About 1070 general insurance disputes sparked by the virus pandemic have been lodged with the Australian Financial Complaints Authority (AFCA), with most related to travel claim denials.

The industry has recorded the second-highest number of disputes after banking and finance, which has 1430 cases, since the coronavirus outbreak was declared a pandemic in March by the World Health Organisation.

While a full breakdown of the insurance disputes by product line is not immediately available, AFCA said today 890 of the disputes relate to travel insurance and it is expecting more complaints to be submitted in the coming months, including for business interruption claims.

“This won’t just be an issue for banking and finance,” COO Justin Untersteiner said. “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.

“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.

“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.”

AFCA has released a guide outlining its approach to COVID-19 travel insurance disputes.

It says that if a claim has been denied because of pandemic-related clauses, AFCA will first seek to determine if a claimant has established a valid claim. If the answer is yes, it will consider if the insurer has an exclusion entitling it to deny the claim.

“Where an insurer finds there is more than one exclusion it seeks to rely on to deny a claim, it is critical to determine what the proximate cause of the loss is,” the guide says.

“For example, an insurer may seek to deny a claim based on a pandemic exclusion as a financial default exclusion – that is the bankruptcy [or] financial collapse of the travel provider.

“If the evidence suggests the travel provider went bankrupt due to COVID-19 factors, the proximate cause is likely to be the pandemic and thus the pandemic-related exclusion is the prevailing exclusion which will be considered.”

If an insurer is entitled to apply a COVID-19 exclusion, a premium refund would be considered a fair outcome, the guide says.

Click here for the guide.