Car Insurance Claim Refused? Send a Letter of Demand (Australia)

You paid your premiums for years. Your car got hit, stolen, or written off. You lodged the claim with all the right paperwork. Then a brief, formal email lands: “After careful consideration, your claim has been declined.” No phone call. No real explanation. Just a denial that leaves you tens of thousands of dollars out of pocket and angrier by the hour.

The system is designed to wear you down. A Letter of Demand is the first formal step that changes the conversation.

The legal framework that’s on your side

Motor insurance in Australia is governed by the Insurance Contracts Act 1984 (Cth), which imposes a duty of utmost good faith on insurers (section 13) and forces them to interpret ambiguity in your favour. Layered on top is the General Insurance Code of Practice, a binding industry code monitored by the Code Governance Committee. Insurers must give clear written reasons for a denial, must respond to internal disputes within 30 days, and must hand you a copy of any expert reports they relied on. Most don’t volunteer those reports — you have to ask.

Common refusal reasons and why they often don’t hold up

• “Non-disclosure” of a prior claim or modification. Section 21 of the ICA only allows the insurer to refuse if the non-disclosure was material AND they would have acted differently. Most don’t actually meet that test.
• “Driver was unlicensed or uninsured.” Often based on assumptions, not the police report. Demand the evidence.
• “Damage pre-dated the incident.” Insurer hires a desktop assessor who never sees the car. Independent panel-beater reports beat desktop reports almost every time.
• “You weren’t the registered nominated driver.” Most policies have flex around occasional drivers; check the PDS wording.
• “Late notification.” Section 54 of the ICA stops insurers refusing on this basis unless the delay actually prejudiced them.

What a Letter of Demand actually does

It’s a formal, on-letterhead document that quotes the policy number, claim reference, the specific section of the Insurance Contracts Act or Code being breached, the dollar amount you want paid, and a deadline (usually 14–21 days). It tells the insurer exactly which AFCA jurisdiction you’ll lodge under if they don’t comply. Insurers triage these. An informal complaint email sits in a queue; a Letter of Demand goes to the disputes team because it signals AFCA exposure.

What Claim Done delivers

You answer about ten questions in our wizard — policy details, what was claimed, what reason was given, what evidence you have. Our Programmatic Algorithms draft your formal complaint to the insurer and your AFCA complaint citing the right sections of the ICA, the relevant Code clauses, and the AFCA jurisdiction. Flat $97 fee. Draft in your dashboard in about five minutes, for you to read, approve and send.

What happens after sending

If they hold the line or ignore you, the next step is an AFCA complaint — free for consumers, binding on insurers up to $1,263,000 (AFCA’s limit since 1 January 2024) per claim, and AFCA decides cases on fairness, not just the literal policy wording. The Letter of Demand is the evidence that you tried to resolve it before escalating.