A life insurer has been ordered to pay compensation after threatening to reduce income protection benefits more than 11 years after a claim.

The Australian Financial Complaints Authority heard a self-employed insured stopped working in 2013 after an injury, and Zurich accepted his claim. 

After “extensive communications”, pre-claim earnings were calculated at $15,304 a month and the benefit, capped at 75% in accordance with the policy, was set at $11,478.

Last year, the insured complained about the calculation, arguing errors were made in relation to motor vehicle expenses, income-splitting and waivers.

Zurich said that while considering the complaint, it discovered it had in fact been overpaying the benefit, which should have been $10,850.

It did not propose recovering past benefits, but said it would reduce payments from July this year.

However, AFCA says this would not be reasonable, because the complainant no longer has the documents available to defend his position.

“He cannot reasonably be expected to have those documents because so many years have passed,” it says.

The ruling confirms Zurich is not entitled to cut the benefit, and must pay $2500 in non-financial loss compensation.

“It was wrong for the insurer to threaten to cut payments,” AFCA’s ombudsman says. “The insurer made its threat in January 2025. The complainant has been facing the prospect of his benefits being cut for around three months. The complainant has been in financial distress many times throughout the claims process. I have no doubt that the threat of his payments being cut caused him further distress.”

AFCA says the insurer is not obliged to increase the benefit, because the complainant does not have the evidence required to prove his case.

See the full ruling here.