An insurer was correct to pause income protection payments once it discovered a policyholder was also receiving compulsory third party benefits, the industry ombudsman has ruled.

The claimant, a self-employed carpenter, received income protection payments under his policy with Nippon Life after a vehicle accident in 2024.

But Nippon paused payments after it found he was receiving CTP benefits. It calculated it had overpaid $17,907 because the CTP payments were not offset against his IP.

The policy allowed for offsetting if he received income from another source.

The insurer said the overpayment must be addressed before IP payments could resume.

The claimant took the matter to the Australian Financial Complaints Authority, disputing Nippon’s overpayment calculation and saying the pause was unreasonable.

He wanted the payments reinstated, arrears plus interest paid, and compensation for stress and inconvenience.

But AFCA says Nippon’s overpayment calculation is correct and it was reasonable to pause the payments. The insurer acted in a timely manner – otherwise the amount the man needed to repay would have increased.

Nippon produced a recording of a phone conversation in which staff explained how offsetting worked, plus follow-up emails asking about CTP payments and explaining there had been an overpayment.

The ombudsman says the insurer need take no further action until the man provides details of the CTP payments he received over a month last year, so it can make a final calculation.

Nippon must then arrange for settlement of the overpayment amount and discuss the man’s entitlement to further IP benefits.

It must let the claimant repay by instalments, given his financial circumstances.

Read the determination here.