Have you been paid late by your insurer? You could be owed interest

What is interest in insurance disputes?

Interest is compensation for the time you were unfairly kept waiting for money that was rightfully yours under your insurance policy.

The ombudsman, the Australian Financial Complaints Authority (“AFCA”) can choose to award interest on delayed payments. This is typically calculated under section 57 of the Insurance Contracts Act 1984 (Cth).

Recent AFCA decision: Resolution Life case

In a recent case involving Resolution Life Australasia Limited & Anor, AFCA found that the insurer had caused significant and unreasonable delays in handling a Total and Permanent Disablement (TPD) claim.

The insurer unnecessarily requested information from seven of the complainant’s previous employers, even though that information wasn’t relevant, and focused only on material from the complainant’s psychologist, despite knowing that this alone wouldn’t satisfy the policy’s TPD definition.

AFCA found that both the insurer and the trustee acted unfairly and unreasonably, given the circumstances. Alongside the insurer’s delay in assessing the claim, AFCA noted that the trustee should not have supported the insurer’s decision if it had acted in line with its legal responsibilities. As a result, AFCA ordered the insurer to pay interest, as outlined in section 57 of the Insurance Contracts Act.

AFCA also required the insurer to pay interest on the delayed interest payment, recognising further unfairness.

Key principles from AFCA approach

• Interest isn’t automatic: AFCA exercises discretion and considers each case individually.

• Interest period: usually calculated from when the claim was unreasonably withheld from the insured. This period is often in dispute as insurers will insist that additional evidence was required and necessary before the benefit could be paid. However, insurance lawyers can look at the evidence more closely and if we determine that is unreasonable, seek a higher interest amount.

• Conduct matters: if the insured was responsible for delays, this may affect the period for which interest is awarded.

• Interest on interest: AFCA can order additional interest for delaying the interest payment.

• Applies only to monetary claims: not available for non-cash remedies such as repairs or replacements.

Why this matters

If your TPD or life insurance was delayed, you may be owed additional compensation through penalty interest.

For claims over $150,000, we recommend seeking legal advice to determine whether interest is payable. Our experienced team can review your claim history and, where appropriate, pursue an interest complaint through AFCA.  

AFCA has the power to:

• remove unfairness or unreasonableness in trustee or insurer decisions affecting a complainant
• require the insurer to pay interest from the date the claim should have been decided
• order interest on the withheld interest payments, recognising further unfairness

These powers help ensure that insurers don’t benefit from delaying payments, and comply with their legal and statutory obligations.

What should you do next?

• Ask for interest: if your claim was delayed, request interest in your complaint to the insurer and/or AFCA.
• Document delays: keep records of all communications and dates related to your claim.
• Seek legal advice: if your claim was worth over $150,000, consult an experienced superannuation and insurance lawyer. A lawyer can look at the evidence and determine interest payable from the earliest possible date, including seeking a higher amount than what the insurer or super fund may be prepared to offer initially.

AFCA’s approach helps ensures policyholders are compensated not only for their claim but also for the time lost due to unnecessary delays.

Our dedicated superannuation and insurance lawyers are here to guide you and help you get the entitlements and compensation you deserve. Contact us today.