Insurance Claim Declined NZ: What to Do Next | QuoteHub

By QuoteHub Editorial Team · Updated 2025-12-05

Insurance Claim Declined in NZ? Here Is What to Do Next

Few things are more frustrating than having an insurance claim declined. You have been paying premiums for years, you have experienced the exact kind of event your cover was supposed to protect you from, and now the insurer says no. It feels personal, even if it is purely procedural.

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?

Understanding the reason behind the decline is the first step to deciding whether to challenge it. Here are the most common reasons New Zealand insurers decline 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

If your claim has been declined and you believe the decision is wrong, follow these steps in order. Each stage builds on the previous one, and skipping steps can weaken your position.

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 $400,000 (the IFSO can consider complaints involving amounts up to this limit)
• 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 the Insurance Law Reform Acts of 1977 and 1985 and introduced several important consumer protections that are directly relevant when a claim is declined.

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

Do not delay if you want to challenge a declined claim. There are important time limits at each stage:

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

If you arranged your insurance through an authorised financial adviser, they should be your first call when a claim is declined. A good adviser will:

• 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 an authorised adviser who can review your situation.

When to Accept a Decline vs. When to Challenge

Not every declined claim is worth fighting. Here is how to assess your situation:

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

While exact figures vary from year to year, IFSO data consistently shows that a meaningful number of insurance complaints result in outcomes that favour the consumer. These outcomes include formal decisions that overturn the insurer's position, negotiated settlements where the insurer agrees to pay part or all of the claim, and cases where the insurer changes its decision during the investigation process.

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

Prevention is always better than cure. Here are practical steps to protect yourself:

• 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 an authorised 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 $400,000.

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 an authorised 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 an authorised financial adviser. QuoteHub operates under FSP 712931.

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

Explore related pages: Life Insurance, Income Protection, Health Insurance, Trauma Insurance.