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Insurance calculation corrected

In March 2020 Rata and Kevin were overseas in the United Kingdom when they heard the call from the New Zealand government to return home due to the Covid-19 pandemic. Although they were intending to travel home on 6 April 2020, they were able to bring their departure date forward to 24 March 2020. After checking with their insurer that they had cover, Rata and Kevin abandoned their plans to fly home through Singapore, with a side trip to Bali, and purchased new, more expensive tickets, to fly straight home through Canada.

Fortunately, Rata and Kevin received their money back from the cancelled tickets, but the new tickets cost $7,300.

Rata and Kevin’s insurer accepted their claim but, from Kevin and Rata’s perspective, did not pay the full amount of their loss. Rata and Kevin complained to FSCL.



Rata and Kevin calculated that the insurer owed them $4,900. They reached this figure by subtracting the original cost of their tickets home( $2,400) from the cost of the new tickets flying through Canada ($7,300).

The insurer calculated that they owed Rata and Kevin $3,700. The insurer deducted the full cost of the refunded tickets, $3,600, which included the cost of the tickets to and from Bali from the new tickets flying through Canada ($7,300).

The insurer referred to the policy wording which stated “…we will pay up to the policy’s Maximum Benefit for Reasonable additional travel and accommodation expenses … The amount claimable will be less any amounts refundable on unused tickets.”

Rata and Kevin did not accept the insurer’s explanation, saying that no one would fly via Bali to return to New Zealand. The trip to Bali was a side trip, requiring a return flight to Singapore. Rata and Kevin said the insurer should only deduct the cost of the direct flight from the United Kingdom to New Zealand from the cost of the replacement tickets.



Under the policy the insurer agreed that if Rata and Kevin were unable to complete their journey due to circumstances beyond their control, the insurer would pay the reasonable additional travel and accommodation expenses, less any refunds from unused tickets. The literal interpretation suggested the insurer’s calculation was correct. However, when this clause was read in the context of the section as a whole, it was our view that insurer was only entitled to deduct the cost of refunded tickets for the same or similar services from the additional travel expenses.

When comparing Rata and Kevin’s planned trip home with their actual trip home, it was our view that the flight from the United Kingdom to New Zealand, through Singapore, was similar to their actual flight through Canada. As there was no diversion on the Canada trip that could be compared to the diversion to Bali, we found that the insurer could not deduct the refunded tickets to Bali from the amount payable under the claim.



We suggested that the insurer reconsider its position and pay the claim as calculated by Rata and Kevin. The insurer agreed, and paid Rata and Kevin $1,200 being the difference between the amount the insurer had already paid ($3,700) and the true cost of the claim ($4,900).


Insights for consumers

If you think your insurer has made a mistake when calculating the compensation payable under a claim, let us know. If we agree the insurer has made a mistake, we will ask the insurer to increase the amount it needs to pay to settle your claim.