In 2024–25, the Australian Financial Complaints Authority received 34,231 general insurance complaints — a 17% jump from the previous year. Denial of claim alone made up 6,362 of those, up 32%. For the average homeowner, that means the odds of an insurer saying no are rising, but so is the chance of successfully fighting back. Consumers and small businesses secured a record $643 million in compensation through AFCA in 2025, more than double the year before.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
Those numbers don’t tell the full story. The ASIC study — which covered roughly 60% of the Australian market across six insurers — found that 76% of home insurance claims were accepted or partially accepted, while 12% were withdrawn and 4% were still pending. But roughly one in four property claims either gets declined or withdrawn before a decision lands. That gap between the 8% formal decline rate and the one-in-four figure is where most of the confusion lives. Many homeowners accept a denial without realising the decision can be challenged, and that the process to do so costs nothing out of pocket. Here’s what you actually need to know.
When an insurer says no, the first step is always the insurer’s own Internal Dispute Resolution process.
What I tend to notice is that most homeowners don’t know the IDR process exists. They get a denial letter, assume it’s final, and move on. But the insurer is legally required to give you a written explanation referencing specific policy clauses, and you have the right to dispute it. That’s the starting point for everything that follows. If you’re already thinking about how to lower your property insurance premiums, that’s a separate conversation — but first, make sure the cover you’ve paid for actually delivers when you need it.
Insurers don’t just say no without a reason — or at least they’re supposed to give you one. A valid decline letter must state the exact policy clause relied on, explain how it applies to your situation, and include the factual findings and evidence the insurer used. Common denial grounds fall into a few distinct categories, and each one has a different set of rules for how you can respond.
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| Denial Ground | What It Means | Your Best Response |
|---|---|---|
| Policy exclusion | The event or item isn’t covered (e.g. flood vs stormwater, wear and tear, gradual damage) | Check the PDS definition. Disputes often turn on whether the cause was a sudden event or gradual deterioration. |
| Non-disclosure or misrepresentation | The insurer says you didn’t disclose something relevant at application or renewal | Under the Insurance Contracts Act 1984, the insurer must prove the misrepresentation would have changed their underwriting decision. |
| Failure to follow procedures | Late lodgement, unauthorised repairs, or disposing of damaged items before assessment | Section 54 of the Act says the insurer can only refuse if the act or omission caused or contributed to the loss. |
| Underinsurance | Your sum insured is below the actual rebuild cost | Construction cost inflation has made this more common. An independent assessment can challenge the insurer’s valuation. |
Each denial ground has its own legal pathway. The one that catches the most people off guard is the “failure to follow procedures” category. You might have thrown out water-damaged carpet or done an emergency roof repair, and the insurer says you prejudiced the claim. But under Section 54 of the Insurance Contracts Act, an insurer can only reduce the claim proportionally for the increased loss — they can’t refuse the whole thing unless the act caused the loss itself. That’s a protection most homeowners don’t know exists.
Where Homeowners Slip Up After a Denial
Accepting the first letter as final
The most expensive mistake is treating a denial letter as the end of the road. About a quarter of denied claims lead to a formal complaint, and nearly half of those complaints are overturned. A denial letter is the insurer’s position, not a binding verdict. You have the right to request an internal review, and the insurer must respond in writing within 30 calendar days. What I’d do in that situation: read the letter for the specific policy clause, pull up the Product Disclosure Statement, and check whether the exclusion actually applies to the event you experienced. Many denials rely on clauses that don’t match the facts.
Withdrawing the claim instead of disputing it
Roughly one in four home insurance claims ends up withdrawn. Sometimes the insurer nudges you toward withdrawal, or you assume it’s easier than fighting. But a withdrawn claim removes the formal decision, which means you lose the structured pathway to challenge it. You also lose the written reasons. If you’re unsure whether to push back, don’t withdraw — ask for the formal decline in writing instead. That triggers the IDR clock and preserves your rights.
Throwing away evidence or doing early repairs
Disposing of mould-affected contents, removing water-damaged plasterboard, or doing urgent roof repairs before the insurer assesses the damage can backfire. The insurer may argue you prejudiced the claim. Under Section 54, they can only reduce the payout proportionally, not refuse entirely — but you’ll still have to prove the loss amount without the physical evidence. An independent assessor can document the scene before you touch anything. If you have to do emergency repairs, take photos and videos first, keep samples of damaged materials, and get written approval from the insurer where possible.
Not requesting the insurer’s internal claim notes
You are entitled to request copies of the insurer’s internal claim notes. These often contain the adjuster’s observations, photos, and reasoning that the denial letter doesn’t include. If the notes show the adjuster was uncertain about the cause of the damage, or if they recorded something different from what the denial letter says, that’s ammunition for your dispute. Ask for the notes in writing, and cite your right to access them under the insurer’s IDR process.
How to Challenge a Denied Property Insurance Claim, Step by Step
Step 1: Build your evidence file
Before you write a single letter, gather everything. Photos and videos of the damage taken before any repairs. Receipts, invoices, and quotes. Weather data if the damage was storm-related. Any correspondence with the insurer. If the dispute turns on whether the damage was sudden or gradual, an independent building assessor’s report can make or break your case. The goal is to have a file that tells the story from your side, with documentation that backs up every claim. A video doorbell camera can capture real-time footage of events like storms, break-ins, or accidental damage — the kind of timestamped evidence that cuts through a “wear and tear” argument.
Step 2: Lodge an Internal Dispute Resolution request
Write to the insurer’s complaints team. Be specific about what you’re disputing and why. Attach your evidence. State what outcome you want — full payment of the claim, or a revised decision. The insurer must respond in writing within 30 calendar days. If they miss that deadline, you can escalate immediately. Keep copies of everything and note the date you submitted the complaint. The IDR process is free, and you don’t need a lawyer for it.
Step 3: Escalate to AFCA if the IDR doesn’t resolve it
If the insurer’s final response is still a no, or if they don’t respond within 30 days, you can take the case to the Australian Financial Complaints Authority. AFCA is free for consumers. They can consider claims up to $1,085,000 and award compensation up to $542,500. In 2025, AFCA resolved 45% of general insurance complaints at the referral stage and 11,516 at the case management stage. You can contact AFCA on 1800 931 678. The ombudsman’s decision is binding on the insurer but not on you — if you don’t like the outcome, you can still pursue legal action.
Step 4: Consider an independent assessment
One of the most effective things you can do is commission an independent building assessor or restoration contractor to document the damage, identify the cause, and provide a repair cost estimate. This neutral report carries weight with both IDR and AFCA, especially when the insurer’s adjuster has already taken a position. The cost of the assessment is usually recoverable as part of the claim if you win. If you’re hiring a legal professional for advice on the dispute, make sure they have experience with insurance contract law and the AFCA process.
What’s changing: the 2026 complaint landscape
Complaint volumes are still climbing. In the first three months of 2025, AFCA received 8,827 general insurance complaints, with almost 30% relating to home building and contents insurance. That’s a 10% rise on the same period in 2024. Industry-wide shortages in vehicle parts and skilled labour are also driving delays, particularly for combined motor and property claims. The upward trend means AFCA is under pressure, but it also means the ombudsman is seeing more of these cases and getting better at spotting unfair denial patterns. If you’re considering whether your building insurance versus contents insurance cover is adequate, check your sums insured against current construction costs — underinsurance is a growing reason for partial denials.
Frequently Asked Questions About Denied Property Insurance Claims
Can I still get paid if I reported the damage late? ▾
What if my policy lapsed before the damage happened? ▾
Does AFCA charge me to lodge a complaint? ▾
Can I claim for stress and inconvenience? ▾
What if the insurer says I didn’t disclose a previous claim? ▾
Do I need a lawyer to challenge a denied claim? ▾
The Denial Letter Is a Starting Point, Not a Final Answer
Most of the $643 million in compensation AFCA secured in 2025 came from people who didn’t stop at the first no. The formal decline letter triggers a structured process — written reasons, a 30-day IDR window, and a free pathway to a binding ombudsman decision — that you can use to push back. The data shows that roughly half of those who challenge a denial through the proper channels get the decision overturned. The system is designed to be used, but only if you use it. The single most important thing you can do after a denial is not accept it at face value.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Renting Out Your Place: What Landlords Need to Know About Aussie Property Insurance.
Sources and Further Reading
Building Code Changes and Your Insurance: Are You Up to Date? — A practical guide to how recent regulatory changes affect your property cover and what you need to check before renewal.
Gap Insurance for Property: The Safety Net You Didn’t Know You Needed — Explains how underinsurance gaps arise and what options exist to cover the difference between your sum insured and actual rebuild costs.
Finance Directory (2025). Property Insurance Claims Denied? Know Your Rights as an Aussie Homeowner! 🔗
Canstar (2026). What to do if your insurance claim is denied. 🔗
Owner Inspections (2025). Insurance Claim Denied: Steps to Challenge. 🔗
Disaster Recovery Australia (2025). Insurance Claim Denial: Your Rights as a Property Owner. 🔗
