What if..your small business has just been hit by a disaster.

Say, your pipes burst and now, your shop’s been flooded.

You’re not that worried, thinking that your insurance has got you covered.

But then, an email arrives saying your claim was denied. 

That gut-punch moment is something no one prepares you for.

A denied insurance claim can be devastating, especially for small to mid-sized business owners. 

However, it doesn’t need to be. 

Let’s break down your survival plan: why claims get rejected, what you can do about it, and how to protect your business moving forward.
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Why Do Insurance Claims Get Denied?

A rejected claim can be shocking and stressful. But that’s not the end of it all. 

You have to understand the reasons behind such rejection. Doing so can help you better understand what next steps are available to you.

The Australian Financial Complaints Authority (AFCA) reported that in 2023 to 2024, claim denials made up 13% of all general insurance complaints. That’s 3,762 cases!
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So, what’s going wrong?
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• Policy Exclusions: Every policy has fine print listing what’s not covered. Take a look at your policy regularly. Perhaps it excludes flood damage. So if you have a claim for water damage due to a storm surge, this might be denied.
  
  
• Missed Deadlines: Insurance policies usually impose strict timelines for reporting incidents. Miss the window, and your claim could be denied outright.
  
  
• Insufficient Documentation: Failure on your end to provide sufficient evidence to support your claim, say receipts, photos, or expert reports, can lead to your claim being denied.
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Imagine a retailer whose store was flooded after a downpour. They file a claim, only to be told it’s denied since their policy doesn’t cover “flood” damage, only “storm” damage. 

On top of that, they didn’t report the incident within the 30-day window. 

That situation could’ve been avoided with better preparation.
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What Can You Do If Your Claim Is Denied?

A denial isn’t the end. There might be options open to you to assist in getting back on track.  

Here’s what to do:
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• Review the Product Disclosure Statement (PDS): Grab your policy documents and read the fine print. Look for the specific exclusion or condition the insurer mentioned. Does it really apply to your situation? Sometimes, the insurer’s interpretation might be off.
  
  
• Ask for a Clear Explanation: Under Australian law, insurers must explain why they denied your claim. Request this in writing. It’ll help you understand their reasoning and spot any errors.
  
  
• File a Complaint for Internal Dispute Resolution (IDR): Reach out to your insurer and request a formal review. They’re expected to respond within 45 days. Submit new evidence because this might help overturn the decision.
  
  
• Go to the Australian Financial Complaints Authority (AFCA): If the decision remains unchanged, AFCA has a free and independent dispute resolution service. They can mediate or make a binding decision on the insurer. In 2023 to 2024, AFCA resolved 10,352 complaints at the case management stage alone, showing they’re a real lifeline for businesses.
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How to Strengthen Future Claims and Avoid Denials

Prevention is always better than cure. 

Reduce your risks of a future denial and make the claims process smooth for you.

Here are some tips:
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• Team up with a Broker: An insurance broker can walk you through your policy, ensuring you’re covered for the right risks. They can also be your advocate when you’re making a claim. This helps reduce the chances of rejection.
  
  
• Secure Detailed Records: Always do your best to document everything. Be it photos of your property, receipts for equipment you’ve used, and maintenance logs. Keeping a record of all measures you have in place can significantly strengthen your case.
  
  
• Know Your Policy: Don’t wait for disasters to strike before you read your PDS thoroughly. Read it in advance. Familiarise yourself with what’s in it, such as the exclusions, inclusions, and the deadlines for reporting incidents. If you’re unsure, never hesitate to reach out to a broker.
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Picture this:

A bakery suffers a cyberattack that halts online orders. 

They file a claim. 

However, it’s denied because they failed to disclose their outdated cybersecurity software when renewing their policy. 

Things might have been different if they worked with a broker at the outset. 
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Don’t Face Denials Alone, We’ve Got Your Back

Having your claim denied can be disheartening, but you’re not alone. 

As an insurance broker in Sydney, our team of dedicated experts can assist Australian businesses like yours in obtaining the right coverage and managing claims effectively. 

Regardless of your industry, whether you’re a café owner or a tech-savvy farmer, our team can guide you through the process and achieve a fair outcome. 

Ready to protect your business? Contact us and check out our business insurance services and let’s get started.