Travel insurance is under the microscope for the way it’s been handling claims
An empowered Australian Securities and Investments Commission is turning its attention to the travel insurance industry.
The Australian Securities and Investments Commission (ASIC), which received broad new powers as a result of the Royal Commission, is considering a review of the travel insurance industry to address a growing number of denied claims and the resulting barrage of consumer complaints.
Travel insurance experiences the highest percentage of denied claims (11.7%) compared to any other general insurance product including car insurance (2.7%) and home insurance (6.4%) according to a 2016-2017 report from the Code Governance Committee, the independent organisation responsible for monitoring insurers' compliance with the General Insurance Code of Practice.
This is up from 11% the year before.
It's also one of the most heavily disputed insurance products relative to its size. The Financial Ombudsman Service was recently replaced by the Australian Financial Complaints Authority (AFCA). It reported that 10% of all disputes it accepted in 2017-18 were related to travel insurance – behind only comprehensive car insurance and home building insurance, both of which are much larger industries.
Why are travel insurance companies denying all these claims?
At the heart of the travel insurance controversy is the issue of pre-existing medical conditions. Currently, travel insurers handle pre-existing conditions in one of three ways:
- They'll automatically cover them at no additional cost.
- They'll charge you extra to cover them.
- They'll refuse to cover them but cover you for everything else.
John Price, the AFCA's lead ombudsman for general insurance, said the issue of pre-existing medical conditions is problematic. "Often the exclusions contained in insurance policies, travel insurance policies in particular, are quite broad," Price told the Sydney Morning Herald.
In other words, if an insurer declines to cover your pre-existing condition, they could use this as an excuse to deny a claim related to a different condition altogether if they can tenuously connect the two.
Price said travellers are also complaining about denied claims related to lost and stolen belongings. Many policies will deny your claim if you've left your belongings unattended. However, the term "unattended" can be hard to define. For example, is something unattended if you turn your back for one second?
What can you do to protect yourself from denied claims?
The ASIC may come to the conclusion that a review into the travel insurance industry isn't necessary. But regardless of what happens, there are things you can do to protect yourself from denied claims. Here are a few tips:
- Declare all pre-existing conditions to your insurer. You don't want to give your insurer any excuse to deny your medical claims. Be as upfront as possible about all pre-existing conditions, no matter how minor. If the insurer agrees to cover you for these conditions, make sure you get it in writing.
- Pay close attention to your belongings and keep them secure. Insurers can deny your claim if you left your items unattended when they were lost or stolen. The term "unattended" can be hard to define but you don't want to give the insurer any wiggle room. Provide evidence that you took all possible security precautions. This can include police reports, witness statements, descriptions of any security devices you were using and receipts showing you checked your belongings into a secure location (such as the front desk of a museum).
- Keep your receipts and other proof of ownership. If you have to claim for lost or stolen items, you may need to prove to your insurer that you actually owned the items. Before you leave on holiday, take pictures of yourself with everything you're taking as this can be used as proof of ownership. Keep the receipts for everything you buy during your travels.
- Compare policies. Don't just go with the first insurer you stumble across. Grab a few quotes and then do a quick search for some online reviews. Customers will often describe their experiences with the claims process, and this will help you decide which insurers are more likely to handle your claims fairly.
What else is new?
Insurance has been in the spotlight since the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry kicked off in late 2017. The commission handed the ASIC more power over the insurance industry by expanding the regulator's role to include claims-handling and by extending unfair contract laws to include insurance.
So even if the ASIC's review of travel insurance does not go ahead, we can still expect to see positive outcomes in the way travel insurance claims are handled going forward.