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Common motor vehicle insurance decline reasons
- Claim decline reasons
Introduction
Has your motor vehicle insurance claim been declined? Thinking of lodging an AFCA complaint to have the decision reviewed?
Whether it’s your car, motorbike or caravan, a declined vehicle insurance claim can be stressful. While some denials are valid, many result from how the insurer interprets the policy or from information gaps that can be corrected. This article covers some of the most common reasons car, motorbike and other vehicle claims are declined in Australia, and more importantly, what you could do about it.
No Valid Claim
Before a claim can be accepted, you must establish that an insured event occurred, such as a collision, theft, fire, malicious damage, or weather-related impact (like hail or flood), resulting in loss or damage during the policy period.
If there’s no clear link between the event and the damage, or if the insurer believes the damage existed beforehand, they may say no valid claim has been made.
This could happen when:
- The driver didn’t witness the damage occurring (for example, returns to car park to find a dent)
- The vehicle had existing or unclear damage
- The incident wasn’t reported to police or there’s no supporting evidence
- The cause of damage is uncertain or disputed (for example, mechanical issue vs. impact)
Exclusions
Vehicle policies contain a range of exclusions, situations where the insurer will not pay, even for valid claims. These often relate to how the vehicle was being used, the driver’s conduct, or the nature of the damage, and include:
Mechanical issues
Most policies exclude damage caused by mechanical or electrical failure, including engine seizure, gearbox failure, or battery issues, unless caused by an insured event like a collision, fire or flood.
Wilful or Reckless Acts
If the vehicle was driven dangerously, misused, or intentionally damaged (e.g. doing burnouts, off-road use where not permitted), the insurer may argue the driver acted recklessly and refuse cover.
Driving Under the Influence (DUI)
If the driver was over the legal limit for alcohol or drugs, or they were under the influence, most policies exclude cover for any resulting damage.
Unattended Vehicle or Keys Left Inside
Claims may be declined if the vehicle was left unattended with the keys inside or was not locked at the time of theft or damage.
Wear and Tear
Damage caused by wear and tear or gradual deterioration (for example, tyre baldness, rust, faded paint, or fluid leaks) is often excluded.
Non-Disclosure
When you apply for or renew a policy, you must take reasonable care not to make a misrepresentation. Insurers rely on this information to assess risk and pricing. If something was not disclosed, and it’s relevant to the claim, the insurer may deny it.
Driving History
Insurers ask about past claims, licence suspensions, fines, and accidents. If you answer incorrectly or not at all, they may argue non-disclosure and reject your claim, if they later find out facts that would have altered their decision to cover you.
Criminal Offences
Some insurers ask whether you or any regular driver have criminal convictions. Failing to disclose these, especially if recent or related to dishonesty, drugs, or dangerous driving, can be grounds for a denial, if the insurer can show they wouldn’t have offered cover had they known.
Pre-Existing Damage
If your vehicle was damaged before the policy started, and this was not declared, the insurer may refuse to pay for any related repairs, if they can show that they would not have offered or continued cover had they known about the damage.
Fraud
Claims involving dishonesty, misrepresentation or deception, can be rejected. These are serious allegations by the insurer and must be supported by clear evidence.
Theft
If the insurer suspects the theft was staged, or the circumstances are unclear, they may deny the claim and allege fraud.
Staged Collision
If the insurer believes a collision was intentional, involved a known party, or wasn’t consistent with the damage, they may accuse you of staging the event.
Conclusion
Vehicle insurance claims can be declined for a range of reasons, but that doesn’t necessarily mean the decision is correct. Insurers must assess claims fairly, explain their reasoning in writing, and base their decision on evidence.
Understanding why a claim has been declined is critical. You should review the policy wording, look closely at any exclusions or disclosure concerns raised, and gather any evidence that may clarify the situation. Many decline reasons involve interpretation, assumptions, or missing context, not outright ineligibility.
Jump To
What is the insurer required to tell me?
If your insurance claim has been declined, it’s essential to carefully review the reason provided. Insurers are required to give you a clear and specific explanation of their decision, not just a generic reference to the policy.
Under the General Insurance Code of Practice and Use of Expert Reports:
Industry Best Practice Standard, your insurer should:
- Explain what part of the claim they are rejecting
- Tell you the reason for declining your claim in plain and specific language
- Summarise the evidence they relied upon and how it supports their decision
- Inform you of your rights to dispute the decision, including access to internal dispute resolution (IDR) and AFCA.
What can I do next?
Step 1 – Ask for a detailed explanation
If the insurer’s decision is unclear, you can request a written explanation from the insurer outlining:
- The exact reason for the decline
- The policy term(s) they’ve relied on and how they apply to your circumstance
- Any evidence they used in making their decision
Often, just getting a clear explanation helps you spot gaps, misunderstandings, or assumptions worth challenging.
Step 2 – Lodge a complaint
If the explanation still doesn’t sit right, you can escalate the matter to the insurer’s Internal Dispute Resolution (IDR) team. At this stage, it’s important to provide any further evidence you can that challenges the insurer’s exclusions. For instance, if they are alleging that you did not disclose certain information, you can provide evidence that you did. Complaints teams will usually uphold the original decision unless you raise new points, provide new evidence or challenge the reasoning clearly.
Step 3 – Escalate to AFCA
Still not resolved? You can lodge a complaint with the Australian Financial Complaints Authority (AFCA) at www.afca.org.au. AFCA is independent and free to use.
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