Overall life insurance disputes rose 30% last year to 2474, due mainly to complaints lodged against funeral products sold by Youpla, which collapsed last year and required the Federal Government to step in with a financial redress scheme for affected policyholders.

Funeral plans topped the list by product type with 1038 cases, followed by income protection (558), term life (286), whole of life (257) and total and permanent disability (222).

The Australian Financial Complaints Authority (AFCA) provided the figures for the January-December period during an industry forum on life insurance on Friday.

“It is important to remember that this data includes a large number of complaints that we received about Aboriginal community benefit funds or Youpla products,” Lead Ombudsman Insurance Emma Curtis said.

“We weren't able to proceed with most of them as the companies were placed into liquidation. But we have supported affected consumers to register their complaints with us and these will remain on the record pending future developments.”

The Youpla Group companies, also called the Aboriginal Community Benefit Fund, collapsed early last year. The business was exposed during the 2018 Hayne royal commission over its use of high pressure and misleading sale tactics to sell near-worthless funeral insurance products to the Indigenous community.

And in October last year the Federal Government in its Budget papers set aside $7.2 million over two years from 2022/23 to establish the Youpla Group Benefits Program to provide redress for beneficiaries of Youpla policyholders.

AFCA says complaints over claims delay is “persistently” among the top-five issues causing disputes and that it may prepare an approach document to guide insurers.

"There is a published approach on claims delay in superannuation, but that approach isn’t strictly applicable in the non-superannuation life insurance space,” Senior Ombudsman Insurance Andrew Weinmann said. “So we’re considering it.”

He says AFCA expects insurers to continue assessing a claim even when the case is still going through the process at the dispute resolution body.

“This is a really important point,” he said. “We don't want the AFCA process itself to cause a claim’s delay. While the complaint is moving through the ACA dispute resolution process, insurers should continue to assess the complaint as well as they can.”