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In the past years, Australia’s insurance sector has faced significant challenges in claims handling. According to the Australian Financial Complaints Authority (AFCA), in 2025, there were 111,373 reported complaints. This increase is alarming as it marks a total of 14% increase from the previous year. Alongside the surge in complaints, compensation and refunds reached $643 million, representing a 120% year-on-year increase. The key driver is the delays in claims handling.
Quality customer service is crucial in handling claims. Improper handling may lead to more complicated problems. More than operational challenges, the data show a growing concern regarding customer experience, service delivery, and operational efficiency across Australia’s financial services sector.
AFCA’s latest report highlights that claims delays are now one of the leading causes of formal complaints and disputes. Because of this, regulators have placed a greater emphasis on faster claims resolutions and clearer customer communication. The data emphasizes a broader industry expectation for organizations to improve customer service while maintaining service standards.
Failures in handling claims spark regulatory scrutiny and criticism from the authorities. They are now investigating the root causes of several major financial firm collapses. As regulators allocate significant resources to addressing large-scale financial failures, there is an increasing pressure on insurers and financial institutions to strengthen compliance and operational performance.
While AFCA did not identify major merger or acquisition activity, the market continued to experience disruption stemming from the collapse of several firms. These collapses affect complaint volumes and regulatory activity.
The collapses generated 2,162 related complaints and a 58% increase in investment and advice complaints. The impact is not limited to investment products; it also reaches across multiple financial sectors, including insurance and superannuation.
These events highlight the importance of customer trust and risk management in the market environment. Firms must be put under pressure in order to maintain effective customer operations to lessen complaints and increase customer satisfaction. Furthermore, this reflects the need for being accountable for past lapses. This way, moving forward, firms will be more efficient in addressing operational issues.
Operational inefficiencies remain a key driver of customer dissatisfaction across the industry.
Prompt and timely communication is essential in the insurance sector, particularly during the claims process. Claimants need real-time updates regarding the status of their claims to stay informed and reassured. However, limited communication with customers throughout the claims processing period remains a common operational challenge. In addition, backlogs and inefficient workflows further hinder service delivery. These persistent issues continue to affect the sector’s overall efficiency, highlighting the need for effective solutions to address them.
These trends suggest that many financial institutions are facing capacity constraints and challenges as complaint volumes continue to rise. As a result, organizations are being compelled to improve both operational speed and the overall customer experience.
Complaint volumes across insurance and superannuation are likely to remain elevated. Hence, AFCA will continue prioritizing large-scale complaint investigations. Meanwhile, industry attention will remain focused on claim processing timelines, customer communication standards, and regulatory reforms across financial services. This is designed to strengthen accountability and improve performance delivery.
The industry is entering a period where service quality and turnaround time will be closely monitored and measured. With rising customer expectations and increased regulatory attention, insurers will be expected to handle claims, complaints, and customer requests more efficiently and transparently. However, due to delays and poor service experiences in the past, the sector is likely to attract greater scrutiny in the coming years.
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Reference
Official AFCA page: https://www.afca.org.au/news/media-releases/afca-receives-record-number-of-complaints-in-2025-calendar-year (Published/Updated: 27 February 2026 – Calendar Year 2025 data)
