Travel insurance is a thorny area. While offering peace of mind for consumers, it can be a complicated insurance to buy. Liz Booth considers whether the new Consumer Duty requirements for firms are having a positive impact for customers.
Sadly, all too often we hear of travel insurance claims going wrong, with the insurer concerned being pilloried in the national press, while the customer is left on the wrong side of substantial medical costs.
A recent claim exemplifies this: in January 2024, a family were left with bills for thousands of pounds after their daughter extended her trip but then fell ill in South Africa. Although her father had bought insurance, the claim was denied because she had not started her trip in the UK, but instead, extended the original trip for which she was insured.
The insurer repaid the premium. However, the problem is that the insurer is yet again seen as the villain of the piece. In response to this particular case, Which? deputy editor, Sam Richardson, says: “The information needed by the insurer requires perhaps an unrealistic amount of examining on the part of the consumer.
“The fact that a quarter of claims are not paid is really concerning and suggests that these products could be better constructed, so people know what they are getting,” Richardson adds.
The new Consumer Duty is intended to change the landscape for the better on these kinds of events. Its aim is to force the insurer to improve practice, putting the customer front and centre of the process and to ensure they understand exactly what they are buying and what information needs to be disclosed.
But one still might wonder how many insurers out there regularly test the company’s system by acting as a customer. I had reason to call my travel insurer recently and make a change to my policy. The call started with three failed attempts to be connected to the right department.
After a detailed discussion with the rep, I was about to make a payment to adjust my cover before they then made a passing comment about the fact I didn’t need to change my policy at all. I very nearly shelled out hundreds of pounds for a change I didn’t need.
The Consumer duty
The Duty requires firms to:
- Make it as easy to switch or cancel products, as it was to take them out.
- Provide helpful and accessible customer support.
- Provide timely, clear, and understandable information about products and services, so that people can make good financial decisions.
- Provide products and services that are right for their customers.
- Focus on the real and diverse needs of customers, including those in vulnerable circumstances.
Source: The Association of British Insurers
Customer difficulties
Individuals who have recovered from cancer also face difficulties finding travel insurance, an area investigated recently by The Telegraph. Unlike a heart attack or stroke, cancer rarely requires emergency medical care once successfully cured, but many travel insurers, according to the article, will not provide cover.
It goes on to highlight advice from the UK Financial Conduct Authority (FCA), which after a delay of some years, introduced rules in 2021 requiring all insurers who refuse or limit cover – or raise premiums above a certain level due to a person’s pre-existing medical condition (PEMC) – to signpost the customer to a suitable directory of specialist insurers.
However, in its latest annual Financial Lives report, the FCA admitted that in the year to May 2022, 1.9 million adults looked for travel insurance to cover them for a serious PEMC and nearly a quarter – 437,000 people – did not find one.
Back to the example of the seriously ill daughter in South Africa: note the date. It was in January 2024. Although the story doesn’t make entirely clear when the event happened, it does seem that the insurer should perhaps have taken more care to communicate properly to the consumer?
Aviva (not the insurer involved in the case) responded to this question by stating: “At Aviva, the importance of the customer is – and always has been – embedded in our purpose, strategy, values, and the way we work. It’s why we regularly assess our products to ensure that we continue to provide value for money and good outcomes for our customers.
“When taking out travel insurance, we strongly advise that customers read through their policy documents to understand what they need to tell their insurer about their health. Medical conditions that need to be declared will be screened and this will determine and confirm whether the condition(s) will be covered under the terms of the policy.
Claim rejection
Advice for consumers on why a claim might be rejected is freely available across the web. For example, tips from MoneyHelper include:
Incorrect information: You might have given incomplete or inaccurate details during your claim, intentionally or by mistake. For example, how something happened or got damaged.
The insurer thinks you didn’t take ‘reasonable care’: Most policies include a ‘reasonable care’ or ‘duty of care’ clause that requires you to take steps to prevent a claim from arising.
Omissions or inaccuracies in your insurance application: The insurer can reject your claim if they have reason to believe you didn’t take reasonable care to answer all the questions on the application truthfully and accurately. A common example is failure to disclose a pre-existing medical condition.
The proper claims process wasn’t followed: Insurers often expect customers to go exactly by the letter and might use evidence of you not following their claims process closely enough as justification for turning it down.
The insurer insists it only has to pay part of your claim: This can happen if your policy doesn’t give you enough insurance to cover all your losses. You’ll have to pay an excess if the insurer believes you’ve overstated the value of your claim.
Source: MoneyHelper
“In many instances, we provide cover for those with pre-existing medical conditions,” says Aviva.
Insurers generally claim that if they cannot help a customer then they will point them to the MoneyHelper Service.
Collinson specialises in global travel benefits and insurance and Lawrence Watts, CEO of insurance, tells us: “Travel insurance policies can be complex and Collinson understands its role and responsibility as an insurer, under Consumer Duty, to support travellers in amplifying the terms and coverage of their policy.
“We recognise the need to educate travellers of the financial value when buying travel insurance and to ensure a clear understanding of what they can and cannot claim, thus meeting their needs.
He adds: “Collinson shows an unwavering dedication to empowering travel customers through education and understanding. This commitment to supporting travellers is exemplified through various initiatives, including educational videos and clear policy communications. Working jointly with the Association of British Insurers, the Association of Travel Insurance Intermediaries and contributing via industry committees, demonstrates our commitment to delivering the essence of what Consumer Duty aims to achieve, in helping reduce instances where consumers feel misinformed or confused about their policies.”
Which brings us back to the Consumer Duty and the renewed requirement for firms to improve communication to customers and their understanding of their policies.
Matt Connell, director of policy and public affairs at the CII, stresses: “Consumer understanding is one of the four key outcomes from the Consumer Duty. Where firms see that consumers are misunderstanding the way insurance works – for example, around the difference between single trip and multi trip insurance – they have an obligation to improve communications and, crucially, to test those communications to check that the message is getting through.”
There is a clear rule that insurers must make sure consumers understand what they are buying and what information is required from them. However, Connell adds: “This doesn’t mean that every instance of misunderstanding is a mis-sale, it just means that insurers have to be able to demonstrate that they are learning from the past and working towards better outcomes.”
Liz Booth is contributing editor of The Journal
