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AFCA Backs Insurer in Income Protection Offset Case

Insights into the Recent Ruling and Its Implications for Policyholders

AFCA Backs Insurer in Income Protection Offset Case?w=400

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

The Australian Financial Complaints Authority (AFCA) has recently ruled in favour of Nippon Life Insurance in a dispute concerning income protection (IP) offsets, confirming an overpayment of nearly $18,000 and supporting the insurer's decision to suspend benefits during the reconciliation of compulsory third party (CTP) income.

The case involved a self-employed carpenter who, after a motor vehicle accident in October 2024, began receiving monthly IP benefits of $3,728 from Nippon Life. Subsequently, it was discovered that the claimant was also receiving weekly income-replacement benefits under a CTP scheme. Upon verification, Nippon Life recalculated the claim in accordance with the policy's terms, determining an overpayment of $17,907 up to 6 September 2025.

AFCA upheld the insurer's application of the policy's 'benefits from another source' clause, affirming that both ongoing and lump-sum CTP payments must be apportioned and offset as stipulated. The claimant's argument for an annualised assessment was rejected, with AFCA supporting the insurer's month-by-month calculation method.

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

This ruling underscores the importance for policyholders to fully understand the terms and conditions of their income protection policies, particularly regarding offsets from other income sources. It also highlights the necessity of promptly informing insurers about any additional income received during a claim period to ensure accurate benefit calculations and avoid potential overpayments.

For more information on this case, refer to the full determination available at Riskinfo.

Published:Tuesday, 26th May 2026
Author: Paige Estritori

Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.

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