Friday 29th April 2022 from 9am

Wills & Estates Senior Associate Debbie Sage will join Robyn Hyland to talk about the importance of planning for end-of-life care and what options are available.

Banks and Insurance Companies – up to their old tricks?


AFCA has been inundated with consumer complaints as customers struggle to make financial arrangements with their bank or insurance provider. Many customers are simply having their claims denied leaving them in financial hardship during the COVID-19 pandemic. Attwood Marshall Lawyers Commercial Litigation Lawyer, Georgia Taylor, discusses how customers have once again come off second best.


Hailed as an opportunity to scrape up what they have left of their tarnished reputations following the Hayne Royal Commission, it seems that the banks have missed the boat to assist customers suffering financial hardship as a result of the COVID-19 pandemic.

Unfortunately, government restrictions and heavy job losses have pushed many taxpayers onto the ‘Job Seeker’ program which for those prior medium to high income earners, is a fraction of the income they’ve budgeted their livelihood upon. This has left the government to appeal to the financial institutions to give the reprieves necessary to small businesses, homeowners and investors in order to help them get through these difficult times.

In the early days of the pandemic, while the government was still working on their stimulus regimes, it was reported that the banks had already given out up to $700 million in loans, however, it seems some customers were being left out of the loop, even appealing to their local MP’s for assistance.

Why have bank customers come off second-best during the pandemic?

The Australian Financial Complaints Authority (AFCA) who are now the go-to for consumer complaints against banks, insurers and other entities with a registered financial services license, have reported that they’ve been inundated with complaints relating to COVID-19 and these are expected to continue to grow through to the end of 2021. AFCA has received over 3,180 COVID-19 related financial complaints since the Coronavirus (COVID-19) was declared a pandemic in March 2020.

Speaking to members at an online forum recently, Chief Operating Officer Justin Untersteiner revealed the COVID-19 related complaints included 1,430 banking and finance complaints (with 680 of these relating to financial difficulty), 1,070 general insurance complaints and 610 superannuation complaints.

“Many of these complaints result from poor communication, where a consumer has trouble contacting their firm, does not understand their policy, or is confused about the information they receive,” he said.

Vulnerable consumers have been left struggling to repay mortgages and other debts and are frustrated as they are unable to come to an agreement with their bank or financial institution, despite the bank’s public appeals and self-proclamations that they’re doing all they can to assist.

A large proportion of AFCA complaints have been related to:

  • Denied travel insurance claims
  • Delays with early release of superannuation
  • Banking and finance complaints
  • Disputed transactions
  • Requests to extend payment terms
  • Claims made under income protection and business interruption insurance policies

Banking and Finance Complaints

AFCA has urged financial institutions to actively engage with their customers and resolve issues as early as possible.

Mr Untersteiner urged financial firms to provide early, proactive communication with consumers following an increase in complaints relating to COVID-19.

“To support consumers, we encourage financial firms to ensure their contact details and resources are visible and accessible and allow for genuine engagement with customers to resolve issues early on.”

Many financial institutions have been unable to handle the influx of enquiries due to their offshore call centres being closed when COVID-19 restrictions first rolled out and the additional calls being managed by local staff. This has left customers in the dark, unable to discuss their unique situation and struggling to meet their financial commitments.

A large number of complaints were in relation to loan break costs, with many customers looking to discard their fixed rate home loan for a cheaper alternative. AFCA has urged lenders to waive loan break costs in order to help consumers during this unprecedented time.

There is an expectation for these types of disputes to continue to rise as temporary measures, such as mortgage deferral periods and government assistance packages, expire and consumers are once more left to re-evaluate their financial commitments.

My Untersteiner said AFCA anticipates receiving more financial difficulty complaints in the next 18 months.

“We expect to see more complaints from vulnerable consumers or others who struggle to repay mortgages or other debts as Government and sector support initiatives come to an end,” he said.

“This won’t just be an issue for banking and finance, many will turn to their insurance policies to look for help, and in some cases, they will not be covered which will lead to disputes.”

Travel Insurance Complaints

Consumer complaints about travel insurance have almost tripled during COVID-19 with many travellers left with great financial loss. Many customers who took out insurance assuming it would cover them, were left disappointed when insurance companies refused to pay on the basis that the policies no longer covered losses relating to COVID-19 after WHO announced the worldwide pandemic. This is despite the insurance being taken out prior to the pandemic being declared.

Travellers were not necessarily alerted to the change in policy after COVID-19 had escalated to pandemic stage and this lack of communication is what has led many to take their complaints to AFCA.

An analysis of 32 travel insurance policies by found that eight did not refer to epidemics or pandemics or were not clear on how claims related to these events would be treated.

The average time to resolve a general insurance complaint by AFCA is 65 days. Consumers not happy with AFCA’s ruling are advised to seek alternative legal action.

Early Release of Superannuation

Many consumers have requested early release of their superannuation to try to cope with financial hardship due to COVID-19, but have been met with either delay or denial of that early release of funds.

Customers have been left waiting for unacceptable periods with superannuation companies challenging the claims. AFCA has indicated that many of these matters lead to denial or delay due to:

  • The superannuation trustee challenging discrepancies in the complainant’s identification data
  • The superannuation trustee needing original documents to provide the complainant’s identification
  • Superannuation trustee delays in coordinating with the ATO in relation to early release applications

Claims made under income protection and business interruption insurance policies

There will be a large number of consumers directly affected by the loss of their usual salary or income associated with their usual occupation.  Although many employees hold income protection policies of insurance, the circumstances under which cover is activated vary from policy to policy. Usually the policies are activated due to someone’s job being interrupted by illness or injury, however there are many policies that cover people who have lost their job for whatever reason.  The issue will be whether the policy holds an exclusion clause involving loss of your job or income as a result of the COVID-19 pandemic. Many insurance policies have an exclusion clause which specifically denies cover in the event of losses suffered due to a pandemic. Many of the policies refer to an outbreak of some form of disease that is based on now redundant former legislation under the repealed Commonwealth Quarantine Act. The Quarantine Act has been repealed and therefore the argument is that this exclusion would not apply given that the legislation contemplated under the exclusion clause no longer exists. No doubt the insurance companies will be arguing that the exclusion does apply.

Similar issues arise in relation to business interruption insurance. There would only be a minimal number of businesses that were not affected by the onset of COVID-19. Even businesses which continued to operate suffered significant losses and a downturn in their turnover, notwithstanding the fact that they were able to continue their operations either through exemptions or staff working from home etc. However, the significant number of businesses who have registered for the JobKeeper scheme would indicate that the losses suffered by these businesses (which would range in percentages exceeding 30% for businesses under an annual turnover of $50 million and 50% for those businesses with a turnover exceeding this amount).

Many of the business interruption policies contain similar exclusion clauses to those of income protection and no doubt there will be a similar legal argument in relation to the definition of whether the COVID-19 pandemic constitutes grounds for the insurance company to deny liability. Given that insurance companies generally take any opportunity to deny claims, it would not be a surprise to see insurance companies fight these issues as hard as they can.

How long does AFCA take to deal with matters?

AFCA generally takes six weeks to review a simple case, and eight to twelve weeks for more complex matters, which includes the case management and adjudication period. AFCA are of course doing what they can with limited resources, but it may be too little too late for some customers already struggling to stay afloat.

Having lawyers experienced in this area acting for you can speed up the negotiation process with the banks and we have had success in many cases involving our clients through an informal mediation process. This only works if the banks are agreeable to do so, but it is usually a quicker and more cost-effective way to deal with the dispute.

How can Attwood Marshall Lawyers help?

If you are experiencing financial hardship due to COVID-19 and have not accepted the decision made by AFCA in an attempt to resolve your complaint, you have a legal right to take your complaint further.  For those who have suffered a large loss due to a financial institution, court action may be your only avenue to seek compensation for your loss. In some cases, we may be able to represent you in an informal mediation process with the banks or the insurance companies. Our experienced Commercial Litigation team can help determine your right to compensation and in many cases accept this on a “no-win-no-fee” basis*.

For more information or to discuss your circumstances, please contact our Commercial Litigation Department Manager, Amanda Heather, on direct line 07 5506 8245, email or free call 1800 621 071.

*Only to approved cases where there is genuine financial hardship and claims have a good prospect of success.

Share this article

Georgia Taylor - Senior Associate - Commercial Litigation, Racing & Equine Law

Georgia Taylor

Senior Associate
Commercial Litigation, Racing & Equine Law

Contact the author

The contents of this article are considered accurate as at the date of publication. The information contained in this article does not constitute legal advice and is of a general nature only. Readers should seek legal advice about their specific circumstances. 

Brisbane Employment Law

Employment Law Sydney

Gold Coast Employment Law

Defamation Law

Employment Law

Download a Brochure

Please enter your details below and
a link will be emailed to you
Download Form

Compensation Law

Select your state