Your Insurer Will Not Pay. Will a Regulator Step In?

01 Who regulates your insurer?

No single body oversees every part of an insurance dispute. Identifying who does what avoids wasted time at the point a claim is already under pressure.

• ASIC. The Australian Securities and Investments Commission regulates insurers' conduct. It administers the Insurance Contracts Act 1984 (Cth), licenses insurers as financial services providers and can bring enforcement proceedings.
• APRA. The Australian Prudential Regulation Authority focuses on financial soundness, including whether insurers are able to meet their obligations. It does not generally assess individual claims.
• AFCA. The Australian Financial Complaints Authority is not a government regulator. It is the external dispute resolution scheme that decides eligible complaints, including individual insurance disputes.
• The Code Governance Committee. This independent body monitors compliance with the General Insurance Code of Practice by subscribing insurers. Life insurers have a separate code framework.

These bodies exchange information. ASIC told insurers in September 2026 that it will continue working with APRA, AFCA and the Code Governance Committee on priorities and issues of concern. That cooperation does not merge their roles, and a report to one is not a complaint to another.

The framework also varies by product. The Insurance Contracts Act does not govern every insurance arrangement, and private health insurance, workers compensation and compulsory third party schemes can involve different rules and decision-makers. Start by identifying the actual policy, insurer and governing law.

02 What the law requires of insurers

Several overlapping obligations apply when an insurer handles a claim. Each has a different source and consequence.

Utmost good faith

Section 13 of the Insurance Contracts Act implies a duty requiring each party to act towards the other with utmost good faith. Since March 2019, an insurer's failure to comply has been capable of attracting a civil penalty under s 13(2A).

The duty goes beyond honesty. In CGU Insurance Ltd v AMP Financial Planning Pty Ltd [2007] HCA 36, the High Court emphasised due regard to the insured's legitimate interests and commercial standards of decency and fairness. The duty does not, however, create a free-standing obligation to do whatever seems fair. It conditions how an insurer exercises its existing rights, powers and duties.

Efficiently, honestly and fairly

Since 1 January 2022, handling and settling insurance claims has been a financial service under the Corporations Act 2001 (Cth). Insurers must therefore do all things necessary to ensure those services are provided efficiently, honestly and fairly under s 912A(1)(a). They must also meet other licence obligations, including adequate resourcing, risk management and dispute resolution.

Misleading conduct and unfair terms

A statement about what a policy covers can raise misleading conduct issues under the ASIC Act 2001 (Cth) and the Corporations Act. Since April 2021, unfair contract terms protections have also extended to insurance policies with consumers and small businesses, subject to the statutory limits on what can be reviewed.

Timeframes and written reasons

For complaints covered by ASIC's Regulatory Guide 271, an insurer ordinarily has up to 30 calendar days to give an internal dispute resolution response, subject to permitted exceptions. Subscribers to the General Insurance Code have additional commitments about claim decisions, communication and reasons.

The Code is changing. The Insurance Council of Australia lodged a redrafted Code with ASIC in October 2026. As reported, it would make key commitments enforceable through consumer policies, and would accept certain home and motor property claims automatically after 12 months where no decision has been made for reasons within the insurer's control. ASIC must still review it and a transition period is expected. These changes should not be assumed to apply to an existing claim.

03 What a regulator can do

ASIC's work ranges from sector-wide reviews to court proceedings. Most of it never concerns a single claim.

Supervision. ASIC can review an industry's practices and publish its findings. In a 2025 follow-up review of seven home insurers, it found quality checks on independent expert reports focused more on timeliness than accuracy, and that cash settlement fact sheets often gave minimal information about review rights.

Investigation. ASIC can use compulsory powers to obtain documents and information. The Insurance Contracts Act also gives it supervisory powers to obtain insurance documents and review administrative arrangements under ss 11C and 11D.

Court enforcement. ASIC can seek declarations, civil penalties and publicity orders. For corporations, the maximum penalty can be very large: the parties in Hollard agreed that the maximum was $81.6 million. That figure is a ceiling, not a forecast. ASIC sought $30 million, Hollard argued for $100,000 to $300,000, and the Court imposed $2 million.

Licensing and banning. Section 14A of the Insurance Contracts Act links a failure of utmost good faith in claims handling to ASIC's licensing and banning powers. These are powerful regulatory tools, but they serve a protective purpose rather than resolving a particular claim.

Involvement in private cases. ASIC may intervene in proceedings under s 11F of the Insurance Contracts Act, and may commence representative proceedings under s 50 of the ASIC Act. Both depend on their statutory requirements and ASIC's own decision to act. Neither should be expected as a matter of course.

Executive accountability. Since 15 March 2025, the Financial Accountability Regime has applied to insurers. Jointly administered by APRA and ASIC, it imposes obligations on insurers and their senior executives. A claims failure does not automatically establish personal liability, but accountability now sits with named individuals as well as the company.

Insurers also remain responsible for those they use. In Hollard, the insurer did not dispute that its external claims manager's conduct was attributable to it under s 11DA of the Insurance Contracts Act. Outsourcing a claim does not outsource the legal standard.

04 What recent cases show

The decided cases show ASIC's growing use of these laws. They also show their limits.

TAL Life: the process matters

In ASIC v TAL Life Limited (No 2) [2021] FCA 193, TAL avoided an income protection policy after investigating the insured's medical history. The Federal Court held TAL breached s 13, including by reaching its decision without giving her a chance to address its concerns. The conduct predated the civil penalty regime, so the outcome was declaratory rather than a penalty.

MLC: failing to pay what was owed

In ASIC v MLC Limited [2023] FCA 539, MLC failed to pay rehabilitation benefits to 119 eligible income protection customers. The Court found contraventions including misleading conduct, breach of s 13 and failures under s 912A, and imposed an agreed $10 million penalty with an adverse publicity order. An insurer's failure to pay entitlements can therefore be more than a contractual dispute when systems let it happen.

Zurich: ASIC does not always win

In ASIC v Zurich Australia Limited (No 2) [2023] FCA 1641, ASIC challenged the process used to avoid a policy for fraudulent non-disclosure. ASIC accepted the insurer's conclusion was reasonable. The Court dismissed the case and ordered ASIC to pay costs, rejecting its argument that the insurer should have made further inquiries. A process that feels inadequate to the insured is not necessarily a breach.

Hollard: one claim can be enough

ASIC v Hollard Insurance Partners Limited [2026] FCA 1487 concerned a single home insurance claim. It was not pleaded as a systems case, and the conduct was not found to be deliberate or malign. The combined failures still produced the first civil penalty ordered against an insurer for breaching the duty of utmost good faith, according to ASIC. Justice Button said the insureds were “given the runaround in more ways than one”.

The insureds received about $1.55 million, but that followed their complaint to AFCA, which determined the matter in their favour. The penalty was a separate consequence. Christopher Fahmy examines the decision in ASIC v Hollard: When Insurance Claim Delays Become a Breach of Utmost Good Faith.

Conduct matters, but an insurer may still investigate, dispute and decline a claim where the policy and evidence justify it.

05 What a regulator cannot do for you

ASIC's published guidance is direct on this point. It treats misconduct reports as intelligence, cannot investigate every report, and does not resolve complaints, act in individual disputes or seek to recover your money. Reporting an insurer can be worthwhile, particularly if the conduct appears systemic. It is not a substitute for pursuing the claim.

Three misunderstandings are common.

• A regulator's silence does not mean your claim is weak. ASIC prioritises. A decision not to act says little about whether your policy responds.
• A penalty is not compensation. A civil penalty is generally paid to the Commonwealth. Compensation requires its own legal basis.
• A breach does not prove cover. An insurer may handle a claim poorly and still have a valid exclusion. Equally, polite and prompt handling does not make a wrong decision right.

The last point often decides the shape of a dispute. If the real issue is whether a loss is covered, the focus should be the policy wording, causation and evidence. Good faith and regulatory arguments may add considerable weight, and may support separate claims, but they rarely replace that analysis.

06 When your insurer will not honour the policy

The response should follow the decision or conduct you are actually challenging. These steps apply to most disputes.

1. Identify the insurer's position. Has it declined the claim, reserved its rights, made a partial offer or simply not decided? Ask for its reasons and the policy terms relied on in writing.
2. Assemble the complete policy. Obtain the schedule, wording, endorsements, proposal or renewal documents and any expert reports. The summary you remember may not match the contract.
3. Build the chronology. Record the date of loss, notification, each request, each response and any periods of inactivity. Note what the insurer knew and when.
4. Protect the position. Take reasonable steps to prevent further loss, check the policy's conditions and keep dated evidence of costs and damage.
5. Complain formally. Use the insurer's internal dispute resolution process. Say clearly that you are making a complaint and what outcome you want. ASIC reported in December 2024 that insurers were failing to identify one in six complaints.
6. Consider AFCA. If eligible, you can generally go to AFCA after a final response or once the response period has passed. The service is free for complainants.
7. Consider court. Court may suit larger claims, complex coverage questions, urgent relief or a dispute outside AFCA's jurisdiction.
8. Report conduct where appropriate. A report to ASIC or the Code Governance Committee can sit alongside these steps, but it does not replace them.

Choosing between AFCA and court

AFCA can be an effective forum: it received 36,022 general insurance complaints in 2025–26, with claim delays among the leading issues. However, its limits need checking before you rely on it.

• Time. A complaint generally must be lodged by the earlier of two years after the insurer's final internal response and six years after you became aware of the loss, subject to special circumstances.
• Money. Under the limits applying from 1 January 2024, the general claim limit is $1,263,000, with a $631,500 cap on direct financial loss per claim for most claims. Lower caps apply to indirect and non-financial loss. Limits are periodically indexed and should be checked at lodgment.
• Jurisdiction. Eligibility depends on the complainant, the insurer's AFCA membership, the product and AFCA's Rules.

An AFCA complaint should not be assumed to stop a court limitation period. Check the applicable time limits early.

What you may recover

The primary remedy is usually payment under the policy. Where s 57 of the Insurance Contracts Act applies, the insurer may also owe interest from when it became unreasonable to withhold payment. Damages for breach of the duty of utmost good faith are possible, but require proof of breach, causation and recoverable loss.

07 If the policy is a business policy

Regulatory attention has centred on consumers, especially home insurance. That should not lead a business to assume it is outside the law's protection, or that a consumer pathway is available.

The duty of utmost good faith can apply to commercial policies governed by the Insurance Contracts Act. A business may therefore have the same statutory foundation as a household, even if ASIC is less likely to focus on its individual dispute.

AFCA access is narrower. It defines a small business as having fewer than 100 employees, and only certain small business insurance products are covered. A policy can sit outside its jurisdiction even where the business qualifies. Larger businesses, and many professional indemnity, directors and officers or industrial special risks disputes, will usually need to be resolved by negotiation, or in court or another agreed forum.

The documents matter as much as the regulator. Our article on the $3.7 million insurance gap explains why a business can be insured while the activity giving rise to its liability is not.

08 How GopherWood Lawyers can help

GopherWood Lawyers acts for policyholders in insurance coverage and litigation disputes. We advise businesses, directors and individuals where an insurer has declined, delayed or reduced a claim, or reserved its rights.

We review the insurer's position against the policy wording, the evidence and the regulatory framework, and advise on the most effective pathway, whether that is a targeted response to the insurer, an AFCA complaint or court proceedings.

If your insurer will not honour your policy, bring the decision letter, complete policy documents and claim correspondence to the first discussion. Contact GopherWood Lawyers about your insurance dispute.

09 Sources and further reading

Reviewed as at 3 November 2026. This article is general information, not legal advice. Your rights depend on your policy, the facts and the law that applies to your claim.

1. ASIC, 26-236MR: Hollard fined $2 million for serious insurance claim delay: penalty outcome, judicial quotation and first-penalty description.
2. ASIC v Hollard Insurance Partners Limited [2026] FCA 1487: agreed maximum penalty, the parties' submissions and the penalty imposed.
3. Insurance Contracts Act 1984 (Cth): ss 11C–11F, 13, 14A and 57.
4. CGU Insurance Ltd v AMP Financial Planning Pty Ltd [2007] HCA 36: the content of the duty of utmost good faith.
5. ASIC v TAL Life Limited (No 2) [2021] FCA 193: process failures in avoiding a policy.
6. ASIC v MLC Limited [2023] FCA 539: unpaid rehabilitation benefits and the $10 million penalty.
7. ASIC v Zurich Australia Limited (No 2) [2023] FCA 1641: ASIC's case dismissed with costs.
8. ASIC Report 802, Cause for complaint: Complaints handling in general insurance: the one-in-six complaint identification finding.
9. ASIC, Home insurance claims handling improvements need to go further: the follow-up review of seven home insurers.
10. ASIC RG 271, Internal dispute resolution: complaint response timeframes.
11. AFCA Annual Review 2025–26, general insurance complaints: complaint volumes and leading products.
12. AFCA, insurance complaints and small-business eligibility: time limits, monetary caps and jurisdiction must be checked against the Rules.
13. ASIC INFO 180, ASIC's approach to involvement in private court proceedings: intervention and representative proceedings under s 50 of the ASIC Act.
14. APRA, Financial Accountability Regime: application to insurers from 15 March 2025.