Introduction: why “fairness” has become the organising idea in claims

Claims handling is where the insurance promise is either delivered or denied. In Australia, expectations about claims conduct have historically been anchored in the duty of utmost good faith implied into insurance contracts and expressed in s 13 of the Insurance Contracts Act 1984 (Cth) (ICA). That duty remains central to modern disputes, but it is no longer the sole regulatory “north star”.

Since claims handling and settling was brought within the definition of a financial service from 1 January 2022, claims conduct has been reframed through the AFSL regime and, in particular, the obligation to provide financial services “efficiently, honestly and fairly” (EHF) under s 912 A(1)(a) of the Corporations Act 2001 (Cth). That obligation is now complemented, and in many respects operationalised, by the GI Code of Practice (GI Code), which has steadily moved from principle to process, and is now being redrafted again to further elevate claims standards, vulnerability supports and governance.

This article traces that evolution: from good faith, to fairness, to the “fairness-by-design” direction signalled by the Draft GI Code.

1. Utmost good faith: the original claims-handling guardrail

1.1 The duty as an implied condition of the insurance bargain

The duty of utmost good faith in ICA s 13 is often described as a key statutory expression of a long-standing insurance norm. In modern authority, the High Court has emphasised that s 13 is not a free‑standing general duty, but is to be understood in a way that aligns with the duty’s operation as an implied contractual conditiongoverning the manner in which rights, powers and obligations are exercised “under or in relation to” the contract.

That framing matters in claims because the “pressure points” in claims, information requests, investigations, repair pathways, reserving rights, reliance on remedies for non-disclosure or misrepresentation, partial admissions and settlement strategy, are all exercises of contractual or statutory rights in connection with the contract.

1.2 What good faith has come to mean in claims conduct (and what it does not)

Although the duty is contextual and case-specific, judicial discussion and regulatory pleadings have repeatedly linked utmost good faith to commercial standards of decency and fairness, due regard to the insured’s interests, and conduct that is not merely “not dishonest” but also not oppressive, capricious or unfair in its practical operation.

At the same time, a persistent theme in modern commentary is that utmost good faith is not fiduciary and does not demand “unnatural altruism”; it is compatible with insurers legitimately protecting their own interests within the contract and the statute, provided that protection is pursued consistently with the duty’s constraints.

The High Court’s decision in Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 [2022] HCA 38 illustrates the point. The case arose from claims and settlement communications following cyclone damage, complicated by non‑disclosure of pre-existing defects and a dispute about the scope/sequence of works and allocation of costs. The High Court ultimately held that the insurer’s conduct (including reliance on statutory rights) did notamount to a breach of utmost good faith in the circumstances.

1.3 Why good faith did not “solve” claims handling

Utmost good faith provides an essential normative standard, but it is also:

• open-textured (difficult to translate into operational requirements like standard timeframes, update cadence, or the minimum content of explanations); and
• often enforced ex post (through disputes, litigation, or regulator action after consumer harm has occurred).

These characteristics created space for more explicit service-conduct regulation, particularly once claims handling was reframed as a financial service.

2. Claims handling and settling becomes a financial service: EHF enters the claims room

2.1 Closing the “regulatory gap” from 1 January 2022

A significant reform commenced on 1 January 2022, described by ASIC as “a new chapter” that brought claims handling and settling reforms into full force and “into the fold as a financial service”. That shift means entities providing claims handling and settling services (subject to scope and exemptions) must hold the appropriate AFSL authorisation and comply with AFSL obligations, including EHF.

ASIC’s INFO 253explains how licensees should approach claims handling and settling in a way consistent with their AFSL obligations, and it makes explicit that the shift is intended to lift claims conduct standards and close what had been perceived as a gap in regulation.

2.2 EHF as a “compendious” conduct standard (and why that matters in claims)

The obligation in s 912 A(1)(a) to ensure financial services are provided “efficiently, honestly and fairly” has been repeatedly treated in the case law as a compendious standard, a requirement to act efficiently having regard to honesty and fairness, honestly having regard to efficiency and fairness, and fairly having regard to efficiency and honesty. Courts have also recognised the phrase as connoting competence and a flavour of ethical soundness and judgmentin matters relevant to clients.

While much of the EHF case law arises outside general insurance, the principles translate readily to claims as a “service”:

• claims processes must be capable and competent (efficiency),
• not morally wrong by commercial standards (honesty), and
• even-handed and outcomes-conscious (fairness).

2.3 INFO 253’s “fairness in practice”: minimum intrusion, transparency and avoiding delay

INFO 253 is particularly useful because it translates EHF into claims-operational expectations.

Avoiding delay and overseeing outsourced providers.INFO 253 flags that licensees should follow up outstanding information and regularly review ongoing need for it, and that fulfilment and service providers acting on the insurer’s behalf should be sufficiently overseen so they do not cause delays (including responsiveness to complaints about their quality and timeliness).

Minimum intrusion and burden.INFO 253 articulates an expectation that claims be assessed in the “least onerous and intrusive way reasonably possible”, with information requests only if “strictly relevant”; it criticises issuing standard template requests with long lists to all claimants, and it frames surveillance as appropriate only in exceptional circumstances (e.g. reasonable suspicion of misrepresentation or fraud).

Transparency and procedural fairness.INFO 253 highlights the importance of claimants knowing what to expect, how long decisions generally take, why information is required, being regularly told of progress, being given an opportunity to respond to adverse findings (procedural fairness), receiving explanations for rejections, and being told about internal and external dispute resolution pathways.

Vulnerability and hardship tailoring.INFO 253 expects services to be tailorable for consumers experiencing vulnerability or financial hardship, and identifies a wide range of vulnerability factors; it also notes that industry codes provide useful indicators of appropriate strategies for such consumers.

2.4 How EHF operates alongside utmost good faith

The post‑2022 position is not that EHF replaced utmost good faith; rather, claims conduct may now be evaluated through two overlapping lenses:

• Utmost good faith(ICA s 13): an implied contractual condition shaping how an insurer may exercise contractual/statutory rights in relation to the policy and claim.
• EHF(Corporations Act s 912 A(1)(a)): a licensing-based service standard that focuses on service delivery competence, honesty by commercial norms, and fairness (including transparency and procedural fairness).

Practically, the same claims practice can implicate both:

• A protracted investigation and repetitive information requests might raise good faith questions (manner of exercising claims rights) while also being an EHF issue (inefficiency; unfairness; lack of transparency).
• A denial letter lacking clear reasons may be a fairness and procedural fairness problem under INFO 253, and may also contribute to an argument that the insurer has not acted consistently with decency and fairness in the circumstances.

3. The General Insurance Code of Practice: raising claims standards beyond the black letter

If EHF is the regulatory “what”, the GI Code has increasingly supplied the “how”: timeframes, communications expectations, vulnerability supports, and accountability mechanisms.

3.1 A customer-focused benchmark, increasingly aligned to dispute resolution expectations

At the time, the current GI Code was described by the industry as the “most customer-focused Code in its history”, with a strong focus on supporting customers experiencing vulnerability. It was also adjusted to align with ASIC complaints handling guidance, including reducing the timeframe to resolve a complaint from 45 to 30 days.

This aligns with ASIC’s broader complaints-handling expectations under RG 271, including the 30 calendar day standard timeframe for IDR responses (subject to exceptions).

3.2 Codes as indicators of appropriate standards (INFO 253’s explicit linkage)

INFO 253 expressly recognises that industry codes impose timeframe obligations and that code-based timeframes for handling claims are “useful indicators of what industry considers to be appropriate standards.” This is important because it ties the operational commitments of the GI Code to the evaluation of EHF performance.

The effect is that code commitments, while not legislation, can influence what “good” looks like in claims operations in a way that is relevant to both:

• internal governance and assurance; and
• external scrutiny (regulator, AFCA, and consumer expectations).

3.3 The GI Code’s practical contribution to claims conduct

At a practical level, modern code commitments tend to do three things:

1. Make timeliness measurable (update cadences, response timeframes).
2. Reduce process friction (more structured communications and reasons).
3. Normalise vulnerability and hardship support (moving from exception-handling to mainstream claims design).

That matters because open-textured good faith principles and even EHF can be difficult to audit or assure without process markers.

4. The 2026 Draft GI Code: where claims handling is heading

The 2026 Draft GI Code materials signal a continuing evolution: from principle-based commitments to a model that looks more like a service standard with governance, metrics and enforceable consequences.

4.1 Claims communication cadence and enquiries

The Draft, as is the case with the current Code, proposes explicit commitments to:

• update customers about claims at least every 20 Business Days, and
• respond to routine enquiries about claim progress within 10 Business Days.

It also contemplates a mechanism for proposing reasonable alternative timeframes where standard ones are impractical, with reasons and explanation of impacts on rights and escalation to the complaints process if the customer does not agree.

The critical difference in the Draft Code to the current Code is that these timeframes will be embedded in the policy wording and be contractually enforceable.

4.2 “Primary contact” as a service design feature

The Draft introduces a clearer “primary contact” commitment in certain claims:

• home building claims (excluding strata) where the claim requires one; and
• other claims where the customer is identified as requiring “Extra Care” and the claim requires a primary contact.

This is a subtle but important shift: it treats continuity of engagement not merely as good practice, but as a structured feature of the claims service.

4.3 Relevance-limited information requests, and the obligation to explain relevance

One of the most direct alignments with INFO 253’s “minimum intrusion and burden” approach is the Draft’s express commitment that:

• insurers will only request and rely on relevant information to assess the claim, and
• insurers will explain whythe information is relevant.

It also frames assessment by reference to:

• all relevant facts known to the insurer,
• the policy terms, and
• the law.

This kind of drafting is consistent with a direction away from “process opacity” and toward demonstrable, explainable decisions.

4.4 Vulnerability: moving from “supporting vulnerable customers” to “Taking Extra Care”

The Draft includes a dedicated section framed as “Taking Extra Care” with customers experiencing vulnerability. The companion vulnerability guidance emphasises that claims often occur after disruptive events and that the need for extra care can be amplified (particularly in natural disasters), and it expressly positions the guidance as relevant across the entire customer journey including claims and complaints.

A notable feature is the recognition that where distribution occurs via brokers, insurers may have limited visibility of customer vulnerability indicators, increasing the importance of broker-insurer communication in identifying and implementing extra care. It is noted that the draft 2027 Brokers Code of Practice imposes an obligation on brokers to identify vulnerability and to inform insurers and access the insurers internal and external resources.

4.5 Governance, breach reporting and sanctions: strengthening accountability

The Draft also strengthens the “compliance architecture” of the Code:

• Sections 1-9 are enforceable and included as a term of the insurance contract with the insured;
• annual compliance reporting to the Code governance body,
• governance processes to report to the board/executive on compliance, and
• a defined process for reporting “Significant Breaches” within 30 calendar days, assessed holistically against factors such as repetition, customer harm, and compliance system adequacy.

The Draft contemplates additional sanctions for Significant Breaches and reporting of significant breaches/serious misconduct to ASIC.

This reflects a broader “regulatory maturation” of codes: not merely commitments on paper, but measurable performance expectations and consequences.

Conclusion: from good faith, to regulated fairness, to fairness by design

Utmost good faith remains the foundational claims-handling ethic in Australian general insurance, shaping the legitimate exercise of insurer rights “under or in relation to” the policy and claim. But since 1 January 2022, claims handling has also been regulated as a financial service, bringing claims conduct squarely within the AFSL regime and the EHF obligation, an obligation now given concrete content through ASIC guidance, particularly INFO 253’s emphasis on minimum intrusion, transparency and procedural fairness.

The current GI Code and its 2026 Draft iteration signal the next stage: clearer service standards, more prescriptive claims communication and enquiry timeframes, structured supports for customers requiring extra care, and a stronger governance and enforcement framework.

In short, Australian claims handling has evolved from a system where “fairness” was largely argued after the fact, into one where fairness is increasingly expected to be built into claims design, communications, information practices, and governance, and to be demonstrable in the data.

This article was written with the assistance of AI Habeas. the original concept, framing and final article is the work of the author.

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