New claims data puts life insurance dispute risk back in focus

The update matters because life insurance is often discussed at the purchase stage, while the real test comes later: whether a valid claim can be documented, assessed and paid without avoidable friction. For companies that rely on key person cover, that test can arrive at a difficult moment, when management is already dealing with the loss, serious illness or disablement of a founder, director, senior technician or major revenue generator.

The APRA release covers 13 Australian life insurers writing direct business and is designed to show claims and dispute outcomes by insurer, cover type and distribution channel. The MoneySmart tool presents part of that data in a consumer-friendly format, but it is not a product recommendation. It also has limits: results depend on enough finalised claims being available, and average claim times do not necessarily capture every step in a superannuation trustee process or every practical delay in gathering medical, financial and business evidence.

For business owners, the practical message is to treat claims data as a due diligence prompt rather than a simple ranking table. A policy with an attractive premium can still create problems if the insured event definition is narrow, business records are incomplete, ownership is poorly structured or the sum insured no longer reflects the company’s exposure. Conversely, a longer claims process may sometimes reflect the complexity of the evidence required, particularly for TPD or trauma-style benefits.

When reviewing key person insurance, businesses may wish to consider:

• whether the insured person’s role, revenue contribution and replacement cost are documented;
• whether the chosen cover type matches the risk being managed, such as death, TPD or trauma;
• how policy definitions, exclusions and disclosure duties could affect a future claim;
• whether the policy owner and beneficiary structure align with the intended business purpose;
• whether current debts, guarantees, investor expectations and continuity costs have changed.

The latest APRA and ASIC material does not mean every insurer or policy should be viewed negatively. It does, however, reinforce that claimability is a design issue as much as a claims-handling issue. Businesses can use general planning tools to estimate the financial impact of losing a key person, but the final structure should still be assessed against policy wording, tax treatment, ownership and the company’s wider continuity plan.