Ombudsman Sides with Insurer on Imposed Excess Dispute

A recent ruling by the Australian Financial Complaints Authority (AFCA) has upheld an insurer's decision to impose an additional $2000 excess on a property policy, following a dispute raised by a policyholder over claims history impacts.

The policyholder contended that he was unaware of the increased charge until he filed a claim in November of the previous year. However, the insurer, IAG, clarified that the imposed excess was communicated during the policy renewal in July. This move was justified by the insured's frequent claims and "pattern of loss," with guidelines indicating a $2000 excess for customers with six or more claims within three years, barring exceptional circumstances.

The claimant, who had submitted seven claims in three years due to weather-related incidents and accidental damages, argued that the imposed excess was unfairly added without his consent. He described it as "unfair, unilateral and surreptitious" and claimed that he wasn’t informed about the consequences of multiple claims leading to an imposed excess.

AFCA confirmed that the policy renewal documents clearly outlined the imposed excess and stated that the insurer was not obligated to specifically notify the insured that frequent claims might result in additional charges. The ombudsman expressed confidence that the insurer met their obligations by informing the complainant ahead of the policy renewal.

The AFCA ombudsman stated that it was then up to the complainant to review the policy terms and conditions offered at renewal (including the excesses) and decide if he wanted to accept these terms. By paying the premium, the complainant accepted the terms of the policy renewal, including the imposed excess

This decision has significant implications for policyholders and insurers alike. It underscores the importance of policyholders thoroughly reviewing renewal documents and understanding the financial implications of a high claims history. Meanwhile, it solidifies insurers' authority to impose additional costs under specified circumstances, influencing how claims are managed and communicated.

The ruling serves as a reminder to both consumers and insurers of the need for transparency and clarity in presenting policy terms. Policyholders are encouraged to regularly review and understand their insurance agreements, while insurers may need to consider enhancing their communication strategies to prevent misunderstandings. This decision is likely to foster discussions around consumer rights and the obligations of insurers, potentially prompting policy reviews to ensure fairness and clarity for all parties involved.

Published:Monday, 25th Aug 2025
Source: Paige Estritori

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