Complaints about life insurance claim denials and claims-handling delays increased somewhat during 2025–26, despite a modest rise in overall life insurance complaints, according to the Australian Financial Complaints Authority’s latest Annual Review.
The report shows AFCA received 1,561 life insurance complaints during the financial year, an increase of 3%, with income protection remaining the most complained-about life insurance product.
In total the authority received 119,949 complaints across all categories, the the highest number received since the organisation was established.
In the life insurance area, complaints involving the denial of claims rose 20%, from 243 to 292, while complaints about delays in claims handling increased 31%, from 199 to 260.
However complaints relating to incorrect fees, premiums or charges fell 16%, from 222 to 187.
Of the top five life insurance complaints received by product, Income Protection accounted for 599 complaints, up 13% from 530 in the previous year, representing 38% of all life insurance complaints.
Term Life insurance attracted 379 complaints, up from 359, while Total and Permanent Disability complaints fell from 321 to 302 in the 2025-2026 year.
The AFCA report says that income protection claims can involve complex assessments, particularly for self-employed policyholders and business owners where income before and after disability must be established.
The authority also highlighted the potential financial consequences of delayed decisions for claimants relying on insurance benefits during periods of illness or reduced capacity to work.
AFCA says these complaints “…reinforce the importance of insurers providing clear information about policy features and premiums throughout the life of a policy, while assessing claims fairly, communicating clearly and making decisions as promptly as possible.”
Complaint Resolution Times Improve
AFCA closed 1,591 life insurance complaints during the year, slightly exceeding the number received. The average time taken to close a complaint fell from 129 to 124 days, with 30% of complaints resolved at the initial referral stage.
A further 715 complaints were closed during case management, while 208 proceeded to a formal decision.
The report also points to a case study involving a life insurance policy sold over the telephone. AFCA found an insurer had inadequately explained stepped premium increases and required a refund of premiums attributable to age-related increases, that had not been properly disclosed.
Financial Advice Complaints Surge
Meanwhile, investment and advice complaints increased 56% to 6,542, largely reflecting the impact of large-scale investment collapses.
Complaints involving failures to act in clients’ best interests rose from 1,266 to 2,083, while inappropriate advice complaints more than doubled, from 393 to 913.
AFCA identified the Shield and First Guardian fund collapses, alongside continuing Dixon Advisory matters, as significant contributors to the increased complaint volumes.
The authority highlighted recurring concerns involving conflicts of interest, inappropriate superannuation switching, poorly diversified investment recommendations, noting that licensees must actively supervise their authorised representatives and ensure advice is tailored to each client’s circumstances.
It also warned about advice business models involving high-volume, standardised recommendations and lead generation practices that prioritised product distribution over clients’ individual circumstances.
While the Annual Review separately reports life insurance complaints and investments and advice complaints, it does not provide a breakdown of complaints relating to life insurance advice.
Click here or on the cover image below to see the full report.
