Insights for consumers
If you rely on free travel insurance provided with a credit card, it is important to check the policy wording carefully to understand what is covered and what is not.
A family holiday to Australia
In October 2022, Anna planned a family holiday to Australia for herself, her husband and their two children.
She booked accommodation for a stay from 12 to 23 April 2023. The total cost of the accommodation was $6,800, which was paid in full.
By spending more than $250 on prepaid travel costs using her credit card, Anna activated the free overseas travel insurance attached to the card.
Illness in the family caused trip cancellation
Between 6 and 9 April 2023, Anna’s mother-in-law, residing in the United Kingdom, was admitted to hospital and required emergency surgery.
Anna cancelled the family holiday to Australia and travelled to the United Kingdom to be with her mother-in-law. The accommodation was cancelled on 11 April 2024 with no refund under the accommodation provider’s terms and conditions.
The insurance claim
On 23 April 2023, Anna submitted a claim to the insurer seeking reimbursement of the accommodation costs, explaining the circumstances and that her mother-in-law lived in the United Kingdom.
Decline of claim
On 22 May 2023, the insurer declined the claim. They said the policy only covered trip cancellation due to the death, serious illness, or injury of a relative who resides in New Zealand or Australia. Because Anna’s mother-in-law lived in the United Kingdom, the claim did not meet the insurance cover threshold.
Anna disagreed with this outcome, feeling it was unfair and discriminatory. After receiving the insurer’s final response maintaining their position, Anna complained to Financial Services Complaints Limited (FSCL).
FSCL’s review of the complaint
We reviewed the insurance policy, which said there was cover for a claim arising from the unforeseeable death, serious illness, or serious injury of a relative who resides in New Zealand or Australia.
The policy wording clearly did not apply where the affected relative lived in the United Kingdom.
The Human Rights Act 1993 does not prevent insurers from limiting cover based on where a person is located. Insurers are entitled to decide which risks they wish to insure, and it would have been unfair for us not to apply the clear wording of the insurance policy.
The outcome of FSCL’s Investigation
We explained to Anna that her claim did not meet the policy wording and that the insurer was entitled to decline the claim. Anna discontinued her complaint.
