John and Beryl purchased a $40,000 cruise around South and Central America. They had a travel insurance policy with their credit card.
As he was over 75 years old, John called the travel insurer about mature age cover and cover for Beryl’s pre-existing medical conditions. The insurer said that before the additional cover could be added to the policy, the couple needed to activate the cover under the policy by paying half the costs of their trip using the bank credit card.
During this conversation, John told the staff member that the trip was costing more than $40,000. They also discussed that John and Beryl needed to pay another $12,000, to bring the amount paid with their credit card to $20,000 in order to activate their cover.
Shortly before their trip, Beryl suffered an unforeseen medical condition, and they had to cancel. The insurer accepted their claim and paid the maximum amount for cancellation costs under the policy of $10,000 per person ($20,000 in total).
John and Beryl complained to FSCL that the insurer should have reimbursed them the full $40,000. They said the insurer knew their trip cost $40,000, and should have advised them of the $10,000 per person cancellation limit. They also believed the policy wasn’t fit for purpose under the Consumer Guarantees Act.
The insurer said when John called, it was to seek additional mature age and pre-existing medical conditions cover. It said it was not reasonable for staff to run through every section of the policy and outline any limits, as it could not provide personalised financial advice to customers about its products.
The insurer also said it was the customer’s responsibility to read and understand the terms and conditions of the insurance policy. The cover schedule the insurer sent John and Beryl specifically directed them to read their policy wording and to check it met their requirements.
We agreed it was John and Beryl’s responsibility to read and understand their policy, and be aware of policy limits in relation to cancellation.
We also said the insurer had not breached the Consumer Guarantees Act because the policy was still fundamentally fit for purpose – it simply did not cover all of the couple’s loss. The policy would still have covered lost baggage and overseas medical expenses (up to a certain limit) had they taken the trip.
We also accepted the insurer could not provide financial advice, because it was not authorised to do so, and although it was told about the cost of the trip, it was unreasonable to expect the staff member to assess what this meant for any claims under the policy.
In addition, John called the insurer’s line specifically seeking additional cover. If he had asked about the policy’s cancellation limits, the staff member would have referred him to the policy section on cancellation limits. Without asking a specific question about cancellation cover, there was no further obligation on the insurer. Otherwise, the staff member would be giving financial advice.
Despite our findings, the insurer wanted to try and resolve the complaint with the couple and offered them $1,000. Although disappointed, John and Beryl accepted that amount in full and final settlement of their complaint.
FSCL consumer insight
It is common, particularly with credit card travel insurance, for there to be specific policy limits. It is critical to read your policy to ensure it meets your requirements and objectives.