AFCA Upholds Policyholder's Income Protection Benefits Against Zurich

In this case, the policyholder, a self-employed individual, ceased working in 2013 due to an injury. Zurich accepted the claim and, after extensive communications, calculated the pre-claim earnings at $15,304 per month, setting the benefit at 75% of this amount, equating to $11,478 monthly. However, in January 2025, Zurich informed the policyholder of an overpayment, stating that the benefit should have been $10,850 per month and proposed reducing future payments accordingly.

AFCA found this proposed reduction unreasonable, noting that the policyholder no longer possessed the necessary documentation to contest the insurer's recalculations due to the significant passage of time. The authority emphasized that it was inappropriate for Zurich to threaten a reduction in benefits after such a prolonged period, especially given the policyholder's financial distress throughout the claims process.

As a result, AFCA ordered Zurich to continue paying the original benefit amount and awarded the policyholder $2,500 in compensation for non-financial loss. This ruling highlights the necessity for insurers to address benefit adjustments promptly and communicate any changes transparently to avoid causing undue stress to policyholders.

For individuals holding income protection insurance, this case serves as a reminder to maintain thorough records of all communications and calculations related to their policies. It also underscores the importance of understanding one's rights and the avenues available for dispute resolution in the event of disagreements with insurers.