AFCA Supports Insurer in Income Protection Offset Dispute

The case involved a self-employed carpenter who filed an IP claim following a motor vehicle accident in October 2024. Nippon Life Insurance accepted the claim and commenced monthly payments of $3,728. However, it was later discovered that the claimant was also receiving weekly income-replacement benefits under a CTP scheme.

Upon verification, the insurer recalculated the claim in accordance with the policy's terms, applying both the monthly benefit limit and the income replacement ratio. This reassessment revealed an overpayment of $17,907 up to 6 September 2025. AFCA concurred with the insurer's application of the policy's 'benefits from another source' clause, affirming the accuracy of the recalculated benefits.

The claimant contended that an annualised assessment should be applied, arguing that the insurer owed him money once gaps in income were considered. However, AFCA upheld the insurer's month-by-month calculation, confirming that both ongoing and lump-sum CTP payments must be apportioned and offset in line with the policy terms.

Furthermore, AFCA found it reasonable for the insurer to suspend benefits in May 2025 while awaiting confirmation of CTP remittances, noting that continuing payments would likely have increased the claimant's repayment liability. The authority declined to award compensation for non-financial loss, determining that the insurer had not mishandled the claim overall.

This ruling underscores the importance of understanding the terms and conditions of income protection policies, particularly regarding offsets from other income sources. Policyholders are encouraged to thoroughly review their coverage and consult with financial advisers to ensure clarity on how benefits are calculated and the implications of receiving multiple forms of income support.

For self-employed individuals and gig workers, this case highlights the necessity of maintaining accurate records and promptly reporting any additional income sources to insurers to avoid potential overpayments and subsequent disputes.