Ambiguous wording, confusing structures or misleading terms are a systemic issue in general insurance disclosure materials, according to the Australian Financial Complaints Authority.

“These weaknesses may not always arise from deliberate misconduct, but they can nonetheless create confusion, deter customers from seeking assistance, and contribute to high rates of declined claims,” AFCA said.

“Poorly drafted or outdated documents undermine fairness, increase dispute volumes and erode trust.”

The seventh edition of the twice-yearly Systemic Issues Insights Report says problems exist in materials such as product disclosure statements, proposal forms and certificates of insurance.

The ombudsman adds product design or disclosure issues are leading to mismatches between what customers believe is covered and the reality.  

“Ambiguous policy wording, unsuitable add-on products and weak controls around product distribution can all leave customers paying for cover that delivers little or no value, or facing uncertainty at claim time when clarity is most important.”

Claims handling remains a common cause for concern, driven by unclear exclusions, lengthy delays, inadequate investigations and inconsistent applications of policy terms.

Add-on insurance continues to feature prominently, with issues “particularly acute” in relation to legacy products such as consumer credit insurance and mortgage protection and loan protection covers.

“Weaknesses in complaint handling, particularly delays and lack of transparency, compound the detriment of historically poor sales practices,” AFCA said.

The ombudsman reported 11 general insurance systemic issues to regulators in the second half of 2024-25, plus six in life insurance, 18 in banking and finance, and 15 in superannuation.

Across the sectors, 342,194 consumers and small businesses were affected by identified issues and $3.4 million of refunds and remediation was secured.

A further 276 matters were reported to regulators, including 271 involving refusal or failure to act on determinations.

Of those, 24 involved active members of the ombudsman scheme and 247 related to potential Compensation Scheme of Last Resort claims. 

AFCA says cross-sector themes in the half included companies continuing to treat complaints as case-by-case issues rather than opportunities for identifying wider problems, and not adequately supporting vulnerable customers.

Legacy systems and limited governance controls are undermining the ability to deliver on commitments and maintain consumer trust, while policy versus practice gaps mean even where policies meet regulatory expectations, execution failures expose consumers to confusion, delay and harm.

The report is available here. 

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