Key Takeaway

Evidence from the Australian insurance sector suggests customers who purchase cover with guidance from a licensed insurance adviser may experience different claim approval outcomes compared to those who buy directly without advice. The gap typically stems from better policy matching, more complete documentation, clearer understanding of terms and exclusions, and more appropriate cover selection when professional guidance is involved, not from preferential treatment by insurers.

Introduction

When you lodge an insurance claim in Australia, the insurer assesses it against the terms in your Product Disclosure Statement (PDS) and your policy schedule. The approval decision hinges on whether the claim event is covered, whether you met your disclosure obligations when you applied, and whether you provided the required evidence. Industry observations suggest customers who worked with a licensed insurance adviser when purchasing their cover may see their claims approved at different rates compared to those who bought directly, a pattern that raises questions about the role advice plays in claims outcomes.

What Drives the Claim Approval Gap

The difference in claim approval rates between advised and non-advised customers is not about insurers favouring one group over another. Australian consumer protection law and the Australian Securities and Investments Commission (ASIC) require insurers to assess all claims fairly and consistently (ASIC, 2026). Instead, the gap typically reflects differences in how well the policy matches the customer’s actual needs, how thoroughly the customer understood the terms when they bought it, and how effectively they navigate the claims process.

When you purchase cover directly without advice, you make every decision yourself: which type of cover to buy, how much sum insured or benefit amount to select, which optional extras to add, and which exclusions you can accept. If you misunderstand a term in the PDS, select insufficient cover, or overlook a critical exclusion, you discover the mismatch only when you lodge a claim and the insurer declines it or pays less than you expected. A licensed adviser, by contrast, is required under law to recommend cover that is appropriate for your circumstances, explain the terms and exclusions that matter for your situation, and document your needs and the basis for the recommendation. This front-end work reduces the likelihood of a fundamental mismatch between what you think you bought and what the policy actually covers.

Policy Suitability and the Target Market Determination

Every insurance product in Australia must have a Target Market Determination (TMD), a document that describes who the product is designed for and who it is likely to be inappropriate for. When you buy directly, you self-assess whether the product fits you, often without reading the TMD in full. A licensed adviser is required to consider the TMD alongside your personal situation and recommend a product that falls within your target market. According to foundational insurance principles covered in texts such as Principles of Finance, appropriate product selection is the first line of defence against claim disputes, as a well-matched policy is less likely to contain exclusions that apply to your actual circumstances.

For example, a comprehensive car insurance policy with a high excess might be appropriate for a driver with a strong no-claim discount and a low-risk profile, but inappropriate for a driver who has frequent small claims. If the latter buys that policy without advice and later discovers the excess exceeds the repair cost, they may feel the claim was unfairly handled, when in fact the policy was never designed for their usage pattern. An adviser would typically identify this mismatch before the purchase.

Documentation and the Claims Process

Claims are declined or reduced most commonly because of incomplete documentation, undisclosed pre-existing conditions (for life and income protection cover), or misunderstanding of what evidence the insurer requires. Customers who worked with an adviser during the application process often have better records: the adviser typically keeps a file note of what was discussed, what was disclosed, and what the customer’s circumstances were at the time of application. When a claim arises years later, that documented trail can be critical in demonstrating you met your duty of disclosure and that the cover was appropriate when you bought it.

Advisers also often assist with the claims process itself, helping you gather the required evidence, complete claim forms accurately, and respond to insurer requests for further information. This does not guarantee approval, but it does reduce the risk of a claim being declined for procedural reasons such as missing documents or incomplete answers.

Read also: Business Insurance in Australia: What Small Businesses Need

The Role of Disclosure

Under Australian insurance law, you have a duty to disclose to the insurer, before you enter the contract, every matter you know (or a reasonable person in your circumstances could be expected to know) that is relevant to the insurer’s decision to accept the risk and on what terms. Failure to disclose can allow the insurer to reduce or refuse a claim, or cancel the policy. When you apply online or over the phone without advice, you answer disclosure questions yourself and may not recognise that a seemingly minor health condition, past claim, or circumstance is material. A licensed adviser is trained to prompt you on common disclosure issues and to document what you told them, which provides a defence if the insurer later alleges non-disclosure.

What This Means for You

If you buy insurance without using an adviser, you are not disadvantaged in the claims process provided you have selected appropriate cover, understood the terms and exclusions, disclosed all material facts accurately, and lodged your claim with complete documentation. The key is to treat the purchase decision with the same care an adviser would apply: read the full PDS (not just the summary), compare the Target Market Determination against your actual situation, ask the insurer to clarify any terms you do not understand, and keep records of what you disclosed during the application.

If you have complex needs (multiple types of cover, pre-existing health conditions, high-value assets, or a claims history), the cost of advice is often justified by the reduction in claim dispute risk. A licensed adviser’s fee is disclosed up front, and their advice must meet a legal standard of appropriateness. You are not required to use an adviser, but the data suggests the front-end investment in proper policy selection and documentation can pay off when a claim event occurs.

Your Rights if a Claim is Declined

If your claim is declined and you believe the decision is unfair, you have the right to complain. First, escalate the matter through the insurer’s internal dispute resolution process. If you remain unsatisfied, you can lodge a complaint with the Australian Financial Complaints Authority (AFCA), an independent body that resolves insurance disputes at no cost to consumers (AFCA, 2026). AFCA assesses whether the insurer followed the law and the terms of the policy, and can require the insurer to pay your claim if it finds the decision was unfair. According to ASIC MoneySmart, many declined claims are overturned on review when the customer can demonstrate they met their obligations and the claim event is genuinely covered (MoneySmart, 2026).

Conclusion

The pattern of differing claim approval rates between advised and non-advised customers reflects the value of front-end advice in selecting appropriate cover, understanding terms, and documenting your circumstances, not preferential treatment by insurers. Whether you use an adviser or not, your claim will be assessed on the same legal and contractual grounds. The difference lies in how well-prepared you are when the claim event occurs. If you choose to buy directly, invest the time to read the PDS and TMD in full, confirm the cover matches your actual needs, and keep thorough records of your disclosure. If your circumstances are complex, consider whether the cost of licensed advice is justified by the reduced risk of a claim dispute. For further guidance on selecting appropriate cover and understanding your policy terms, refer to the consumer resources published by the Insurance Council of Australia (Insurance Council, 2026) and ASIC MoneySmart.

General Advice Warning: This article provides general information only and does not take into account your objectives, financial situation, or needs. Before acting on any information in this article, you should consider whether it is appropriate for you, read the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD), and consider obtaining personal advice from a licensed insurance adviser. The availability, terms, exclusions, and premiums for insurance products vary by insurer, by state or territory, and by your personal circumstances. Always confirm current details in the PDS and with a licensed adviser before making a decision. This article does not constitute legal, tax, or financial advice. For personal legal matters, consult a solicitor; for tax matters, consult a registered tax agent; for personal financial advice, consult a licensed financial adviser.