AFCA Outlines Approach to Pre-Existing Condition Disputes

AFCA has outlined how it assesses disputes involving pre-existing medical condition exclusions, providing insight into the principles that commonly determine outcomes in life, income protection, and TPD insurance complaints.

In a webinar held on Wednesday 29 April, led by Lead Ombudsman Emma Curtis, a panel comprising Senior Ombudsman Andrew Weinmann, David Short, Ombudsman Decision, and Senior Manager – Insurance Caroline Brand examined how section 47 of the Insurance Contracts Act is applied in practice, alongside AFCA’s broader “fairness jurisdiction” in resolving complex medical disputes.

The discussion focused on complaints where insurers seek to rely on pre-existing condition exclusions, particularly in circumstances where a formal diagnosis was not made prior to policy inception.

AFCA noted that complaints frequently arise where a claimant was not diagnosed with a condition before cover commenced, but where there may have been symptoms or medical investigations prior to policy issue.

…the key issue is not necessarily whether a diagnosis existed, but whether there was sufficient awareness of a potentially serious condition when the policy was taken out…

Under section 47, an insurer may be prevented from relying on a pre-existing condition exclusion if, before the policy was issued, the complainant was not aware of the condition, and a reasonable person in the same circumstances would not have been aware of it.

AFCA emphasised that the key issue is not necessarily whether a diagnosis existed, but whether there was sufficient awareness of a potentially serious condition when the policy was taken out.

Top takeaways for advisers

• “Awareness” is judged objectively: It’s not what the client believed – it’s what a reasonable person would have understood based on symptoms, consultations and investigations
• The pre-diagnosis window is critical: Most disputes turn on what happened before policy inception, when symptoms exist but no formal diagnosis has been made

  

• GP records carry decisive weight: Contemporaneous medical notes are often the most persuasive evidence. Later recollections or revised histories are frequently discounted
• Escalation signals matter: Repeat GP visits, specialist referrals and diagnostic testing can indicate awareness of a serious condition, even where symptoms appear routine
• Outcomes hinge on consistency: Small gaps between application disclosure, medical records and claim statements can determine whether a claim is accepted or denied

In practice, AFCA said this involves assessing the nature and severity of symptoms, the timing of medical consultations, and whether investigations such as referrals or scans had occurred prior to policy inception.

The discussion highlighted that mild or isolated symptoms, on their own, may not be sufficient to establish awareness of a condition. However, where symptoms are more serious, persistent, or accompanied by medical escalation, a different conclusion may be reached depending on the facts of the case.

AFCA also emphasised the importance of contemporaneous medical evidence in determining disputes. Across multiple examples, it noted that GP records and specialist notes created at the time of treatment are generally given greater weight than retrospective accounts provided later during a claims dispute.

In one case AFCA found that an insurer was not entitled to rely on a pre-existing condition exclusion where contemporaneous medical records did not support the existence of significant symptoms prior to policy inception, despite later assertions to the contrary.

In another example, AFCA upheld an insurer’s application of a pre-existing condition exclusion stating medical evidence indicated the complainant had undergone consultations and investigations before applying for a policy.

Symptoms

Members of the panel also addressed situations where symptoms may exist without a clear diagnosis, noting the presence of medical consultation and diagnostic testing may be relevant in assessing whether a reasonable person would have been aware of a serious underlying health condition.

Panellists also highlighted operational factors that can influence the progression of disputes.

They noted that inconsistencies between underwriting, claims handling, and internal dispute resolution processes can contribute to complaints escalating, particularly where explanations provided to customers are unclear or inconsistent.

AFCA encouraged clear and well-documented decision-making processes, including consistent reasoning across insurer teams and the provision of complete information early in the dispute process.

Conciliation

The authority also highlighted the role of conciliation in resolving disputes prior to determination, and that mediation can continue even when a complaint has been made to AFCA.

Curtis said: “Conciliation is a really good way to resolve complaints without them having to go the whole way through the AFCA process to decision, and it can result in happier customers and less expenditure of resources and effort to resolve complaints.”