrong When Challenging a Denial
Not reading the denial letter carefully enough
Insurers are required to give specific reasons in plain English. But many people skim the letter, see “claim denied,” and move straight to anger or resignation. The real information is in the details: which policy exclusion was cited, what date the incident was reported, whether the insurer claims non-disclosure. That paragraph is your roadmap. If the reason is vague — “based on policy terms” without specifics — that itself can be grounds for a complaint. The Australian Consumer Law requires services to be provided with due care and skill, and a vague denial arguably fails that test.
Missing the Internal Dispute Resolution window
Before you can go to AFCA, you must first try to resolve the issue with your insurer through their Internal Dispute Resolution (IDR) process. The insurer must acknowledge your complaint within 24 hours and respond within 30 days (45 days in some cases). If you don’t lodge the IDR request promptly, you risk delaying the entire process. And if you skip IDR entirely and go straight to AFCA, they’ll send you back. It’s a mandatory first step, not an optional one.
Assuming AFCA is the same as court
AFCA is a free dispute resolution service, not a court. It can order the insurer to pay your claim, vary or cancel a debt, or award compensation for distress — up to $542,500 for individuals. But it cannot provide legal advice, and it cannot handle disputes that are already in court. Many people confuse AFCA’s role and expect it to act like a judge. It doesn’t. It mediates and makes binding decisions based on what’s fair and reasonable, not just what the policy says. That distinction matters because AFCA can overturn a denial even if the policy technically supports it, if the outcome would be unfair.
Waiting too long to act
You have two years from the date of the insurer’s final decision to lodge a complaint with AFCA. That sounds like plenty of time, but the clock starts ticking from the final decision — not from the incident, and not from when you first reported the claim. If you spend six months trying to negotiate directly with the insurer without formally starting IDR, you’ve already burned a quarter of your window. And if you miss the two-year deadline, your only option is court, which is more expensive and less predictable.
If you’re dealing with a complex denial — especially one involving alleged non-disclosure — it’s worth understanding what hidden extras your policy might have included that you didn’t know about.
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| Step | Time Limit | What Happens | Max Award |
|---|---|---|---|
| Internal Dispute Resolution | 30-45 days | Insurer reviews your complaint internally | Varies by policy |
| AFCA Complaint | 2 years from final decision | Free independent dispute resolution | $542,500 (individuals) |
| Court Action | 6 years from loss | Legal proceedings for unresolved disputes | Unlimited |
How to Challenge a Denied Car Insurance Claim — Step by Step
Step 1: Read the denial letter and gather your evidence
Start with the letter itself. Highlight the specific reason given — is it non-disclosure, a policy exclusion, late reporting, or something else? Then gather everything you have: the policy document, your application, any correspondence with the insurer, photos of the damage, police reports, and witness statements. The more documentation you have, the harder it is for the insurer to rely on vague claims. If the denial cites non-disclosure, look back at your application. Did you honestly answer every question? If you’re unsure, a business law service can help you review the policy language and identify whether the insurer’s interpretation is reasonable.
Step 2: Lodge an Internal Dispute Resolution request
This is the mandatory first step. Contact your insurer’s complaints team — usually there’s a dedicated email or online form. Put everything in writing. State clearly that you’re requesting an internal review of the claim denial, reference the policy number and claim number, and attach your evidence. The insurer must acknowledge receipt within 24 hours and provide a final response within 30 days (45 days for more complex cases). Keep copies of everything. If the insurer doesn’t respond within the timeframe, you can escalate to AFCA immediately.
Step 3: If IDR fails, go to AFCA
Once you have the insurer’s final response (or if they miss the deadline), you can lodge a complaint with AFCA. This is free. You can do it online or by phone. AFCA will review your case and try to mediate a resolution. If that fails, they’ll make a binding decision. They can order the insurer to pay your claim, award compensation for distress, or vary the policy terms. The key limit: you must lodge within two years of the insurer’s final decision. AFCA’s decisions are binding on the insurer but not on you — if you don’t agree, you can still go to court.
Step 4: Consider court action as a last resort
If AFCA’s decision doesn’t resolve the issue, or if your claim exceeds AFCA’s $542,500 limit, you can take the insurer to court. You have six years from the date of the loss to file a claim. Court is more expensive and time-consuming, but it’s the only option for very large claims or cases involving bad faith conduct. If the insurer denied your claim without proper investigation, or if they’re demanding something beyond their legal rights, a lawyer becomes essential. For claims under $10,000, the cost of legal representation often outweighs the potential payout, so weigh that carefully.
If you’re considering legal action, a finance advice service can help you understand the costs and risks before you commit.
Frequently Asked Questions
Can AFCA help if my claim was denied for non-disclosure? ▾
What if my insurer says I reported the claim too late? ▾
Do I need a lawyer to challenge a denied claim? ▾
How long does the AFCA process take? ▾
Can AFCA help with CTP (Compulsory Third Party) disputes? ▾
What if my insurer refuses to give me a written reason for the denial? ▾
Your Next Move Starts With the Denial Letter
A denied claim isn’t the end of the road — it’s the start of a process that thousands of Australians navigate successfully every year. The $643 million recovered through AFCA in 2025 proves that insurers don’t always get the final say. Your job is to read the denial carefully, follow the three-step process — IDR, AFCA, then court if needed — and keep every document along the way. The two-year window from the final decision is generous, but it’s not infinite. Start today, not next month.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified solicitor or tenancy adviser.
If this was useful, you might also want to read Tips for Getting the Best Car Insurance for Older Cars in Australia.
Sources and Further Reading
How Does Location Impact Your Car Insurance Rates in Australia? — Explains how where you live affects your premiums and policy terms, which can influence claim outcomes.
Finance Directory Australia (2025). AFCA Annual Review 2025: Record Complaints and Compensation. 🔗
Go To Court (2025). Car Insurance Claim Denied? Your Rights and Recourse in Australia. 🔗
Canstar (2025). AFCA Car Insurance Complaints: What You Need to Know. 🔗
Mash Magazine (2025). Why Car Insurance Claims Get Denied in Australia. 🔗
