'Comprehensive' policy did not cover cancelled trip's flights

Tuesday, 25 July 2017

Travellers are being told not to 'set and forget' their insurance.

Julie Noel and her husband, Chris, had been on holiday in New York for four hours when she received a phone call to let her know that her mother had died.

She knew immediately that the dream trip was over and the only thing to do was head home. The accommodation was cancelled and flights changed - at a cost of $500 each. 'Everyone said it's lucky you've got insurance.'

Susan Taylor says travel insurance is a common source of complaints to Financial Services Complaints Ltd.

But it was not long before she started to feel that was not so lucky at all. Despite having paid $540 each for full, comprehensive cover with AA Travel, she found she was barely able to claim more than they had paid for the policies.

The insurer wanted two years of her mother's medical records to determine whether there was a pre-existing condition that would preclude her claim completely.

Julie Noel was disappointed when her $1100 travel policy would not cover cancelled flights.

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Then, when it found there was not, Noel was told it would not pay out the $5000 cost of the flights, because they had used them to come home. It would only pay the cost of changing them, plus another $300 towards cancelled accommodation.

She was told that she should have contacted the accommodation providers directly to try to arrange a refund. 'But you're supposed to put in a claim with them within 14 days and we didn't because we had no idea.'

Two months later, she has now requested the insurer look again at paying the $120 cost of the 48-minute phone call she had to make to Air New Zealand to change the flights. 'I wasn't ringing them for a chat.'

Noel said she had always travelled with insurance but had never before had to claim. When she was looking for a policy for the US trip, she compared the options online. 'I thought I'd choose that one because if anything does happen I'd be fully covered but it didn't work.'

She said she would stick to medical-only cover in future. 'I felt it was a poor experience.'

Financial Services Complaints Limited (FSCL) has released its latest annual report, which shows that Noel is not alone in being frustrated by travel insurance.

It recorded a 21 per cent increase in inquiries and complaints over the past year compared to the year before, up to 4365.

Insurance – predominantly travel – remains the largest category of complaints formally investigated by FSCL, followed by consumer credit.

FSCL chief executive Susan Taylor said a common theme underlying the complaints FSCL investigated was a communication breakdown.

'Many complainants say they were not given important information, or that the information they were given was ambiguous or poorly worded. Other times the complainant hasn't disclosed certain information or simply hasn't understood the information provided, be that the terms of an insurance policy or a written recommendation or plan.'

She said travel insurance was a perennial issue, partly because New Zealanders keen travellers.

In some cases, people expected too much, she said. 'Some people expect travel insurance is going to cover them for absolutely everything, they haven't realised there are exclusions that apply.'

Insurance should not be expected to chip in in cases of extreme carelessness, she said.

'And with more than a few that complain, they seem to set and forget. They think they've got insurance so they are covered, even if they change their minds about wanting to travel.'

She said the significant increase in complaints and inquiries was probably due to increasing consumer awareness of external disputes resolution schemes, not an increase in problematic behaviour from financial services providers.

The schemes deal with complaints and inquiries that consumers and providers are not able to resolve between them. All financial service providers must register with a dispute resolution provider.

Noel said in her case, the fine print of her policy backed up the insurer's stance but that did not lessen her disappointment.

AA Travel said Noel could request a review of the claims decision.

'We completely understand Julie's need to immediately return home following the unexpected death of her mother and our sympathies are with her and her family.

'Julie's early return meant there was additional cost to alter her flight home along with the cost of the unused hotels she had booked. AA Travel Insurance covered those costs which, together, were about $1300.

'AA Travel Insurances Comprehensive and Essentials policies cover additional travel and accommodation expenses if the journey can't be complete because of an unforeseeable circumstance. Julie's bereavement is included within that.'