The Australian Financial Complaints Authority (AFCA) has issued updated procedural guidance for handling disputes involving add-on insurance products.
The revised guide is designed to support financial institutions in preparing external dispute resolution (EDR) responses, particularly as a key complaint lodgement deadline approaches.
From May 19, AFCA expects financial firms to align their responses with the new guide for all unresolved complaints that are referred back to them. The authority has clarified that firms must provide full responses in accordance with the guide even if they contest AFCA’s jurisdiction over the matter.
The updated guidance focuses on complaints involving add-on insurance products typically bundled with credit offerings such as car loans, novated leases, personal loans, and credit cards. These products include:
According to AFCA, financial firms are required to address every issue raised by the complainant, provide relevant documentation – including policy details and consumer correspondence – and submit the response to both the complainant and AFCA.
AFCA’s lead ombudsman for insurance, Emma Curtis, emphasised the importance of acting before a looming deadline. Consumers with concerns about policies sold before July 2019 must file complaints by June 30 to be considered.
“AFCA is very familiar with add-on insurance and the issues that arose in sales of this product,” she said. “AFCA is designed to be a free and simple alternative to a court or tribunal process, without people needing to pay for representation. If you have a complaint, please make sure you lodge by the deadline.”
The updated response guide outlined the structure firms should follow when preparing EDR responses. Required information includes a summary of the complaint, policy background, consumer and firm positions, and responses to a series of standard and supplementary questions depending on the product’s sales channel. Firms must also include documentation such as PDSs, proof of dispatch, sales timelines, and signed application forms.
Where sales occurred through agents, firms must provide training records, internal communications, audit processes, and, where possible, statements from those agents or their managers. For online sales, firms are asked to submit screenshots of the digital sales path and metadata confirming the self-service nature of the transaction.
For cases involving personal advice, firms must provide a Statement of Advice and evidence of adviser accreditation and compliance with obligations under the Corporations Act.
AFCA also acknowledged that some complaints concern policies issued many years ago, which may limit a firm’s access to historical records. In such cases, firms may submit a statutory declaration or system-based evidence to demonstrate the extent of any information gaps.
The authority said that complaints related to policies issued after July 2019 are not impacted by the June 30 cut-off, though standard complaint timeframes still apply.
The regulatory spotlight on add-on insurance began more than a decade ago, when ASIC identified widespread issues with product design and distribution.
These concerns were later scrutinised by the Financial Services Royal Commission, resulting in remediation programs and the removal of several products from sale.
In the 2023-24 reporting year, AFCA received more than 105,000 complaints across all financial service sectors. Independent assessments of randomly selected cases indicated that most outcomes aligned with accepted standards for fairness and quality.
AFCA encourages financial firms to proactively review the new EDR guide and ensure any outstanding complaints are addressed in line with the updated process.
