Australian Financial Complaints Authority · AFCA Approach — life insurance non-disclosure · 2025

Non-disclosure remedies are not a substitute pre-existing clause

Approach document — ICA s 29 variation is a different tool from an exclusion.

What happened

Insurers sometimes decline a claim on a pre-existing story and, in the same letter, try to vary or avoid the contract for non-disclosure or misrepresentation, including a retrospective mental-health exclusion.

Holding / approach — A s 29(6) variation must put the insurer in the position a reasonable and prudent insurer would have been in at entry. AFCA may narrow or strip a retrospective exclusion that other prudent insurers would not have applied. Declining the claim and varying the contract are two decisions; each needs its own proof. An exclusion that does not cover the claimed condition does not save a bad variation.

What to capture on the file

If the letter mixes ‘pre-existing’, ‘you didn’t tell us’, and ‘we have added an exclusion from day one’, split the grounds. Ask what a prudent insurer would actually have done with the omitted fact.

What happened

What to capture on the file

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