Consumer NZ: Travel insurers shouldn't profit from misfortune

Sunday, 21 June 2020

Less than half of New Zealand's travel insurance companies offer full refunds on travel cancelled due to the coronavirus pandemic, a Consumer NZ analysis has found.

Of the 28 policies reviewed by Consumer, just 13 companies offered full refunds.

Others offered refunds on a case-to-case basis.

Consumer NZ chief executive Jon Duffy said blanket policies from insurers refusing any refunds for useless policies were unfair.

**READ MORE:

* Air New Zealand's refund problem

* Air NZ defends giving credits instead of cash refunds

* Coronavirus: Air NZ sitting on millions of dollars for cancelled flights, Consumer NZ says

* Unfair that Air NZ refunds passengers in the US but credits Kiwi customers: Consumer NZ

**

'Consumers can’t travel and insurers aren’t covering any risk, they shouldn’t be profiting from consumers’ misfortune,' Duffy said.

New Zealanders needed to be aware of the individual refund policies of insurers, he said.

'There are insurers out there that are doing the right thing and refunding customers in full, but there are others that are only providing credits or charging penalty fees as high as 25 per cent of the original premium to process a refund,' he said.

'These fees are exorbitant and are unlikely to reflect the insurer’s actual costs for processing a refund. Again, we think it is unfair that insurers should be able to profit from consumers’ misfortune.'

Duffy said the insurance industry had lobbied for wide-ranging exceptions to provisions in the Fair Trading Act.

'The Fair Trading Act only allows the Commerce Commission to apply to the courts for declarations that contracts are unfair, but since 2015 only one unfair contract case has made it through the courts,' he said.

'We think the insurance industry should be subject to the same rules as other sectors and consumers should be able to take their own cases to court or the Disputes Tribunal to argue contract terms, like these travel insurance refund policies, are unfair.'

The companies that offered a full refund were AA Leisure Travel, AMP Comprehensive Travel Insurance, ANZ Travel Protector, ASB Cigna Travel Insurance, Cigna Travel Insurance, House of Travel Insurance for Business or Leisure, Kiwi Holiday Insurance, Mix and Match Leisure Travel Insurance, Southern Cross TravelCare, Tower Cover 4 Travel and Provider Travel Insurance, Chubb Travel Insurance, American Express Travel Insurance and Worldcare Go Comprehensive.

STA Travel offered a credit.

Tim Grafton, chief executive of the Insurance Council, said many members were offering refunds for unused travel insurance premiums, or providing a credit for when they could travel again.

“We understand that it can be frustrating when a refund isn’t for the full premium paid. However, people should be aware that travel insurance offers cover from the date of purchase and not for the travel period alone. Reflecting this with a discount to the full premium is fair as it reflects the cost of the risk the insurer has already covered, not just administration fees. Where insurers are offering 100 per cent refunds they really are going above and beyond for their customers.

“Clearly these contracts are not unfair because Consumer NZ has not understood that insurers are on risk from when the policy is taken out.”

The question of refunds for travel booked prior to the spread of Covid-19 has been an issue for a number of companies.

Air New Zealand has faced pressure from Consumer NZ to completely refund passengers who are unable to travel due to the coronavirus.

The national carrier said it was paying out $20m a week on average, but would only make refunds if legally obliged to or in special cases.

This story has been updated to correct the name of AA Leisure Travel. An earlier version of this story, based on incorrect information in Consumer NZ’s report, said that Chubb and American Express did not provide full refunds. Chubb Insurance New Zealand Limited iand American Express are providing full premium refunds to customers who wish to cancel their travel insurance policy, assuming that the customer has not travelled and has not made any claims under the policy.