The Australian Financial Complaints Authority (AFCA) has released its latest Systemic Issues Insights Report, covering the second half of the 2024-25 financial year.
The report details the identification and resolution of systemic issues across Australia’s financial services sector, with a significant focus on insurance and related products.
During this reporting period, AFCA’s systemic investigations impacted over 342,000 consumers and small businesses.
The authority facilitated $3.4 million in financial remediation and delivered a range of non-financial outcomes, including corrections to credit files, improved product disclosures, and enhanced hardship processes.
AFCA notes that both financial and non-financial remedies are essential to maintaining trust and fairness in the sector.
AFCA’s report reveals that failures in complaint handling, gaps in recognising customer vulnerability, and reliance on outdated systems remain persistent issues.
The authority conducted 86 systemic issue investigations and reported 50 matters to regulators. Additionally, 276 further matters were referred under section 1052E of the Corporations Act 2001, including two serious contraventions of the law and 271 cases involving refusal or failure to implement AFCA determinations.
A recurring theme is the tendency for firms to treat complaints as isolated incidents, missing opportunities to identify broader process deficiencies.
“Complaint volumes, trends, and AFCA determinations contain important signals of potential systemic weakness," AFCA said. "Minimising or siloing complaints means missing opportunities for improvement. A culture that values openness to feedback and learning can turn these red flags into drivers of better practice.”
The report highlights that systemic issues often cut across products and business models. Common challenges include inconsistent application of policy intent at the frontline, legacy IT systems, and inadequate escalation of complaints.
AFCA also observed that support for vulnerable customers is not always embedded in practice. The absence of trauma-informed approaches and specialist escalation pathways can increase the risk of avoidable harm.
“Supporting consumers experiencing vulnerability is not just about compliance – it means embedding practices that recognise people’s realities and respond with care,” it said.
Legacy add-on insurance products continue to present risks, with AFCA reporting ongoing detriment from products that no longer meet consumer needs or expectations.
While regulatory reforms have changed sales practices, the authority notes that harm from legacy sales persists.
AFCA encourages firms to review these portfolios proactively and ensure remediation programs are consumer-focused.
The report points to gaps between policy design and execution, often due to outdated systems or manual processes.
AFCA found that errors in data handling, such as incorrect credit listings or beneficiary details, can have lasting impacts on consumer trust.
The authority recommends investment in system upgrades and regular reconciliation of data flows to address these risks.
Several case studies in the report are directly relevant to insurance professionals:
AFCA’s report concludes that systemic issues are often the result of entrenched patterns, such as outdated technology, siloed responses, and gaps between policy and practice.
The authority recommends that firms treat complaints as early warning signs, strengthen support for vulnerable customers, address legacy product risks, and ensure that policy intent is reflected in day-to-day operations.
The report also emphasises the importance of robust quality assurance, regular technology reviews, and comprehensive staff training in dispute resolution.
AFCA suggests that embedding systemic awareness into staff training and escalating complaint analysis to senior governance forums can help firms identify and address weaknesses earlier.
