The insurance industry operates under a General Insurance Code of Practice directed at standards and consumer protection and other legislation covering the contents of insurance policies and standard cover for some domestic insurance policyholders. Insurance marketing and selling practices have been reformed by financial services legislation.


Mark Attard

Partner, Clyde & Co.

Financial hardship

The Insurance Code deals with three situations of policyholder hardship:

  1. Policyholder is in urgent financial need;
  2. Policyholder owes an insurer;
  3. Policyholder is vulnerable

1. Policyholder is in urgent financial need

Where a policyholder has made a claim, is in ‘urgent financial need’, and can demonstrate the urgency of their situation, an insurer will fast-track the assessment and payment of the claim or make an advance payment or both (pt 8 Insurance Code).

2. Policyholder owes an insurer

Where a policyholder or other party is indebted to an insurer (but not in respect of the premium) – for example, a policyholder who is having difficulty paying an excess, or a third party from whom an insurer is seeking to recover money is suffering financial hardship – an insurer will consider providing assistance by modifying the terms of payment, or waiving or discharging the debt (pt 10 Insurance Code).

3. Policyholder is vulnerable

Insurers are committed to taking extra care of vulnerable policyholders.

Part 9 of the Insurance Code sets out a range of factors that may give rise to vulnerability, including age, disability, language, family violence, and remote location. Insurers are required to have policies to support vulnerable policyholders.


As a result of the COVID-19 pandemic, there has been a significant increase in insurance claims for travel and business interruptions. Many policyholders have been disappointed by the rejection of their claims by insurers.

The law in relation to such policies is uncertain. In November 2020, the New South Wales Court of Appeal held in favour of policyholders in the first COVID-19 test case (HDI Global SpecialtySE v Wonkana No.3 Pty Ltd [2020] NSWCA 296). In June 2021, the High Court refused leave to the insurer to appeal this decision. 

The Insurance Council of Australia and the Australian Financial Complaints Authority have filed a second series of test cases. Other test cases are likely to follow.

The trend both in Australia and the United Kingdom is favouring policyholders but they will need to wait for the outcome of the next series of test cases before they will know if their claims will be paid.

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