What are your chances of making a successful travel insurance claim?
Nearly 90% of all travel insurance claims are paid out. That means if you have to claim, you're almost certain to have your claim accepted.
But don't get too excited – the 11% denial rate for travel insurance is higher than almost every other category of insurance.
Let's look at why this might be, so that you can avoid being part of the percentage of Aussies whose claims have been denied.
Why are more travel insurance claims rejected?
The bottom line is that people are taking out travel insurance without knowing what's in it. Then they make a claim, thinking they are covered, and are later surprised when they find out they aren't covered at all or have disqualified themselves in some way.
As many as 36% of 18-29 year olds with travel insurance do not look at their policy documents at all, according to a DFAT study. For those over 30, it's a little better at just more than 21%.
That's a big chunk of people, and it's no surprise their claims are being denied – not because the insurers are stingy but because they may not have read the fine print.
Why can travel insurance claims be denied?
One of the reasons travel insurance claims may be disproportionately turned down is that people haven't understood what's covered (and what's not!) and travel insurance policies can be cheap enough that it doesn’t seem worth it. Very few people would dream of signing up for a life insurance policy without going through it in detail, but a lot more people are happy to do this with travel insurance.
These problems can be compounded by there being different types of travel cover available, including complimentary credit card travel insurance which carries additional eligibility requirements. Common reasons for rejection include:
|Standalone travel insurance||Complimentary credit card travel cover|
|Pre-existing medical conditions not declared||Did not meet the credit card activation criteria|
|The claim was due to a close relative who did not meet age criteria||Pre-existing medical conditions|
|The claim was because the airline had rescheduled flights||The claim is not covered by the terms of the policy|
|Did not meet travel delay timeframes||Failed to prove ownership of items claimed as lost or stolen|
|Failed to prove ownership of items claimed as lost or stolen||The value of the excess was more than that of the claim|
Across both types of policy, the most common reason for rejected claims is that policyholders did not meet all requirements. In all cases, this top reason for rejected claims is explained in the insurance PDS.
- Not meeting the credit card activation criteria is the number one reason such policies are rejected, even though these criteria are typically fairly easy to meet and often involve nothing more than using the card to pay for a certain amount of holiday expenses.
- The excess was also an issue for many complimentary credit card travel insurance claims, as well as being a top cause of withdrawn claims with direct travel insurance. Claims are often turned down if the cost of the excess is more than the value of the claim.
- Failure to adequately prove ownership of lost or stolen items is an obstacle for many travel insurance claims. By going through the policy terms in detail beforehand, it’s easier to know what kind of proof of ownership is needed and easier to make sure it’s available.
Overall, the claims rejection rate is disproportionately high for travel insurance compared to other types of policy, but the vast majority, more than 90%, of claims are successful.
In many cases the reason for rejected claims comes down to the question of whether or not Australians really understand travel insurance.
What are some errors people make when claiming?
Most denials happen because people don't know what's in their policy and end up making errors that can't always be fixed. Here are the reasons why claims are commonly denied:
- Not understanding what you're covered for. Not all travel insurance policies cover all events. For example, many providers of budget policies have stripped cover for trip cancellation from their policies just to make them cheaper. If you're not paying attention and get one of these policies, you won't be able to claim if external circumstances force you to cancel your trip.
- Not paying attention to exclusions. All policies have a list of reasons why they can deny your claim, but a full third of Australians ignore these. For example, you won't be covered for your stolen phone if you weren't watching it or didn't have it put away safely.
- Not supplying the correct information with your claim. Most claims require some bit of supporting evidence. If you're injured, you need a medical report. If you've been robbed, you need a police report. Unfortunately it's easy to forget to grab these things in the thick of your travels, but your claims will be denied without them.
- Not meeting activation requirements. If you are using the free travel insurance that comes with your credit card, it’s a good idea to make sure you're eligible. Some people have had their claims denied because they didn't trigger the cover by making the right number of purchases with the card.
- Not proving ownership of items. If you try to claim for lost or stolen items, especially expensive ones, your insurer will want to see evidence that you actually did own the item. If you can't find the receipts for the items you are travelling with, make sure to take pictures of yourself with them before you leave. This is often evidence enough.
- Not mentioning pre-existing conditions. Medical cover is a big part of international travel insurance, and your insurer will want to know if you have any medical conditions going in. If you end up claiming, your insurer will investigate and deny your claim if they find you've been lying or holding back info.
Are travellers shooting themselves in the foot when it comes to travel insurance?
The DFAT survey shows that a lot of Aussies are travelling without cover, and many do not understand some very important elements of travel.
One of the most glaring misconceptions was that more than half of young people surveyed thought the Australian government would arrange and pay for them to get home in the event of a medical emergency, or would pay for overseas medical bills. This is simply not true.
- People are not even looking at policies. More than a third (36%) of 18–29s do not look at their policy at all. Older groups aren’t much better, with 21% of people age 30+ likewise not even looking at the PDS. This can lead to a lot of unpleasant surprises in the event of a claim, especially when it involves risky activities which are often not covered, like playing sports or riding a motorcycle overseas.
- People are going without travel insurance. 15% of young Australians went without travel insurance on their last overseas trip, while only 6% of those over 30 did.
- Exclusions are being ignored. Only 31% of surveyed travellers considered the exclusions when selecting a travel insurance policy. Unsurprisingly this can lead to claims being rejected.
What are the most common travel insurance claims?
In the late 90s, almost all travel insurance claims were either medical or for lost or stolen property. These days there’s a lot more colour. From most to least common, the top five travel insurance claims in Australia are:
Lost or stolen luggage. When you’re where you should be, but for whatever reason your luggage isn’t.
- Claims may be rejected because travellers assume their luggage is also covered as other belongings are, when instead it typically requires its own form of protection. Conversely, valuables that are transported in your checked luggage are usually excluded from valuables cover while they are checked in.
Lost or stolen cash and cards. Valuable, convenient, lightweight and compact. The same features that make cash and cards so attractive for travellers also make them rich targets for thieves.
- Claims may be rejected because the policyholder claimed the loss against the wrong section of their policy. Cash and credit cards are often bundled together in their own form of cover, or may be protected in different parts of the policy. Sub-limits apply, and it can be easy to exceed the limits of your cover or make a claim worth less than the excess if you don’t read the PDS.
- The main reason for rejection of medical claims is that the policyholder has not disclosed all relevant pre-existing medical conditions. Other than this, claims may be rejected if injuries resulted from taking part in a high-risk activity that was not covered by the policy, or for other reasons.
- Claims are typically not covered in the event of an airline or transport provider’s insolvency, and may also be rejected if carriers reschedule flights. A failure to understand the policy conditions can also lead to rejected claims, such as if it is made against the wrong benefit.
Lost, stolen or damaged items. When your belongings are stolen, damaged, lost, destroyed or otherwise meet an untimely end.
- Claims may be most commonly rejected because the policyholder cannot prove the value of or loss of items, or hadn’t appropriately secured the items in line with the policy requirements. This can include storing items in hotel safes even when the door is locked, not leaving items unattended in a car except the trunk and other specific obligations.
What can I do if I feel my claim shouldn’t have been rejected?
Amidst all the justifiably turned-down claims it’s possible for valid claims to slip through the cracks too. When this happens you can turn to the Australian Financial Complaints Authority (AFCA) for an independent third party resolution.
Follow these three steps to take action against a rejected claim.
- Contact your insurer. They are required to provide a reason for their rejection in writing. Consider this in line with the policy and see if they have a point. If you’re not satisfied and still think they’ve made the wrong decision then you should contact their customer service team and explain the situation.
- Lodge a dispute with the Australian Financial Complaints Authority (AFCA). If the situation was not resolved you can lodge a dispute with the AFCA. They will then get in touch with the insurer for an explanation, and the insurer has a limited time to respond.
- Let the FOS handle it. If the situation is still unresolved, the FOS will begin reviewing the situation and working out what’s doable. They will be in touch with both you and the insurer, and can help work out resolutions that involve negotiation, conciliation or simply reaching a decision and siding with one party or the other.
It’s preferable not to contact the FOS at all if you can help it, but it can be an effective way to resolve disputes. The most effective way is to ensure that you look at the details of each policy when getting travel insurance quotes and comparing policies online.