What are your chances of making a successful travel insurance claim?
Only 7% of all insurance claims made in Australia are for travel insurance, but it accounts for about 20% of all insurance rejections. What is the reason for these claims being rejected?
Are travellers getting taken for a ride by their insurance providers, or is there a misunderstanding for when a claim will/won’t be paid?
To find out, we crunched the numbers and looked at how travel insurance claims and rejections stack up against other types of insurance.
Why are more travel insurance claims rejected?
Despite the troubling figures above, it is still worth noting more than 90% of all travel insurance claims are still successful.
It’s also worth considering that travel insurance claims are often broken into separate parts, and where the statistics show a rejected claim, that applicant might also have had several successful claims for other losses on their policy.
Why are some travel insurance claims rejected?
One of the reasons travel insurance claims may be disproportionately turned down is that people just aren’t reading the fine print, 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.
|Direct travel insurance||Complimentary credit card travel cover|
|Pre-existing medical conditions||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.
Are travellers shooting themselves in the foot when it comes to travel insurance?
A 2016 survey of Australians over 18 has shown that a lot of people 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 Financial Ombudsman Service (FOS) 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 Financial Ombudsman Service. If the situation was not resolved you can lodge a dispute with the FOS. 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.