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A Cautionary Travel Insurance Tale

The exclusions that tripped these people up are standard ones I'm afraid, but it is a VERY good reason to use a broker with whom you can talk specifically about your trip and any issues that may arise:

A Cautionary Travel Insurance Tale

The clauses that derailed Steve Radburn's claim were on page 49 of the 76-page travel insurance policy from 1 Cover.

Radburn had organised a family get-together in the United States, but at the last minute Theo, his grandson living in the United Kingdom, was hospitalised with a life-threatening heart condition. This meant the family bash was cancelled with the loss of a $2100 rental deposit Radburn had put down on a holiday home in the US.

This may seem to many like just the kind of thing travel insurance is designed to deal with. But like many policyholders, according to complaints watchdog Susan Taylor, Radburn only discovered after he made a claim that there were clauses in his contract which ruled out any payment on it.

It highlights what may be a systemic market failure for which there is no easy fix, with ordinary people signing up online to lengthy insurance contracts when they haven't read the fine print, which they would struggle to understand even if they tried.

Radburn says he read the digest 1 Cover provided of the policy he was taking out, but did not read the eye-wateringly long document, assuming that the policy would cover him for major, unforeseen disruptions to his travel which were outside of his control.

"People want the quickest fix. We went on a website. We printed off the bits we thought were appropriate to check what sort of cover we had," he said. "It isn't until you make a claim that you find out there are all sorts of get-out clauses in the policy."

He knows he should have read the whole policy, but he does not believe it was unreasonable of him to assume it provided what he says is "reasonable" cover.

Taylor, chief executive of Financial Services Complaints Limited, said the particular exclusion that tripped up Radburn, was a common one which had tripped up many others before.

But she said: "There's a legal obligation when buying insurance to read the policy. We find an awful lot of people don't."

People can't assume policies will be "reasonable" or "fair".

The Consumer Guarantees Act requires a good or service be fit for purpose, but Taylor said insurers are free to limit the risks they cover.

"It's fit for the risks it is prepared to cover," she said.

The obligation is on people to understand the lengthy contracts they are signing up to, though Taylor said: "It would take some time, I agree."

"The length of policies is also a common thing people are complaining about."

1Cover protests that it makes the policy documents available for download, and once a policy is purchased a policy certificate is emailed to the buyer along with an additional link to the policy wordings.

It did not say whether it had data to show whether buyers were downloading the policies before or after buying them, but said: "1Cover meets all required legal and regulatory obligations within NZ and makes every effort to ensure that our communications/responses to customer queries are in plain English and simple to understand."

And customers can ask questions, if they struggle to understand anything in a policy, it said.

But if people are not reading contracts, and part of the problem lies with the length and complexity of policies and slick-and-easy sales techniques, should obligations be placed on insurers to check people are actually understanding what they are buying?

That's easier said than done, Taylor says. "How could you prove that someone has read it [a policy]?"

Radburn is convinced there's a problem, and that his story highlights the issues.

He had his 60th birthday in February 2013 and in order to celebrate, made arrangements to bring all of his sons and their families together in a rental property in Florida.

"My wife and I paid the deposit of $2124 on the holiday home but then our Grandson Theo who lives in the UK, and who had been diagnosed with a minor heart condition and deemed fit to travel by his medical consultant, was suddenly hospitalised when his condition deteriorated to the point that he nearly died."

"This made travel for the family in the UK impossible. Also my wife and I had to down tools and rush to England to look after their other child while he and his wife sat at their son's bedside in the hospital, not knowing if their son would survive the surgery. As a consequence we had to cancel the Florida booking and submitted a claim to the insurance company for the lost deposit on the holiday home."

But Allianz, which provided the underwriting for the 1 Cover policy, rejected the claim saying because Theo had been born with a congenital heart defect, he was suffering a "known" medical condition which Radburn had not declared.

And, secondly, under the "family emergency" section of the policy rules, the family member had to have been hospitalised in New Zealand or Australia.

Radburn asks whether travel insurers really expected people to check the health status of overseas family members and disclose it before buying travel insurance?

And he says many New Zealanders have close family overseas, and 1Cover's policy should not exclude claims involving them. But he has no legal grounds to pursue his claim.

One part of this story has a happy ending, however, Radburn said.

"Thankfully little Theo has pulled through now and is a beautiful little chap, and although we are very fed up at being two grand out of pocket, we are very thankful that we hadn't yet paid for everyone's flights, which we were intending to do, and which would have left us something like $10k to $20k out of pocket."

But it does provide a salutary lesson to travel insurance buyers, that the policy they are buying may not provide the cover they expect.

Source - © Fairfax NZ News


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