The life insurance sector continues to face systemic weaknesses in record keeping, policy design and claims handling according to the most recent Systemic Issues Insights Report published by AFCA.
In Edition 7 of the series, covering the third and fourth quarters of 2024-25, AFCA says recurring failures at large insurers are undermining transparency and consumer confidence, even where no direct financial loss is identified.
A key concern at AFCA is some insurers’ reliance on legacy systems and manual processes. The organisation reports cases where firms were unable to produce basic policy documentation due to missing or incomplete records.
In one case, an insurer introduced compulsory digital record keeping and mandatory digitisation of all incoming documents after internal reviews confirmed widespread gaps.
Outdated policy wording also continues to generate disputes according to the report, published in October 2025. AFCA highlighted an unresolved issue involving a trauma insurance product that retained an obsolete definition of “heart attack”.
…the insurer declined to update the wording or offer remediation…
Despite industry awareness of similar issues, the insurer declined to update the wording or offer remediation, leading AFCA to report the matter to regulators.
In another case, AFCA found an inconsistency where an insurer ceased long term care TPD benefits at age 70, despite policy wording extending cover to age 99. Although premiums were refunded and cover cancelled for affected customers. AFCA concluded the issue remained unresolved and escalated it to regulators.
Claims handling remains a major source of complaints, particularly for income protection. AFCA identified patterns of delayed assessments and incorrect initial claim declines that were later overturned. AFCA notes that claims practices remain under close regulatory scrutiny.
