Insurance Claim Declined in NZ? Here Is What to Do Next
A declined insurance claim in New Zealand is not final. Ask the insurer for its reasons in writing, use the internal dispute resolution process, then take the complaint to the Insurance and Financial Services Ombudsman scheme, which is free to consumers and accepts complaints within 2 years of the insurer's final response. Non-disclosure is the single most common reason a claim is declined.
In short
- Non-disclosure is the most common reason a New Zealand insurance claim is declined, followed by a policy exclusion and the claim not meeting the policy's definition of the covered event.
- The insurers that publish an acceptance rate accept most claims: 97% at Asteron Life for 1 July 2023 to 30 June 2024 and 91% at AIA New Zealand for the year ended 31 December 2025 (both read 8 September 2026).
- The IFSO Scheme costs the consumer nothing, and a complaint must reach it within 2 years of the insurer's final internal dispute resolution response.
New Zealand's largest life insurers accept the great majority of claims. Asteron Life reported paying 97% of the Trauma, Life and Income Protection claims it received from 1 July 2023 to 30 June 2024 (media release 11 December 2024), and AIA New Zealand accepted 91% of all claims received in the year ended 31 December 2025, paying $790 million to more than 789,000 New Zealanders (riskinfo NZ, 12 May 2026), both read 8 September 2026. A decline is the exception, which is exactly why one deserves to be tested rather than accepted.
The good news is that a declined claim is not always the final answer. In New Zealand, you have clear rights and well-established pathways to challenge a decision you believe is wrong. Each year, the Insurance and Financial Services Ombudsman (IFSO) overturns or settles a significant number of complaints in the consumer's favour.
This guide explains why claims get declined, what you can do about it, and how far you can take the fight if you believe the insurer has made an error.
Why Do Insurance Claims Get Declined?
Before you start, our claims readiness checklists list what each insurer will ask for and who to contact first. Published claims-outcome statistics by insurer, with their differing bases explained, are in our Claims & Insurer Strength report.
New Zealand insurers decline claims for six main reasons: non-disclosure, which is the single most common, an exclusion in the policy, the claim not meeting the policy's precise definition of the covered event, a waiting period that was not completed, a lapsed policy after the grace period of typically 30 days, and fraudulent or exaggerated claims.
1. Non-Disclosure
This is the single most common reason for declined claims in NZ. When you applied for your policy, you were asked a series of health, lifestyle, and financial questions. If you failed to disclose something material, whether intentionally or by genuine oversight, the insurer may decline your claim on the basis that they would have assessed your application differently had they known.
Under the Contracts of Insurance Act 2024, there are important new rules around non-disclosure. Insurers can no longer automatically void a policy for innocent non-disclosure. Instead, they must consider what they would have done had they known the information. If they would have still offered cover (perhaps with an exclusion or a higher premium), the claim outcome may be adjusted rather than declined outright.
2. An Exclusion Applies
Most policies contain specific exclusions. Common ones include pre-existing conditions, self-inflicted injuries, participation in certain high-risk activities, and acts of war. If your claim falls within one of these exclusions, the insurer will decline it.
The key question is whether the exclusion was clearly communicated to you and whether it reasonably applies to your situation. Sometimes insurers apply exclusions too broadly, and this is worth challenging.
3. The Policy Definition Is Not Met
Insurance policies define covered events very precisely. For example, a trauma policy might cover "heart attack" but use a clinical definition that requires specific biomarker levels and a certain degree of cardiac damage. You may have genuinely suffered a cardiac event, but if it does not meet the policy's exact definition, the claim can be declined.
This is one of the areas where many people feel most aggrieved, and it is also one of the areas where the IFSO regularly intervenes.
4. The Waiting Period Was Not Completed
Income protection and some health policies have waiting periods (also called stand-down periods) before benefits become payable. If your claim event occurred during the waiting period, or if you returned to work before the waiting period expired, your claim may be declined.
5. The Policy Had Lapsed
If your premiums were not up to date at the time of the claim event, your policy may have lapsed. Most insurers provide a grace period (typically 30 days) for missed payments before the policy formally lapses. If the claim event occurred after the grace period expired, the insurer is within their rights to decline the claim.
6. Fraudulent or Exaggerated Claims
If the insurer has evidence that a claim is fraudulent or materially exaggerated, they will decline it. This can also lead to the policy being voided entirely and, in serious cases, criminal prosecution.
Step-by-Step: What to Do When Your Claim Is Declined
A declined insurance claim in New Zealand is challenged in six stages, starting with requesting the insurer's written decline letter, reviewing the full policy wording, gathering medical and financial evidence, lodging an internal dispute resolution complaint, escalating to the Insurance and Financial Services Ombudsman, and finally considering legal advice.
Step 1: Understand the Reason for the Decline
Request the insurer's decline letter in writing. This letter should clearly state the reason for the decision, the specific policy clause or condition they are relying on, and any evidence they have used to reach their conclusion.
Read it carefully. If the language is unclear or overly technical, ask the insurer to explain it in plain English. You are entitled to understand exactly why your claim was declined.
Step 2: Review Your Policy Wording
Pull out your full policy document (not just the summary or schedule) and read the relevant sections. Pay close attention to:
- Definitions of the event you are claiming for
- Exclusions listed in the policy
- Conditions you needed to meet (e.g., waiting periods, notification requirements)
- The duty of disclosure section and what questions you were asked at application
Compare what the insurer has said in their decline letter with what the policy actually says. Sometimes insurers misapply their own terms, or the wording is ambiguous enough to support your interpretation.
Step 3: Gather Your Evidence
Build the strongest possible case by collecting:
- Medical records and specialist reports relevant to the claim
- Your original application (request a copy from the insurer if you do not have one)
- Correspondence between you and the insurer or your adviser
- Financial records if the claim involves income protection
- Any other documentation that supports your position
If the decline was based on non-disclosure, gather evidence showing that you answered the application questions honestly, or that the undisclosed information was not material to the insurer's decision.
Step 4: Request an Internal Dispute Resolution (IDR) Review
Every insurer in New Zealand is required to have an internal complaints process. Write to the insurer (or have your adviser write on your behalf) formally requesting an internal review of the decline decision.
In your letter:
- State that you are lodging a formal complaint
- Explain why you believe the decision is wrong
- Reference the specific policy wording you are relying on
- Attach your supporting evidence
- Ask for a written response within a specified timeframe (30 days is reasonable)
The insurer is legally required to acknowledge your complaint and provide a final response. Many claims are actually overturned at this stage, particularly where the original assessor made an error or did not have all the relevant information.
Step 5: Escalate to the IFSO Scheme
If the insurer's internal review upholds the decline and you still believe the decision is wrong, you can escalate your complaint to the Insurance and Financial Services Ombudsman (IFSO).
The IFSO is a free, independent dispute resolution service. Key facts:
- Cost: Free for consumers
- Jurisdiction: Claims up to $500,000 plus GST (the lump-sum limit that has applied to complaints since 18 July 2024)
- Timeframe: You generally need to lodge your complaint within two years of the insurer's final decision
- Process: The IFSO will review the policy, the evidence, and the insurer's reasoning, then make a determination
- Binding: IFSO decisions are binding on the insurer but not on you. If you disagree with the IFSO's decision, you can still take legal action
According to IFSO annual reports, a meaningful proportion of complaints result in outcomes favourable to the consumer, whether through formal decisions, settlements, or the insurer changing its position during the investigation process.
Step 6: Consider Legal Advice
If the amount at stake is significant and both the IDR process and IFSO have not resolved the matter in your favour, you may want to seek legal advice.
An insurance lawyer can:
- Review the strength of your case
- Advise on your prospects of success in court
- Handle correspondence and negotiations with the insurer
- Represent you in the Disputes Tribunal (for claims up to $30,000) or the courts
Legal action should generally be a last resort because of the cost and time involved. However, for large claims (particularly life insurance or total and permanent disability claims), it may be worthwhile.
Your Rights Under the Contracts of Insurance Act 2024
The Contracts of Insurance Act 2024 replaced New Zealand's Insurance Law Reform Acts of 1977 and 1985 and gives consumers four key protections when a claim is declined: proportional remedies for innocent non-disclosure instead of voiding the policy, protection against unfair contract terms, plain language requirements, and good faith obligations on both parties.
Proportional remedies for non-disclosure. The old law allowed insurers to void a policy entirely for non-disclosure. Under the new Act, if the non-disclosure was innocent (not deliberate or reckless), the insurer must apply a proportional remedy. This means they need to consider what they would have done had they known the information. If they would have charged a higher premium, they can reduce the claim payout proportionally. If they would have added an exclusion, they can apply that exclusion. But they cannot simply void the policy if they would have still offered cover in some form.
Unfair contract terms. The Act provides protections against unfair terms in insurance contracts. If an exclusion or condition is found to be unfair, it may be unenforceable.
Plain language requirements. Insurers are expected to communicate policy terms clearly. If a policy definition is so technical or obscure that a reasonable person could not understand it, this may work in your favour during a dispute.
Good faith obligations. Both the insurer and the policyholder have a duty of good faith. An insurer that declines a claim unreasonably or fails to properly investigate may be found to have breached this duty.
These changes have strengthened the position of consumers in claim disputes and are worth raising with the insurer or the IFSO if they apply to your situation.
Time Limits You Need to Know
Time limits apply at every stage of challenging a declined insurance claim in New Zealand. Insurers typically respond to an internal dispute resolution complaint within 30 to 60 days, an IFSO complaint must be lodged within two years of the insurer's final response, and Disputes Tribunal or court proceedings must generally be filed within six years of the claim event under the Limitation Act 2010.
| Stage | Time Limit |
|---|---|
| Internal dispute resolution (IDR) | Lodge as soon as possible after the decline. Insurers typically respond within 30 to 60 days |
| IFSO complaint | Within two years of the insurer's final IDR response |
| Disputes Tribunal | Within six years of the claim event (general limitation period) |
| Court proceedings | Within six years of the claim event under the Limitation Act 2010 |
The sooner you act, the better your chances. Evidence is fresher, documents are easier to locate, and you demonstrate to the insurer and any dispute resolution body that you are serious about the matter.
The Role of Your Insurance Adviser
A licensed financial adviser should be your first call when a claim is declined in New Zealand, explaining the decline reason in plain language, reviewing the policy wording, advocating on your behalf during internal dispute resolution, helping prepare evidence, and guiding you through the IFSO process. Advisers should not charge extra for claims support.
- Explain the decline reason in plain language
- Review the policy wording and assess whether the decline is justified
- Advocate on your behalf with the insurer during the IDR process
- Help you prepare your case with the right evidence and documentation
- Guide you through the IFSO process if needed
Your adviser has a professional obligation to act in your best interests and should not charge you extra for claims support. This is one of the key benefits of working with an adviser rather than purchasing insurance directly.
If you do not have an adviser and need help navigating a declined claim, QuoteHub can connect you with a licensed adviser who can review your situation.
When to Accept a Decline vs. When to Challenge
A declined claim in New Zealand is worth accepting when the reason clearly matches the policy wording, the exclusion genuinely applies, the amount at stake is small, or you did not disclose something clearly asked about. Challenging is worthwhile when the wording is ambiguous, the insurer has misapplied its terms, or you hold medical evidence that contradicts the assessment.
Consider accepting the decline if:
- The decline reason clearly aligns with the policy wording
- You can see that the exclusion or condition genuinely applies
- The amount at stake is small relative to the time and effort required to dispute it
- You did not disclose information that was clearly asked for and would have changed the insurer's decision
Consider challenging the decline if:
- The policy wording is ambiguous or could reasonably support your interpretation
- The insurer has not provided a clear explanation or has misapplied the policy terms
- You disclosed everything you were asked about (or the question was unclear)
- The definition of the claimed event is borderline and could go either way
- The amount at stake is significant
- You have medical or other evidence that contradicts the insurer's assessment
When in doubt, seek a second opinion from your adviser or the IFSO. The IFSO's enquiry line can give you an indication of whether your complaint has merit before you lodge a formal case.
Statistics on Overturned Decisions
IFSO data on New Zealand insurance complaints consistently shows that a meaningful number result in outcomes favouring the consumer, though exact figures vary from year to year. Those outcomes include formal decisions overturning the insurer's position, negotiated settlements where the insurer pays part or all of the claim, and cases where the insurer changes its decision during investigation.
The numbers put a decline in proportion. The IFSO Scheme's Annual Report 2025 records 377 health insurance cases and 89 formal disputes (published 13 October 2025, read 20 August 2026), against a market in which insurers paid $1.368 billion in life claims and $2.545 billion in health claims in the year to September 2025 (Financial Services Council State of the Sector report, reported by Insurance Business NZ, February 2026, read 8 September 2026). Most claims never become a complaint at all: the insurers that publish an acceptance rate report 97% at Asteron Life for 1 July 2023 to 30 June 2024 (read 8 September 2026), 95% of assessed claims at Partners Life for the year to 31 March 2025 (read 18 August 2026), 93% at Fidelity Life for the year to 30 June 2025 (read 18 August 2026) and 91% at AIA New Zealand for the year ended 31 December 2025 (read 8 September 2026). The four bases differ, so the rates are not strictly comparable, and insurers that publish nothing are absent from the picture entirely.
The takeaway is clear: if you have a genuine case, the system does work. Declined claims are not always final, and the dispute resolution process exists specifically to catch errors and hold insurers accountable.
How to Reduce the Risk of a Future Claim Being Declined
Reducing the risk of a future declined claim in New Zealand comes down to being completely honest on your application, reading the full policy document so you know what is excluded, keeping premiums up to date by direct debit, notifying your insurer of significant health or occupation changes, keeping your policy records, and reviewing your cover regularly.
- Be completely honest on your application. Disclose everything you are asked about, even if you think it is minor. If in doubt, disclose it. Your adviser can help you decide what is relevant.
- Read your policy document. Understand what is covered, what is excluded, and what conditions apply. Ask your adviser to walk you through the key sections.
- Keep your premiums up to date. Set up a direct debit and monitor your bank account to ensure payments are not missed.
- Notify your insurer of changes. If your health, occupation, or lifestyle changes significantly, let your insurer know. This can prevent non-disclosure issues down the track.
- Keep records. Store your policy documents, application forms, and any correspondence with your insurer or adviser in a safe, accessible place.
- Review your cover regularly. A free insurance review ensures your cover still matches your needs and that you understand what you are paying for.
Get Help With a Declined Claim
If your insurance claim has been declined and you are not sure what to do next, talking to a licensed financial adviser is the best first step. They can review the decline, assess whether it is worth challenging, and guide you through the process.
Get matched with an adviser through QuoteHub for a free, no-obligation conversation about your options.
Frequently Asked Questions
Can I dispute an insurance claim that has been declined?
Yes. Every insurer in New Zealand must have an internal complaints process, and you can escalate to the IFSO if the internal review does not resolve the issue. The IFSO is a free service and can consider complaints involving amounts up to $500,000 plus GST, the limit that has applied since 18 July 2024.
How long do I have to challenge a declined insurance claim in NZ?
You should lodge an internal complaint with the insurer as soon as possible after the decline. If the internal process does not resolve the issue, you generally have two years from the insurer's final response to lodge a complaint with the IFSO. Court proceedings must generally be filed within six years of the claim event.
What is the most common reason insurance claims are declined in NZ?
Non-disclosure is the most common reason. This occurs when the insurer believes you did not provide accurate or complete information on your application. Under the Contracts of Insurance Act 2024, insurers must now apply proportional remedies for innocent non-disclosure rather than voiding the policy entirely.
Does the IFSO charge a fee?
No. The IFSO scheme is completely free for consumers. It is funded by the insurance industry as part of their regulatory obligations.
Should I get a lawyer for a declined insurance claim?
For most claims, the IDR and IFSO processes are sufficient and do not require legal representation. However, if the claim involves a large sum, the issues are legally complex, or both the IDR and IFSO processes have been exhausted without a satisfactory outcome, consulting an insurance lawyer may be worthwhile.
Will my adviser help me with a declined claim?
Yes. If you arranged your insurance through a licensed financial adviser, they should assist you with the dispute process at no additional cost. This includes reviewing the decline, communicating with the insurer, and helping you prepare evidence for an internal review or IFSO complaint.
Disclaimer: This article is general information only and does not constitute personalised financial advice. Insurance policies vary between providers, and individual circumstances differ. For advice tailored to your situation, speak with a licensed financial adviser. Financial advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). QuoteHub is a trading name. Henry Smith is a Financial Adviser (FSP1010699).
References
- Financial Markets Authority (FMA), Insurance guidance
- ACC New Zealand
- Sorted.org.nz, Insurance guides
- Insurance & Financial Services Ombudsman (IFSO)
- MoneyHub NZ, Insurance resources
- Heart Foundation NZ
- ACC New Zealand, What we cover
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Explore related pages: Life Insurance, Income Protection, Health Insurance, Trauma Insurance, Free Will.