How long is too long? AFCA's approach to delayed TPD and super insurance claims

If you've lodged a total and permanent disability (TPD), income protection (IP) or death benefit claim through your superannuation and you're still waiting for an answer months later, you're not alone and fortunately, you're not out of options.

In May 2022, the Australian Financial Complaints Authority (AFCA) published its formal approach to delayed insurance claims in superannuation, setting out how it decides whether a trustee (the representative of the superannuation fund) or insurer has taken too long to make a decision, and what it can do about it if they have. AFCA is the body that you can go to when you have issues with a super fund's handling of your claim.

This article covers what AFCA actually looks at when it assesses a complaint about delay, the timeframes it expects insurers and trustees to meet, and what tends to happen when those timeframes are missed.

Who this is relevant to

This applies to insurance held through your superannuation fund — the death, TPD or income protection cover that most Australians have bundled into their super without ever choosing it. It doesn't cover:

• delays in claims on insurance policies held outside super (for example, a standalone income protection policy you took out directly with an insurer), or
• delays specifically in the administration of a death benefit once it's been approved (as opposed to the insurer's decision on the claim itself).

If either of those applies to you, the general principles below are still a useful guide, but AFCA's rules differ slightly. For a broader look at TPD and super claims generally, see our TPD and superannuation claims page.

Why AFCA gets involved in delay at all

Under the Corporations Act 2001 (Cth), a trustee's or insurer's failure to make a decision on a claim is itself treated as a decision — which means AFCA has the power to review it, even if no formal rejection has ever been issued. The same goes for conduct, or a failure to act, in the lead-up to a decision.

This means you don't have to wait for a formal decline to complain about delay. If a fund or insurer has gone quiet, that can be challenged in its own right.

When AFCA looks at a superannuation complaint, its central question is whether the trustee's or insurer's decision — or the conduct around it — was fair and reasonable in all the circumstances. AFCA can't override the terms of your policy or the fund's trust deed, but within those restraints, it steps into the shoes of the decision-maker and asks whether the outcome (and the process that led to it) holds up.

The three sources of delay AFCA recognises

AFCA's approach breaks delay down into three categories, and it treats each one differently.

1. Delay caused by the insurer or trustee

This is the most common category, and it's where AFCA applies the most scrutiny. AFCA treats the timeframes in the Life Insurance Code of Practice as the minimum standard insurers should be meeting. Broadly, those timeframes are:

If an insurer misses these timeframes, AFCA expects a real explanation. A generic response blaming "processing volumes" or "staff shortages" aren't going to pass.

Trustees aren't off the hook just because the insurer is the one assessing the claim. Under section 52(7)(d) of the Superannuation Industry (Supervision) Act 1993 (Cth), a trustee has an obligation to do everything reasonable to pursue an insurance claim for the benefit of a member, where that claim has a reasonable prospect of success. In practice, AFCA expects trustees to actively chase the insurer, flag claims early even before all the paperwork is in, and push back if the insurer appears to be dragging out a claim.

The Insurance in Superannuation Claims Handling Guidance Note also sets specific benchmarks for trustees, including:

• releasing approved benefits to a member within 5 business days of receiving the money and confirming release requirements are met
• reviewing an insurer's decision to decline a claim within 15 business days
• notifying the insurer within 5 business days if the trustee disagrees with a decline
• notifying the member within 5 business days if the trustee agrees with a decline
• providing progress updates to the member at least every 20 business days

On top of these codes, insurers and trustees carry a general obligation under their Australian Financial Services Licence to handle claims efficiently, honestly and fairly.

2. Delay caused by the complainant

Sometimes a claim stalls because the person claiming,  or someone acting for them, hasn't provided a signed authority, hasn't attended a requested medical examination, or hasn't returned paperwork. AFCA does look at this, but it's careful not to assume the claimant is automatically at fault.

Before accepting that a delay was caused by the claimant, AFCA asks whether the insurer's request was actually reasonable in the first place. If an insurer asks for a further medico-legal examination when there's already enough medical evidence on file to decide the claim, AFCA may find the insurer is the real source of the delay. AFCA also considers whether the person genuinely couldn't comply, for example because of illness, injury, or being unable to travel to appointments.

Where AFCA does find the delay sits with the claimant, it may decide to exclude that particular complaint. Importantly, that doesn't shut the door forever — AFCA can still review a later decision on the same claim (for example, if the insurer eventually declines it) even after excluding an earlier complaint about the delay itself.

3. Delay caused by a third party

Claims often depend on evidence from someone outside the insurer's control — such as a treating doctor, a former employer, a specialist. AFCA accepts that third parties sometimes hold things up, but that alone doesn't excuse the insurer or trustee. In these situations, AFCA expects the insurer and trustee to be able to show:

• why the third-party evidence was actually necessary
• why it couldn't have been obtained some other way (for example, from a different treating doctor)
• what follow-up they did to chase the missing information, and
• what other parts of the claim they kept progressing while they waited

If an insurer simply parks a claim indefinitely while waiting on one unresponsive third party, without pursuing alternatives or continuing other lines of inquiry, that's unlikely to satisfy AFCA.

What AFCA asks insurers and trustees to produce

When a delay complaint reaches AFCA, it typically asks the insurer for a full, chronological timeline of the claim — every piece of correspondence, every document request and the reason for it, every follow-up, and an explanation for any timeframe that wasn't met. Trustees are asked whether they agree with that timeline and to show what steps they personally took to keep the insurer accountable.

This is worth knowing if you're the one waiting: the paper trail that already exists on your file is often the same evidence that will ultimately be used to assess whether your fund and insurer acted reasonably.

What happens if AFCA finds an unreasonable delay

This is where the superannuation jurisdiction differs from AFCA's general insurance jurisdiction in an important way: AFCA cannot award compensation for the stress or inconvenience an unreasonable delay has caused when the claim is inside superannuation.

What AFCA can do is more practical than a payout for distress:

• If there's enough evidence on file, AFCA can find the insurer delayed unreasonably and direct it to accept the claim, along with interest calculated under section 57 of the Insurance Contracts Act 1984 (Cth).
• If there isn't quite enough evidence to accept the claim outright, AFCA can send it back to the insurer with specific directions about what needs to happen next.
• If the evidence actually points toward the claim failing, AFCA can direct the insurer to decline it — delay findings don't automatically mean the underlying claim succeeds.

Where AFCA sees a pattern of delay complaints against the same insurer or trustee, it can refer the matter to its own Systemic Issues Team, or — where a breach of the Life Insurance Code is suspected — to the Life Insurance Code Compliance Committee, which can impose its own sanctions.

What this has looked like in practice

AFCA's guidance includes several case studies that illustrate how these principles play out. Here's a few of those examples to show you what might happen:

• A TPD claim delayed while an insurer waited to see if therapy would help. A nurse in her 60s had lodged a TPD claim relating to PTSD triggered by being around medical professionals. Even the insurer's own medico-legal psychiatrist supported the view that she was unlikely to return to suitable work, yet the insurer sought a further assessment rather than deciding the claim. AFCA found there was already enough evidence to approve it, and directed the insurer to pay the claim with interest — and found the trustee's decision to simply agree with the insurer was also unreasonable.
• A TPD claim that should have been declined much sooner. An insurer sent a claimant to multiple medico-legal examinations over roughly a year, while the real issue — that he didn't satisfy the policy's waiting period and had lost cover when he changed super funds — was clear from the outset. AFCA found the insurer should have identified and declined the claim early, rather than putting the claimant through repeated assessments, and referred the matter for a broader Code compliance review.
• A delay genuinely caused by the claimant. An income protection claimant refused to authorise release of his medical file, which was needed to confirm he met a specific policy requirement. AFCA found the insurer and trustee hadn't done anything wrong and excluded the complaint.
• A delay caused by an unresponsive former employer. A claimant's income protection claim stalled for months while her former employer failed to respond to repeated requests for records. AFCA found the insurer should have found another way to resolve its concerns once it became clear the employer wasn't going to respond, and directed it to accept that the claimant had ceased work due to injury.

AFCA looks past who is nominally "waiting on" the missing piece, and asks whether the insurer or trustee did everything reasonable in the meantime.

If your claim has been sitting for months

A few practical takeaways from all of this:

• Ask for a timeline. You're entitled to know where your claim sits and why it hasn't progressed. If the response is vague, that could give more support for a claim being made with AFCA.
• If you're the one being asked to do something. If you're sitting on a request from the insurer (a form, a medical authorisation, an appointment), respond to it. If a request seems excessive given what's already on file, it's worth asking why it's needed.
• Know that AFCA can act even without a formal rejection. You don't need to wait for a decline letter to raise a complaint about delay.
• Understand what a delay complaint can and can't achieve. It can potentially get your claim decided and paid with interest. It won't result in compensation for the stress the wait has caused.

Where to from here

Delay complaints in superannuation sit in a genuinely technical corner of insurance and financial services law, and the right approach depends heavily on your specific policy terms, your fund's guidance note obligations, and exactly where in the process your claim has stalled. If you're dealing with a TPD, income protection or death benefit claim that's gone quiet, it may be worth having your claim reviewed against the timeframes above.

This article summarises AFCA's published approach as at May 2022 and is general information only, not legal advice. Every claim depends on its own policy terms and facts, so please seek advice before relying on anything above.