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What Is Procedural Fairness in Insurance Claims?

2 April 2026by leonardandwelch

If you have made an insurance claim and the insurer starts asking awkward questions, getting reports behind the scenes, or hinting at a decline, you might hear the phrase procedural fairness.

It sounds fancy. It is not.

In plain English, procedural fairness means this: if an insurer is going to make a decision that hurts your position, it should tell you the substance of the issue, give you the material it is relying on in a meaningful way, and give you a proper chance to respond before it locks in the decision. In Australia, that sits alongside the insurer’s duty to act with the utmost good faith and broader expectations that claims be handled fairly, transparently and efficiently.

Why procedural fairness matters in insurance claims

Insurance claims do not happen when life is going well. Usually, the person making the claim is already under strain. They may be sick, injured, out of work, grieving, or just trying to keep things together while waiting for the insurer to make up its mind. That is why process matters.

A lot of bad insurance decisions do not begin with the final letter. They begin much earlier, with a poor process. The insurer might rely on an investigation report the claimant has never seen. It might prefer one medical opinion without giving the claimant a fair chance to answer it. It might raise non-disclosure issues late in the piece without properly spelling out the concern. When that happens, the problem is not just the result. The problem is the road taken to get there.

What procedural fairness actually means

At its core, procedural fairness in insurance claims usually means five simple things.

First, the insurer should identify the real issue. Not dance around it. Not hint at it. Not keep it tucked in a file note. It should say what the problem is.

Second, the insurer should put the important material on the table. If it plans to rely on a medical report, surveillance, investigation material, policy interpretation, or some alleged inconsistency, the claimant should generally know the substance of that material.

Third, the claimant should get a real chance to respond. Not a token chance. Not a rushed deadline with half the information missing. A proper opportunity to answer the point.

Fourth, the insurer should actually consider the response with an open mind. There is no fairness in inviting a response if the decision has already been made.

Fifth, the insurer should explain its decision in a way that makes sense.

That is really all procedural fairness is. Nothing magical. Just a fair go.

Examples of procedural fairness in insurance claims

This is where it becomes easier to see. Say an insurer gets a medical report saying you can return to work. If that report is going to be used as the basis to decline or stop benefits, fairness usually requires the claimant to know about it and have a fair chance to respond.

Or, say, the insurer has surveillance footage and says it proves the claimant is exaggerating. Again, fairness usually means the claimant should have a chance to comment on it before the insurer relies on it as the killer blow. Same thing with alleged non-disclosure. Same thing with factual disputes. Same thing with investigator summaries. Same thing with vocational assessments.

You cannot run a fair process if one side is playing with the cards face-up and the other side is left guessing.

Is procedural fairness legally required?

In Australian insurance claims, the answer is that fairness is built into the legal and regulatory framework, even if the exact label used in correspondence might differ.

Section 13 of the Insurance Contracts Act 1984 says an insurance contract is based on the utmost good faith and each party must act towards the other with the utmost good faith in relation to matters arising under or in relation to the contract.

So while insurers do not always use the words “procedural fairness” in their letters, the obligation to act fairly in practice is very much part of the landscape.

Procedural fairness and insurance complaints

This matters not only when the insurer is deciding the claim, but also when you complain about the decision.

If the complaint is rejected in whole or part, the response has to do more than say, “We have reviewed the matter and maintain our decision.” It must clearly explain the reasons, address the issues raised, and identify the factual findings and supporting information.

What happens if an insurer does not act fairly?

A poor process can have real consequences. It can mean the insurer missed critical information. It can mean the decision was based on incomplete or misunderstood material.
It can mean the complaint should never have been rejected in the first place. It can also strengthen a dispute if you take further action, and support arguments that the insurer has breached its obligations in handling the claim.

So even where the insurer talks a lot about the policy wording in their claim decision, the way it handled the claim – how it got to that decision – can still matter.

Common signs of a lack of procedural fairness

There are a few warning signs that usually set off alarm bells.

One is where the insurer declines the claim based on a report you were never given a fair chance to answer.

Another is where the insurer keeps changing the reason for concern as the claim goes along.

Another is where the insurer says it considered your submissions but never actually grapples with them in the decision letter.

And another is where the complaint response is full of broad conclusions but light on actual reasoning.

When that happens, it is often worth stepping back and asking not just, “Is the insurer right?” but also, “Did the insurer get to this position fairly?”